Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 440 - 459)

TUESDAY 22 NOVEMBER 2005

Ms Helen France, Sir Howard Bernstein and Mr John Willis

  Q440  Chairman: 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 London—the cost of those, the people costs, the capital employed on studios—and 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.

  Q441  Chairman: 25 years is a long time.

  Sir Howard Bernstein: It is a long time.

  Q442  Chairman: Is it because housing, transport and business costs are more expensive here?

  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.

  Q443  Chairman: By efficiencies do you mean costs?

  Mr Willis: Yes.

  Q444  Chairman: What about wages, what is the differential?

  Sir Howard Bernstein: Lower.

  Q445  Chairman: Lower?

  Sir Howard Bernstein: Twenty per cent or thereabouts.

  Mr Willis: and significantly reduced housing costs.

  Q446  Chairman: 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.

  Q447  Chairman: 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.

  Q448  Chairman: 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 psychological issue?

  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 to you?

  Mr Willis: Certainly we are not privy to the detail.

  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 jobs—and again I find it easier with round numbers—the 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.

  Q453  Chairman: 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 ambition—that 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 create—and this is one of the purposes of the Media Enterprise Zone—the 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 Vision—and I know you have received evidence from them—is 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.


 
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