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

5  The future funding and governance of the World Service

66.  In addition to the financial settlements announced in the Spending Review, the Government also announced a change to the method of funding of the World Service: "from 2013-14, responsibility for funding the BBC World Service will transfer to the BBC".[104] In its written evidence to the Committee the BBC World Service confirmed that from April 2014, it would be financed from the UK Licence Fee, rather than through the existing Grant-in-Aid delivered via the Foreign Office.[105] The Foreign Secretary clarified that:

From 2014/15, the BBC will provide World Service funding from the Licence Fee, and the amount I had allocated (£227 million for resource and capital) will be cut from the FCO's baseline [...] Until then the FCO will continue to fund the BBC World Service in line with the (CSR10) settlement figures.[106]

The TV licence fee has been frozen at £145.50 a year for the next six years as part of an agreed 16% cut in the BBC's budget.[107] The BBC World Service noted that "after extracting an efficiency dividend", the BBC would commit to providing sufficient investment in the World Service to support its current plans for the period.[108]

67.  Giving evidence as part of our FCO Performances and Finances inquiry in November 2010, our witnesses from the World Service and the FCO supported this change. The World Service stated that "the move away from direct government funding will further reinforce BBC World Service's reputation for independence" and that "BBC World Service will be strengthened by its ability to draw on the full resources of the BBC [...] without being constrained by the barriers that have been required by separate funding sources".[109] Peter Horrocks told us that "we [the BBC] can be confident about this new arrangement", and that it was something he had always thought to be a good thing.[110] He was clear that this change was "in the best interests of the World Service".[111] The FCO argued that day-to-day governance as a result of this change would not differ from current practice: the objectives, targets and priorities of the World Service would continue to be agreed between the BBC Trust and the Foreign Secretary, whose consent would continue to be needed to the closure of foreign language services (see paragraph 68 below). Simon Fraser told us that the "terms of the relationship remain unaffected, other than in the sense of who holds the purse strings".[112]

68.  The BBC's written evidence to our previous inquiry set out the basis of the Government's new agreement with the BBC Trust in relation to the Service's governance from 2014-15:

  • The BBC Trust sets the overall strategic direction of the BBC including the World Service;
  • The BBC World Service will remain editorially independent and will be answerable to the BBC Trust;
  • The BBC will continue to set the objectives, priorities and targets for the World Service with the Foreign Secretary, and
  • The Foreign Secretary's written approval will still be needed for the opening and closure of any language service.[113]

69.  When we took evidence in November 2010 there had yet to be a formal concordat drawn up between the FCO and the BBC over the future management of the World Service. Peter Horrocks assured us at the time that "the right measures would be put in place" to prevent any possible risk of the World Service budget being 'siphoned off' to fund other BBC activities. He was sure that the World Service would "be able to reassure the Committee in relation to those mechanisms once they're agreed in the next period."[114]

Timing of the decision

70.  During our original inquiry, it became apparent that part of the reason for the lack of detailed information about future governance arrangements for the World Service arose from the last-minute nature of the decision to transfer funding responsibility to the BBC. In November 2010, Peter Horrocks told us that "the actual decision to do it, or the likelihood of it, only happened about 10 days or two weeks prior to the announcement",[115] and the process "suddenly accelerated because there were proposals from the Government to which we needed to respond. It was something that we had put thought into in advance, but, of course, it happened more quickly than any of us had expected."[116] Simon Fraser told us that "the discussions on the handling of the BBC World Service came relatively late in that negotiation".[117]

71.  In March 2011, Mark Thompson provided further information on just how 'last minute' the decision to transfer funding responsibility had been. He told us that he was aware of discussions "in the air" and he had discussed the possibility of this change "throughout the summer" with Mr Horrocks. Mr Thompson added that, prior to formal request from Ministers in October 2010, the BBC had "modelled the funding of the World Service":

we, at the top of the BBC, had in our own time and on our own terms in that summer discussed, researched, considered and come to the conclusion that, on balance, the merits of moving to licence fee funding over grant in aid funding outweighed the demerits. We came into the conversation with Ministers in October with a considered and carefully researched view that under the right circumstances this could be a good idea.[118]

Notwithstanding these earlier "modelling" exercises carried out by the BBC during summer 2010, the first formal conversation on the matter with the Secretary of State for Culture, Media and Sport had taken place in "early October". [119] During that conversation, the Secretary of State had asked the Director-General whether "there was any kind of Government expenditure currently on the national accounts that the BBC might potentially be prepared to fund through the licence fee" and "first raised the idea of whether the licence fee could take over funding the World Service." Mr Thompson recalled that he had met the Foreign Secretary twice during the Spending Review process: "immediately prior to the announcement of the Spending Review" and then after the settlement decision to discuss options in terms of closures and reductions.[120]

72.  In subsequent written evidence, the World Service provided us with a "Summary of events during licence fee settlement negotiations between the BBC and the Government in October 2010".[121] The first event listed occurred on Monday 11 October (nine days before the Spending Review announcement), when "the BBC was advised (both Trust and Executive) that as part of the Spending Review the Government was actively considering the funding of free television licences for the over-75s and the funding of the World Service, and was considering transferring funding responsibility for both from the Government to the licence fee".[122] The "exploratory" conversation with the Secretary of State for Culture, Media and Sport that Mr Thompson had mentioned in his oral evidence had taken place on the following day, Tuesday 12 October. Negotiations had continued throughout the run-up to the SR2010 announcement. A set of draft Government proposals was not prepared "for review by the Executive Board and the [BBC] Trustees" until Monday 18 October.[123]

73.  The Foreign Secretary confirmed to us "that the final agreement within Government on this was only reached shortly before the Comprehensive Spending Review was finalised—the day before, I think". He went on to present the change in management and governance of the World Service, not only as a benefit to the World Service but also to the Exchequer:

This is an attractive option on the grounds of a secure future for the World Service, and a genuine reduction in public expenditure. It is a huge saving off the FCO baseline. It is a genuine public spending reduction, because it then goes into the licence fee. However, there were other options available to the Chancellor and the Government which were also looked at up to the last moment—I think up to the day before the comprehensive spending review.

74.  The FCO subsequently informed us that Mr Hague agreed to the transfer of the funding of the World Service to the licence fee on Monday 18 October 2010. They added:

There were discussions over the formal wording of the DCMS [Department of Culture, Media and Sport] Settlement letter and of our settlement letter on 19 October and the announcement was made on 20 October. The Foreign Secretary met Sir Michael Lyons and Mark Thompson on 20 October.[124]

75.  The decision to transfer funding responsibility for the BBC World Service from the FCO to the BBC will have major long-term ramifications for the future of the World Service. We were told that the BBC carried out "modelling" of a transfer of funding during summer 2010, because such a decision was, according to the Director-General, "in the air" during the run-up to the Spending Review. We recommend that, in its response to this Report, the Government should clarify exactly when and by whom such a transfer was first mooted in discussions between the Government and the BBC, who initiated those discussions, and to what extent the BBC's "modelling" work and internal discussions about a transfer carried out prior to October 2010 were encouraged by the Government. We note that following this preliminary work by the BBC, discussions between Ministers and the BBC about a funding transfer did not take place until nine days before the formal announcement of the change on 20 October 2010, and the agreement of the Foreign Secretary was secured only 48 hours before. We conclude that taking this decision in such a short space of time cannot have allowed the FCO to consider the full range of options and implications. We further conclude that the decision was essentially financial, taken at very short notice, with the full agreement of BBC top management.

Future governance arrangements

76.  We pursued the question of future governance arrangements for the World Service during our session on 9 March. Representatives from the trade unions recommended that a combination of continued Parliamentary scrutiny of the World Service, and an internal ring-fence, guaranteeing the World Service a set percentage of the overall BBC budget, could help protect its budget from any risk of its being siphoned off to other areas of the BBC.[125] We raised these suggestions with World Service management. Peter Horrocks reiterated that the transfer of funding responsibility was to the benefit of the Service. He also made clear that he and the FCO had not seen eye to eye in recent months:

As long as the understanding of the need for the World Service is there, and the BBC Trust puts in place the right mechanisms, and has a way of being able to assess the difficult judgment between the delivery of services to UK audiences and the delivery of services to international audiences [...] I believe that we will be in a better position, not least because of the experience of recent months, when it has been difficult to share with the Foreign Office the judgments that I have been outlining through the course of my evidence.[126]

Mr Horrocks stated that a concordat over governance would be devised in due course: "within the licence agreements the protection will be there. It will not be possible under those mechanisms for the budget to be raided month by month or year by year."[127]

77.  Mark Thompson elaborated on these proposed arrangements, which, he suggested, would provide "a higher level of protection than that which the World Service has enjoyed up until now". He told us that:

The expectation is that there will be some form of service licence; that is, a formal document that requires the BBC to pay within a certain parameter plus or minus x% of the licence fee to this service. That will be accounted for, and it will be audited afterwards.[128]

In common with Mr Horrocks, he was critical of the FCO's past exercise of its responsibilities for the World Service:

our current system has led to a very substantial and damaging reduction in the funding of the World Service. We are moving to a system where that will be harder and much less likely to happen. I think that there will be more security in the future than there manifestly is in the current arrangements.[129]

78.  Mr Thompson also argued that a planned new management structure at the BBC would help guarantee the World Service a voice at the senior levels of the BBC:

Under the new arrangements there will be a director of news [...] who will be on the executive board of the BBC and who will be in charge of delivering all the BBC's journalism. They will have explicit objectives in ensuring that the BBC's international journalistic services, and specifically the BBC World Service, are delivered to the highest possible standard. [ ...] within her brief, I am clear that she will be charged and held to account for the quality and support of the international services.[130]

79.  The Foreign Secretary described the proposed change to World Service governance as "an attractive option on the grounds of a secure future for the World Service".[131] He added that:

The governance mechanisms are to remain essentially the same [...] Such provisions that are in the existing agreement, which mean that the Foreign Secretary has to approve the opening or closure of new language services, will be retained in the new arrangements. I agreed that with the BBC Trust at the time of this change [...] So those safeguards will be there for the future.[132]

He also indicated to us that the FCO, despite transferring funding responsibility for the World Service to the BBC, would monitor the BBC's management decisions in respect of the World Service and would intervene if necessary: "If the BBC set about systematically running down the entire thing in the way described, it would be open to us to change the arrangements again."[133]

80.  We do not believe that the decision to transfer funding responsibility for the World Service from the FCO to the BBC will make the World Service's funding more secure. We are concerned that, despite the mechanisms and procedures we have been assured will be put in place, this decision could lead to long-term pressure on the World Service budget, with the risk of a gradual diversion of resources from the World Service to fund other BBC activities. The freezing of the BBC licence fee for six years from October 2010 may increase the temptation for BBC senior management to "raid" World Service funding. In addition, the BBC may be vulnerable to media campaigns confronting the British public with a choice between, for instance, BBC spending on popular light-entertainment programmes and spending on news services in foreign languages in remote parts of the world. There is also a risk that Parliament's current ability to oversee the work of the World Service, in particular through select committee scrutiny, may be weakened under the proposed new arrangements. We therefore recommend that no transfer of funding responsibility for the World Service from the direct FCO Grant-in-Aid to the BBC should take place until satisfactory safeguards have been put in place to prevent any risk of long-term erosion of the World Service's funding and of Parliament's right to oversee its work.

81.  The FCO has attempted to reassure us about governance arrangements after the proposed transfer of funding, by arguing that "the terms of the relationship [will] remain unaffected, other than in the sense of who holds the purse strings". Unfortunately, whoever holds the purse strings exercises a great deal of power. It is not difficult to imagine a situation some years in the future in which the BBC Trust might present the Foreign Secretary of the day with a fait accompli, along the lines of, "You can have a Russian service or you can have an Arabic service, but you can't have both because we are not prepared to fund both". We therefore conclude that a formal concordat should be drawn up between the Government and the BBC Trust, to make detailed provision for future funding and governance arrangements for the World Service. We recommend that this concordat give the Foreign Secretary not only the final decision over service closures, but also the right to stipulate minimum levels of service provision which the BBC will have a formal responsibility to fund.

82.  In the event that the proposed transfer of funding in April 2014 goes ahead, then, in view of the Foreign Secretary's retained oversight responsibilities for the World Service, we intend to continue after that date, in conjunction with our colleagues on the Culture, Media and Sport Committee, to monitor the funding, policies and performance of the World Service, its links with the FCO, and its role as an important projector of the UK's influence and 'soft power'.

83.  We further recommend that, if the transfer of funding takes place, the Foreign Secretary ensure that the World Service is adequately represented at the top levels of BBC management; and in particular that the Director of the World Service should have a place ex officio on the new Executive Board of the BBC, and that the International Trustee of the BBC Board of Governors should be given the specific responsibility of representing the interests of the World Service.

104   Spending Review 2010, October 2010, Cm 7942, p. 59, para 2.90 Back

105   Foreign Affairs Committee, Third Report of Session 2010-11, FCO Performance and Finances, Ev 71-78 Back

106   FCO Performance and Finances, Ev 35-36 Back

107   Tara Conlon, 'How the BBC Licence Deal was done', The Guardian Unlimited, 21 October 2010 Back

108   FCO Performance and Finances, Ev 71-78  Back

109   Ibid., Ev 78 Back

110   Ibid., Q 59 Back

111   Ibid., Q 65 Back

112   Ibid., Q 160 ff. Back

113   Foreign Affairs Committee, Third Report of Session 2010-11, FCO Performance and Finances, Ev 71-78 Back

114   FCO Performance and Finances, Q 72 Back

115   Ibid., Q 62 Back

116   Ibid., Q 63 Back

117   Ibid., Q 118 Back

118   Q 110 Back

119   Qs 111, 106 Back

120   Qs 106-118 Back

121   Ev 41-42 Back

122   Ev 41-42, para 11 Back

123   Ev 41-42 paras 1-3, 12 Back

124   Ev 45 Back

125   Q 15-17 Back

126   Q 58 Back

127   Q 60 Back

128   Q 103 Back

129   Q 103 Back

130   Q 121 Back

131   Developments in UK Foreign Policy, Transcript of session of 16 March 2011, Q 80 Back

132   Developments in UK Foreign Policy, Q 81  Back

133   Developments in UK Foreign Policy, Q 81 Back

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