Appendix 2: Response from the BBC Trust
BBC Trust response to the Culture, Media and Sport
Select Committee's report on the BBC's Annual Report and Accounts
2008/09
In March 2010 the Culture, Media and Sport Select
Committee published its report "BBC Annual Report 2008-09."
This is the BBC Trust's response to those recommendations where
we feel we can offer a useful contribution to the Committee's
work.
As noted by the Committee, the Trust is currently
conducting a review of the BBC's Strategy, on which we have consulted
publicly. As we are mid-way through this process we are sure the
Committee will understand that we are unable to comment in this
response on those areas currently under consideration. Where we
have covered issues in our initial conclusions, published on 5
July and available on our website , we have referred to them.
BBC Trust response to specific Committee recommendations
3. We are disappointed that the BBC Trust and
the BBC Executive took so long to provide to us information on
reach targets. We are further concerned that BBC services may
be failing to fulfil the reach aims in some of their Service Licences,
something that does not appear to have been addressed by either
the Trust or the Executive in the Annual Report or in its oral
or follow-up evidence to us. (Paragraph 24)
Service licences set out the reach aims of each service,
often specifying that the service should either aim to maintain
or increase reach. These aims are designed to ensure services
contribute to the BBC's overall target that BBC services as a
whole reach 90 percent of the population. This target has been
set by the Trust through service licences in line with our role
to set the overall strategic direction for the BBC and performance
is reported in the annual report. The Trust has not set reach
targets for individual services as it is a matter for BBC management
to establish the relative contribution each service should make
to this overall target.
4. We agree with Sir Michael Lyons that there
is a direct obligation for the BBC to show that it demonstrates
value to all licence fee payers and that measuring audience reach
is a useful component of that. However, the proportion of those
who do not use any BBC television or radio service for at least
15 minutes per week, and the figures for some services which are
used only by a minority of their own target audiences, indicates
to us that this value is not being delivered to enough people.
(Paragraph 33)
In a UK where over 91 percent of households now have
multichannel television, the BBC as a whole reaches some 97 percent
of the population each week. This is an impressive achievement.
We recognise that changes such as video on demand will continue
to change the media landscape and audience behaviour, and will
continue to emphasise the importance of reach to the whole population
in this context. Reach trends for individual services should be
considered alongside other performance measures relating to quality,
delivery of the public purposes and value for money.
5. The BBC should be more transparent in setting
out its reach targets, including the figures for minimum level
of reach considered necessary to serve its target audiences. It
should also consider publishing additional measures of reach likely
to provide a better indicator of the proportion of the public
watching entire BBC television programmes, and the time licence
fee payers spend on individual services each week, rather than
just 15-minute reach figures. (Paragraph 34)
The Trust regularly monitors the reach of individual
BBC services and publishes its assessment of performance in the
BBC annual report. In line with the Committee's recommendation
we will review the information we provide and consider whether
additional measures of reach would give a better indication of
performance.
The Trust shares the Committee's objective of transparency
but does not set reach targets for individual services. We set
an overall target that BBC services as a whole should reach 90
per cent of the population but it is a matter for BBC management
to determine how each service should contribute to this target.
8. We commend the BBC on its increased targets
for the proportion of network output to be produced in Scotland,
Wales and Northern Ireland, and note that the proportion of spend
in television in the nations and regions has generally been rising.
However, the fact remains that the BBC is spending less now than
before. After rising by £100m to £984m in 2007/08, licence
fee spend in the nations and regions decreased by £40m to
£948m in 2008/09. (Paragraph 49)
Over the past few years, the BBC Trust has looked
in detail at the BBC's approach to its work in the Nations and
Regions. We have conducted a review into the impartiality of network
news coverage, approved a new approach to local provision across
the BBC's services, and revised the BBC targets for out of London
production.
In May 2008, the Trust agreed that in future the
BBC should adopt more challenging targets for measuring and meeting
its targets for network production in the nations by using Ofcom's
definition instead of the existing BBC one.
This decision formed part of a renewed commitment
by the BBC to move more network television production out of London
to draw on the talent and skills of the whole UK. Including the
impact of moving several departments to Salford in 2011, the Trust
now expects the BBC to ensure that 50% of network production will
be made outside London under the Ofcom definition by 2016.
Although the proportion of network television expenditure
invested outside London has gone up, total expenditure in the
nations and regions (of which network television is only one component)
has gone down. The 2008-09 annual report shows that total expenditure
in the Nations and regions fell from £984 million in 2007-08
to £948 million in 2008-09. In the same year around 35% of
eligible spend, according to Ofcom definitions, was in the Nations
and Regions. This figure includes network and non-network television,
radio, on-line and an allocation of overhead expenditure. The
Accounts for 2009-10 show that the proportion of eligible spend
in the Nations and regions has risen to 38% while overall spend
has further decreased to £903m due to the BBC's ongoing
efficiency programme.
The decrease in expenditure in 2008/09 was mainly
due to changes in the level of overhead allocation, efficiency
savings, the move of some Radio 2 operations out of Birmingham
and a reduction in expenditure on radio sports rights.
Total investment in the Nations and regions is likely
to fluctuate year on year for a variety of reasons. For example,
peaks and troughs in commissioning and the impact of efficiency
saving measures have an impact, while the overall nations and
regions investment reported in the Annual Report is subject to
variations in expenditure on non-network television, radio, on-line
and overhead allocation, as well as a range of year-end accounting
adjustments. The ongoing efficiency programme will also have an
impact.
Underpinning this broad approach is a policy of creating
sustainable growth throughout the UK. We acknowledge that this
will take time but fluctuations in spend should be viewed in this
context.
10. We consider that some of the claims regarding
BBC Three made by the BBC Trust and Executive are not fully supported
by the evidence. The BBC has been more ready to highlight favourable
over unfavourable information and its implications. In particular,
we note that the Trust's claim of "BBC Three's effectiveness
in reaching young people" is not supported by its audience
reach. We are also surprised that the test of the value of BBC
6 Music and the Asian Network in the latest strategy review appears
not to have been applied to BBC Three. (Paragraph 63)
The Trust's assessment of BBC Three was informed
by our review of this service which was completed in June 2009.
We ran a public consultation and carried out audience research
looking at trends in reach, quality, value for money and the service's
contribution to the public purposes. On the basis of this analysis
we concluded that BBC Three had become an important part of the
BBC's television portfolio, both in terms of its reach to younger
audiences (which has increased significantly in recent years and
was higher than comparable broadcasters) and its willingness to
innovate and take creative risks.
Around 43 per cent of viewers consider BBC Three's
programmes to be 'original and different' - higher than Channel
4 which has a remit to take creative risks, and much higher than
BBC One. BBC management's YouGov research provided to the Trust
as part of our review, shows that audiences perceive BBC Three
to be better than comparable broadcasters with regards to statements
such as 'not afraid to take risks and try new things'. Among 16
to 34 year olds, BBC Three scored 7.1 out of ten, ahead of the
highest comparable broadcaster, E4, which scored 7. This view
was also reflected by respondents to our public consultation -
nearly two thirds of whom told us that BBC Three is performing
well at providing programmes that feature fresh and new ideas.
In our recently published initial conclusions on
the strategy review we endorsed BBC Three's role as an important
part of the current TV portfolio.
13. We welcome the BBC's move towards greater
transparency regarding its staff and talent costs, including the
disclosure of senior BBC managers' headcount and payments to talent
in bands. However, the BBC's commitment to this level of transparency
is long overdue. This Committee has been one of a number of voices
pushing for some time for greater openness. We believe that the
information released by the BBC should be expanded, at minimum,
to include a breakdown of headcount by salary band not just for
senior managers but all BBC employees, and the number of individuals
in each payment band for talent. We further recommend that additional
payment bands for talent should be introduced, disclosing the
number of individuals and total payments for those earning £250,000
to £500,000; £500,000 to£750,000; £750,000
to £1m; £1m to £5m; and £5m plus. We do not
expect to see any entries in the £5m plus category. (Paragraph
77)
The BBC Trust is committed to being as transparent
as possible about the way that the BBC spends the licence fee.
We also recognise the public interest in the amount the BBC pays
to staff and artists. In our initial conclusions on the strategy
review, we make clear that we want to accelerate the changes we
are making to increase transparency and value for money.
Licence fee payers have a right to know more about
how their money is spent on management salaries and talent costs.
We will ask the BBC to disclose more detail about how these costs
are structured and have challenged them to provide greater transparency
about who is at the top end of the talent pay scale. The Trust
believes the BBC should release the names of the talent who receive
the very highest incomes from the BBC, although this should not
go to the level of divulging individual salaries. As such we have
asked that:
- Full and formal records of
all public service senior managers' pay, anonymised in bands,
together with a clear, costed summary of the overall pay/grade
structure. Much of this information has already been released
in response to Freedom of Information requests. We now will ask
for progress to be tracked and reported annually.
- Aggregate costs of presenters' and other talent
salaries in the narrower bands recommended by the Committee. We
agree with the Committee that the current bands are not sufficiently
transparent in explaining how talent pay is broken up. Equally,
we remain convinced by the argument that publication of all individual
talent payments at all levels would be likely to have an overall
inflationary effect, reducing the value delivered to licence fee
payers.
While all the above information would be provided
in aggregate, without individuals' names attached, for on-air
talent we also believe the BBC should be clearer about who the
very highest paid individuals are.
We recognise that this will not be simple. Terms
of trade with independent producers do not currently allow for
sight of talent salaries. Some existing BBC contracts contain
confidentiality clauses that would prevent immediate publication.
But given the BBC's reliance on public funding, there is an over-riding
public interest justification for greater transparency about who
is at the top end of the talent pay scale, although this should
not go to the level of disclosing individual salaries. We are
therefore challenging the Director-General to work urgently on
a plan to deliver this level of transparency.
We welcome the fact that the BBC is already making
progress in reducing the costs of talent, with this year's Annual
Report showing that £7.2m has been saved since 2008/9. We
expect further transparency should help that trend to continue.
14. The reward packages of the Director General
and senior management of the BBC are seen to be out of step with
the current economic climate and the need for public sector pay
restraint. The BBC must look to cutting its costs, and leadership
on this should come from the top of the organisation. We therefore
welcome the BBC's commitment to making a 25% cut in the BBC senior
management pay bill by 31 July 2013. However we recommend that
the BBC's remuneration policy should include benchmarks not only
with the private sector but also with senior management pay scales
in the public sector. (Paragraph 82)
In addition to our commitment to reduce the total
paybill for senior managers across the BBC by 25%, the Executive
Board has also made explicit that future executive roles will
be benchmarked against a mix of public and as well as private
sector roles and offered at an explicit discount to the private
sector. The 'discount factor' that we have set ranges from 20%
- 80% depending on the seniority of the role in question.
The BBC Trust has always been clear that our approach
to senior remuneration at the BBC is that it must balance the
need to attract the high calibre people to deliver the services
that licence fee payers expect with the need to demonstrate value
for money. Our remuneration review, released in October 2009,
aims to do exactly that.
Our initial conclusions on the BBC's strategy review
make clear that we agree with the Committee that it is important
that the top management of the BBC responds to public concern
and shows leadership to the rest of the BBC in tough times. We
will ask the Director-General to accelerate existing work to reduce
the senior pay bill by 25% - so that it is completed within eighteen
months, by which time we expect there to be a different, simpler
management and pay structure in place. In the meantime the Director-General
and all members of the BBC Executive Board have each volunteered
that for this year and next they will forego a month's salary.
In parallel, Trustees will take an equivalent 8.3% pay cut for
those two years.
As reported in the Annual Report and Accounts for
this year, progress has already been made. Bonuses have been suspended
indefinitely and the most senior directors have had their salaries
frozen for four years, taking home around 5% less in real terms
than they did two years ago. Although senior manager numbers grew
in the first half of the year, by March - five months after the
measures were announced - the BBC had reduced the number of senior
managers by 15 (2.3%) and the total paybill for the period dropped
by £6.8million (8.6%).
Since March there has been further progress. As of
the end of May, the number of senior managers had been reduced
by 24 and the total paybill dropped by £7.76 million.
July 2011
| 
