Conclusions and recommendations |
1. The BBC has made good progress towards
the efficiency target set by the BBC Trust in 2007, but its assumptions
about the savings it could achieve were unambitious.
In negotiating the licence fee the BBC had claimed it would already
be at its "efficiency frontier" by 2008, yet the BBC
is comfortably on track to exceed the 3% annual savings target
that was subsequently agreed. The BBC claims that it will have
a better understanding of the scope for efficiency savings by
the time the BBC's Royal Charter is renewed and the level of the
licence fee renegotiated in 2016. This should not be left to chance.
The BBC should establish a clear methodology for assessing how
efficient it can be and where it can make the savings. Our recommendations
are intended to help the BBC make the necessary progress.
2. The BBC did not base its understanding
of the scope for efficiency savings on a proper analysis of the
cost of services and how much they are valued by licence fee payers.
Making cuts to services without such analysis risks inadvertently
harming highly valued services, such as local radio. We welcome
the BBC Trust's interim report into Delivering Quality First,
which recognises the importance of BBC local radio to the communities
it serves. The BBC should make sure that all proposed cuts are
supported by good evidence of what services cost and a rounded
assessment of how much they are valued by licence fee payers.
3. The BBC does not know with confidence whether
the savings it has delivered have affected the quality of its
services. In future the BBC will be going
beyond efficiency savings by making cuts to services, and it must
be clear about the distinction between the two. The BBC should
publish how it expects cuts to impact on services, the level of
impact it is willing to tolerate, and how it will respond if these
levels are breached.
4. With funding falling, the BBC will need
to get better at challenging what its services should cost to
deliver. The BBC faces legitimate challenges
in comparing the cost of producing its services with those of
other broadcasters but acknowledged that there is still more it
can do. The BBC should challenge the cost of its services more
vigorously, through greater use of internal benchmarking across
the BBC and, for example, by gathering intelligence on costs from
other broadcasters, from overseas, or from individuals with relevant
5. The BBC's plans for increasing commercial
income, from £280 million to £320 million a year by
2016-17, are unambitious in the context of the financial pressures
it faces. We understand that the BBC Trust,
which has to ensure that the BBC's commercial activities do not
unduly distort the market, set the level of increase at "the
lower end of the spectrum". We accept that the BBC Trust
should consider what impact the BBC's commercial activities have
on the wider market. Nevertheless, the BBC Trust should formally
revisit whether the target for commercial income can be increased.
If the target remains unchanged, the Trust should provide us with
a clear explanation of why £40 million is the tipping point
beyond which further rises would distort the market or be over