Conclusions and recommendations
The negotiation process
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.
(Paragraph 26)
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.
(Paragraph 27)
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.
(Paragraph 32)
Outcome
4. In the current climate, the financial terms of the settlement appear to us, on balance, to be reasonable. In reaching the agreement, the BBC clearly believed that the terms were worth the certainty given by a licence fee agreement securing its financial future to 2016/2017. We urge the BBC to make it very clear in future financial statements where they are proposing new savings measures, and where they are simply progressing previously announced plans. (Paragraph
38)
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.
(Paragraph 47)
The BBC World Service
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.
(Paragraph 52)
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.
(Paragraph 53)
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. (Paragraph
56)
S4C
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.
(Paragraph 57)
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.
(Paragraph 62)
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.
(Paragraph 63)
BBC Monitoring
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.
(Paragraph 65)
Broadband
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.
(Paragraph 66)
Local TV
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.
(Paragraph 69)
Content
15. A balance must be struck between BBC-generated and acquired programming, as there is clearly a place for the BBC acquiring distinctive, high quality programmes when other terrestrial broadcasters do not wish to bid. Generally, however, we welcome the shift of emphasis away from acquired programming, and trust that the downward trend will continue.
(Paragraph 74)
16. We urge the BBC to increase still further its efforts to support the production of quality programmes in the nations and regions when a strong case for doing so can be made.
(Paragraph 76)
Strategic Review: Outcome
17. While we are content with the broad thrust of the BBC Trust's strategic review, we have concerns that the BBC remains slow to implement necessary change. We will monitor closely the extent to which the BBC increases the speed with which it fulfils its strategic review commitments, including implementing improvements to the distinctiveness and quality of its services.
(Paragraph 79)
The Strategic Review and the new settlement
18. The main outcomes of the BBC Trust's strategy review are largely underwhelming in that they simply repeat verities such as the importance of putting quality first, ensuring value for money and having boundaries appropriate to its publicly-funded status. Our sense is that the hard choices on content are yet to come, but that they should not be avoided any longer. We will await with interest any indication that the new Chairman of the BBC Trust and the Director General can give us on the future shape of BBC services and their content during our next annual oral evidence session, and look forward to comparing the options considered and the choices made against the values of the strategy review.
(Paragraph 85)
Transparency and accountability
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.
(Paragraph 88)
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.
(Paragraph 89)
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.
(Paragraph 97)
Salford Quays
22. We
believe that the new development at Salford Quays sends a powerful
signal of the BBC's intention to look beyond London for its production
base. We assess that the early indications are that it should
also deliver the creative and employment benefits which were hoped
for, if not the immediate financial ones. Having made the commitment,
we would expect the BBC to keep under review the scope for transferring
further production to its new home in the North West where there
are clear benefits from doing so. (Paragraph 102)
23. It is inevitable
that a major project such as the development at Salford Quays
will attract media attention, not least regarding staff relocation,
and attention from the newspapers, which tend to be critical of
the BBC. Senior management would be well aware of this. To employ
a "migration manager", therefore, who commuted from
his US home, simply opened the BBC up to self-inflicted and predictable
ridicule. Such decisions cannot simply be dismissed as inconsequential
gaffes. They lower the esteem of the BBC, its senior management
and the Trust in the eyes of the public and its own staff. It
is a task for the incoming Chairman to ensure that the BBC is
seen always to lead by example in the future. (Paragraph 103)
The way ahead
24. Particularly
when set against the additional responsibilities and financial
challenges of the new settlement, the strategy review Putting
Quality First did not move the BBC on to the extent required by
current circumstances. Big questions remain as to how radically
the BBC will need to re-configure both its content and the way
in which it delivers its content in the years ahead. There is
much for Lord Patten, the incoming Chairman of the BBC Trust,
to get to grips with, and we look forward to hearing his views,
alongside those of his Director General, in future oral evidence
sessions. (Paragraph 105)
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