Appendix 1: Government response
Letter from Rt Hon Jeremy Hunt MP, Secretary of
State for Culture, Olympics, Media and Sport, dated 6 July 2011
I was interested to read the Culture, Media and Sport
Committee's report, BBC Licence Fee Settlement and Annual Report:
Fourth Report of Session 2010-12. I have considered very carefully
the evidence presented to the Committee and the conclusions and
recommendations of the report. I welcome the report's contribution
to the on-going debate about the role and funding of the BBC.
I am pleased to present the Government response to
the recommendations in the report aimed at Government as an annex
to this letter.
Annex
GOVERNMENT RESPONSE TO THE CULTURE, MEDIA AND SPORT
COMMITTEE'S REPORT, BBC LICENCE FEE SETTLEMENT AND ANNUAL REPORT:
FOURTH REPORT OF SESSION 2010-12
Introduction
The Government welcomes the report and has considered
very carefully the evidence presented to the Committee. The Government
notes the conclusions and recommendations set out in the report
and is pleased to be able to present its response.
Conclusions and recommendations
1. The Government's proposal to have the BBC fund
the cost of free licences for the over-75s would have had a significant
impact on the BBC's finances, and the present Trust and management
clearly regarded this as unacceptable. This may well have made
them more amenable to other suggestions and to the eventual outcome.
It was inevitable that the BBC would be required to contribute
to the effort to reduce the overall level of Government spending
but the broadening of this negotiation into a licence fee settlement
was not necessary and has weakened the distinction between the
BBC and other publicly funded bodies.
Response to 1: This has not weakened the distinction
between the BBC and other publicly funded bodies. I am clear about
the BBC's unique role but it was important to explore all possible
options for reducing the fiscal deficit. As a large-scale public
body, with public service obligations in its Charter and in receipt
of public funding to the value of £3.5bn, it was entirely
appropriate to include the BBC within the scope of the exercise.
2. We recognise that the Government made the first
move, that time was of the essence and that the BBC seized the
opportunity to pursue a wider settlement, securing its immediate
financial future. We consider, however, that the decision to leave
the vast majority of the negotiations with the Government to the
BBC's Editor-in-Chief and senior management further weakened the
arm's length principle. In future licence fee negotiations, we
would expect the Trust Chairman, as head of the independent Governing
Body, to play a more prominent lead role, acting as a buffer between
the BBC and Government.
Response to 2: We do not agree that the arms-length
principle has been weakened. It is for the BBC to decide which
individuals should represent the BBC. Government was satisfied
that the individuals with which we were dealing had the full authority
of the Trust Chairman and that the Chairman was being kept fully
in the picture. Furthermore, the final settlement was agreed between
the Government and the Trust, as set out in the Secretary of State's
settlement letter to the Trust.
3. If the BBC is to continue to benefit from a universal
licence fee then it is vitally important that both licence fee
payers and Parliament should have some involvement when far-reaching
decisions about funding and the responsibilities are taken. It
is regrettable that the decision to broaden the negotiations over
expenditure into a full licence fee settlement meant that the
opportunity for this was lost, thus undermining confidence in
both the Government's and the BBC's commitment to transparency
and accountability. We recommend that it should not become a model
for the next round of licence fee negotiations for the post 2016/2017period.
9. The Welsh Affairs Committee has recently undertaken
a detailed inquiry into S4C and we do not propose to repeat all
its findings here. We do, however, find it extraordinary that
the Government and the BBC, which is fiercely protective of its
own independence, should find it acceptable to agree a change
in the funding and governance arrangements for another statutorily
independent broadcaster, S4C, without the latter having any involvement,
say or even knowledge of the deal until it has been done.
Response to 3 and 9: Given the scale and pace of
the licence fee agreement discussions, it was not practical to
have in-depth discussions with all interested parties. The Secretary
of State was focussed on the interests of licence fee payers and
taxpayers and the timeframe reflected the Government's desire
to put the UK's finances in order.
We have responded separately to the Welsh Affairs
Committee's recent report on S4C. It is proposed that any changes
to S4C's statutory arrangements will be made by order under the
Public Bodies Act once that Bill receives Royal Assent. Those
changes will be subject to public consultation.
5. It seems evident to us that some of the additional
responsibilities that the BBC has taken on under the terms of
the settlement widen the scope of licence fee spending beyond
any previous interpretation of the BBC's mission and purposes.
By any normal definition, this constitutes "top-slicing".
The challenge for both the BBC and the Government over the rest
of the Charter period will be to demonstrate a clear benefit to
the licence fee payer from the BBC taking on additional responsibilities
outside its core remit.
Response to 5: The Government disagrees with the
Committee's assessment. All the BBC's new funding responsibilities
arising from the licence fee settlement are consistent with the
BBC's Public Purposes.
6. We share the concerns of the Foreign Affairs
Committee regarding the risk to BBC World Service services arising
from the proposed 16 per cent cuts in the years 2010 to 2014/2015
before the BBC has taken on responsibility for its funding. We
strongly believe that, for relatively modest expenditure, the
BBC World Service delivers huge benefits in terms of extending
Britain's reputation and influence overseas. We are concerned
at the proposed closure of a number of services and, although
we have not examined the scope for efficiency savings, we agree
with the Foreign Affairs Committee that there is a case for reversing
some or all of the planned reduction in funding. We also support
its view that this could be achieved by meeting part of the funding
requirement from the Department for International Development
budget.
Response to 6: The Government has noted the concerns
of both the Culture, Media and Sport Committee and the Foreign
Affairs Committee, as well as the comments raised in the House
during the debate on the World Service on 19 May. The Foreign
and Commonwealth Office was invited to review the reduction of
the budget of the World Service. This they have now done, and
the result was announced in a Written Ministerial Statement laid
before the House on 22 June. We attach a copy of the Written
Ministerial Statement for the ease of reference of the Committee.
The Government has made clear that the original funding
settlement for the BBC was proportionate and fair, with all parts
of government having to find difficult savings to address the
fiscal legacy of the last government. But in light of events
in the Middle East and North Africa since October last year, the
FCO looked again at options to enable the BBC Arabic Service to
continue its valuable work. To this end, the WMS announces that
the FCO will provide additional funding of £2.2m per annum
to enable the World Service to maintain the current level of investment
in the BBC Arabic Service.
The Foreign Affairs Committee has welcomed the Government's
response to their Report.
7. While acknowledging the importance of an adequately
funded World Service, there is also a separate funding issue for
the licence fee payer; namely the extent to which domestic services
and content might be adversely affected if additional funding
is diverted to the World Service. This is, of course, the mirror
image of concerns expressed by the Foreign Affairs Committee that
the BBC may seek to "raid" World Service funding to
support domestic services. Together with that Committee, we will
follow closely BBC plans to strike a balance between its new World
Service and existing domestic priorities.
Response to 7: The Government is confident that the
BBC can arrange for sufficient funding for the World Service without
significant detriment to core services.
8. Like the Foreign Affairs Committee, we believe
that there is a need for clarity as to how the dynamics of the
new relationship between the BBC and the Foreign Office will work
in practice. A formal concordat between the Foreign and Commonwealth
Office and the BBC World Service might provide the desired clarity,
so long as it did not undermine BBC editorial independence. We
will continue to monitor closely the BBC's progress in securing
a positive future for the World Service and the balance of its
relationship with the Government.
Response to 8: The rights and responsibilities of
all sides will be set out in an amendment to the BBC Agreement,
which is an agreement between the Secretary of State for Media,
Olympics, Culture and Sport and the BBC. This will include the
role of the Foreign Secretary in setting the priorities, objectives
and targets of the World Service, and that his written authority
would be required for the opening or closure of any language service.
We are discussing how the relationship between the BBC Trust and
the Foreign and Commonwealth Office will develop once the funding
transfers to the licence fee, including a formal exchange of letters
between the BBC Trust and the Foreign Secretary to confirm the
provisions of the amended BBC Agreement.
Once the funding moves to the licence fee, the Government
believes that the proposed new World Service Operating Licence,
issued by the BBC Trust, will enable the public and Parliament
to see the proposed level of service required from, and funding
available to, the World Service.
10. We remain unclear as to how S4C can retain its
independence if the BBC Trust is involved at a strategic level.
While there may be benefits to both parties from the partnership,
there can be no doubt that substantial public funding otherwise
available for other BBC content and services will be diverted
to S4C. The shotgun marriage of S4C and the BBC is an awkward
match, and we shall monitor developments closely to see whether
this aspect of the settlement really does represent best value
to the licence fee payer.
11. Should it become apparent that the partnership
agreement is not the best way forward, or that S4C is unable to
maintain sufficient editorial or operating independence under
the agreement, then an alternative funding mechanism will be needed.
In this event, we recommend that consideration be given to sharing
the licence fee in support of increasing public service content
choice in Wales without involving the BBC in S4C governance arrangements,
as well as to a reduction in the level of the licence fee and
alternative funding for S4C.
Response to 10 and 11: The Government is committed
to the future of S4C as a strong and independent Welsh language
broadcaster, retaining its editorial distinctiveness, and the
best way of securing the long-term future of S4C and Welsh language
broadcasting is through partnership with the BBC. The Government
envisages that the partnership model will provide greater opportunities
for value-for-money arising from synergies and efficiencies.
There will be a further review of S4C's strategy
and finances, to conclude in good time before the end of the period
covered by the Comprehensive Spending Review. The outcome of this
review will inform decisions on future funding of S4C.
12. We recommend that the Government and the BBC
identify how the licence fee payer benefits from BBC Monitoring
and clarify how the decision-making process regarding prioritisation
and funding allocation for BBC Monitoring will work once the BBC
assumes budgetary responsibilities.
Response to 12: BBC Monitoring supports the BBC's
Public Purposes, particularly in bringing the world to the UK,
and increases the BBC's ability to maximise scope for sensible
efficiencies and economies across the whole of the BBC family.
How BBC Monitoring features in the BBC's budgets is a matter for
the BBC.
13. We recommend that the Government clarifies the
BBC's involvement in the broadband rollout programme and the extent
to which it will be involved in the allocation of licence fee
money earmarked for broadband.
Response to 13: The Secretary of State and the BBC
have agreed that the BBC Trust should be given an appropriate
role in the oversight of the broadband rollout programme. DCMS
and the BBC Trust will put in place arrangements that fulfil that
agreement.
14. Plans for local TV are only in their formative
stages and we look forward to the Government's decision, hopefully
before the summer, on how it intends to proceed. We applaud the
Secretary of State's commitment and enthusiasm, but the project
will certainly merit close scrutiny as to its viability. It remains,
therefore, to be demonstrated that the admittedly modest funds
the BBC has undertaken to commit to this project represents good
value for the licence fee payer. We urge the Government and the
BBC to clarify the extent to which the BBC will retain control
of the licence fee resources allocated to local TV, and the pre-conditions
for such an outlay.
Response to 14: The Government is working with the
BBC to consider how the BBC's contribution will help support local
television services and ensure value for money for licence fee
payers. A summary of the 140 responses to the Government's consultation
on Local TV was published on 2 June, with the vast majority supportive
of the principle of Local TV. The responses produced a wide range
of views about how local television could be delivered in the
UK and the Government is currently considering the statutory and
regulatory options available to enable Local TV to emerge in the
UK. The government's final proposals will be published in July
and will take account of the settlement reached with the BBC regarding
its contribution to this area.
19. We welcome the commitments the BBC Trust has
now made on transparency. We are, however, disappointed and frustrated
that the banded information on talent salaries is still not in
the public domain, given that it was July 2010 when Sir Michael
Lyons announced that the BBC would publish it. This is another
example of the long gestation time between the BBC identifying
a need for policy change and delivery of that change.
20. We assess that the BBC still needs to raise
the bar with regard to transparency. We welcome its commitment
to go further in this area, and will continue to monitor its publications
and statements closely for signs of change.
Response to 19 and 20: The Government strongly encourages
the BBC to meet the highest standards in relation to transparency
and value-for-money.
21. Having originally made a clear commitment to
allow the National Audit Office unfettered access to the BBC,
we are very concerned that the Government's proposals fail to
deliver this. We urge the Government to address the concerns expressed
by the Comptroller and Auditor General and to reach an agreement
that will give the National Audit Office all the powers it needs
to provide independent assessments of the value for money of BBC
expenditure. These should be reported to Parliament rather than
to the Secretary of State through the BBC Trust.
Response to 21: The Government is committed to giving
the National Audit Office full access to the BBC's accounts to
ensure greater transparency. The Government is currently in discussion
with the BBC and the National Audit Office about the detail of
the new value-for-money arrangements and the National Audit Office's
rights of access.
Given the BBC Trust's independence from Parliament
and its ultimate responsibility for value- for-money at the BBC,
it is appropriate that the National Audit Office reports are presented
to the Trust. Under the new arrangements, therefore, the National
Audit Office will continue to present its reports to the BBC Trust.
July 2011
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