Examination of Witnesses (Questions 440
TUESDAY 22 NOVEMBER 2005
Ms Helen France, Sir Howard Bernstein and Mr John
If anything got in the way of that would it be the cost of the
move which you think would be the most important? Let me put it
another way; at the moment the BBC is predicting, although this
may change, its relocation to Manchester will cost about £50
million a year and there will not be any savings to be found until
after 25 years. That from my business experience sounds a remarkably
long period for such an investment. Comments?
Sir Howard Bernstein: If I can go first. Very
clearly we have not been made privy to all of those numbers. We
are broadly familiar with the headlines but all the assumptions
which underpin those calculations are clearly not known to us.
A whole range of different inputs would be required in order to
come to a conclusion about property requirements in London as
well as outside of Londonthe cost of those, the people
costs, the capital employed on studiosand how all of that
relates, in any event, to the very clear drive announced by the
BBC to compete more and secure greater competition between in-house
and external production units. We would expect at some point,
and I do not know what the precise timeline would be, that this
would become a self-financing exercise, and whilst it would be
wrong for people like me as a simple bureaucrat to actually contribute
to a debate which is clearly going on currently within government,
I think the point we would make is that when the BBC comes it
needs to be a dynamic, healthy organisation, able to achieve all
the outcomes which it has declared for itself and which we believe
are broadly shared by Government.
25 years is a long time.
Sir Howard Bernstein: It is a long time.
Is it because housing, transport and business costs are more expensive
Mr Willis: There is already evidence of businesses,
even public sector businesses, relocating to the North West because
of the efficiencies that can be made. A number of London authorities
are now moving their services and having them delivered in the
North West because of the efficiencies they get up here. I would
expect that to be replicated with the BBC move.
By efficiencies do you mean costs?
Mr Willis: Yes.
What about wages, what is the differential?
Sir Howard Bernstein: Lower.
Sir Howard Bernstein: Twenty per cent or thereabouts.
Mr Willis: and significantly reduced housing
Because the development agency, correct me if I am wrong, is expecting
to invest, is it not, in this project?
Ms France: The development agency is expecting
to invest in the move and is intending to invest in it as part
of the package that Howard has already mentioned in terms of the
£50 million investment. That includes resources from the
North West Development Agency.
You therefore must have done some investigation into the costs
of the whole project?
Ms France: As I mentioned earlier, we are looking
at the economic impact of the move and that will be the basis
of our investment. Obviously we need to provide a strong case
to the Treasury to justify putting public money into the scheme
and you would expect us to do that in a credible way. We need
to have proper evidence to back the justification for that investment
and it will be on the back of the impact that the move has to
the economy and also to the supply chain and issues that we have
mentioned earlier on.
Would it be fair to say that the jury is still out on the costs
of this project?
Ms France: I think NWDA and the BBC are continually
reviewing the process. We have got a strong process of evaluation
in train to enable us to look at the costs of the move both from
the Northwest and the impact at in London.
Q449 Bishop of Manchester:
Would you agree that from the point of view of the licence fee
payer that on the face of it this seems hugely expensive and therefore
possibly not value for money? Are you at your end aware of that
problem and trying to work out a way of overcoming at least the
Sir Howard Bernstein: At the present time, as
I understand it, the BBC's proposals certainly as far as the licence
fee settlement is concerned are currently being scrutinised within
the Department of Culture, Media and Sport and inevitably they
will then be scrutinised by the Treasury, and whatever those numbers
are that will be an outcome of those exercises. I think there
is a cost and a benefit equation that needs to be managed. Based
around the information we have at the moment, I think it would
be inappropriate for us to comment any further without seeing
the detailed build-up of all the numbers. Just as an example to
demonstrate how organisations differ, Manchester has been fortunate
enough to secure the Bank of New York relocation out of London
and other places and they got a pay-back period in five years.
That was based on their own particular configuration of costs
and functions and all the rest of it. It would therefore be highly
appropriate and you need to look at it in the context of the BBC
in light of their circumstances.
Chairman: Could I bring in Lord Peston.
Q450 Lord Peston:
I am probably going to ask a very unfair question because, as
you rightly said, you are not privy to all the financial detail.
Wearing my economics hat, the numbers do not make any sense to
me at all. £50 million over 25 years is more than £1
billion in simple terms, if you ignore the discounted cash flow
for the moment. As I understand it, a priori the BBC is
creating 1,000 jobs for themselves for that £1 billion which
means each job is costing £1 million. That is almost unbelievable.
I do not know what your experience is of regional policy but as
somebody who is in favour of regional policy if I was told that
every new job was going to cost an initial £1 million, I
would say, "Then I am afraid we are going to be have more
congestion in the South East." Do the figures make sense
Mr Willis: Certainly we are not privy to the
Q451 Lord Peston:
Exactly, that is why it is an unfair question.
Mr Willis: For instance, we do not know what
has or has not been taken into account in the BBC's calculations.
Does it make assumptions that they will retain the existing assets
they have got down in London or not? What would be the impact
of the disposal of assets on that figure? Again, we are not privy
to that. To come back to an earlier point, I would make the point
that I do not think the status quo is really sustainable. I do
not think it is equitable that the licence fee payers' money should
be spent wholly in London. I think there is a very strong argument
for spreading licence fee money around the country and I would
hope the Treasury would consider that in their detailed analysis.
Q452 Lord Peston:
I might as well ask my other couple of questions on jobs. To make
sure I understand what you are saying on jobsand again
I find it easier with round numbersthe BBC is saying it
will create 1,000 original jobs. I am not very clear about your
multiplier. At one point it looked as if you were talking about
2,500 more and then you said something like 4,500.
Sir Howard Bernstein: The total jobs output
as a result of this project is about 4,400 jobs gross impact.
That includes the 1,000?
Sir Howard Bernstein: That includes the 1,000.
Q454 Lord Peston:
So the multiplier is three point something?
Mr Willis: That includes jobs created in the
construction industry, jobs created in supply industries, jobs
created within the independent sector, et cetera, et cetera. That
is a total gross impact which also includes impact outside the
Greater Manchester area which is around 20 per cent, from memory.
Q455 Lord Peston:
Could you also then clarify that for me because somewhere in your
evidence you talk about people resident outside Manchester. It
says in the evidence of Manchester City Council that something
like over 60 per cent of jobs in the city are taken by people
resident outside Manchester. So I can get a perspective, if I
worked here I would be resident outside Manchester because if
I was at the University I would find some posh bit of the countryside
and live there, but I would still think I was part of Manchester.
Sir Howard Bernstein: One of the facts of life
in places like Manchester certainly over the last 20 years has
been that whilst we have created wealth and jobs, many of the
people who have accessed those jobs unfortunately are not in high
enough numbers from within the administrative boundaries of the
city. Therefore one of our key drivers, along with Salford and
the North West Development Agency, is to ensure that a greater
proportion of people who live within our areas have the opportunity
to access the jobs that are being created. That is fundamentally
about how we create neighbourhoods where people choose to live
rather than where they have to live. It is also about the skills
and education and the relevance and effectiveness of public service
generally. Certainly in the context of this particular project
all of us have the same shared ambitionthat here is a real,
real opportunity to support that objective.
Q456 Lord Peston:
Just to put it crudely, would I be right in saying from your policy
point of view that you would expect to have Manchester, or more
generally North West people, dominating this job creation and
therefore insofar as they appeared on radio and television I would
hear a lot more Lancashire accents, for example? If you were running
policy is that what you would expect to happen?
Mr Willis: That would be a very pleasant experience.
Lord Peston: That is what I mean. I was trying
to think of the last time I heard a Lancashire accent on television.
Even Alex Ferguson talks with a Scottish accent.
Q457 Lord Maxton:
I should hope so, he is Scottish.
Sir Howard Bernstein: Of the 1,200 to 1,500
jobs which the BBC are looking to move up here, I think they have
identified something like 600 as being one of their objectives
in relation to relocating people out of London and the South East,
which is very important because you need that backbone in order
to make the whole project work effectively.
Q458 Baroness Bonham-Carter of Yarnbury:
Picking up on that last point, one of the things that will accompany
this is an increased number of independent production companies.
How concerned are you that they will be the big independent companies
setting up offshoot offices here and not really generating employment
for this area?
Sir Howard Bernstein: I think part of the rationale
for this project has to be serious engagement with the independent
sector. You do not secure the levels of benefits which all of
us are looking to capture if that does not happen. That does not
necessarily mean that all independent companies need to be actually
co-located within the Media Enterprise Zone and what we have got
to do is createand this is one of the purposes of the Media
Enterprise Zonethe opportunity for new emerging businesses
to come, flourish, incubate and then move on. One of the key requirements
of the Media Enterprise Zone would be not only in terms of how
you secure regulatory and, custodial rights in the way that the
Media Enterprise Zone is operated to regulate the use of the facilities,
but also working with the sort of policies the RDA has been pursuing
for some considerable time and attract funding with business support
for independent companies in order to bring businesses in to come
and flourish to provide an example the wider area.
Q459 Baroness Bonham-Carter of Yarnbury:
I noticed in the North West Vision paper that we had that just
recently four London companies have opened northern branch offices.
Are you concerned about brass-plating going on?
Ms France: Obviously we would be concerned if
brass-plating were to happen but we are confident that the work
we are doing with North West Visionand I know you have
received evidence from themis around developing local companies
and skills. We are working at the regional level to ensure that
our production companies that are already here can face the challenge
of the requirements of the BBC.
Mr Willis: I think that is an important point
that we are not starting from scratch. There is a really solid
base here. We have got the largest independent studios outside
London already here so there is a critical mass already developed.
We have got quite a strong base. Do not think we are starting
from zero by any means.