4 Options for alternative funding
of the World Service |
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.
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.
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.
He later more explicitly suggested that DFID could
provide some funding for the ODA-eligible activities of the World
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.
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
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
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.
BECTU agreed with this statement.
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."
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
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."
In the eyes of the Foreign Office, at least, it appears that some
of the activities of the World Service qualify.
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.
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."
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,"
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
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.
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
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.
The International Development Secretary told IDC
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-compliantthe Committee will
understand the very good work that the British Council does around
the world, particularly on educationI 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.
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.
62. We note the discrepancy
between the relatively small amounts of money needed to avoid
the most damaging cuts to the World Servicethose to BBC
China Mandarin, BBC Hindi and BBC Arabicand 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.
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".
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.
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.
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
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.
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
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
HC Deb, 26 January 2011, col 299UQ Back
Ibid., col 300UQ Back
HC Deb, 14 March 2011, col 140-141 Back
Ev 23-28, para 45 Back
Ev 22-23, para 5 Back
Ev w34 (Annex) Back
Q 80 [Mr Horrocks] Back
'DAC list countries' refers to countries listed by the OECD Development
Co-operation Directorate Development Assistance Committee (DCD-DAC). Back
Q 82 [Mr Egan] Back
Q 122 Back
International Development Act 2002, Part 1, Clause 1 Back
Ev 28 Back
Ev 28 Back
International Development Committee, Third Report of Session 2010-11,
International Development Annual Report and Resource Accounts
2009-10, HC 605, para 24 Back
International Development Annual Report and Resource Accounts
2009-10, para 24 Back
Developments in UK Foreign Policy,
Transcript of session of 16 March 2011, Q 77-79 Back
FCO Performance and Finances, Ev 48 Back
Ibid., para 76 Back
BBC Broadcasting Agreement 2006, Cm 6872, Clause 75 Back