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

6  Transparency and accountability


86.  In the previous Parliament, our predecessor Committee was frustrated by the BBC's reluctance to increase transparency, particularly with reference to BBC staff and talent costs. In 2007, the BBC told the Committee that disclosing talent costs, even grouped in bands, would cause commercial prejudice to the BBC and potential exposures to actions for breach of confidence.[105] It was only in February 2010 that the BBC first disclosed the total amount paid to artists, presenters, musicians and other contributors across its services (for the year ending 31 March 2009) and a breakdown of the total amount paid in four bands — the top one being £150,00 plus. The BBC did not disclose the numbers of individuals in each band.

87.  Our predecessor Committee was still pressing for further transparency in March 2010 in its last report on the BBC, when it recommended 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 £1 million; £1 million to £5 million; and £5 million plus. We do not expect to see any entries in the £5 million plus category.[106]

In July 2010, we were able to publish the BBC Trust's response to our predecessor's Report. We were pleased to read that the Trust now:

[…] agreed with the Committee that the current bands are not sufficiently transparent in explaining how talent pay is broken up.

The Putting Quality First document also reflects the Trust's commitment to publishing talent costs broken down into figures for aggregate spend in the bands suggested by our predecessor Committee, as well as indicating the numbers of individuals falling into each band. The same document also commits the BBC to producing an annual report on all public service senior manager pay, with salaries anonymised but published in bands no greater than £5,000 wide and fitted into an organisational plan. On 24 March 2011, our Chairman wrote to Mark Thompson expressing disappointment that the banded information on talent salaries was still not in the public domain, given that it was July 2010 when Sir Michael Lyons announced that the BBC would publish it. He pointed out that, by waiting until the publication of the 2011 Annual Report, the BBC would have taken nearly a year to implement the decision made by the Trust and saw no reason why this information could not be published now, in advance of the Annual Report. Mark Thompson's response, published in this Report, was unhelpful.[107]

88.  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.

89.  It is undoubtedly helpful that the outcome of the strategy review includes, as one of its key four objectives, setting new standards of openness and transparency. We note, in particular, that Putting Quality First states that:

A key test of the success of this strategy will be whether it can be shown to be working through a much wider pattern of public disclosure and reporting.

In the past our predecessor Committee has observed a perhaps unsurprising tendency in BBC Annual Reports to highlight favourable over unfavourable information, for instance with reference to BBC Three performance. In a similar vein, the recent NAO value for money study, The BBC's management of the costs of producing continuing drama, noted that the BBC's reliance on cost per viewer hour as its main measure of value for money had its limitations and recommended that the BBC Trust "require the BBC to use a range of measures to report against value for money, including the cost of producing an hour of programming".[108] 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.


90.  Transparency and accountability are closely linked. During the last Parliament both our predecessor Committee and the previous Committee of Public Accounts pushed for the National Audit Office (NAO) to be given full access to the BBC's accounts to ensure that the BBC was held sufficiently accountable for the licence fee money it spent. The coalition's programme for Government included a commitment to give the NAO full access to the BBC's accounts by November 2011. Knowing that the media had reported that Sir Michael Lyons and Mark Thompson had been lobbying against the NAO having anything more than selective access to BBC accounts, we pressed the BBC on this issue during our first oral evidence session.

91.  In response, Sir Michael Lyons was cautious, arguing that there were three important principles at stake: accountability; transparency; and, perhaps in opposition to these first two principles, the independence of the BBC. He asserted that the BBC already worked closely and effectively with the NAO on value for money studies, and that he would have no objection to the NAO bidding to become auditors of the BBC when KPMG's current contract came to an end. He observed, rhetorically:

Does the Trust take seriously its responsibility for both challenging expenditure within the BBC and making sure that people understand what money is being spent on? Yes, it does and I don't think there is any room to criticise that role and I underline that the NAO has been an ally in the way that we do that job.[109]

Mark Thompson supported Sir Michael Lyons' arguments, suggesting that:

[…] it is laid out very clearly in the Charter that the BBC will be unlike other public bodies. Yes, it gets public money but it will be unlike other public bodies in the matter of how it is held to account for value for money, specifically because of the need to keep it independent of Government and the political process for its editorial reasons.

Sir Michael Lyons did see scope, with respect to the NAO's value for money exercises, for the NAO to have greater freedom to name the areas they want to go in — subject to certain ground rules being established, such as ensuring that the BBC's negotiating position in the market place was not impaired by more financial information appearing in the public domain. He also affirmed that he would be content for the NAO to undertake a value for money audit of the BBC Trust.

92.  At the time of the first oral evidence session, discussions with regard to delivering the Government's commitment were ongoing. On 22 September 2010, the Government announced that agreement had been reached to give the NAO full access to the BBC accounts for the first time. The agreement included:

  • NAO routine access to BBC management information;
  • NAO right of access to any information it needed to identify and carry out its duties;
  • NAO access to confidential BBC contracts with third parties; and
  • Agreement that the NAO would not question the BBC's editorial policy.

The Government press notice explicitly stated that the NAO would have the authority to determine which areas of BBC expenditure it wished to scrutinise. It also, however, advised that — uniquely for NAO reports — the value for money studies would be submitted first to the BBC Trust which would then transmit them to the Secretary of State for laying in Parliament. Normally, it is the NAO itself which determines when it reports its findings to Parliament, subject only to the limitation that its Reports are published when Parliament is sitting. The Government announcement also stated that discussions would now be taken forward to implement these changes well before the original deadline of November 2011.

93.  Recognising that the devil might lie in the detail, we wrote to the Comptroller and Auditor General in October 2010 seeking his assessment of the new arrangement. We are publishing his response, which took the form of a covering letter, and a copy of a letter sent to the Secretary of State, on our website.

94.  The Comptroller and Auditor General revealed in his letter to the Secretary of State his concerns at the manner in which the agreement had been announced — with the NAO apparently only informed a few days before the announcement was made. He also queried the scope of the agreement, noting that the NAO was not solely interested in BBC spending, but rather in the use of all BBC resources. He noted that, without a statutory right of access, the NAO would continue to have no access to information covered by the Data Protection Act. He was seeking further clarity on the requirement to inform the BBC Trust before the NAO decided upon its programme of work, particularly given a Trust statement that this would be decided on an annual basis. [110] He made it clear that he would be unwilling to commit to annual plans, as the NAO needed the flexibility to react to changing circumstances and the issues of the day. He expressed his disappointment that the Government was content for NAO reports on the BBC to reach Parliament via the BBC Trust and the Secretary of State because:

It raises the possibility that the BBC Trust or the Secretary of State could redact material or indeed not publish the report, and, under current arrangements, it means that the BBC, uniquely, responds to the issues raised by our reports before they have been considered in Parliament.

He expressed his view that the NAO would be better placed to deliver a fully informed programme of value for money work if it was the BBC's external auditor. Finally, he concluded that the fact that audit access remained dependent upon a continuing agreement between the Government and the BBC, rather than on statute, left important matters unresolved, and might mean in practice little progress in terms of independent scrutiny of the BBC.

95.  We were copied in to the Secretary of State's response, dated 18 November 2010, which we are also publishing on our website. He advised that he did not intend to give the NAO statutory access as he wanted a successful outcome within the current Charter and Agreement framework. He agreed that a mutually acceptable definition of editorial policy was required. He rejected requiring the BBC to appoint the NAO as its external auditor, observing that it was open to the NAO to compete for the contract when it came up for renewal in 2012.

96.  Reading the Comptroller and Auditor General's letter, we were surprised by the number of issues which still needed to be addressed. As things stand, the arrangements with regard to setting an inquiry programme on an annual basis and submitting resulting reports to the BBC Trust rather than to Parliament, do not meet the original commitment to give the NAO unfettered access. This matters because, as shown in its recent Report on the BBC's management of its Digital Media Initiative, the NAO is identifying deficiencies in the BBC's approach in this case to project management.[111] Furthermore, the Public Accounts Committee's (PAC) own Report into the Digital Media Initiative, concluded that:

The BBC's confidential settlement with the contractor delayed the C&AG's access to relevant information, and led the National Audit Office's review being held up for eight months.[112]

Calling this unsatisfactory, PAC affirmed that it expects the BBC and BBC Trust to ensure that full access is given promptly in the future.

97.  We understand that negotiations on the detail of this agreement are ongoing. 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.

105   Culture, Media and Sport Committee, Fourth Report of Session 2007-08, BBC Annual Report 2006-07, HC 235 Back

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

107   Ev 66 Back

108   National Audit Office and BBC Trust, the BBC's management of the costs of producing continuing drama, Report by the Comptroller and Auditor General presented to the BBC Trust's Finance and Compliance Committee, 3 March 2011, p 9 Back

109   Q20 Back

110   Ev 65 Back

111   The BBC's management of its Digital Media Initiative, Report by the Comptroller and Auditor General presented to the BBC Trust's Finance and Compliance Committee, 13 January 2011 Back

112   Public Accounts, Twenty Ninth Report of Session 2010-12, The BBC's management of its Digital Media Initiative, HC 808 Back

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© Parliamentary copyright 2011
Prepared 19 May 2011