BBC Licence Fee Settlement and Annual Report - Culture, Media and Sport Committee Contents

1  Introduction

1.  The Culture, Media and Sport Committee conducts annual scrutiny of the British Broadcasting Corporation (BBC) and its Annual Report and Accounts on behalf of Parliament and the licence fee payer. Our role in holding to account the BBC Trust (the independent governing body responsible for setting the overall strategic direction of the BBC) and Executive — and the part played by the Government in relation to them — has been of particular significance over the last year. During this time, pivotal decisions about the future direction of the BBC have been made without consultation or significant Parliamentary debate.

2.  When we began our annual scrutiny of the BBC in September 2010, it was already clear that this was an important year for the BBC, given the anticipated publication of the outcome of the BBC Trust's review — entitled Putting Quality First — of the BBC's overall strategy. The BBC Trust initiated the first stage of this review by tasking the BBC Executive to submit its own proposals. In its own words, the BBC Trust:

[…] challenged the Director General to undertake a review of the BBC's overall strategy in July 2009 to address questions about the scope of the BBC's activities, focusing on how the BBC can most effectively deliver its public service mission and meet audience needs and deliver value for money.[1]

The Strategy Review also offered the BBC the opportunity to address criticisms that it was straying too far from its public service broadcasting remit; was being too profligate with licence payer money; and was insufficiently transparent, particularly with regard to the salaries of senior staff and talent. During the last Parliament, our predecessor Committee had highlighted some problem areas, including the expansion of BBC Worldwide;[2] the level of expenditure on Project Kangaroo (a now-defunct proposed joint venture video-on-demand service with ITV and Channel 4 that was blocked by the competition authorities);[3] and the need for greater transparency on pay.[4]

3.  At the time of the Committee's oral evidence session with the BBC on Wednesday 8 September 2010, the BBC Trust had already published the initial conclusions of its Strategy Review, and BBC Director General Mark Thompson had recently highlighted some key themes when he gave the MacTaggart lecture on Friday 27 August 2010 at the Edinburgh International Television festival.

4.  Shortly after the session, on 16 September 2010, the Rt. Hon Jeremy Hunt MP, Secretary of State for Culture, Olympics, Media and Sport, announced that the Government had accepted a proposal from the BBC Trust to forego the planned rise in the licence fee in 2011/2012. Already in September 2010 then, the BBC was coming under pressure to show that it was aligned with the new climate of austerity and public sector belt-tightening. However, it was only in the days leading up to Wednesday 20 October, the day of the Government's announcement of the outcome of its Comprehensive Spending Review (CSR), that reports started to emerge of a comprehensive licence fee settlement that would last until the end of 2016/2017. The previous BBC licence fee was not due to expire until 2013. The confirmation on Wednesday 20 October 2010 that the Government and the BBC had indeed done a deal — and one moreover which also involved the BBC taking on a number of new responsibilities in return for a guarantee that the licence fee would remain at £145.50 until the end of 2016/2017 — was, therefore, highly significant.

5.  We quickly concluded that the settlement had huge ramifications for the BBC and licence fee payers. We also observed that negotiations had been completed in an unprecedentedly short period of time, with no opportunity for consultation. Despite its significance for the BBC and viewers, Parliament had been given no opportunity for scrutiny. We decided, therefore, to prolong our scrutiny process, and held a second oral evidence session with the BBC on Wednesday 15 December to provide the opportunity for the detailed scrutiny that the settlement, and the manner of its negotiation, called for. Following this oral evidence session, we sought further clarification on a number of points, in writing, from both the BBC and the Secretary of State. This correspondence is published with our Report. Finally, on 10 March 2011 we held a pre-appointment hearing for the position of Chairman of the BBC Trust, with Lord Patten of Barnes, the Government's preferred candidate to replace outgoing Chairman, Sir Michael Lyons.[5]

6.  In recognition of the unprecedented nature of the events of October, the next three chapters look at the negotiation process and the settlement outcome, explaining what went on and why and assessing the wider significance and impact. Chapters five and six — set within the context of the new settlement, the Strategic Review and the BBC's 2009/2010 Annual Report and Accounts — assess the progress that the BBC is making against three key themes of long-standing interest to the Committee: content, transparency and accountability. Chapter seven examines the progress of the BBC's relocation to Salford Quays, which the Committee visited in November 2010. Finally, chapter eight concludes with a brief look at the way ahead for the BBC.

7.  Finally, we would like to extend our thanks to Ray Gallagher, the Committee's broadcasting specialist adviser, for his invaluable contribution to this Report.

1   Lyons sets out initial conclusions on future direction of the BBC, BBC Trust Press Release, 5 July 2010  Back

2   Culture, Media and Sport Committee, Fifth Report of Session 2008-09, BBC Commercial Operations, HC 24 Back

3   'Project Kangeroo' - Final Report, Competition Commission Press Release 05/09, 4 February 2009 Back

4   Culture, Media and Sport Committee, Fifth Report of Session 2009-10, BBC Annual Report 2008-09, HC 515 Back

5   Culture, Media and Sport Committee, Second Report of Session 2010-12, Pre-appointment hearing with the Government's preferred candidate for Chairman of the BBC Trust, HC 864-I Back

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© Parliamentary copyright 2011
Prepared 19 May 2011