House of Commons - The implications of Cuts to the BBC World Service

The implications of Cuts to the BBC World Service - Foreign Affairs Committee Contents

4 Options for alternative funding of the World Service

Funding from DFID?

51. Many of our witnesses have suggested that the Department for International Development (DFID) could help to fund the World Service. It has been argued that since DFID will see an increase in funding over the SR2010 period, and that since some of the World Service's activities can be classed as "Official Development Assistance" under OECD guidelines, DFID could legitimately transfer some of its budget to the World Service and to assist in maintaining particular services. It was also noted that the changes to World Service activities announced in January 2011 are expected to generate savings of £30 million over the period 2011-14, which is a relatively insignificant amount when taken in the context of DFID's total £23.3 billion Spending Review settlement over the same period.[82] Figures provided for us by the House of Commons Scrutiny Unit show that if DFID funding were made available to compensate for the proposed 16% reduction in World Service funding, this would involve an average financial transfer of 0.35% of DFID's real DEL budget over three years.[83]

52. The Spending Review allocated £25 million of the FCO's grant to the World Service for ODA-eligible activity. On 26 January, the Foreign Secretary suggested that some extra funding would be available to fund ODA-eligible activity by the World Service. He stated that:

It is not impossible that we will find some additional money for the World Service. A good part of the public money that is spent on the World Service is ODA-able-official development assistance-expenditure, so it falls within that category.[84]

He later more explicitly suggested that DFID could provide some funding for the ODA-eligible activities of the World Service:

a good deal of the expenditure is already ODA-able. I do not know what scope that leaves for additional ODA-able funding, but DFID is already in the process of setting its own priorities, which do not normally include supporting the operations of the BBC World Service[...]I am considering whether additional money can be provided to help the World Service through the restructuring — I am talking about only up to a few million pounds, but it may be of assistance. I cannot promise a large part of the DFID budget for this cause.[85]

53. This view was repeated by FCO Minister David Lidington MP in an adjournment debate in the House on the future of BBC Hindi on 14 March 2011. Mr Lidington told the House that while the current Broadcasting Agreement governing the relationship between the BBC and the Government required the FCO to fund the World Service, and that DFID's funding priorities over the next few years did not include the BBC World Service, discussions within Government were ongoing:

some World Service activity may count as official overseas development assistance. We are discussing with DFID and the OECD how BBC World Service expenditure may be reported as official development assistance. I understand that the World Service is discussing funding for specific projects with DFID, which already supports the BBC World Service Trust, the charitable arm of the World Service [...] It is sensible that those conversations should initially take place at official level before advice is put up to Ministers.[86]

54. Many of our witnesses welcomed the FCO's intimation that DFID could help plug the "funding gap" in the World Service's budget. The National Union of Journalists' written submission contrasted the reduced budget of the World Service (and wider 'FCO family') with the increases to DFID's budget:

If limited DFID funding were provided for dedicated services that met development purposes, World Service could avoid damaging cuts and invest in new services [...] The DFID budget is increasing over the period by an average of £3.5bn pa. £50m for WS would be less than 1.5% of the average annual increase in development spending and could be targeted to fully qualify towards the development target.[87]

BECTU agreed with this statement.[88]

55. Andrew Tyrie MP, Chair of the Treasury Select Committee, wrote to the Foreign Secretary on 21 February, in a letter copied to us, to argue that "the full value of the cuts in cash terms, of £28 million, can and should be found from the DFID budget." He went on to state that "this can be achieved without prejudicing the coalition's commitment to increase aid to 0.7% of GNI from 2013. This is because, under OECD definitions, much of the value of World Service activity can be legitimately scored as aid."[89]

56. We asked Mr Horrocks to elaborate on the World Service's ODA-eligible activities and its relationship with DFID. He told us that:

Our submissions to the Foreign Office, which were also shared with DFID, identified clearly our priority proposals, which were Pakistan, Afghanistan, sub-Saharan Africa and Bangladesh. They were all defined in a way that would make them absolutely susceptible to being scored as ODA and we have defined them in those terms. We have also had, through the settlement letter from the Foreign Office in relation to our existing activity, a requirement that £25 million of our existing expenditure should count towards development. However, we did not receive any extra funding for that.[90]

Likewise, Jim Egan, Controller, Strategy and News, BBC Global News, told us that:

there was a clause within our settlement letter from the Foreign Office, which stated that funds are provided "to the BBC World Service in order to provide impartial and independent news services as a developmental good to DAC list countries."[91] In the eyes of the Foreign Office, at least, it appears that some of the activities of the World Service qualify.[92]

57. Notwithstanding these expressions of hope from the World Service, the Director-General of the BBC, Mark Thompson, told us that he did not:

have any indications yet that any fresh, additional or compensatory money is available [...] The case for the developmental value of much of what the World Service does is considerable ... [But] As yet, we have not heard anything that gives us comfort that that broad sense of support is being translated into money.[93]

The International Development Act 2002 and the OECD Guidelines

58. How DFID spends its money is governed by the International Development Act 2002, which states that "The Secretary of State may provide any person or body with development assistance if he is satisfied that the provision of the assistance is likely to contribute to a reduction in poverty."[94] We asked DFID for a legal opinion on whether the provisions of that Act would allow for the direct funding of the World Service. They replied that "the International Development Act 2002 makes reducing poverty the core purpose of DFID's assistance," and that:

core funding to the BBC World Service could not be deemed to meet the terms of the Act as poverty reduction is not identified as a purpose or objective of the BBC World Service in either the BBC Royal Charter or the BBC World Service Broadcasting Agreement.[95]

As a result, any financial assistance the BBC World Service received from DFID would be marginal:

Our preliminary view is that it is difficult to identify any specific BBC World Service activities which will meet this test [of reducing poverty] other than for example, the training of local journalists and technicians.[96]

59. We also sought independent legal advice as to whether it would be lawful for the Secretary of State for International Development to fund the activities of the BBC World Service. The advice we received from Counsel was that:

I do not think that the powers conferred on the Secretary of State under the International Development Act 2002 are wide enough to permit him to make grants or loans to the BBC World Service.

60. We note that there is a precedent for DFID transferring funding to other bodies for ODA-eligible activities, even if these activities do not appear to conform to the "reduction of poverty" requirement in the 2002 Act. In its report on DFID's Annual Report and Resource Accounts 2009-10, the International Development Committee (IDC) noted that:

Some of DFID's budget is being transferred to other departments. In the 2010-11 Winter Supplementary Estimate £58.697m is transferred to the FCO for British Council Official Development Assistance (£40m), Conflict Prevention Pool (£16.547m), Papal Visit (£1.85m), Police Training in Tanzania (£0.2m) and Visas for Chernobyl Victims (£0.18m). £16.033m is transferred to the Ministry of Defence in respect of the Conflict Prevention Pool.[97]

The International Development Secretary told IDC that:

When I was in discussions with the Foreign Secretary about the British Council, it was clear that he would not be able to fund that through his budget and I said that we would look at it. I made it clear back in July that, as much of what the British Council does is ODA-compliant—the Committee will understand the very good work that the British Council does around the world, particularly on education—I would not want us as a country to lose the ability to fund that. So I made it clear to the Foreign Office that we would take that over.[98]

61. In our evidence session on 16 March, the Foreign Secretary told us that while the World Service undertook activities that can be classed as Overseas Development Assistance, there was little likelihood of diverting "a whole chunk of [DFID] money for the core funding of the World Service", and that while it was possible that further World Service activities, over and above the already agreed £25 million minimum stipulation, could be classed as ODA, beyond a possible extra £3 million of funding this financial year, no extra funding would recompense the World Service for these activities.[99]

62. We note the discrepancy between the relatively small amounts of money needed to avoid the most damaging cuts to the World Service—those to BBC China Mandarin, BBC Hindi and BBC Arabic—and the scale of the Department for International Development Spending Review settlement. We accept that under the terms of the International Development Act 2002, DFID is not able to fund substantial parts of World Service activity directly, because that activity cannot be directly demonstrated to contribute to poverty reduction. However, we conclude that some of the activity of the World Service does contribute to the wider aims of DFID and it would therefore be appropriate to consider how an additional small element of the DFID budget might be spent on specific activities and projects of the World Service which are consistent with the terms of the International Development Act. Our figures show that just 0.35% of DFID's budget would be enough to compensate for the Government's planned cuts to the World Service. We conclude that there is no reason why such a transfer should not be made if the political will to carry it out is present.

Commercialisation

63. The FCO Permanent Under-Secretary, Simon Fraser, told us that "the British Council can, and increasingly does, earn income from commercial work to supplement their Grant-in-Aid; and the BBC World Service can also do so to a lesser extent".[100] The British Council and the World Service are the FCO's two major "associated public bodies". The Council is facing similar deep cuts to its direct grant from the Department. Between 2010-11 and 2014-15 the value of the FCO's grant to the British Council will fall by 25% in real terms.[101] Around 70% of the Council's revenue is currently earned through commercial activity, in particular by the provision of English language courses and examinations. According to the National Audit Office, the Council aims to double this income by 2014-15.[102] On 10 March 2011, the Council wrote to inform us that its new Corporate Plan will be agreed with the FCO in May. It is a reasonable expectation that this Plan will set out the Council's plans to raise an even greater proportion of its revenue by means of commercial activity.

64. The BBC World Service has more limited scope than the British Council to generate income from commercial work. In particular, it is constrained by the strict restrictions on use of advertising which apply to the BBC as a whole, under section 75 of the BBC Charter and Agreement.[103]

65. While we note that the opportunity for expanding commercial activity is much greater for the British Council than the BBC World Service, we recommend that the World Service, in its response to this Report, provide us with a detailed memorandum setting out the extent to which there is realistic scope for it to increase turnover from its commercial arms such as advertising on its websites and to work more closely with private sector firms in host countries, and indicating how it proposes to exploit any such opportunities to raise revenue.

82 Q 59 and Spending Review 2010, Cm 7942, page 10, table 1 Back

83 Research provided for the Committee by the House of Commons Library and House of Commons Scrutiny Unit. E-mail to Committee staff, 29 March 2011. Back

84 HC Deb, 26 January 2011, col 299UQ Back

85 Ibid., col 300UQ Back

86 HC Deb, 14 March 2011, col 140-141 Back

87 Ev 23-28, para 45 Back

88 Ev 22-23, para 5 Back

89 Ev w34 (Annex) Back

90 Q 80 [Mr Horrocks] Back

91 'DAC list countries' refers to countries listed by the OECD Development Co-operation Directorate Development Assistance Committee (DCD-DAC). Back

92 Q 82 [Mr Egan] Back

93 Q 122 Back