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

Letter from Sir Michael Lyons, Chairman of the BBC Trust, 4 February 2011

I refer to your Committee's evidence session with the BBC on Wednesday 15 December 2010 and Andrew Griffiths' subsequent letter of 10 January 2011 seeking further information about the BBC's negotiations over the licence fee settlement with Ministers and Departmental officials.

As you are aware the negotiations over the licence fee settlement took place in unusual circumstances over a very short period of time between Monday 11 October and Thursday 21 October 2010. I undertook to provide a written summary of those events from the BBC's point of view and it is enclosed with this letter. An exchange of letters between myself and the Secretary of State on 21 October formally documented the terms of the settlement.

During the Evidence session there was discussion about the extent to which meetings between the BBC and civil servants were minuted. I undertook to reflect on the Committee's request for copies of notes and minutes relating to negotiations over the licence fee settlement with Ministers and Departmental officials which were conducted by the Director General and his team and the Director of the BBC Trust and his colleagues. We checked our records and found no formal minutes of meetings with officials. This reflects the speed and nature of the discussions and the fact that key conclusions were reflected in the final settlement correspondence.

However, I have reflected on what I believe might be helpful to the Committee in understanding the process by which the settlement was reached and the role the Trustees played in approving the settlement agreement. I enclose five documents which are listed in the attached table. I have also provided a brief commentary to assist with cross referencing against the summary of events.


Prepared in February 2011 by the BBC Trust at the request of the Culture Media and Sport Select Committee
DateSummary of events
Monday 11 October 20101. The BBC was advised (both Trust and Executive) that as part of the Comprehensive Spending Review (CSR) the Government was actively considering the funding of free television licences for the over-75s and the funding of the World Service, and was considering transferring funding responsibility for both from the Government to the licence fee.
Tuesday 12 October 20102. The Director-General had an exploratory telephone conversation with the Secretary of State.

3. There were internal discussions between the BBC Trust and the BBC Executive about the implications of the CSR and about how best to protect the BBC's independence.

Wednesday 13 October 20104. The Director-General and the Secretary of State met to discuss the CSR implications for the BBC. With the Chairman's agreement, the Director-General expressed outright opposition to the over-75s proposal but signalled the BBC might be willing to agree to absorb World Service costs if that could be part of a full licence fee settlement running to the end of the Charter period.
Thursday 14 October 20105. The Chairman called the Secretary of State and reiterated the BBC's outright opposition to free licences for the over-75s being funded by the licence fee. He identified the important principles that he thought the Trustees would expect to underpin any settlement negotiations.

6. The Trustees were updated via a conference call and agreed principles upon which discussions with the Government would continue.

7. Discussions with the Government continued.

Friday 15 October 20108. Discussions with the Government continued.
Weekend Saturday 16 and Sunday 17 October 2010 9. Talks with the Government continued over the weekend and the BBC continued to assert the principles agreed by the Trustees on 14 October as well as presenting indicative proposals to illustrate the financial implications of any settlement.

10. Concerned that no progress was being made, the Chairman wrote to the Prime Minister and stated the BBC's objections to the over 75s proposal and the BBC's intention to oppose it, while reiterating the BBC's willingness to consider a full settlement including consideration of the proposal that the licence fee payer fund the World Service. [Letter to Prime Minister attached as Document 1].

Monday 18 October 201011. The Secretary of State met the Chairman and then the Director-General. He informed them that the Government still had in mind to impose the full cost of the over-75s' licences on the licence fee. The Chairman and the Director General both made clear the BBC would oppose this, and talks were suspended.

12. At the Secretary of State's initiative, talks were resumed and continued through the night between the BBC and the Government. A set of draft proposals was prepared for review by the Executive Board and the Trustees.

Tuesday 19 October 201013. The Executive Board met and agreed that it would be possible to implement the settlement.

14. The Trustees held a teleconference. They noted that the Executive Board had advised that implementation of the settlement was possible. Therefore on the basis that the proposals were consistent with the principles the Trustees had agreed on 14 October, they agreed to the settlement and delegated authority to the Chairman to conclude discussions with the Government. [Trust Minutes for teleconference meeting on 19 October attached as Document 2]

15. Details of the impact of the CSR on the BBC came into the public domain.

Wednesday 20 October 201016. The Chairman, the Director-General, and the Director of the World Service met the Foreign Secretary to discuss the implications of the settlement for the World Service.

17. The Government announced the results of the CSR.

Thursday 21 October 201018. An exchange of letters between the Secretary of State and the Chairman formally recorded the licence fee settlement reached. [Exchange of letters documenting settlement attached as Documents 3 and 4]

19. The Secretary of State announced full details of the licence fee settlement in Parliament as part of the Culture Media and Sport spending review statement. [Hansard Column 64WS refers]

20. In a side letter the Chairman addressed the Secretary of State's particular concerns relating to BBC Worldwide's magazines, the extent of the BBC's local news services and the scale of BBC Online by explaining what the BBC was already doing in all of these areas.

[Letter from the Chairman to the Secretary of State attached as Document 5]

Document NumberDate Document TypeDocument Name Description of DocumentComment
117/10/10Letter Letter from the BBC Chairman to the Prime Minister Letter outlining BBC's position on the over 75's licence and other aspects of the settlement Has been disclosed under FOIA.
219/10/10Trust minutes Minutes of meetingSummarises discussion at Trust meeting on 19/10/10 Published on Trust website
321/10/10Letter Letter from Secretary of State to the BBC Chairman Formal letter from Secretary of State recording licence fee settlement Published on Trust website
421/10/10Letter Letter from BBC Chairman to Secretary of State Formal response to settlement letter from Secretary of State Published on Trust website
521/10/10Letter Letter from BBC Chairman to Secretary of State Addresses separate issues relating to scale and scope of the BBC. Not published on website but has already been disclosed under FOIA.

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Prepared 19 May 2011