Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 2000 - 2019)

WEDNESDAY 18 JANUARY 2006

Mr Michael Grade CBE and Mr Mark Thompson

  Q2000  Baroness Bonham-Carter of Yarnbury: What about other public service broadcasters? What about Channel 4?

  Mr Grade: Channel 4 is not for profit; it is a statutory corporation and it is in a sense in the same league. In fact in the private sector advertisers supported the world of broadcasting hitherto and Channel 4 has been exempt from spectrum charges that the ITV companies, Five and so on, have been subject to.

  Mr Thompson: Professor Kay, whose work related to the spectrum, described the BBC as an efficient user of spectrum, having actually studied it. Inevitably our competitors may want to cast aspersions, but there is no evidence that we are not very efficient users of the spectrum.

  Q2001  Baroness Bonham-Carter of Yarnbury: It is people thinking about the future and the pursuit of high definition television which is very spectrum greedy. So you are really agreeing that if the BBC were to be charged for spectrum, that would be a tax on the licence fee payer.

  Mr Grade: Absolutely.

  Mr Thompson: All other things being equal, it would take money out of the licence fee and out of investment in programmes and move it into the general exchequer, to achieve quite what is not clear.

  Q2002  Bishop of Manchester: If we can talk for a moment about the Manchester move, at the very beginning of our discussions and when you, Director General, were with us before, you talked about the move depending upon the right funding settlement being achieved. We had a helpful letter yesterday from the head of public affairs outlining some of the issues and where you have got to at the moment. It is certainly a relief that we have come down from that enormous £600 million to £400 million and maybe there is another £200 million to go as well, but maybe not. What I really want to ask though is in the light of one of the things which the head of public affairs says and it is on page two. He says that the key driver for the move to Manchester is not to generate savings. Then at the end of that paragraph he says that you clearly want to identify the most cost-effective way of undertaking the move and to realise savings. That obviously is very important, very laudable, but my question is: what advice are you receiving on how these savings can be achieved? In terms of the licence fee payer, what assessments are being made in terms of value, to quote the Chairman earlier this morning, the importance of any expansion being underpinned by clearly demonstrable support from licence fee payers? I want to explore this issue of the value for money of what you are doing.

  Mr Thompson: Perhaps I should begin about how, as a management team, we are looking at the project and working up the proposal and Michael should talk about how the governors would expect to scrutinise the proposal. From our point of view, we have spent the past few months working at a much closer level of detail on how practically Manchester might work. We have been through the process of looking at and short listing progressively fewer and fewer sites which we believe, and there is good evidence to believe, would be the right places to achieve the vision we want to achieve. The nature of doing that means that the costs involved become much clearer. We have also achieved a breakthrough, absolutely thinking with colleagues and other stakeholders on the ground, the local councils, the North West Development Agency, also other broadcasters and other players in the creative industries, about whether the BBC could achieve what it wants to achieve in partnership with others, creating a so-called media enterprise zone and, in particular, thinking about achieving its resourcing needs, studios and so forth, in a way which is shared with other broadcasters rather than a separate build solely for the BBC. Now, if achievable, and we think the media enterprise zone is an exciting idea for us, also potentially for the creative industries in the West and indeed North West and indeed the whole of the North of England, that potentially is a very substantial impact on costs of what is being achieved. We are trying to look at every part of the vision that we have laid out for Manchester to see whether it can be achieved at the minimum possible cost consistent with what we want to achieve. That process has been going on. We have been working; you have met some of my colleagues and heard about it. Where that will lead to is a moment when the management formally put a proposal up to the board of governors for the board of governors to consider and, in a nutshell, there are three things the governors have to look at: they need to look at whether they believe what is being proposed is congruent with the BBC's overall strategic ends and the best long-term interests of the licence payer; second, whether or not the proposal represents value for money, literally, once you accept that it is the right thing for the BBC to do, whether it could be achieved for less money; then third, whether it is affordable. So it is possible for someone to think it is a great idea and, for what it is, value for money, but for it not to be affordable because the BBC does not have the resources to do it. So strategic fit, value for money and affordability and it is the last of those three which obviously relates to the licence fee settlement. The scrutiny of this will be done by Michael and his colleagues with outside experts.

  Q2003  Bishop of Manchester: When you mention outside experts, what about the National Audit Office. They are doing some value for money reviews already in the BBC, why not in an important area like this?

  Mr Grade: When it comes to proposed spending plans, that is a matter for the governors, provided the governors do take independent advice; that is not a matter for the NAO.

  Q2004  Bishop of Manchester: What is the independent advice you will be taking?

  Mr Grade: Deloitte & Touche are presently employed by the governors, not by the management, to scrutinise the way the management is developing its proposals for Manchester. The governors have agreed in principle that investment in Manchester is in the best interests of the licence fee payers. We are much heartened by the results of our investment in the three home nations, as it were, Scotland, Northern Ireland and Wales. That has produced great benefits for licence fee payers in the nations. The English regions have fallen way behind. Everything that the licence fee payers tell us indicates that they want greater identification with their own region, with their own nation, with their own area, with their own community and so on. There is a clear signal coming to us, the governors, that that is what the licence fee payers want us to do. That is why, in principle, we approved the notion of a significant move to Manchester, not a token move but a very fundamental move to Manchester. We shall take a lot of satisfying that what is proposed is value for money and then we get on to the question of whether we can afford it or not. The first question is whether it represents value for money and we are scrutinising it at every stage.

  Q2005  Bishop of Manchester: What about a public value test?

  Mr Grade: I think a public value test is applicable to new services and so on. This is an investment decision and that is not really applicable. A public value test to a change in an existing service is designed to measure market impact and public value created and to balance those two things. That has been designed entirely for the specific purpose of looking at material changes to existing services or the creation of new services, not applicable to a development project like this.

  Mr Thompson: I am sure that is right, but I should not want you to think therefore that we do not believe there is any public interest in doing it. On the contrary, we think that a very substantial investment by the BBC, not just of money but also moving talent and bringing broadcasting to the North West, will make a big impact in the development of Manchester, the North West and the North. It will provide new opportunities and hopefully will be a magnet for other broadcasters, other producers and other people in the creative industries. It is part of a bigger vision of the future of the North of England in particular, of the creative industries in the North of England which we think will, in the long run, add real value for licence payers across the country.

  Q2006  Bishop of Manchester: Let us explore what you just said about the opportunities with other broadcasters and industries, focusing now on the two sites in Manchester and Salford announced yesterday, which appeared on the surface to rather push ITV at least slightly out of the picture. We all remember the great enthusiasm of Charles Allen sitting there and saying how wonderful it was all going to be. Can you reassure us that the whole concept of the media hub with ITV and independent broadcasters is still as strong a hope as it was when you first mentioned it?

  Mr Thompson: It is. I wrote to Charles yesterday just to emphasise that we want to go on talking to ITV and involving ITV in our plans. Clearly, they must in the end make their own choices, but ITV, I think it is fair to say, face many of the same issues that we face. There is a step change in technology, new formats like high definition are arriving and ITV, just like the BBC, will have to think about the future of their resource base and about the capital costs of upgrading their resource base. Both sites offer ITV a range of choices: the central site very close to the city centre, very close indeed to Quay Street: Salford Quays somewhat out of town but very competitive in terms of the economics. The kinds of choices we are making are very similar to the ones ITV will be making and the numbers will look very similar to both of us. I should want to assure you that we very much hope to continue to talk to and engage with ITV as possible partners in this.

  Q2007  Bishop of Manchester: That sounds very exciting, but I do recall that on at least three occasions in evidence that we have received on this Committee, there are people who have said something like "Well, the people at the BBC are lovely people but they are awful to work with". They certainly said the second bit and I am sure they would have said the first bit as well. Can you just address this point? It has been repeated that the reputation of the BBC is not very high when it is thought of in terms of being a potential partner.

  Mr Thompson: Historically, it sometimes may well have been true that the BBC was not a good partner; it may well have been true. If you look at what we have achieved in partnership over the last 18 months, if you look at the Freeview partnership, if you look at the way in which the BBC's relationship with Pact and the independent sector has changed over the last 18 months, if you look at the way we are going about thinking about this Manchester project, I should be surprised if any of those partners would say that we were not being upfront and supportive of them. The Minister yesterday was making this point. We are trying extremely hard to set a new path in terms of the way we work with other broadcasters, other key stakeholders and, in the change in the climate, with the independent sector, with the success of platforms. Freeview is a very good example of that; you can see tangible results of that. Although that was said historically, I hope that that is the kind of comment you will hear less and less of as we go forward.

  Q2008  Lord Kalms: One of the advantages of digital will be the opportunity to expand into local broadcasting and you have some fairly big plans; you intend to open some 60 stations. We have had quite a lot of lobbying about this. This might be an opportunity perhaps for you to expand on it. Some of the lobbying follows up the Bishop of Manchester's views that you state that you want to go into some sort of partnerships and the point was repeated to us time and again that you are not the people to jump into bed with, particularly if you are going to have a broad number of local stations. Then a further point has been put to us that you are going to use the existing radio footprint for your local broadcasting and it has been pointed out that this is not quite local broadcasting, in other words, the footprint is not absolutely appropriate. Then of course it goes further to what you actually mean by local broadcasting and how many hours, what the content will be, what the impact on the community will be vis-a"-vis local newspapers. There have been some very good ideas of the potential that local broadcasting could bring to the community with the concept of digitalisation and the ability to data transmit good local programmes very quickly. If you could give us a little bit more of your thinking and take some of the criticism and respond to it, it would be helpful.

  Mr Thompson: Michael might well want to talk about what will happen when the local TV idea, if it becomes a proposal, is put before the BBC trust, the steps that will then be taken by the trust to ensure that it really does deliver public value and in particular that any adverse market impact it might have is understood and weighed in the balance as the trust decides whether or not to give the management permission to go ahead. I am very clear that we cannot just launch this sort of stuff without external and objective scrutiny of whether or not, taken together, it actually makes sense. The idea of local TV, as set out in Building Public Value, and as developed since, is really to say that we have a very strong heritage going back getting on for 40 years in local radio, one of the best loved services of the BBC. In recent years we have also launched websites which broadly mirror the local radio stations; you now can get, where I live in Oxford, both a website showing you the journalism of BBC Oxford and also a radio station. The idea is to complement that also with a relatively modest journalistically based television service for the same area, paralleling radio and the web, so that the BBC's offer of news and information and comment for the people who live in and around Oxford is offered on all three media. What is most convenient? Do you want to sit down to watch some television? Do you want to catch it maybe on a mobile device? Do you want to listen to the radio in the morning? It is also very efficient. We have one centre there. Increasingly we shall have people who are trained to work in all three media, so we can actually deliver this added service with relatively modest extra investment and for the television component we are not talking about 24 hours, we are talking about quite small segments of news and so forth, being delivered on broadband and also potentially delivered on digital satellite to consumers. We are testing this idea at the moment in the West Midlands. In the West Midlands we have a number of very different communities, urban communities, rural communities, and we are trying out various ideas to see what works for the public. A big say in what happens will be listening to the people using the trials and listening to the public more generally and trying to build what they want into the eventual plan. We are also very aware that, although the BBC has a big local presence already, this idea of local television sounds worrying to some of the other commercial players, particularly local newspapers. One general caveat: when we talk about local television we are talking about something which is happening at the level of BBC local radio, which is therefore nothing like as local as community radio or most local newspapers. Second, to state the obvious but I shall say it anyway, the BBC will not be competing for revenue with the other players. For example, we shall not be offering classified advertisements which are critical to the business plans of local newspapers. Third, we are going to learn from the review and be very careful also not to replicate those parts of web services and newspaper services which are particularly important in terms of revenue generation and which are well provided by local newspapers, both through their websites and newspapers. So, for example, we shall not get involved in listings and the ability to buy tickets for the cinema and other local attraction which, again, local newspapers see as an important revenue stream,. In fact, in the West Midlands and I hope around the country if we go ahead with this, we are actually in partnership with local newspapers, sharing journalism, expecting to link on our website to the local newspapers' websites. We should see ourselves very much in partnership with other players and I understand absolutely why, at national level, there is a lobbying going on. We need to try to do everything we can to reassure them that we understand the dangers of market impact. On the ground, I have to say, collaboration between us and local newspapers is going very well. We hope we can evolve a proposition which adds real value to licence payers, works on the ground, is based on the actual experience of people using our pilots, which works in partnership with other players and which fits into a bigger idea of the BBC's information offer at local, regional, national and global level. Once we have done all of that, we shall pass the proposal over to the board of governors to consider objectively.

  Mr Grade: May I reassure the Committee that the trust—by the time this is ready for sanction we shall have turned into the trust—is not going to put its signature to a proposal to roll out local television without applying the public value test, which will assess market impact, both negative and positive, public value created, value for money and all the issues which are now familiar. I can reassure the Committee that there is going to be no blank cheque to roll this out, it will be subject to the public value test.

  Q2009  Baroness Howe of Idlicote: Can we just have a look at the World Service/FCO/Government interaction? I am sure we all remember Lord Carter of Coles's definition of public diplomacy and he certainly regards the World Service as a diplomacy tool. He defines it as "work aiming to inform and engage individuals and organisations overseas, in order to improve understanding of and influence for the United Kingdom in a manner consistent with governmental medium and long term goals". Does it concern you that this is the view? Is it going to influence in any way the editorial independence of the World Service and how it operates? Is it a good thing?

  Mr Grade: In the course of the gathering of evidence and Lord Carter of Coles putting together his report, I can assure this Committee and the world outside that there were some very robust conversations indeed between the board of governors, particular our international governor Sir Andrew Burns, but also supported by the governors. There were some very robust conversations, the result of which is a report that we do not feel in any way undermines the independence of the World Service. There was a robust debate.

  Q2010  Baroness Howe of Idlicote: That is good to have on the record too. Nevertheless he suggested also that a representative of the World Service should sit on the public diplomacy board which is to be chaired by a minister. Is that a good idea?

  Mr Thompson: It is what happens at present. There is no change there.

  Q2011  Baroness Howe of Idlicote: And you think it is okay, you are not worried?

  Mr Grade: Yes. There is a difference between being an observer and being a member of that body.

  Mr Thompson: It is worth emphasising that the World Service representative will be an observer rather than a participant. We are currently represented as observers on the public diplomacy strategy board. It is not a great change. I should emphasise that we are very grateful that Lord Carter of Coles repeatedly makes it clear that he accepts the BBC's editorial independence should be complete. Certainly from our point of view the World Service's editorial independence is precisely why the World Service is valuable to the United Kingdom because it is a credible voice around the world. Editorial independence is a very, very important central point, the central point for us, but we are satisfied that, as it is laid out, Lord Carter of Coles's report will not compromise that and that the observer status which exists currently in the context of the diplomacy strategy board, will not of itself compromise our editorial independence. If we thought it did, we should say it was impossible and we could not do it.

  Q2012  Baroness Howe of Idlicote: It is perfectly fair that he did emphasise the context of the editorial independence, but it is good to hear you confirm that. Just one point about the funds allocated to launch the new Arabic service. In contrast to Al-Jazeera's English channel which is being launched and will cost £100 million a year, Channel 4 News is £20 million a year and yet the service you are about to launch is £19 million a year for 12 hours as opposed to 24-hour programming. Are you happy with this and do you really think you can achieve the right sort of competition for what already exists?

  Mr Grade: I regret that we are not able to launch with a 24-hour service, the costs of which have been calculated at around an additional £6million, so we shall be on the air for 12 hours a day. Everyone, including myself, seems satisfied that we can present a very respectable service for the money which is available. The difference between us, Al-Jazeera and anybody else is that this is an activity at the margin, a marginal cost for the BBC; we already have the international news gathering capacity which Al-Jazeera will presumably have to build for themselves from scratch, that already exists across the BBC.

  Mr Thompson: And indeed an Arabic radio service and a very rich Arabic website, so our complete investment in broadcasting in all media to the Arab world is much larger than this £19 million suggests; having said that, we should rather do 24 hours than 12.

  Q2013  Chairman: You are saying that only £6 million actually stands in the way of having a 24-hour service.

  Mr Thompson: Yes.

  Q2014  Chairman: But that is pathetic, is it not? Here we are trying to start what I imagine and hope would be an important service and for the sake of £6 million we cannot go 24 hours?

  Mr Grade: Indeed.

  Mr Thompson: That is the position.

  Mr Grade: But happy to be accused by this Committee of giving too good a value for money at £12 million.

  Chairman: It depends what you mean by value for money.

  Q2015  Lord Holme of Cheltenham: I must say that I am impressed by your equanimity at being described as a tool. The World Service has an enormous reputation throughout the world and if on every broadcast that goes out on the World Service you were to put a sub-title which says "A tool of British governmental goals", how do you think people would feel about it? Although we have heard reassuring words from Lord Triesman, the sort we have had from you about the respect for the independence of the BBC, it does not seem to me a promising development that the BBC World Service, which is one of the great decorations of this country in the external sphere, should be described as a governmental tool. I think that this Committee, and indeed all of us who value the BBC World Service, are going to need very specific reassurances that there has not been some step change in the approach towards the World Service.

  Mr Grade: The governors of the BBC have proven over the years and will continue to prove, whether they are governors or trustees, more than capable of defending the independence of the World Service and indeed every other service of the BBC. We did not have the privilege of drafting the report for him and the use of the word "tool" is perhaps an unfortunate word but at the end of the day, it is the audience perception of the services that we actually provide and they will continue to be independent and the board of governors and the trustees will carry out their public responsibility to the licence fee payers to ensure the continued independence of the World Service vigorously, robustly and aggressively, if I may use that word.

  Mr Thompson: Notwithstanding his broader definition of public diplomacy, he does repeatedly emphasise the importance of the BBC's editorial independence. I should certainly want you to be in no doubt that we do not believe there has been any change in the Government's intention that the World Service should remain wholly editorially independent of the Government.

  Mr Grade: I am very grateful that the Committee has picked this issue up. It just reinforces very much what we have been saying and what has led to the drafting of Lord Carter of Coles's report, with which we feel comfortable, but we have taken a very, very deep serious interest in the drafting of this report.

  Chairman: As you know from our first report, we are concerned about the independence of the BBC from government. You do not necessarily agree with all the proposals in ensuring that independence.

  Q2016  Baroness Gibson of Market Rasen: What progress is being made—and I hope it is being made—with the employees affected by the changes at the World Service? I know that you have been having discussions with the unions and I just wondered how they were progressing.

  Mr Thompson: Rather like the bigger redundancy programme across the rest of the BBC in the World Service, we are in detailed conversations with the trade unions and individual members of staff to try, where we can, in every case to deliver the best outcome we can for individual members of staff. Clearly there are particular challenges in the World Service where, in time, radio services are being closed. I believe it is the right strategy, but clearly it is a very tough message for the teams who have made these services so successful over many years. We are trying to do everything we can to get the best outcomes for those individuals. Across the BBC as a whole, we have made good progress in minimising the numbers of redundancies we are going to have to achieve through compulsory means. Overall we are spending a great deal of time in recent months trying to make sure that although these changes clearly will be unwelcome to many members of staff, we handle them in a way which is flexible and which puts the welfare of the individuals involved very high on the agenda.

  Q2017  Chairman: Remind me. How much is BBC World now losing?

  Mr Grade: In the last report and accounts £16 million was the loss.

  Mr Thompson: Sixteen million pounds.

  Q2018  Chairman: Where does that money come from?

  Mr Grade: Commercial activities; there is no licence fee money in that.

  Q2019  Chairman: They are resources which are available to the BBC.

  Mr Grade: Yes.

  Mr Thompson: Yes.


 
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