UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 849 -i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

FOREIGN AFFAIRS COMMITTEE

IMPLICATIONS OF THE BBC WORLD SERVICE CUTS

WEDNESDAY 9 MARCH 2011

LUKE CRAWLEY and JEREMY DEAR

JIM EGAN, PETER HORROCKS and RICHARD THOMAS

MARK THOMPSON

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Foreign Affairs Committee

on Wednesday 9 March 2011

Members present:

Richard Ottaway (Chair)

Mr Bob Ainsworth

Mr John Baron

Sir Menzies Campbell

Mike Gapes

Andrew Rosindell

Mr Frank Roy

Sir John Stanley

Rory Stewart

Mr Dave Watts

Examination of Witnesses

Witnesses: Luke Crawley, Assistant General Secretary, BECTU, and Jeremy Dear, General Secretary, National Union of Journalists (NUJ), gave evidence.

Q1 Chair: I welcome members of the public to this sitting of the Foreign Affairs Committee. It is the first evidence session of the Committee’s inquiry into the implications of BBC World Service cuts. We will be taking further oral evidence from the Foreign Secretary on 16 March. I welcome our two witnesses: Jeremy Dear, General Secretary of the National Union of Journalists, and a late stand-in, Luke Crawley, Assistant General Secretary of BECTU, as Gerry Morrissey has unfortunately broken or twisted his ankle and is unable to walk. We send him our best wishes and commiserations.

Let me open the batting and ask, given the Foreign Office’s need to cut its levels of public expenditure, whether you think that they had no alternative but to make cuts to the World Service, or whether you think that the axe should have fallen on other Foreign Office activities instead.

Luke Crawley: The short answer is that the cuts in the Foreign and Commonwealth Office budget, as I understand it, are of the order of magnitude of about 10%. However they’ve decided that the cuts in the money they give to the World Service should be of the order of 16%. My first point is that, if there was some equality or parity between the two levels-only a 10% cut-that would at least be seen to be equal treatment in all areas of Foreign Office spending.

Q2 Chair: You would have accepted a 10% cut?

Luke Crawley: I am not sure we would have accepted it, because there’s a second point I’d make, which is that, in terms of the amount of money spent on the World Service-I believe it is about 0.5% of Government spending on international effort-it is small, but extremely good value. The audience it reaches is of the order of 2.5 billion on television, on radio and online and it is extremely effective at providing an impartial news service-I’m sure you know all this-but it is also seen by many people as a vital part of their day and it reaches audiences of a different kind. There are obviously people who can listen to FM on the internet, but short wave is very effective at reaching a huge range of people who would not otherwise be able to access that kind of news and information.

Jeremy Dear: We can make a strong case as to why we believe all the services should be saved, but we can make an even stronger case that the cuts in the World Service and BBC Monitoring are disproportionate to the cuts that the Foreign and Commonwealth Office are facing and certainly disproportionate to the increase in the budget for the Department for International Development, for example, when the World Service quite clearly meets a number of development goals. We think that there are alternatives to these cuts. Obviously, if the FCO has cuts imposed on it, as part of a general comprehensive spending review, that’s a matter for it, but what it passes on to the World Service is clearly disproportionate.

Q3 Chair: I know you both don’t agree with the cuts. You have made that perfectly clear. Can I put a hypothetical question to you? If you had to make the cuts yourselves, would you have made the same cuts or would you have had other priorities in the World Service? In other words, given that cuts were going to be made, are the priorities right?

Jeremy Dear: There are two clear things that the BBC World Service depends on: properly resourced journalism and safe and secure transmission networks to broadcast its journalists’ work. I certainly believe that many of the decisions around the ending of short wave are wrong, in that they mean that we will rely much more on either the internet or FM transmission, which is much more susceptible to political pressure. There needs to be a re-looking at strategy for the BBC World Service, and therefore these are not necessarily the right cuts.

Cuts have been made before to services where there was perceived to be a lack of geopolitical interest at that particular time. The last such situation that I remember was the Thai service, which was closed down days before thousands of people took to the streets of Thailand to overthrow the Government. It is easy to say, "We would cut this service." The Foreign Office needs to look again at the strategy, in particular based on those two principles.

Luke Crawley: I would not disagree with what Jeremy has said. It is obviously extremely invidious to be asking us where we would make cuts, because any cuts that we proposed would be cuts in our members’ jobs. Clearly, as trade unions, we’re here to defend our members’ jobs. But Jeremy’s points about the importance of the World Service, and how it delivers an impartial news service without political interference by either the host country or any other, are extremely valuable.

The issue about short wave has been bypassed. The closing down of short wave does not seem to me to achieve any of the goals that the BBC World Service wants to fulfil or, in fact, any of the goals that the Foreign and Commonwealth Office hopes to achieve by funding it.

Q4 Chair: Given the importance that the unions obviously put on the World Service, would you be prepared to accept any cuts at all?

Jeremy Dear: We have a history since the Second World War of negotiating with the BBC over cuts that are imposed. We are not going to go round advocating cuts, but sometimes there are cuts in budgets that we have to respond to. Whether that means changes in technology or changes in the natures of services, we have had to do it. Of course, we will do that if that is the implication, but we think that these cuts should not happen.

Q5 Chair: Do you have a view on what the size of the budget should be for the World Service?

Jeremy Dear: If you look at the size of the cuts-about £46 million-I understand that about 1.5% of the increase in the DFID budget would cover the whole of that £46 million. Were that money for overseas development assistance to be transferred to the World Service for overseas development assistance goals, you wouldn’t need to make any of these cuts.

Q6 Chair: So you are saying that the budget you would agree to is the budget pre-cuts?

Luke Crawley: Jeremy is absolutely right. Both unions at the BBC have been in the unfortunate position in the main BBC of having to deal with job losses, but that is also true of the World Service. I was the official for the World Service in the early 1990s, when there was a similar attempt-in my view, misguided-by the Foreign Office to reduce the budget. We ran a very vigorous campaign and had some success in turning it over. I have to say that we had an extraordinary level of cross-party support then, as I hope we would have now. People feel very strongly about the World Service in Parliament, and rightly so. It’s something of a jewel in the crown of Britain, both here and abroad, and it is seen as a very important force. For that reason, the Foreign and Commonwealth Office needs to look again at whether it should cut or not. In our view, it should not.

Jeremy Dear: It is an argument based not just on, "Give us this amount of money," but the cost-effectiveness of this money. If you look at the use of what people term soft power in the delivery of British values in different parts of the world, the World Service is an amazingly cost-effective way of doing that. The level of these savings seems disproportionate to the impact they will have, such as the 30 million fewer listeners-that will be even more when you take all the shortwave transmission endings into account.

Q7 Sir Menzies Campbell: I understand the reluctance to becoming cutters, but may I turn the question round slightly? If you were to wake up tomorrow and discover that the 16% cut had gone back to 10%, and that there was a 6% unexpected bonus, what would be the elements that may be subject to cuts that you would want to keep?

Luke Crawley: Again, you are putting us in an invidious position, because, clearly, we do not want any of our members, whether they are involved in the delivery of the broadcast or working on the journalism side, to be dismissed. That seems to be what is facing us. If 6% was restored, we would welcome that. We would be prepared to talk to the BBC World Service management about what should be done with that and what should happen. Jeremy has made the point that we have negotiated in the past, usually successfully-i.e. without dispute-our way through problems of this order of magnitude, and I think that we could do so again.

Q8 Sir Menzies Campbell: I do not want to put you in an invidious position. I am trying to find out whether there is an order of ranking of priorities in your mind.

Jeremy Dear: There is for a lot of campaigners. You will have seen high profile campaigns around some services, but there is not for us. We believe that a lot of these services all contribute to BBC World Service journalism. The BBC World Service English language newsroom and other parts of the BBC rely on the expertise of people in the Caribbean, in Latin America, in Africa, in India and so on, in order to produce other programmes as well. It is hard to say that there is a priority, because all of it contributes to BBC journalism.

Sir Menzies Campbell: I will not press the point.

Q9 Mr Ainsworth: Maybe there is another way of handling this that might help you. Nobody is surprised by the position that you take; it would be very surprising if you took another. Given the difficulties that you understandably have, can you be specific on the adverse consequences of the cuts programme as you see it?

Jeremy Dear: For people in five language service areas, they will have no BBC transmissions in their own language. For many people around the world, they will no longer be able to receive BBC radio via shortwave. That means that they rely either on rebroadcasts or relays on FM or internet services. In many of the debates that there have been, there has been a lot of talk on how listening online has gone up by 125% in such and such a country, while listening on the radio has gone down 30%. Most people still receive the BBC World Service through shortwave transmissions across the globe. That is a fact. The balance is clearly changing, but not to the extent that shortwave should be ended.

The ending of shortwave will have a massive impact in many places, particularly in places with the poorest people, and where there is no access to electricity in order to access internet services. There is a danger-it was made clear in one of the pieces that Mark Tully wrote about the Hindi service-that you only talk to the elite and that you do not talk to the people. That will be the overriding effect of the ending of these services. In our written submission we have included a detailed breakdown of each service and what we think the implications of the cuts will be in different places. I am happy to send that on again, so that you are able to see that, to back that information up.

Luke Crawley: Just to pick up on the shortwave issue, anyone who has had the pleasure of listening to the World Service abroad on shortwave will know that it is an interesting auditory experience, shortwave being what it is. You may not be aware that there is a thing called Digital Radio Mondiale, which translates as digital radio on shortwave, which is being developed. It is an opportunity that the BBC could and should take, to ensure that listeners on shortwave can listen in quality. That would do an enormous lot of good. There are obvious advantages; not least that it would be a delivery system free from political interference, the add-on licensing costs of rebroadcasting FM and so forth.

Jeremy has made the point that, in some areas, shortwave audiences have actually increased, not just decreased and that 53% of the radio audience is on shortwave. The majority of people listen on shortwave. For example, the Indian Government took the view that, politically and financially, they want to support Digital Radio Mondiale and told all Indian radio to get on with sorting it out and making sure that they could broadcast in that way. That is a very important thing that the BBC could and should pick up. The Foreign and Commonwealth Office should pay attention to that fact because, as Jeremy said, it reaches an audience-not just the elite, but the mass of people and it is all the more important for that.

Jeremy Dear: That is just one example. For non-English services, the BBC’s mobile and internet audiences are just 6% of the audience for radio. Although the balance is changing, it has not changed that significantly.

Q10 Mr Ainsworth: I want to chase those two issues a little further without putting you in an impossible position. You appear to be particularly exercised about the language services. Is that right or are you just opposed to cuts in principle? Is that an area that you are particularly worried about?

Jeremy Dear: Of course, we are particularly worried about the BBC withdrawing entirely from certain languages. That is clearly a concern. There are also concerns about the impact of the cuts on places such as the World Service English language newsroom where key correspondents and regional experts are among those whose jobs are scheduled to be cut. Particular programmes such as "Europe Today" and "Politics UK" are to be cut. Again, those add to the pool of experience and expertise that the whole of the BBC relies on when it is producing its journalism. It will mean a narrowing of the range of stories provided for English and language services because that is what those 120 or so journalists who work there do.

Q11 Mr Ainsworth: On the shortwave issue, how would you respond to what is being said by some: this is merely an acceleration of something that was going to happen in any case. It has been said that the BBC was going to get out of shortwave and become more reliant on other methods as all uses change. How do you respond to that?

Luke Crawley: Ask the BBC obviously, but from our point of view we would say that shortwave is right now reaching the majority of the radio audience. With the development of such methods as DRM, it could be reaching more people. The fact is that if the BBC gets out of shortwave, it becomes a self-fulfilling prophecy. You might not know, but internationally a frequency cannot be owned in the way that they are controlled in this country. You own it by the fact that you broadcast on it. If you stop broadcasting on it, guess what? Someone else will take it over as soon as possible, and you cannot get back on to it.

Even if, let us say, in five years’ time Digital Radio Mondiale became the norm for broadcasting shortwave in this country, the BBC would have real problems in trying to build its audience back up again on those frequencies because it had vacated them, and someone else was squatting on them and had developed a different audience. The BBC would have lost it. It is something that the BBC has got that it should not be throwing away. There is a real danger of throwing it away.

Jeremy Dear: You cannot underestimate the issue about political interference and the blocking of FM stations or blocking of the internet compared with shortwave. Whether it is China, Russia, Iran or parts of the Caribbean or Africa, this happens on a regular basis. Our evidence documented quite a lot of examples of that sort of thing happening. Shortwave is not susceptible in the same way.

Q12 Mr Watts: Looking to the future, are you confident that the BBC Trust will protect world services in the future? Do you take comfort from the director-general’s commitment that the funding for the World Service will be increased after it takes over responsibility from the FCO?

Luke Crawley: From our point of view, that is a pudding, the proof of which is in the eating, but the fact is that I am sure the trust will give undertakings and do its best to police that. As I understand it, and because the BBC is taking it over from 2014, it will obviously come under scrutiny along with charter renewal in 2016. That will be within 18 months of it having taken over. It will be possible for the Committee and other parliamentary Committees to have a look at what has happened.

As for whether we think that funding increase is bound to happen, it is a bit hard to say at the moment. The BBC is wrestling with quite a difficult licence fee settlement at the moment. What will it be able to do when it takes over the World Service? It says that it will take over the World Service and hopes to be in a position to put more money into different parts of it. I hope that that is the case, but I don’t know for certain whether it will be or not.

Jeremy Dear: A number of changes have already happened at the World Service that we have not been supportive of, and that we think have already caused some damage to the ability of the BBC World Service to cover the range and scope of stories in the way that we would hope, but we have been told that the BBC will put more money into the World Service post-2014. We have to take that at face value. There is a concern about the possible implications of merging all the BBC’s news operations into one large news operation. Of course, more co-operation can be achieved between all parts of the BBC, but the World Service has a very distinctive voice and a very different style of journalism to some extent, which we would not want to be lost. There needs to be some way in which there is a ring-fenced budget for the BBC World Service within an overall BBC budget.

One of the dangers in all this is that we are going to see some services close. We will see a lot of skilled, expert journalists and technical staff lost to the BBC. The BBC might say, "Well, two or three years down the line, we are actually going to be putting more money in and we may well be looking to re-recruit some of these very same skilled staff." We think that there is an argument to be made about bridging that period. If the BBC’s commitment to put more money in is genuine, there can be a discussion about how we make sure we don’t pay out a load of money in redundancy pay in 2012, and then in 2014 hire the very same people to do pretty much the same job.

Q13 Mr Watts: On the ring-fencing, is that something that you have discussed with the BBC?

Jeremy Dear: Not at this stage, no.

Q14 Mr Watts: Is that something that you would seek to do in future?

Jeremy Dear: Certainly we would be seeking to protect the amount of money that goes into the World Service. I don’t know what the mechanism for doing that is, but ring-fencing its budgets would be one way to do that. But we would also hope that there is sufficient parliamentary scrutiny at the time of the BBC licence fee settlements and charter renewals and so on to make sure that it is sticking to the commitments that it has given to fund the World Service properly once it has taken it over.

Q15 Mr Baron: Can I press you on the issue of whether the BBC Trust is going to be adequately protective of the World Service? We live in a world of the cult of the celebrity. We all know there is a danger that funds and resources could be switched to-how can I put it?-"more popular" programmes. The current governance arrangements are still in force, and Peter Horrocks, who is sitting behind you, said that the right measures would be put in place in future. We briefly discussed ring fencing. What other options are there? What sort of mechanism would you like to see put in place to ensure that the World Service is adequately protected?

Luke Crawley: You talked about ring fencing, and Jeremy has talked about the kind of scrutiny that would be undertaken. If you put such and such a mechanism in place, it is difficult to say that that guarantees something will happen. At the moment, clear undertakings have been given by the director-general about what will be spent and the increases that could happen after 2014. If we in the trade unions feel that we’ve been given an undertaking by the employer to do something, and we get to the point where that thing is going to be done and it inevitably involves spending money, but the employer suddenly says, "We can’t possibly spend that money now, for these reasons", we would take a view on that, and, depending on what it is, you might end up in a discussion, a negotiation or even a dispute. The World Service is no different in that regard.

Between now and 2014, we are likely to be having many heated and vigorous discussions with the BBC about restructurings and redundancies. Assuming we get to some point around the middle of 2013 and those have been dealt with, we would expect the BBC in 2014 to be able to deliver on its promises about the protection of the World Service. If the BBC said, "Guess what-we are now going to have to dismiss large numbers because we can’t do what we said", I am sure that Parliament and Committees such as this would take a view, and we would certainly be taking a view on behalf of our members. It is not clear to me that there is another mechanism that we could use to enable us to do any more than that. We exist to try to protect our members’ jobs as well as to try to preserve the value of something like the World Service. I think we will be very vigorous in trying to do that. If we weren’t, our members would be telling us about it in short order.

Jeremy Dear: Mechanisms are difficult to achieve; scrutiny of what is being spent is easier. The point you make reflects our real fear about the idea that you suddenly create one big news pool and there is then internal competition for resources. We know that covering a story in the Great Lakes area of Africa is much more expensive than covering a film-opening in Leicester Square, for example. Yet when budgets are under pressure, there will clearly be pressure on editors to meet budgets and therefore cover stories that rely more on celebrity or political PR than expensive news-gathering. Ring-fencing of budgets is one way to guard against that, but it seems that it is almost down to you, in terms of parliamentary scrutiny, to do something too.

Q16 Mr Baron: Absolutely, and we accept that responsibility, no doubt. But coming back to the point made earlier, that approach-realistic though it may be-assumes that there is a clear picture, quite early on, of the ambition, scope, responsibilities and coverage of the BBC World Service in the future. How else can you judge whether promises have been abided by?

Jeremy Dear: But isn’t one of those promises the percentage of the BBC’s budget that is spent on the World Service? Although the BBC’s budget may change from year to year as a percentage of its spending, the World Service should have no less than is spent on it at this time. Indeed, the BBC is saying they would spend more on it. Were the BBC to be successful in increasing its commercial income, for example, more money would go into the BBC World Service as well.

Q17 Sir John Stanley: Leaving the present cuts situation to one side for a moment, can you both tell us, as far as your respective union memberships is concerned, whether, in the long term, you feel that your members would be better off if the World Service remained as a grant-in-aid body under the wing of the Foreign Office, or within the BBC? Depending on your answer, will you explain why you feel they would be better off in your favoured place?

Luke Crawley: That is not an easy question to answer, because at the moment it is not easy to tell what is going to happen when the World Service becomes part of the BBC. Obviously, you could argue that if it is inside the BBC and gets a set proportion of the BBC licence fee settlement-whatever that is-that gives it some measure of protection. Equally, you could say that if it remained part of the FCO, you would expect a Government to recognise its value and try and preserve the level of funding.

However, whichever way you go, things can happen. For example, the licence fee settlement could be reduced-it has been frozen for the next few years, but it could be reduced. Similarly, we could be facing, as we are now, general cuts by the Government across the board, which would have an impact on the FCO. To be perfectly honest, I am not sure that I can give you a definitive answer one way or another, because it is not clear to me that one is necessarily better than the other.

Jeremy Dear: Again, I don’t think there is a definitive answer. At the outset, I set out the two principles about properly resourced journalism and safe and secure transmission mechanisms for such journalism. We would want to see whoever is funding the BBC meeting those criteria. There are drawbacks with it being Foreign Office-funded; equally, there could be drawbacks with it being BBC-funded, because of the kind of points that John Baron was making about competition for budgets. I don’t think that there is a definitive answer. In 10 years’ time we may be coming back and saying there is, but I don’t think we know now.

Q18 Sir Menzies Campbell: But isn’t the absence of a definitive answer absolutely the crux of this part of the debate? You have a flat licence fee for six years. You do not have grant in aid, over which we, sitting round this table, have a much more direct influence, than influence with an independent trust, whose independence is guaranteed.

It is not just a question of one element of news competing with another, because it could easily be one division-light entertainment competing against news and documentaries, or news and documentaries competing against the World Service. That uncertainty fills people like myself with considerable apprehension about where we will be in 10 years. Even accepting the sincerity of the undertakings that have been given by the Foreign Office on behalf of the BBC and the Trust, it is that element of uncertainty that cannot be eliminated, as your answer to the question makes clear.

Jeremy Dear: You are right to some extent, but let’s not forget that the next three years’ funding are nothing to do with the BBC, it is Foreign Office funding and we are facing a 20% cut-£46 million less. Therefore, those who perhaps had some faith in the grant in aid and the FCO grant have probably lost some of it as a result of these cuts and now there will be more people who say, maybe the BBC will make a better fist of it.

Sir Menzies Campbell: At the moment I can ask questions directly of the Ministers responsible for that part of the Foreign Office which is responsible, in turn, for the World Service. I can approach them formally or informally. That is a much more immediate opportunity to exercise influence than it would be approaching the chairman of the BBC Trust.

Q19 Mr Roy: May I move on to pensions? On 26 January the Foreign Secretary said on the Floor of the House: "While any closures might be regretted, they would not be necessary at all were it not for the inherited BBC pension deficit". What did you think?

Jeremy Dear: I actually only read it this morning and I think it is an outrageous statement and completely untrue. Let me put it this way, it seems to suggest that there is a pensions deficit caused by people having overgenerous pensions. There is potentially a pensions deficit, although we have not had the valuation yet; it has not been finalised and there have already been changes announced to BBC pensions which will reduce the value of people’s pensions. If there is a deficit in the scheme, some of us might argue that it is as a result of the BBC having had a partial pensions holiday over a 13-year period to the tune of around £1 billion. It seems to suggest, in the way it is phrased, that it is to do with workers having too generous pensions. I simply do not accept that. The BBC knew exactly what their pension commitments were, their pension commitments will be less going forward as a result of agreements that have been made; that could have been expected and therefore, I simply do not accept that argument as a reason for the cuts. The reason for the cuts is because there is £46 million less being given to the BBC.

Luke Crawley: Just to make a point on pensions; as we understand the figures, the contribution from the World Service to deal with the deficit is included in the proposals relating to the World Service, but the figures exclude BBC Monitoring, which we haven’t really talked about. That is going to have a consequence; it could well lead to further job losses. Estimates have been made of how much will be required to deal with the deficit, but, as Jeremy said, there is no announcement yet of what the deficit actually is. There have been quite serious changes made to the scheme to reduce its costs, but the actual payments that have been budgeted for, as we understand them, could actually exceed the estimate of what’s required and that would lead to further job losses, so there are still difficulties to be got through in terms of the impact of the pension scheme deficit.

Q20 Mr Roy: What would therefore be lost to the World Service in relation to separate provision if it has to contribute to the BBC’s wider pension deficit?

Luke Crawley: The World Service has already budgeted for that as part of its proposal, but BBC Monitoring, based at Caversham in Reading, as we understand it, have not yet budgeted for that and we think that there is a problem coming when that comes over the horizon. We think that they should have done. There are lots of issues about where the money comes from, but it not as though any of this has been a secret; we have been in and around the issue of pensions in the BBC for the last eight or 10 years and in the last three or four years, it has been pretty intense, so the management there should have known what was coming down the line.

Q21 Mr Roy: Do you think that it’s right that your members should be willing to accept a lower pension settlement to help with the BBC pension deficit if it means maintaining a better World Service?

Luke Crawley: I am not sure that is quite how we put it to our members when we balloted them; I don’t think we put it to them that there was an issue about the cost of the BBC pension scheme and what was required to clear the deficit. It is no secret that it was an extremely contentious issue because a lot of people felt that the BBC were going back on promises that had been made in relation to past service, but, by and large, union members at the BBC were prepared to say, "Okay, we don’t like this, this is definitely not what we thought was going to happen, but we are prepared to sign up to it in order to make the BBC pension scheme affordable going forward." I don’t think they saw it in the context of being able to deal with possible deficits arising either in the World Service or in Monitoring; that is a completely different issue, which BBC management have to address, rather than the staff.

Jeremy Dear: It is also worth making it clear that we still await the valuation of the pension scheme. No final conclusion has been made until such time as that valuation report is in.

Chair: We are waiting for that too.

Q22 Mr Watts: Just to get that on the record, I think what you are saying is that the Foreign Secretary’s statement was inaccurate, because he couldn’t have known what the deficit was when he linked it to the savings that needed to be made in the BBC. He would have no way of knowing.

Luke Crawley: As far as I understand it, as I sit here now, it is not in the public domain, so if he knew about it, he would have had it from some method that is not in the public domain. Perhaps the director-general can answer directly the question of whether he knew, but I don’t believe that he could have done. I agree Jeremy, it seems not possible. But who knows?

Q23 Mike Gapes: Can I take you to the job losses? I have a specific question, first to BECTU. In your written submission, you expressed specific concern about impacts on those foreign language staff whose UK residence depends on their employment by the World Service. The Foreign Secretary, on the Floor of the House, said something about that on 26 January: "Ministers will want to make sure that they do not" was his exact phrase. What does that mean? Are you reassured by what he said?

Luke Crawley: You would probably need to address the first part of your question to the Foreign Secretary; I am not able to see into his mind and determine exactly what he means. On the second part-whether we are reassured-well, we are a little bit reassured, but actually we require a great deal more reassurance.

As I understand it, there are around about 277 people affected; that is to say, people whose residence we think depends on their World Service job. Depending on their status-not everyone has the same visa status-some would face repatriation. We believe that around half of the 277 could fall into that category. We would certainly welcome a definitive statement from the Foreign Secretary that this will not result in repatriation. His words were some comfort, as I said, but we would prefer something absolutely categorical.

Q24 Mike Gapes: Do you have a detailed breakdown by country of those individuals?

Luke Crawley: Not at the moment.

Q25 Mike Gapes: Do you think that there is such a list somewhere in the World Service?

Luke Crawley: We have to think so. There must be, yes.

Jeremy Dear: Yes.

Q26 Mike Gapes: Obviously, if you were being sent back to a democratic country it is rather different from being sent to somewhere where your status might be rather vulnerable.

Jeremy Dear: That is the key point. You have here journalists broadcasting news about foreign Governments, some dictatorial and tyrannical, in different parts of the world. You then have the possibility that they lose their job and their visa, as a result being sent back. I have seen the statement and it talks about procedures for dealing with such issues, which there are, because my union represents lots of people in deportation cases. We currently have one, for example, involving a Cameroonian journalist, who was very critical of the regime in Cameroon, was in prison there and beaten up, escaped, came to Britain, is now a failed asylum seeker and so is to be returned to a country that is called the biggest jailer of journalists in Africa. That has all been done through proper procedures, so our fear is that we will get some situations-it might be China, Russia or some of the countries in Africa and so on-where you have a very real danger of people being sent back to countries that can appear vaguely democratic on the surface, but actually for journalists are very dangerous.

Q27 Mike Gapes: You are not satisfied by the statement made by the Foreign Secretary.

Jeremy Dear: No.

Luke Crawley: No.

Q28 Mike Gapes: Can I take you to the wider question? What consultations have taken place between the unions and the BBC World Service management about the job losses?

Luke Crawley: I think I can say that they have been fairly detailed, extensive and-I have to say-over a relatively short period of time, for lots of good reasons. I think the BBC has made serious efforts to ensure that consultation is proper and adequate. At the moment, I don’t think we would have any complaint about what is happening. We are less happy about the outcome, but the BBC is consulting properly.

Q29 Mike Gapes: Are you in a position to know at this stage the grades of jobs to be lost, and how many? How many of those will be at management level, of the, I think, total 480 announced job losses?

Jeremy Dear: I understand from the figures we have got that none is at senior management level.

Luke Crawley: Yet. We are not sure what senior management level means. As far as we have figures, I believe that in this round of cuts, nothing proposed is at senior management level.

Jeremy Dear: We have them broken down almost into types of jobs, such as editorial and technical, rather than all the grades at this stage, because we are still in a consultation process.

Q30 Mike Gapes: Do you know the specific posts and individuals? Or is this more general?

Luke Crawley: It is a mixed picture because in some cases, there is only one person in the post-a singleton post-and that is obviously going to be closed. In other cases, they are reducing the number of hours rather than closing the whole service. So let’s say that there are 20 producers, for argument’s sake, and they are going to lose 10 or five. There has to be a selection process. It is less easy to be certain about exactly who is going to be affected at this stage.

Jeremy Dear: And where it is a whole-language service, it is clearly different from reducing the number of jobs in a larger news room.

Q31 Mike Gapes: You can’t easily transfer someone from one language service to another language service because of the particular skills.

Jeremy Dear: Generally, there are strong redeployment policies across the BBC, but it becomes more difficult when it is a language service.

Q32 Andrew Rosindell: The NUJ suggested that one solution to the cuts to the BBC World Service would be for DFID to step in and use some of their seemingly vast resources to ensure that cuts do not take place. That has been supported by my colleague, Andrew Tyrie. Could you tell us how, if that were to happen, it would affect the accountability and independence of the BBC World Service? Would DFID have too much influence, if they were funding it?

Jeremy Dear: It is certainly not asking DFID to fund the whole of the World Service.

Andrew Rosindell: Just to plug the gap.

Jeremy Dear: Yes. The point we are making is that with their budget increasing by an average of £3.5 billion a year, less than 1.5% of that average annual increase, which would be about £50 million, the equivalent of what is being cut from the World Service, could be used. Clearly, it could only be used where the World Service is carrying out work that is compatible with overseas development assistance goals. Quite clearly, a lot of it is already being done, in bolstering fragile states, enhancing democracy and media freedom. I don’t believe it would give DFID any more of a say over what the BBC World Service did than it would give the Foreign Office through the grant-in-aid. There are mechanisms that can be put in place to ensure that they don’t have any more say over it. We are talking about the period of three years until the BBC takes over funding of the World Service.

Q33 Andrew Rosindell: Have you discussed the proposal with DFID? Have you put it to them? What reaction did you get?

Jeremy Dear: We haven’t. I understand that the BBC has, and I understand that a number of MPs have also had discussions. I also understand that the Secretary of State said that he would look at it and have discussions with his colleagues in DFID about the possibilities. I am not aware that any definitive conclusions have been reached, but it is certainly something that you as MPs are in a better position to press than we are.

Chair: May I thank you both very much? You have been very frank and open with your views, and it is much appreciated.

Examination of Witnesses

Witnesses: Jim Egan, Controller, Strategy and Distribution, BBC Global News, Peter Horrocks, Director, BBC World Service, and Richard Thomas, Chief Operating Officer, BBC Global News, gave evidence.

Q34 Chair: We now turn to the management of the BBC World Service. I give a warm welcome to Peter Horrocks, who is the Director, to Richard Thomas, who is the Chief Operating Officer at BBC Global News, and to Jim Egan, who is the Controller of Strategy and Distribution at BBC Global News.

Peter, you have been here once before and spoken to us. Is there anything you would like to say just to bring us up to date, before we get into the questioning?

Peter Horrocks: Thank you very much, Chairman. Briefly, by way of introduction, I was here in November and at that stage it was only possible to speculate about the nature of the changes that the World Service would need to announce. Clearly, we have announced our specific changes since then.

More importantly, I want to draw the Committee’s attention to developments in the world-after all the World Service is about responding to the world-and in particular what has been happening in the Middle East and North Africa. I am sure that members of the Committee will have seen the intrepid reporting by people such as John Simpson and Jeremy Bowen, but I want to briefly mention the work of the BBC Arabic service.

In recent weeks, we have seen the crowds gathering in Tahrir Square. They set up a makeshift projection system to be able to watch the BBC Arabic television service. Again, in the protests in Bahrain a similar thing was set up. Recently, on the border between Libya and Tunisia, again people were watching BBC Arabic. That’s because of the trust that BBC Arabic has with the audience in the Arabic world, through the history of Arabic radio and the developments that there have been in television and in online recently that have built that trust. It is that relationship which is so precious to us.

You can see through the Arabic service, through both the traditional delivery through radio-we are retaining and sustaining the shortwave for radio-as well as the investment in television and online, whose figures have doubled in recent weeks, the importance of and the need for what the World Service does. The struggle that we have had in recent months is to strike the right balance between the traditional delivery and what was being discussed with the previous panel-delivery through radio, which remains vitally important-and our ability to invest in the future. That is what we have been working through with the Foreign Office.

I have no doubt that the Foreign Secretary personally is hugely supportive of the World Service. He has said that repeatedly. Our dilemma has been that with the resources that are available in the current economic and financial circumstances, we are suffering damage to our existing services and, of equal importance to me, we are not able sufficiently to invest in new services for the future that can maintain the strength, quality and reputation that are important to our audiences, but also reflect so well on Britain.

We very much welcome the Committee’s investigation of this issue, to assess whether the level of resource is correct, whether all the right sources of funding have been explored and whether the right choices have been made in these very difficult circumstances.

Q35 Chair: Thank you very much indeed. That is very helpful. You were originally asked to look at a 25% cut, and you eventually ended up at 16%. When was that decision made? When was agreement reached, as it were? And do you think it is fair, in the light of the fact that the Foreign Office is having a 9% cut in real terms?

Peter Horrocks: We were asked to do a scenario of 25%. It wasn’t a question of 16% being agreed; it was clearly a decision that was ultimately made by Ministers, and we were informed about it some weeks before the announcement of the comprehensive spending review on 20 October.

When I originally spoke to the Committee, we were in the position of having the information that was provided by the Chancellor to the House, which described an overall Foreign Office settlement of a reduction of approximately of 24%. Certainly at that point, the comparison was between the World Service’s 16% and that broader figure. However, through the investigations of the Committee and your report, it has become clearer. The figure that I recall from the evidence is that there is a 6% real terms reduction for the FCO budget, so the strict comparison is between 6% and 16% for the World Service. Clearly the difference in that number speaks for itself. The Foreign Office has explained the rationale for that, but there clearly is a discrepancy, and the reference to the FCO family is the fact that different members of the family have clearly been treated in different ways.

Q36 Chair: Did the Foreign Secretary personally intervene in the discussions leading up to the final decision?

Peter Horrocks: I do not know. There was a meeting that the director-general, the chairman and I had with the Foreign Secretary immediately before the announcement of the settlement, but otherwise my dealings were primarily with officials and the permanent secretary.

Q37 Andrew Rosindell: The service closures to the BBC World Service that are being proposed are quite devastating, particularly in areas of the world such as the Caribbean, where we still have a huge amount of interest in countries and territories that still look to Britain. How did you reach the conclusion that the Caribbean and other parts of the world should be targeted for the cuts?

Peter Horrocks: I should say that none of the services that the BBC proposed for closure were any that we regarded as involving a simple or light decision. They were all significant losses for each of the audiences in those areas. However, given the extreme financial pressure we were under, we needed to make choices. The consequence of retaining all of our services would have been a degradation and thinning out of the quality of our whole operation, which we judged would in the end lower the BBC’s reputation and be a reflection on Britain. We therefore had to look primarily at the need as well as the cost-effectiveness in each part of the world we serve. As an illustration, you are absolutely right that there is a strong connection between the UK and the Caribbean. However, economically the Caribbean is developing reasonably well and there are free media generally. And interestingly, since the BBC announced the closure of the Caribbean regional service, we are still serving our global English to Caribbean audiences.

A number of islands, broadcasters and media organisations have got together and said that maybe the Caribbean should itself be providing a regional service, rather than its needing to come from Britain. That is a signal that those economies and societies are in a position to provide such a service. But more generally, it was a question of the need for the World Service in the context of the tight financial framework that we were working within.

Q38 Andrew Rosindell: Which area of the service that is being cut do you regret cutting most? Is there any particular area that you feel should, on reflection, perhaps be reviewed, or is what you are going to do set in stone?

Peter Horrocks: It is not entirely set in stone. In terms of our distribution to the Arabic region, we have adapted our radio changes and are sustaining our shortwave and mediumwave more than we originally intended. The Committee might be aware that the other area where we have made an adjustment is in our Hindi service. We have not been able to reprieve the shortwave service entirely, but we have had a number of approaches from commercial partners in India, and in order to give ourselves the time to explore that-it is by no means certain-we have said that we would sustain an hour per day of our Hindi shortwave service for a year to be able to establish those alternatives. Those are two examples where we have been flexible and responsive. However, I should make it clear that those have been absolutely about squeezing budgets that might otherwise have been used for other things, and there is not significant further room for flexibility within the resources we have available.

Q39 Andrew Rosindell: How about Tamil language in Sri Lanka, bearing in mind the fact that they have just gone through a horrible war? Are the potential cuts there being reviewed?

Peter Horrocks: We are sustaining the Tamil and Sinhala services in Sri Lanka, and there are small changes there, as there are for all of our services. All of our services are having change of one kind or another. However, I do not believe that the overall effectiveness of the two services to Sri Lanka will be seriously compromised. Of course, we keep all our services under review. As I made clear in my introductory statement, responding to events is the name of the game for the World Service. It is not about having a completely fixed pattern; if political circumstances change, we respond to them.

Q40 Andrew Rosindell: I know you have to look at cuts, but overall do you not believe that reducing essential services to parts of the world will reduce the very good and reliable reputation of the BBC World Service to parts of the world which we have traditionally shown enormous interest in and valued? Do you not think that will undermine our reputation, not only as a country but your service?

Peter Horrocks: It clearly will, and there will be damage. I do not believe that this is about the death of the World Service. Some of our critics, and some people expressing concern as supporters, have used that language, but I do not think that is what this is about. However, the World Service will be damaged. We are less able to carry out our mission for our audiences and for Britain than we were previously. It is my job to make the best of the funding available and to continue the argument-I hope we will come on to this-about whether there may be potential ways of mitigating, or being able to invest further for the future. I absolutely do not want us and the team within the World Service to talk ourselves into thinking that the World Service will no longer be strong. It will be strong. It will still have a strong reputation and it will still be the most significant, most reputable international news organisation in the world. It will just be less effective than it has been, and it is being damaged.

Q41 Rory Stewart: To what extent did you really get the kind of support you should have got from the management, the Trust and the Foreign Office? It seems to me that you were in a pretty bounced and exposed position. You’ve just told us that you didn’t quite know until quite late in the day what the scale of the cuts was and how you compared. Were you getting the support that you needed?

Peter Horrocks: I think I need to divide that up into the two different aspects of your question in terms of governance and the various aspects of the BBC. We made our case to the Foreign Office as strongly as we possibly could. Clearly, under the financial circumstances in which the whole of Government are operating, there were some difficult decisions to be taken. I think that the Foreign Office is in a business that’s different from the BBC. It’s different from broadcasting. That understanding of the nature of the choices that we needed to make is not something that the Foreign Office is that well set up to be able to deal with. Referring to the questions that were asked of a previous witness-we may come on to this-I think that being funded by and strategically directed by the BBC is the right thing to do, because it is about broadcasting activity rather than about the representation of the UK.

In terms of practical support from within the BBC-I have explained to the Committee previously that the idea of licence fee funding was something that I personally supported, and I believe that we can have an integrated approach to our news operations while still delivering for our international audiences-I will draw the Committee’s attention to the funding that the BBC has provided for the costs of restructuring. One of the things that we faced in the various scenarios that we looked at was the possibility of cutting 20 or more services, and that was in the face of the non-availability of funding for restructuring from HMG. The BBC, although it is not required to under the terms of the recent licence fee settlement, has provided £20 million to pay for the restructuring costs. The Foreign Office has offered, but has not yet approved or agreed, £3 million of restructuring support, which the Foreign Secretary referred to in his statement on 26 January. That has not yet been agreed.

In terms of practical ways of helping the World Service through this period, the BBC has certainly come to our assistance, and we have heard reference to the statement that the director-general has made about his intention to improve the funding from 2014 onwards.

Q42 Rory Stewart: Is there any lesson for the Foreign Office? Is there anything that the Foreign Office could do better if it was in this situation again?

Peter Horrocks: It probably isn’t going to be in quite the same situation again, but clearly there is three years’ further funding, and perhaps we will come on to that if I have questions about the potential for development funding. It’s an example of thinking about Britain’s assets across Government as a whole. I absolutely understand why the Foreign Office wanted to support the budgets for its embassies. There has been erosion there, and there was clearly a strong need to support the activities of the Foreign Office. On the thinking between the Foreign Office and DFID, and the ability to consider UK assets across the piece, which is something that the Government have said that they want to do, it would be helpful if that was easier to be able to achieve, and perhaps we can address that if we talk about the issue of development funding.

Q43 Mike Gapes: Can I take you back to your remarks about the Hindi service? As I understand it, the announcement on 7 March was simply for a one-hour evening broadcast for a year while you explore other options. Is that correct?

Peter Horrocks: That is correct, yes.

Q44 Mike Gapes: Given that you had 10.9 million listeners to the shortwave service in Hindi and the broadcasts via the internet audio service, why was a decision taken to close the Hindi shortwave service?

Peter Horrocks: It was largely taken because of the very rapid falls that have been happening in shortwave listening in India-very steep declines in recent years. However, it was made earlier. It was a change that was required because of the financial circumstances, but was ahead of what we would ideally have wanted to do. We would like to be able to be broadcasting on FM in India. We are not allowed to because of regulatory conditions. We would like to be in a position to be able to provide low-cost television programming, and we wanted to get those new things in place before cutting. However, financial circumstances have meant that we need to make significant savings, which was the primary reason for losing the Hindi service.

Q45 Mike Gapes: On the figures you have given us, you are basically saving £680,000 and losing an audience of nearly 11 million. There seems to be an incredible loss of audience. You have 180 million globally?

Peter Horrocks: Yes.

Q46 Mike Gapes: And you are losing 11 million of them. It seems unbelievable that this decision was taken. Now, clearly, there is a public outcry and you have moved a little way back. I just do not understand. You cannot broadcast through FM because of the restrictions to which you referred. Russia and China are apparently increasing their broadcasts in Hindi. India is a major Commonwealth country. It is a major partner. It is a priority for our Government in business and trade connections. It is a potential member of the Security Council. This just seems a perverse decision.

Peter Horrocks: The audience has been falling by more than the 10 million figure organically because of the change in listening habits. As I said, the decision was required because of the scale of change and reduction we needed to make, but it was earlier than was ideal. Jim Egan’s team look at all our distribution issues and they were very involved in the analysis that led to the decision. You might want to add something, Jim.

Jim Egan: We have a very active strategy in India, which is in Hindi, the English language and some other vernacular languages. As Peter said, the shortwave audience has been dropping significantly; it dropped by 5 million last year.

Q47 Mike Gapes: Can you give us some figures? Will you go back four or five years and tell us what the audience was, and how many you are losing each year? We then might be able to get the sense of it.

Jim Egan: In 2007, the audience was 19 million. Last year, it dropped by 5 million from just under 16 million to just under 11 million. The shortwave audience has clearly been going down, as people have other choices about how they access news and information in India. We have had a very active strategy working with mobile companies, with emerging internet companies in India and so on, together with a FM radio strategy whereby we are available in a large number of cities in India, but we are not able to provide news services. As Peter has indicated, it was a decision that we were probably going to make in the next few years, given what has happened to shortwave audiences, but it was something that was required of us because of the financial circumstances that we are operating in.

Q48 Mr Watts: I want to be clear. It seems that there has been a dramatic drop in short band, and you have plans to move into different areas to compensate. Is it the case that you are not doing that, and that you are actually losing a big chunk of your previous listeners. You have lost 10 million, but you have already lost 10 million over the last five years. So that is 20 million.

Jim Egan: Ten million shortwave listeners have been lost in India.

Q49 Mr Watts: So that is 20 million you will no longer cover in any way.

Jim Egan: Well, we are not covering them by shortwave. There are still mediumwave broadcasts going into India. There is explosive growth in the availability of mobile phones, which are used not just for reading texts but for listening to radio services. In Bangladesh next door, for example, more than half of our FM radio listening is now via the mobile phone rather than via the transistor radio. Nokia is now the world’s largest manufacturer of radios and mobile phones.

Peter Horrocks: We are adapting the response of our audiences, and also crucially from commercial partners. It is very striking that people have come forward and said that they are prepared to put money into partnerships. Given the scale of change, there was always bound to be a need for some adaptation and we are responding to that. It is partly the response from audiences in the UK and also that commercial response. It was inevitable with so many changes that there would be some things that we would need to adjust. I am happy to acknowledge that.

Q50 Mr Watts: If you look back, 20 million people were receiving news from the BBC who now will not be receiving news from the BBC.

Peter Horrocks: There has been a fall in the audience which has happened irrespective of BBC changes. If we had entirely shut shortwave, we would have lost another 10 million. We have now said we will sustain an hour a day to keep that going, in order to explore some alternatives.

Q51 Mr Watts: For one year?
Peter Horrocks: Yes.

Q52 Mike Gapes: Mr Horrocks, when you spoke to us in November, you referred to a restructuring plan that would save £46 million by the end of the period before you were transferred to the BBC. Can you give us some idea of the timetable for the implementation of this restructuring plan?
Peter Horrocks: The bulk of the changes have now been announced. As to the changes to our language services in particular, and the bulk of the changes to our English network schedule, we will seek to make further savings once our operations have moved into the new Broadcasting House headquarters. I think approximately two thirds, maybe more, of our savings have already been announced.
Richard Thomas: The announcement was made on 26 January. The savings we put on the table then were worth roughly £30 million, so that is roughly two thirds of the £46 million we need to save over the three years.

Q53 Mike Gapes: So you are front-loading the changes?
Richard Thomas: We are.

Q54 Mike Gapes: You also said that essential services will remain unaffected. What do you mean by "essential services"?
Peter Horrocks: Our priority services: the Arabic service and our services to sub-Saharan Africa, Afghanistan and Pakistan, where our largest audiences are. They are not entirely unchanged, but their ability to deliver a quality service is being sustained. As I have acknowledged, it will clearly be eroded in some way, but the overall reputation of those services will be sustained.

Q55 Mike Gapes: Isn’t India, with more than a billion people, and the Hindi language, a priority in terms of languages and of sheer numbers?
Peter Horrocks: India is a very mixed country, isn’t it? There is the new India, economically thriving, and we have certainly got a strong offer to them through our World Service English, through BBC World News and through our online, in both English and Hindi. We have already talked about the judgment we made about shortwave and the adaptation we have made in relation to that.

Q56 Mike Gapes: Can you summarise where we will be after you have implemented these cuts, both the £30 million you have already announced and the rest of them? What services will you be providing in terms of shortwave, FM or internet?
Peter Horrocks: Clearly, the picture is very detailed-

Q57 Mike Gapes: Have you finalised it yet?
Peter Horrocks: For the first two thirds of those savings. Most of the savings in the final period are more about how we work in the new headquarters, as opposed to editorial delivery changes. However, I can’t rule out those. But we can certainly provide for the Committee a clear description of all our remaining services, the countries that we are serving and on which platforms we provide those services. If I can summarise that in more general terms, clearly there are reductions and withdrawals: the five services we are fully closing, and a number of services where we are maybe not providing radio or shortwave. However, the World Service will still be a global service. We still have the ability to generate journalism from all round the world, and we have the ability, through a variety of platforms-especially in English, but also with sustaining 27 languages-to still be a strong global service. We will be strongly competitive. We will still have the largest overall reach across the BBC’s global news services of any international news broadcaster, and we believe that we will still have the strongest reputation. But it is hard to sustain that in the context of those £46 million savings.

Q58 Sir John Stanley: Mr Horrocks, I want to return to the point that I raised with the trade union representatives in the earlier session. Perhaps you could spell out a bit more to the Committee why you feel that the World Service will be better off within the BBC, as opposed to grant-aided by the Foreign Office. I want to provide a specific illustration of the important general point that Sir Menzies Campbell made in the earlier evidence session, which is that, by virtue of the change, you lose what could prove to be a critically important degree of parliamentary protection. If you cast your mind back to the time when the previous Conservative Government imposed significant cuts on the BBC World Service, it was the action of this Committee and all-party Back-Bench MPs, who rode to your rescue, that got a substantial reversal of the then Government’s cuts. In your present situation you will not have that protection. Is it not a real fear that within the BBC you could be slowly shrivelled and silently shrunk? Here, we will not be able to ride to your rescue.

Peter Horrocks: Sir John, if that protection that was offered previously, which my predecessors clearly appreciated, was applied again and there was parliamentary support, which changed what we have been discussing, I have no doubt that I might revise my view. The situation I am in at the moment, however, is that under the current mechanism there has been the significant change that we are discussing. As I explained to Mr Stewart, in terms of the immediate difficulty that we face-the cost of restructuring-the BBC has been supportive when it is not required to be, to the tune of £20 million. The Foreign Office has not yet agreed the £3 million that it has so far offered. That is just a measure of the difference in perspective of our potential funders.

I appreciate the parliamentary support that we have received, and I hope that in any new dispensation that would continue to be expressed. Clearly the mechanisms would be different. It is important for the BBC-this is primarily the responsibility of the BBC Trust-to put in place protections or guarantees, but, most importantly, it should be able to define what the World Service should be. What need in the world is it responding to and how, in delivering that, does it reflect well on the UK and the UK’s long-term national interests, rather than its short-term foreign policy? The BBC Trust is discussing and working on how it would do that. I am sure an element of accountability to Parliament and mechanisms will be an aspect of that.

I return to the point I made previously. The world that broadcasting is now in is not the straightforward world that it used to be, with the delivery of radio service through one mechanism, through shortwave. It is now a highly complex set of relationships with audiences through online, through social media, through quite difficult changes. The BBC has been, in the UK, world beating in transitioning from the old linear world to the digital world. My colleagues on the BBC executive have enormous experience of dealing with that and the difficult judgments that are involved in those transitions. The Foreign Office, for perfectly understandable reasons, does not contain that expertise and does not have the understanding of the broadcasting business that the BBC has.

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 appreciate that that is difficult to resolve-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.

Q59 Mr Baron: Can I return to the question I asked previously, on the business of protecting the World Service budget from raiding to fund other BBC activities? Mr Horrocks, when you were before us previously, you said that you were looking at the mechanism. Can you update us as to where we are on that?

Peter Horrocks: This may well be something for you to ask the director-general about as well. Ultimately, I believe that this is primarily a BBC Trust responsibility. Just to refer to how the BBC Trust manages the balance between different services, it is already used to dealing with asymmetric services, for example, much larger, expensive services such as BBC1 versus local radio services or vernacular UK language services. It defines a licence for each of those services, and the BBC management is then only allowed to adjust within a narrow margin once those service licences have been set. As I understand it, the BBC Trust is considering an overall service licence for the World Service, which will describe the nature of the need and the broad nature of the response that the BBC should make to that need in the world.

That would sit under the BBC’s purposes, which are its ultimate objective. The particular purpose of the World Service is to bring Britain to the world and the world to Britain. That may be redefined or adapted, or the supplementary language in relation to that may be adapted in order to reflect the World Service’s particular mission. The BBC Trust is considering, I believe, the right mechanisms in terms of a particular trustee who might take responsibility. Those matters are in discussion at the moment and are not yet determined, but they are the broad range of mechanisms that are being considered.

Q60 Mr Baron: There has to be flexibility in this, if only because of world events, and so on. But you have said, Mr Horrocks, that that would be subject to revision-or might be in future. It still lays open the possibility that the budget could be raided for other BBC programmes and activities. We have talked before about ring-fencing as a possible option, and percentages of the overall BBC budget, and so on. I know the indications are very early, and we will ask this question to the director-general, but what would you like to see? How can we best protect the World Service?

Peter Horrocks: The most important thing is the statement about what we should be delivering and how we respond to the world-the World Service’s mission. There should be a mechanism for that within the BBC Trust, which might be an individual who has responsibility and is charged with ensuring that it is carried out. That is the most important thing for me.

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. Clearly, there is a strategy-setting process-possibly at each charter review-but those mechanisms are in place for ensuring expenditure on specific services. So those are the things that I am most looking for.

Q61 Mr Ainsworth: You were in the room when my colleague, Frank Roy, was asking the trade union representatives about the pensions issue. Are you now in a position to clarify-you couldn’t before-what the effects are of the pension problem dispute on funding of the World Service?

Peter Horrocks: The provision that we indicated to the FCO of £13 million remains our current best estimate. We will have updates on that within the next few months, but that agreed figure between us and the FCO remains the position. Richard, do you want to amplify?

Richard Thomas: The negotiations with the pension fund trustees are ongoing and we are not expecting a final announcement on that until June or July. But all the indications are that the £13 million estimate in our budget that we gave to the Foreign Office is still the right number.

Q62 Mr Ainsworth: Let’s clarify the situation, because you, Mr Horrocks, told us that ongoing "like-for-like savings" would mean that a 25% reduction would be needed by 2014-15. The Foreign Secretary told us back in October that the 16% figure included "additional funding for the World Service’s element of the BBC pensions deficit." Which of those statements was true?

Peter Horrocks: It is included within the settlement-Richard, perhaps you want to explain.

Richard Thomas: The 16% figure is the difference between the income that we are getting at the beginning of the period and at the end. Within that 16% we have to find the money for the pension increase. The other way of looking at it would be, we have a 25% cut and we have put money back in for the pensions and for new investments of about £10 million.

Q63 Mr Ainsworth: The cut between now and 2014-15 will be 25%.

Richard Thomas: Yes.

Q64 Mr Ainsworth: And how much money was included in the agreement that you reached with the FCO?

Peter Horrocks: £13 million for pensions provision and there was an allowance for £10 million of new investments. However, and we may wish to turn to this, we feel we should not invest up to that level at this stage because otherwise we will be cutting even more deeply. In relation to the pensions, the £13 million does not improve our position in relation to 16%.

Q65 Mr Ainsworth: The effective reduction between now and 2014/15 is 25%.

Peter Horrocks: Yes, to our existing services there is a reduction of 25%.

Q66 Mr Ainsworth: Is it true that you took a partial pensions holiday of £1 billion over 13 years?

Peter Horrocks: That was not a World Service decision; that was a matter for the BBC as a whole. So I was not involved with that but it may be something you wish to ask the director general.

Q67 Mr Ainsworth: Is there any requirement on the World Service to cross-subsidise the wider BBC pensions deficit problem?

Peter Horrocks: No, we are part of the BBC. All of our staff work interchangeably across the BBC. We are part of it and we get our fair share of the ups and downs of that scheme.

Q68 Mr Ainsworth: So are you protected from those potential wider problems in the BBC?

Peter Horrocks: There is one way in which we have had further support from the BBC within this three-year transition period, before we come into full licence-fee funding, as well as the restructuring money which I have referred to previously. We are not having to pay the full amount once that £13 million charge becomes due until later on. There is a two-year period when our deficit repayments are significantly reduced by the support of the BBC. So it is another way in which the BBC, prior to this transfer to the full licence-fee funding, is supporting us and allowing us to smooth those pension-deficit repayments over a longer period.

Q69 Mr Roy: You will remember I asked the Foreign Secretary whether workers here on work permits would be sent home. Were you assured by the answers that he gave me in late January in relation to those 277 people?

Peter Horrocks: I was and I appreciated that you raised that issue with the Foreign Secretary. We are still in the relatively early stages of the process of losing the staff who unfortunately will need to leave. We have done the analysis of the numbers of people who are on various different visas and permissions to remain and, for reasons that the unions explained, we do not know yet exactly who will be in the frame, but so far the assurances from the Foreign Secretary are very helpful. As we get nearer to identifying individuals, we will be able to assess whether that is working in terms of the response from officials within the Border Agency and Home Office and so on.

Q70 Mr Roy: In relation to who will be in the frame and who will not be in the frame, what grades will be in the frame as opposed to what individuals? What are the grades of those among the 480 who will be losing their jobs?

Peter Horrocks: Of the ones who might be on a visa?

Mr Roy: Total job losses.

Peter Horrocks: Right across the whole range-

Mr Roy: Is that equal? Is that 10, 20 and 430 or is it 150, 150 and 150?

Peter Horrocks: There are smaller numbers of senior staff than junior staff but the changes across the World Service over the course of the last year and looking ahead over this period are spread. Already, senior management has taken a reduction of 25%. in line with the overall BBC target for reductions in senior managers. We carried those changes out in advance of the announcement of the settlement, which is one of the reasons why the union was right to say there are no senior management changes as a result of the settlement because we made those cuts first.

Q71 Mr Roy: So that has already been done in the past.

Peter Horrocks: It has been done immediately before.

Q72 Mr Roy: That is not what we are asking. What I am asking now is in relation to the 480. For example, how will the BBC management numbers be affected?

Richard Thomas: I had a look at the split by grades and, if you look at grades 9 and above, which is where people start getting management responsibility, 15%. of the post closures were within that category. When you compare that to the spread in the total population it came out at 15.6%. So it is roughly in line with the spread between management and non-management.

Q73 Mr Roy: So that is an 85/15 spread. Is it the same spread between management and other grades?

Richard Thomas: Yes, one was 15% and the other was 15.6%, so it was pretty much in line.

Q74 Mr Roy: Therefore, it is 15% of the 480?

Richard Thomas: Yes. We can give you a breakdown by grade, if that would help.

Q75 Mr Roy: Is that junior or senior management?

Richard Thomas: It is all management. Grade 9 would be quite junior.

Q76 Mr Roy: How do you split between junior or senior management?

Richard Thomas: I can give you those figures if you like. I don’t have them with me today, just the split between managers and non-managers.

Q77 Mr Roy: I’d be grateful for that.

In relation to the turmoil in the Middle East, do you regret announcing the loss of 60 jobs in the Arabic section?

Peter Horrocks: Of course; I regret all the job losses. It is a huge loss of talent and colleagues across the piece.

Q78 Mr Roy: Do you regret it more than the rest, based on what has been happening?

Peter Horrocks: Clearly, when something happens immediately after a decision that you’ve announced, you are concerned about how effectively you will be able to respond. If these changes had happened six months earlier, we clearly would have had fewer journalists in Egypt; for instance, the radio journalists who have been brilliantly contributing to our coverage. You may have used the BBC live page on News Online, which has this amazing updated rolling information about what’s happening in North Africa. A large amount of the information in that is being provided by the BBC Arabic journalists, so, of course, losing that number of journalists would mean that we are less able to cover that story.

Q79 Mr Roy: Based on those circumstances, is there not a case for a rethink on those numbers?

Peter Horrocks: This is where it is difficult to take a strategic view as well as being responsive to events. If I were to say we will rescind all those job losses within the Arabic service, I would have to find another 60 posts across the piece and that would be very significant; the Arabic service is one of the largest. We are in constructive discussion with the Foreign Office about an initiative which has been announced, called the Arabic partnership initiative, covering potential interventions across a range of UK activities-educational, cultural, etc.-to respond to the changes that are happening in the Arabic-speaking world.

The BBC has put forward proposals, both for broadcasting and also to support the change in media organisations. State broadcasting in Egypt, for instance, will be going through huge transformation and we believe the BBC can play a vital role in that, and with our colleagues in the BBC World Service Trust, we are putting forward proposals to be able to respond to that. We hope that if there is some funding available from that, we may be able to alter some of those job losses within the Arabic service to provide the programming that will help the Arabic-speaking world to understand and discuss the changes to its society that it is going through.

Chair: Mr Horrocks, we have four subjects we still want to discuss with you. I would be grateful if you could keep your answers brief.

Peter Horrocks: I shall try to tighten up Chairman.

Q80 Rory Stewart: Most of us around this table are very excited at the idea that you might get some DFID funding that might be able to fill some of the gaps. How far have you got with putting together proposals on welfare, poverty and all the other indications required to qualify for DFID funding?

Peter Horrocks: Our submissions to the Foreign Office, which were also shared with DIFD, 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. Other parts of the FCO family have received transfers of funding, as we understand it, and your fellow Committee, the International Development Committee, looked into this and identified that £60 million had been transferred from DFID to the FCO family, including a substantial amount for the British Council.

We understand that a determination has been made-it is in the settlement letter-that says that £25 million of expenditure is granted on the basis that it will support economic development, because free and independent media help counter corruption and sustain governance. What we haven’t established is whether there is potential for that money to be extra, as opposed to it just being counted something we are already doing. We are pursuing both existing activity and potential new services.

Q81 Rory Stewart: Can you give us a sense of deadlines-when you could get an answer, what you will bring together and how you will make sure that you do get the extra money? Presumably you are right, that that £25 million isn’t extra money at all; you will have to find something else.

Peter Horrocks: We are making that case in relation to the existing activity and the potential future activity as vigorously as possible. We have been speaking to officials in both the FCO and DFID about it over many months. Clearly, how that is responded to and the time scales are a matter for Government rather than us. Of course, the sooner we know if there is any potential through this route will be very useful in being able to adapt the changes which we have been discussing.

Q82 Rory Stewart: So no indications as yet.

Peter Horrocks: No. You have been talking to some officials, haven’t you, Mr Egan?

Jim Egan: It is correct that there are no indications yet. The two questions are, I suppose, whether the activities of the World Service could count towards Britain’s international development effort at all and, secondly, whether there is any additional funding available for us.

On the first question, 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.

As Peter said, in our submission to the spending review 2010 process, we identified new activities of £25 million a year, which we think could contribute. All that has happened so far is that £25 million of our existing activities appears to have been rebadged as ODA-scorable, if I may put it that way. We continue to think that there is an interesting case both for ourselves and for Britain more broadly, but at the moment we are not engaged in an active bi-departmental process, if I may describe it that way, that is likely to lead to a resolution.

Q83 Sir Menzies Campbell: So far we have not mentioned BBC Monitoring at all. What assessment can you give the Committee of the impact upon the capability of BBC Monitoring as a result of the cuts proposed in its financial arrangements?

Peter Horrocks: Its cuts are more severe than those of the World Service. As was referred to earlier, it was not provided with any specific funding in relation to the costs of the pension deficit. It is having to withdraw activities. It has already announced a cuts programme.

I think we can work more effectively with BBC Monitoring in providing editorial information to BBC services. Again, in our coverage of the Arabic story, BBC Monitoring has been playing an enormously important role. I know that the United States has expressed concerns about the changes to BBC Monitoring-

Q84 Sir Menzies Campbell: The Secretary of State, Mrs Clinton.

Peter Horrocks: The Secretary of State has also noted the changes to the World Service. The US Administration are admiring of these UK soft power assets and, I think, are surprised by the changes. Undoubtedly, the changes to BBC Monitoring are difficult.

The last thing, which I have been made aware of very recently, is that there is some suggestion from the Cabinet Office that its financial settlement to BBC Monitoring, which we assumed had been fixed as part of the licence fee settlement, is being adjusted-adjusted downward-which would make the cuts to BBC Monitoring even more difficult.

Under the terms of the BBC’s overall licence fee settlement, there is a commitment by Government not to put any extra financial obligations on to the BBC. We think it is important that that is stuck to. But even that position is a reduction in funding for BBC Monitoring that is certainly very difficult to cope with.

Q85 Sir Menzies Campbell: As I read that assessment, the capability of BBC Monitoring is liable to be very substantially damaged.

Peter Horrocks: It will certainly deteriorate, yes.

Q86 Sir Menzies Campbell: BBC Monitoring of course fulfils certain national responsibilities-without going into detail-using open source monitoring that provides information for institutions whose responsibilities are the defence of the realm.

Peter Horrocks: It does. It is a BBC editorial service, which operates under BBC editorial guidelines, and, as you say, it is all about open information. In the agreement that the BBC entered into with the Government, mechanisms were to be put in place to ensure that continued flow of information, even though the funding would be coming from the licence fee. Up to now, generally, the interests of Government and the journalistic interest in countries tend to coincide. The places that are hot spots in the world are of interest from an editorial point of view as well as from other perspectives. We believe that it is possible to keep that consonance of interest, but with a different funding mechanism.

Q87 Sir Menzies Campbell: But the volume of the flow depends on the capability of the organisation, doesn’t it?

Peter Horrocks: Of course it does, and that is changing. That is not part of the licence fee settlement at all, but part of the existing changes that are being made by the Cabinet Office, which, as you are aware, has a stakeholder relationship. It holds the ring for various aspects of the Government and the BBC. That is the funding they have provided, I’m afraid.

Q88 Sir Menzies Campbell: Does monitoring fall under your responsibility?

Peter Horrocks: It does.

Q89 Sir Menzies Campbell: How would you characterise the future prospects of BBC Monitoring?

Peter Horrocks: Within the licence fee, I am sure that the BBC will be supportive of it, but it will be at a deteriorated, lower level of provision than was the case before the recently announced cuts.

Q90 Sir John Stanley: China is the most populous country in the world and is now the second largest economy, yet it is a country that has a totally ruthless system in place for suppressing freedom of expression, particularly that of a politically dissenting nature. You could hardly provide a more compelling case for the maximum possible involvement of the World Service. Can you justify to us how the BBC can do away with the Chinese shortwave service, particularly bearing in mind the critical point that access to shortwave in China is risk-free for the user, whereas access to the internet is far from risk-free, when particular sites are concerned?

Peter Horrocks: Again, it was a change that ideally one would not have wanted to make, but it reflects the level of consumption on shortwave that we are able to detect. Again, Mr Egan’s department has researched and looked at that.

Jim Egan: It is probably fair to describe issues with our Chinese radio service as ones of both supply and demand. There are issues with getting our content in there because shortwave is blockable and jammable. The Chinese Government invest quite actively in that, using both high-power blocking transmitters near cities and skywave jamming within a radius of about 1,500 km. That is an expensive activity, but one that is used quite frequently to block our services. However, it does not work everywhere, and particularly in rural areas, our signal has been available.

As I say, there are problems with demand as well as supply. In rural areas, we have not been able to identify significant listening to our service, even outwith the jamming. It is worth emphasising that the jammings have generally been on our Mandarin broadcasts; we have never experienced any jamming to our English-language broadcasts, but again, the audiences for those are very small. Those are the problems. It is difficult to get in, and even in the instances where we have been able to do so, in such a highly developed economy as China, where people have a wide range of choices for the way they consume their media, it has not been possible to get the sort of impact for our Mandarin broadcasts that merits the expenditure that we have committed to it.

Peter Horrocks: We are investing, and will shortly be making announcements about, new circumvention technology that helps users on the internet to get round some of the blocks put in the so-called great firewall of China. We have received funding-interestingly, from the US Government, rather than from the UK Government-in relation to researching that. Our technologists are developing techniques that will at least help those who seek out our content online.

Q91 Mr Ainsworth: You have an audience for the shortwave Swahili service. How on earth do you justify withdrawing that?

Peter Horrocks: There is an audience, but there is also a large overlap with the increasing FM audience. When people have both shortwave and FM, they invariably listen to the higher-quality FM. We have very large audiences on FM in Swahili-speaking countries.

Q92 Mr Ainsworth: In the urban conurbations, yes, but this is a vast region with a long relationship with Great Britain that looks to Britain and the BBC. It also has, I would suggest, poor, unstable and far from savoury Governments from time to time. This is the ideal area where a service should be preserved. People would be forgiven for believing that it is a little bit cynical on your part that you should see this as the one area where you could force DFID to ride like the 7th Cavalry to your rescue.

Peter Horrocks: I can assure you that that is not our approach. It is a change that I regret, a change that is forced on us by financial circumstances. We are saving more than £10 million through our distribution changes. There have been cases made throughout the course of the afternoon. There is, of course, a strong case for retaining all those services. I am proud of the services that we offer, and I regret the loss to all those audiences. Those 30 million people are 30 million regrets, as far as I am concerned. We are not playing games. We are making choices that we feel we have to make in order to make the books add up. We are looking to where audiences are consuming us in different ways, and those economies are advancing. FM is more widely available, not just in the main cities, but in smaller conurbations. Not everyone who is losing us on shortwave will be able to get us on FM, but a significant number of people will be able to, and that is the reason for the change.

Q93 Chair: Mr Horrocks, in your answer to Sir John Stanley on China, you mentioned a few technical points. Would you be able to give us a note on that?

Peter Horrocks: Of course, yes.

Chair: I thank all of you very much indeed. This has been really helpful, and we very much appreciate your taking the time to come. Thank you.

Examination of Witnesses

Witness: Mark Thompson, Director-General, BBC, gave evidence.

Q94 Chair: Mr Thompson, thank you very much for coming today, and for volunteering to do so. You are clearly a busy man. Are you all right time-wise?

Mark Thompson: Yes.

Q95 Chair: We are about a quarter of an hour behind schedule. That gives me personally a bit of a problem, in that after half-past 4 I am double-booked, so shortly after 4.30 pm I shall hand over the Chair to Mr Gapes. Is there anything you would like to say by way of an opening statement?

Mark Thompson: No.

Q96 Chair: In that case, can we start with your general view of the World Service? What do you think its role should be? How essential are the services, and do you envisage any change to the function of the World Service once you take responsibility for it in 2014?

Mark Thompson: The World Service is one of the most precious things the BBC does. I have had a chance to see and listen to its work in many parts of the world, including difficult parts of the world such as Afghanistan, the Middle East, China and India. I ran the BBC news operation in Tiananmen Square, and, in Tiananmen Square, listened to the World Service to find out what was happening. It is a lifeline to many tens of millions of people around the world who don’t enjoy proper access to accurate, impartial, open media.

Although the world is changing, and people’s use of media is changing-some traditional forms of use such as listening to shortwave radio are diminishing-I think the underlying need, justification and argument for the World Service are as strong as they have ever been, and will be strong in the future. We are at a point when many big Governments in the world-we have heard about the Chinese and the Russians-believe that this is a moment to invest more heavily in international broadcast services. In this country, we are choosing to disinvest in ways that I am afraid will have very negative consequences.

I am the editor-in-chief of the World Service as well as the rest of the BBC. I hope that the BBC will support the BBC World Service and BBC Monitoring as best we can through this difficult transitional period. When we get direct funding of those very important services, we will do our best to reinvest somewhat in them, although, frankly, I think that that will be modest, and hold ourselves-both our governing body, the BBC Trust, but also myself and my successors, personally-to account for our stewardship of those precious services.

Q97 Chair: Talking about potential further reinvestment, when would you announce that? When will we get a clear idea of what it will be?

Mark Thompson: At the level of the BBC as a whole, we are now looking intensely at how we should plan our finances between now and the end of the present licence fee period. I expect to be making proposals later this year to the BBC Trust about how money should flow across the organisation between now and the end of 2016. I would expect, either at the point when I make those proposals or shortly thereafter, that they will be made public. It is absolutely my view, going into that process, that I will feel that we have failed if we have not found a way of directing sufficient funding towards the World Service; if, in 2014, when we take over funding the World Service, we cannot make a nominal increase in its funding at that point. I do not know how big a nominal increase, but these cuts are deep, and if we can reinvest, we should do so.

Q98 Mr Baron: Mr Thompson, you have been sitting here through the evidence session, and you have heard a number of examples of where we have been losing, because of the cuts, vast audiences to save relatively small sums of money. The world is an increasingly volatile place. Most people accept that soft power will be increasingly important. Can I draw you off the fence a little and get you to agree that these cuts to the BBC World Service are exceedingly short-sighted to the point of being perhaps even crass and stupid? A recent example was the cuts to the BBC Arabic services.

Mark Thompson: I am very clear about the responsibilities. The Government have the responsibility for deciding where public money, in the form of grant-in-aid to the World Service, for example, and the funding of BBC Monitoring should sit. They have the absolute right to make a political judgment about how much money they want to devote to anything in that area. I am quite clear that the headline level of the cuts means that we are facing very deep and difficult decisions across our services. You have just heard from a group of people who are having to, in a sense, recommend such choices, and they are proposing things that they very much wish, as I wish, they did not have to do.

The reality is that this funding settlement begins in three and a half weeks. The money is not there. My colleagues and I, as well as the BBC Trust, have approved our taking some of our existing funding, which itself means some sacrifices in the domestic services of the BBC, and directing it to soften the blow by paying for restructuring; you heard about the £20 million. We are also looking at whether we can, particularly in the early years, make the burden of the World Service paying its share of the pension deficit repayment programme less onerous than it otherwise would be. We are doing our best to cushion the effect of the comprehensive spending review on the World Service.

As soon as the licence fee takes over, with the planning beginning now, we will try to find a way of investing more money via the licence fee. Moreover, the audiences of our commercial global services of the BBC-BBC World News, our television channel and BBC.com, the English-language global website-are growing, as are their commercial revenues. This year, I expect BBC World News and BBC.com to generate about £100 million in commercial revenue. We want to look hard at whether we can grow those revenues and, as far as we can, use the BBC’s international revenues, again, as a potential source of reinvestment in the BBC’s complete international news offering. We believe that the BBC and its brand, and the reputation and trustworthiness of the World Service, gives this country, in many ways, an exceptional, rare advantage in getting through to many different societies with outstanding, high-quality, trustworthy journalism. Everything we do is to try to maximise the opportunity of doing that.

Q99 Mr Baron: But would you accept that it is short-sighted? You have just given us a very good exposition of what you are going to do to respond.

Mark Thompson: What I would like to say is that the consequences of this decision are clearly deeply disappointing for those who believe these services are critical.

Q100 Mr Watts: Can I just be clear about 2014? You’re doing a review now on what will happen. Is it your intention publicly to ring-fence the World Service and give an undertaking that after 2014, the budget will be increased, not decreased?

Mark Thompson: What I expect to do is the following: propose a funding level for the World Service for the remaining years. As my colleagues and the unions made clear, there will only be two years left in the present licensing settlement, but for those years-2014-15 and 2015-16, I think they are-we will propose to the governing body of the BBC a funding level for the World Service. As my colleague Peter Horrocks made clear, the expectation is that in some form, the BBC Trust will issue a service licence, as it is called in the jargon, for the World Service, which will set a parameter for the funding of the World Service, with the ability to vary it up or down, as part of the way the BBC Trust will hold me and my colleagues to account for how we spend the money.

We should say as well that from this year forward, our expectation at the start of each year is to publish an indicative budget for the BBC’s expenditure for that year. Our belief is that we need some flexibility, and that funding across the organisation will vary year by year, but in advance, each year we will publish an indicative budget. I would absolutely expect people who have a particular focus on and concern about the World Service, as I do myself, to look very closely at that budget to see how much of the licence fee will be going to the World Service.

I take the point absolutely about the effectiveness of this Committee, in terms of making the case. You will not find me-or, I believe, my successors, or my colleagues at the BBC Trust-turning down invitations to this Committee, if you want to question us about our level of support or funding for the World Service.

Q101 Mr Watts: That is coming at it from a different angle. Can I just be clear that what you’re proposing is that the domestic TV licence payer will pay, and that a bigger proportion of the budget-of what they pay for their services-will now go to cross-subsidise the World Service?

Mark Thompson: The British public have been paying for the World Service through general taxation since the 1930s. As you know, virtually every household pays taxes, and virtually every household also pays a licence fee. Last summer-the summer of 2010, long before we came to the last settlement-we did some audience research in this country about support for the World Service. We asked them a question about what they would feel about the licence fee being used to pay for the World Service. Many people believed it already paid for the World Service, and broadly-subsequent polls have suggested the same figure-the majority of the population are very happy with the idea of the licence fee paying for the World Service, because they, too, are very proud of the World Service and believe it is something this country should be very proud of. I am not suggesting that in 2014, there’s going to be an enormous transfer of money, but if I can, I would like to make a modest increase in the funding, and I believe that we could make the case to the public for why that makes sense.

Q102 Mr Watts: I am not making any judgment on it; I am saying that you propose using TV licence payers’ money to increase the subsidy for the World Service in future.

Mark Thompson: I wouldn’t say the subsidy; to increase the money we would direct to paying for the World Service.

Q103 Rory Stewart: What guarantees can you offer that the BBC is not going to siphon money away from the World Service to put into other bits of domestic programming?

Mark Thompson: The World Service and BBC Monitoring are both very precious things. We have many precious things in the BBC. We have, for example, the home service on BBC Radio 4, and our commitment to the Proms and to our symphony orchestras, performing groups and so forth. Our governing body is, quite rightly, charged with that under the charter, but it is also, it seems to me, obsessively concerned that precisely this kind of siphoning should not happen. This is a moment in the BBC’s history when the amount of money that the BBC spends on television entertainment, acquired programmes and feature films, for example, are all substantially reducing, and we are focusing increasingly on original high-quality journalism and other forms of content. The background is that the direction of travel inside the BBC is to spend more money on things like the World Service and less money on, if you like, mainstream entertainment.

As I have just said, the first guarantee is that we are going to be wholly transparent about this, and not just in retrospect in our annual reports, but also in prospect. You and every other citizen will be able to see how much we are proposing to spend on the World Service. 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.

If I or my successor choose to make a significant change to that, I will have to go through a process of proposing it formally to the trust, and there will be a public consultation. Bluntly, under any future director-general, if there was an attempt to make a substantial reduction in the funding of the World Service, unless there was good cause, there would be blue murder and rightly so.

All I would say is that 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.

Q104 Rory Stewart: But you are putting a huge amount of reliance on the BBC Trust, and in particular in your international trustee.

Mark Thompson: To some extent, Mr Stewart; except that not just I, but the BBC management as a whole, are passionately committed to supporting the service. It is very important to say that we regard the BBC World Service as wholly part of the BBC. I feel personally absolutely and wholly responsible as the editor-in-chief for this service. I can’t for the life of me understand why we, in terms of the operational management of the BBC, would want to do anything other than support it. As you have heard, even in this transition and with some difficulty, we are trying to do our best to limit the consequences of what has happened under the present arrangements.

Q105 Rory Stewart: As my final point, it is wonderful that you have so much passion, but obviously our concern is what happens if you fall under a bus or something happens in the future. Who knows? We are trying to think about the long-term governance arrangements. Everything seems to rely on the BBC Trust, and an enormous amount of that relies on your international trustee, who does not necessarily have the depth of reputation and international exposure that previous international trustees have had. What changes might you make to the governance structure of the trust to guarantee its future?

Mark Thompson: I definitely think there is a case, when the process of debate and the drafting of the next royal charter of the BBC arrives, that-although the present charter absolutely lays out the BBC’s responsibilities in relation to the World Service, and one of the BBC’s public purposes is precisely about, in the jargon, bringing the UK to the world and the world to the UK-rather more specificity about the BBC’s international mission, and consideration of what particular safeguards we might want to put in place to make sure that that mission is fully discharged, is something which probably should be set out more clearly in the next charter, given the way in which the funding arrangements have changed.

Q106 Sir John Stanley: Mr Thompson, I have a series of factual questions that I would like to put to you, relating to how the transfer of the World Service, as a grant-aided body, from the Foreign Office to the BBC took place. First, can you tell the Committee whether the initiative for this transfer came from the Foreign Office or from the BBC?

Mark Thompson: The first time it was substantively discussed was when the Secretary of State for Culture, Olympics, Media and Sport rang me to raise the broad topic of 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. He mentioned the possibility being discussed in Government at the time of whether the funding, which the Department for Work and Pensions then made and still makes, in respect of licences for the over-75s could be forgone. That would mean, as it were, that the other licence payers would have to pay, instead of the Government, for licences for the over-75s. I thought and said-indeed, the BBC Trust was very clear-that that was not an acceptable idea to the BBC.

In that first phone call, I think it was me who first raised the idea of whether the licence fee could take over funding the World Service. The director of the World Service, Peter Horrocks, and I talked several times over the summer and very early autumn about this as a possibility, not least because we-Peter was right in the middle of this-were being very forcibly reminded of just how fragile the grant in aid process was. This was in the middle of the conversations with the Government.

The involvement of the BBC in the comprehensive spending review is, to be honest, a pretty unattractive thing for an independent broadcaster. So we began to explore and, as I said, we did a bit of audience research to look at whether it would be desirable potentially under the right circumstances for the BBC to take over the funding via the licensing fee.

Q107 Sir John Stanley: So this was a proposal that was initiated by yourself. If you can’t recall-I quite understand if you can’t-can you give us in writing the date of the telephone call from the Culture Secretary to yourself? It would be useful for us to have that.

Mark Thompson: Yes. We’re talking about early October, but we’ll get you a precise date.

Q108 Sir John Stanley: Thank you. Can you tell us at what point, if ever, there was a face-to-face meeting between yourself or your chairman with Foreign Office Ministers to discuss this proposal?

Mark Thompson: I believe that there have been two such meetings. The first one was immediately prior to the announcement of the comprehensive spending review in October, which involved the chairman of the Trust, myself and the director of the World Service, Peter Horrocks. That was principally a meeting to discuss the wording of the governance arrangements in relation to the Foreign Secretary’s continuing role in being involved in decisions involving changes to the portfolio. It was about the governance arrangements, rather than about the quantum of the settlement. That took place immediately prior to the announcement of the CSR.

There was a subsequent meeting with the Foreign Secretary that I attended with colleagues. In a sense, that was a meeting exploring the consequences of the CSR settlement for the World Service and, as it were, the options in terms of service closures and reductions in English language, shortwave distribution and so on. It was exploring, given the settlement, what we were thinking about in terms of the range of services that could or should be explored.

Q109 Sir John Stanley: So there is just one meeting between you and the Foreign Secretary prior to the Government’s announcement of the public expenditure review in the House? You said that that was immediately before the public expenditure announcement here.

Mark Thompson: These are the meetings that I was involved in myself.

Q110 Sir John Stanley: That you were involved in yourself. I just want to focus on the top-level meetings. Can we have the date of that meeting that you had with the Foreign Secretary, so that we have that precisely?

Mr Thompson, from what you say this would appear to be very much in time terms a shotgun marriage and not a very long courtship. Would you not agree? If that is the case, how do you think the Committee can possibly be convinced that the issue was given the serious and full consideration that it deserved?

Mark Thompson: You have heard me say that 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. All I want to say to you is that it has been well documented. The process of reaching an overall settlement in terms of the BBC’s funding from the licence fee took place at a fair clip, as you say.

As we modelled the funding of the World Service between now and 2016, knowing that the early years were already fixed by the comprehensive spending review, I was very clear that one of my responsibilities in this rather rapid process was to make it absolutely clear that I could be sure that when the licence fee took over in 2014, not only was there going to be enough money to maintain the funding at the level that we would inherit, but that there was good reason to believe that we could slightly increase it, so I could be confident and I could also advise the BBC Trust that we could take over World Service funding. In the context of the settlement that we were getting through the licence fee, I could recommend that we should be able to increase the fund slightly.

Q111 Sir John Stanley: So if I may summarise the facts that you have very helpfully outlined, we are basically being told that the radical proposal to transfer the World Service from the Foreign Office to the BBC sprang out of a telephone conversation with the Secretary of State for Culture, Media and Sport, and that within what must have been a very short period from that conversation, which began in October, there was a meeting with the Foreign Secretary on the detailed wording of the financial aspects, and a few days later there was a public expenditure announcement. Out in the big wide business world, if you had made decisions of that magnitude, with that very limited degree of due diligence, your shareholders would have a lot of questions to ask.

Mark Thompson: If I might add one footnote, it is my recollection that I raised the issue of the World Service in that first conversation with the Secretary of State. But it is quite clear to me that that was, as it were, in the air and would have been raised in any event. Indeed, it was raised at subsequent meetings by Ministers. I am not claiming any particular credit for that, but, as it happens, I think I was the first person to say that it was one of the possibilities that should be explored.

Sir John Stanley: If I could have those precise dates that I asked for, I would be grateful.

Q112 Mike Gapes (in the Chair): Mr Thompson, can I take you a bit further on this? Was the 2014 date simply because of the timing of the CSR? Or was it considered at any point that the BBC might take over financial responsibility prior to 2014?

Mark Thompson: It was considered. A large number of scenarios were considered in that period.

Q113 Mike Gapes (in the Chair): Considered by whom? In your internal discussions or with Ministers?

Mark Thompson: It was considered in discussions with my colleagues, but also considered and discussed in the dialogue with Ministers.

Q114 Mike Gapes (in the Chair): In this very short period. Did you have any modelling?

Mark Thompson: Absolutely. We had a complete computer model to look at all the different scenarios and financial implications. We had been doing a large piece of work about the strategy of the BBC as a whole, and we had-I don’t want to exaggerate-a way of modelling many different scenarios immediately and looking at the consequences of different scenarios.

Q115 Mike Gapes (in the Chair): But your bottom line was that you did not want to deal with the free licences for the pensioners issue. You were unhappy with that and you saw that basically the Foreign Office was preparing to have a major reduction in the amount of grant in aid that was coming through, and then you thought, "Well, basically, the best thing is that we take this over and then we will have more stability and more certainty." Is that a fair summary?

Mark Thompson: And the prospect of never again being fully involved in a comprehensive spending review because there will be no more funding streams out of Government Departments, and a hope that, although the World Service already enjoys very high standing, its listeners around the world would have even more confidence in a service that was funded directly by the British public rather than via the UK Government.

Q116 Mike Gapes (in the Chair): So, just to be clear, when the final proposal was put forward by Ministers, you were fully cognisant, and were completely happy with what they were proposing for the transfer to 2014.

Mark Thompson: Yes, and it has a different quality from that of the CSR settlement. The licence fee agreement is just that. It is an agreement that I recommended to the BBC Trust and to which the BBC Trust, as it were, freely agreed. Obviously the CSR settlement is just a settlement; it is a determination by Ministers of a piece of public funding.

Q117Mike Gapes (in the Chair): You were, of course, consulted on that, because that was a matter between the FCO and the World Service, not the BBC Trust.

Mark Thompson: To be quite clear, managerially the BBC World Service is part of the BBC, and I was fully consulted on and fully engaged with the process of the World Service’s negotiations with the Foreign Office as well.

Q118 Mike Gapes (in the Chair): But you weren’t content in the same way as you are with the 2014 decision.

Mark Thompson: As you have heard me say, the consequences are going to be very damaging but, to be honest, we weren’t asked in the end to be either content or discontent-it was a decision by Government.

Q119 Mr Baron: May I pursue, if you don’t mind, the line of questioning with regards to protecting the funding for the BBC World Service within the Trust, and the possibility of funds being diverted to more "popular" things, such as the cult of celebrity, etc?

Mark Thompson: Are they terrible things?

Mr Baron: Well, they are not terrible things, but there is a balance, and it is your job to make sure that that balance is maintained.

Do you understand our concern here? The change in the governance arrangements happened over what, to us, seems a relatively short period of time, and we are concerned about the short-sightedness of the decision. We are concerned about the budget being raided, perhaps. Is there a fail-safe method out there-a mechanism? There has been talk about ring-fencing. Is there such a system in place, or could something be put in place to ease our concerns?

Mark Thompson: The mechanisms that we’ve talked about, which are used for our domestic services, are absolutely intended, among other things, to ensure that, as it were, the Radio 3 budget does not get pilfered, that a proper balance is kept and that significant changes to that balance do not take place without an explicit and transparent process of consultation, in which a number of people who have frequently been in Select Committees in the House of Commons will take a view, and opinions will be expressed. I think that this system of scrutiny and accountability regarding where the money is spent should offer a high degree of protection. Moreover, it is likely to deliver a higher level of protection than that which the World Service has enjoyed up until now. We are at a moment when the existing arrangements have not succeeded in protecting the World Service’s funding as much as we would have wished.

Q120 Rory Stewart: I put on the record that I am broadly supportive of this move. I think it was right to move the licence fee funding from the Foreign Office to DCMS. But to push again on the governance issue, have we now got the person running the World Service-Peter-at a significantly senior level within the BBC? I understand, and perhaps I am wrong about this, that when Sir John was doing the same job it was reporting at a different level. Can we change that, to support the BBC World Service?

Mark Thompson: One of the things that we’ve been trying to do at the BBC is to make sure, firstly, that at the top of the organisation you’ve got all the right things being considered and all the right interests being represented, but we have rather fewer overall leaders in the organisation than we used to. Under the new arrangements there will be a director of news-Helen Boden is the current occupant of that post-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. At the moment, the World Service is represented on the executive board by the deputy director-general of the BBC, Mark Byford. That post is being closed. We have also, in the past year, combined two roles: the director of global news with the director of the World Service.

We are reducing the number of people, but I am quite clear that the executive board will consist of some non-executive directors. Among the executive directors there will be seven, one of whom will be the director of news. That is a small number for the BBC, but there has been considerable and proper pressure to reduce the number of senior managers. One of those seven is the person charged with the overall journalism of the organisation, but within her brief, I am clear that she will be charged and held to account for the quality and support of the international services.

Q121 Rory Stewart: Can we not just push that one more time and see whether it is worth reconsidering? You are taking on a huge thing-full responsibility for the World Service, which is leaving the Foreign Office. Does that not justify a seat on the executive board?

Mark Thompson: The answer is that I do not believe that it does. If we had an executive board of 10 to 15 senior executives, there would be no question-even at nine members. The BBC is a big organisation with many operations. For example, we have a commercial arm, BBC Worldwide, which has a turnover of well over £1 billion a year. The chief executive of BBC Worldwide is not on the executive board. We try to keep the top of the organisation as a relatively small number of people not least so that the boards are effective. You will know from public limited companies that most plc boards have a relatively small number of executives, precisely so that they are effective. Does that mean that the World Service will not be discussed? We have had more discussions about the World Service in recent months at the executive board than almost any other topic. It is very much front of centre. I believe that I have an explicit personal responsibility, as my successors will as well.

Mike Gapes (in the Chair): Thank you very much. One more question.

Q122 Mr Watts: Mr Thompson, you have heard people say that part of the problem could be resolved if DFID were to make a contribution to the BBC for some of the services you provide. Not everyone would agree with that, but have you had any indication that DFID would be happy with that? Do you expect the discussions going on at the moment to come to any positive conclusions?

Mark Thompson: Look, it is heartening that so many people are making this case, but, just to repeat what my colleague Jim said earlier, I do not have any indications yet that any fresh, additional or compensatory money is available. We understand that it is not a matter for us. It is a matter for the Government to decide on what they want to spend and how they want to spend it. It is inappropriate for us to badger or to attempt to dictate that. The case for the developmental value of much of what the World Service does is considerable. It is encouraging that others, including members of this Committee, seem persuaded of that. As yet, we have not heard anything that gives us comfort that that broad sense of support is being translated into money.

Q123 Mr Watts: Are you taking this possibility seriously, or do you believe that it is unrealistic?

Mark Thompson: I think we should hope for the best, but prepare for the reality of the funding that we have. That is what we are doing.

Mike Gapes (in the Chair): Thank you, Mr Thompson, and all the previous witnesses who have stayed and diligently listened to the whole session after giving their own evidence. Thank you for coming. It has been a valuable session.