Written evidence from the BBC World Service
EXECUTIVE SUMMARY
Introduction
The BBC welcomes the Foreign Affairs Committee's
Inquiry into The Implications of the World Service Cuts.
In its previous submission to the Committee in November
2010, the BBC set out its initial response to the 16% real terms
cut in World Service revenue funding announced in Spending Review
2010. While we were unable at that early stage to provide firm
details of what changes would be made in response to the settlement,
we informed the Committee that the like-for-like saving required
in existing and ongoing services would be significantly greater
once unavoidable cost increases are taken into account. On 26
January, we announced plans to deliver most of the savings required
within the first two years of the Spending Review period.
The purpose of this evidence is to explain the process
through which the World Service discussed with the Foreign &
Commonwealth Office the likely impact of different funding scenarios,
and the options the BBC thought through in considering different
possible outcomes. A number of different potential financial frameworks
were put to the World Service during the Spending Review preparations
in what was a fluid and changing process. As requested by the
Committee, this submission also addresses the suggestion that
has been voiced both in Parliament and in the media that additional
funding might be found for the World Service from the increasing
budget for Official Development Assistance.
The Committee also provided the BBC with a series
of questions arising from the World Service's announcement. These
are answered point by point, following this summary.
The Spending Review process
Over the course of the Spending Review process, the
World Service was asked, like other publicly-funded bodies, to
respond to hypothetical levels of funding by indicating how it
would cut its cloth accordingly. Throughout, we recognised the
severe pressures public spending would face over the Spending
Review period. We acknowledged that the World Service would need
to prioritise. But we also argued that the World Service - the
most trusted and influential news provider in the world—delivers
a unique value to Britain. The imperative to deliver savings was
clear but it needed to be balanced by continued innovation to
ensure that the World Service remains competitive, maintains a
strong and global impact, and continues to lead the world - a
view shared by the Foreign Secretary when he said that "it
is absolutely right for the World Service to move more of its
services to online and mobile services; that is the way the world
is going."
HM Treasury's initial guidance for the Spending Review
required us to consider the impact of a 25% direct cut in Grant-in-Aid
funding. We explained that because of cuts made last year in the
World Service baseline following the June 2010 "Emergency
Budget"and increases in pensions costs, a 25% headline cut
would have a much greater impact in practice. If this scenario
was enacted, eighteen language services would need to be closed
to deliver savings, even without any investment in new services
on growing platforms.
We argued strongly instead for an alternative proposal,
that savings should be balanced by regenerative investment in
new, high-impact services such as Urdu television for Pakistan,
television partnerships with Indian and African broadcasters,
and increased radio broadcasting for Afghanistan. This new investment
would cost up to £25m per annum. Our analysis suggested that
many of these activities would help to meet development objectives
and could be counted as Official Development Assistance (ODA).
Importantly, this alternative proposal assumed that, as in previous
Spending Reviews, government money would be available to assist
with restructuring and redundancy costs.
Subsequently, we discussed a number of scenarios
with the Government, some that may involve a larger number of
service closures, some fewer. In those discussions, our assessments
involved trade-offs between three factors which lie at the heart
of the decisions we have taken: the number of language services
closed entirely; the extent of cuts to the quality and distribution
of continuing services; and the level of investment in new services
to maintain the World Service's long-term competitiveness. We
had regular discussions with FCO officials about the appropriate
balance. In our view, the most important variable was not singularly
the number of language services; just as important was the quality,
impact and competitiveness of the services that continued. It
is not a sensible strategy to retain a greater number of language
services if in doing so they are stretched so thinly that they
are unable to deliver a service of the quality and relevance audiences
expect of the BBC.
Following the publication of the Spending Review
on 20 October 2010, we had further detailed discussions both with
the FCO and the BBC Trust. It was recognised that the new funding
framework would mean the World Service remaining Grant-in-Aid
funded until 2014 and then being licence fee funded. It was agreed
in these discussions that up to £20 million of licence fee
funds should be made available to the World Service over the next
three years to help meet redundancy and restructuring costs, as
allowed for in the licence fee settlement. The FCO also offered
an additional £3 million Grant-in-Aid in the current year
for this restructuring purpose, although this is not yet confirmed.
Following these discussions, the BBC Trust proposed to the Foreign
Secretary five language service closures, which he approved.
Despite the unavoidable impact of the reduced funding,
it is our ambition that the BBC remains the world's leading international
broadcaster. China's expenditure on international broadcasting
is now over £2,000 million per annum, eight times the UK's
declining spend, and the United States spends twice as much as
the UK (and this budget is proposed to increase by 2.5% over the
next financial year). Yet both currently achieve a smaller audience
and lower reputational scores.
The BBC has explained that anticipated audience loss
from the announced changes to the World Service will be around
30 million weekly radio listeners, from a current audience of
180 million, within the first year. It is our intention that further
reductions in subsequent years are offset by new activities to
be launched over the next three years, intended to maintain the
World Service's relevance and impact even with constrained resources.
Plans for future investment
Innovation has been key to the World Service's sustained
success over almost 80 years. Refreshed services and new editorial
offers will be essential to ensure continued success and mitigate
the closure of services and decline in shortwave audiences.
The FCO has indicated that the settlement provided
for £10m per annum for investment in new services. However,
it is important to be clear that this £10 million is not
"new" or additional money; it is part of the reduced
budget announced in the Spending Review, and were it factored
out—together with a further £13 million per annum allocated
by the FCO to help address the BBC pension deficit—the real
cut to World Service current activities would be over half as
big again as the 16% headline cut.
Initially, therefore, investments will be limited
by the funds available. At this stage we can only guarantee to
spend £2 million annually on new services; if we were to
spend more than this immediately we would need to make even more
significant further cuts elsewhere. However, we do aspire to increase
investment over the Spending Review period, subject to delivering
savings and increasing commercial revenue.
Specific possible activities include partnerships
with broadcasters in priority markets - India, Pakistan and sub-Saharan
Africa - to allow World Service to launch new cost-effective television
programming, and enhanced online services in vernacular languages,
with more and better video news content. However, new channel
launches funded from Grant-in-Aid will not be possible in the
Spending Review period.
BBC World Service and Official Development
Assistance
The Committee asked us to whether there have been
indications that DfID will be providing funding to maintain World
Service programming and coverage.
At the time of writing, the situation is that the
FCO has asked World Service to make a £25m minimum annual
commitment from its Grant-in-Aid allocation to support Official
Development Assistance. No
dedicated funding has been provided for this by the FCO or DfID.
Our analysis, carried out for the Spending Review,
shows that by virtue of providing free, accurate and impartial
news and information to many of the world's poorest countries,
the World Service could play an important role in international
development. Free and independent media are essential to effective
governance, economic development and welfare, promoting accountability
and helping bolster fragile states. This is recognised by DfID,
which supports the development of media via partners including
the BBC World Service Trust.
If the Government wished to pursue the possibility
of limited additional funding for the World Service, for dedicated
services that met development purposes such as those described
in our proposals to the Spending Review, these could be targeted
to fully qualify towards the Government's ODA commitment. This
would appear to be similar to the approach taken in the current
financial year in which £40 million of DfID's budget was
transferred to the FCO to support the British Council.[1]
If the Government decided that it was appropriate
to provide ODA funding to match its ODA commitment, the World
Service would be able both to avoid some planned cuts to services,
and invest in new services, which meet development purposes.
For instance, retaining BBC Hindi on shortwave, while
investing in content partnerships in television, online or mobile
services, would maintain the BBC's presence in rural India. Creating
BBC Urdu television content would help counter the increasingly
politicised news disseminated by local providers and contribute
to the stabilisation of Pakistan and Afghanistan. Retaining the
current breadth, quality and shortwave distribution of World Service
English, would enable the World Service to continue to serve those
listeners in Africa and South Asia with no alternative source
of impartial news. And retaining current levels of shortwave and
medium wave transmission of BBC Arabic radio would enable the
World Service to continue to serve audiences in countries where
instability and biased local media are increasing concerns. The
recent unrest in Tunisia and Egypt has demonstrated the importance
of ensuring that these audiences have access to impartial, high
quality news, on platforms that cannot easily be censored or switched
off.
CONCLUSION
The plans announced by the World Service on 26 January,
in order to deliver the required savings, reflect the BBC's strategic
judgement about the best ways to prioritise within the limited
resources available, in the context of the agreement with the
FCO about the language service closures. The World Service continues
to have a vital role to play, and could - should the Government
wish to explore it - make a greater contribution to the UK's international
development strategy.
16 February 2011
APPENDIX
WORLD SERVICE
FUNDING
All figures below for the years 2010-11 to 2013-14
refer to Grant-in-Aid funding from Government, to be drawn down
from the FCO. Figures for 2014-15 are those intended by Government
to apply in the last year of the Spending Review period. However,
the World Service will transfer to Licence Fee funding in that
year and the BBC Trust will set the budget.
REVENUE FUNDING
World Service revenue funding over the Spending Review
2010 period is detailed in the following table, which was presented
to the World Service by the FCO.
SR10 ALLOCATIONS FOR BBC WORLD SERVICE
| 2010-11 | 2010-12
| 2012-13 | 2013-14
| 2014-15 |
| BBC World Service Baseline (and inflated equivalent in brackets)
| 229 | (234) | (239)
| (245) | (252) |
| Adjusted Grant-in-Aid Baseline |
| 206 | 203 | 199
| 189 |
| Plus funds for new services |
| 10 | 10 | 10 |
10 |
| Plus contributions to BBC Pensions |
| 13 | 13 | 13 |
13 |
| Total Grant in Aid Resource Allocation for BBC World Service
| | 231 | 226 |
222 | 212 |
The table shows a reduction of £63 million from the inflation-adjusted
baseline of £252 million down to £189 million—a
25% real terms cut. However, this include nominal allocations
of funds to new services (£10 million) and pensions costs
(£13 million). We were advised by FCO officials that these
funds were not hypothecated to those purposes and could be used
flexibly to maintain existing services if needed. Once these two
sums are added to the baseline funding, the real terms cut falls
to 16%. However, if those sums were to be spent as the table suggests,
current services would face the full effect of the 25% baseline
reduction. This would require significantly greater cuts than
have been announced to date.
The effective cut increases further when the effects of the 22
June 2010 "Emergency Budget" are taken into consideration.
The World Service's share of the budgetary cuts announced then
was £7.6 million. Of this, £1.6 million per annum was
applied in 2010-11. Although the remaining £6 million per
annum will not be applied until 2011-12, the Government subtracted
the full £7.6 million from the World Service's formal baseline
for the purposes of the Spending Review.
Because World Service's actual allocation for 2010-11 is £6
million higher than the baseline used for the Spending Review,
this adds £6 million to the savings the World Service has
been required to make, increasing the real terms cut to the baseline
to 27%.
These considerations are summarised in the following table:
WORLD SERVICE BASELINE(S) AND TOTAL REVENUE FUNDING 2010-11
TO 2014-15
| 2010-11 |
2011-12 | 2012-13 |
2013-14 | 2014-15 |
| 2010-11 baseline in March 2010 |
236.7 | |
| June 2010 Baseline cut | Applied from 2010-11
| -1.6 | |
| To be applied from 2011-12
| -6.0 | |
| Total baseline cut | -7.6
| |
| 2010-11 revenue allocation (£m)
| 235.1 | |
| 2010-11 baseline used for SR2010 |
229.1 | |
| 2010-11 baseline + inflation (£m)
| 229.1 | 234 | 239
| 245 | 252 |
| Adjusted baseline |
| 206 | 203 | 199
| 189 |
| Nominal allocation for |
| 10 | 10 | 10
| 10 |
| CSR | services |
| | | |
|
| 2010 | Nominal allocation for
| | 13 | 13 |
13 | 13 |
| Pensions |
| | | |
|
| Total revenue grant |
| 231 | 226 | 222
| 212 |
| Real terms reduction in total revenue grant (£m)
| 3 | 13 | 23 |
40 |
| Real terms reduction in total revenue grant (%)
| 1% | 5% | 9% |
16% |
| Real terms reduction in baseline from official SR2010 baseline (£229.1m)
| 25% |
| Real terms reduction in baseline from actual 2010-11 revenue grant (£255.1m)
| 27% |
CAPITAL GRANT
CAPITAL ALLOCATION FOR THE WORLD SERVICE OVER THE SPENDING
REVIEW 2010
PERIOD IS DETAILED BELOW:
| 2010-11 | 2011-12
| 2012-13 | 2013-14
| 2014-15 |
| Capital funding (£m) | 31
| 22 | 16 | 16 |
15 |
1
House of Commons International Development Committee, Department
for International Development Annual Report & Resource Accounts
2009-10. Back
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