House of Commons Culture, Media and Sport Committee BBC Licence Fee Settlement and Annual Report Fourth Report of Session 2010–12 HC 454 House of Commons Culture, Media and Sport Committee BBC Licence Fee Settlement and Annual Report Fourth Report of Session 2010–12 Report, together with formal minutes, oral and written evidence Ordered by the House of Commons to be printed 12 May 2011 HC 454 Published on 19 May 2011 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Culture, Media and Sport Committee The Culture, Media and Sport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Culture, Media and Sport and its associated public bodies. Current membership Mr John Whittingdale MP (Conservative, Maldon) (Chair) Ms Louise Bagshawe MP (Conservative, Corby) David Cairns MP (Labour, Inverclyde) Dr Thérèse Coffey MP (Conservative, Suffolk Coastal) Damian Collins MP (Conservative, Folkestone and Hythe) Philip Davies MP (Conservative, Shipley) Paul Farrelly MP (Labour, Newcastle-under-Lyme) Alan Keen MP (Labour, Feltham and Heston) Mr Adrian Sanders MP (Liberal Democrat, Torbay) Jim Sheridan MP (Labour, Paisley and Renfrewshire North) Mr Tom Watson MP (Labour, West Bromwich East) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/cmscom. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Emily Commander (Clerk), Andrew Griffiths (Second Clerk), Elizabeth Bradshaw (Inquiry Manager), Ian Hook (Senior Committee Assistant), Keely Bishop/Alison Pratt (Committee Assistants), Steven Price, (Committee Support Assistant) and Jessica Bridges-Palmer (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Culture, Media and Sport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6188; the Committee’s email address is [email protected] BBC Licence Fee Settlement and Annual Report 1 Contents Report Page Summary 3 1 Introduction 5 2 The negotiation process 7 The narrative of events 7 Settlement: Choice or coercion? 11 Independence 12 Transparency and accountability 14 3 Outcome 16 The BBC’s defence of the settlement 16 The financial settlement and its critics 17 Wider concerns 18 4 New responsibilities 22 The BBC World Service 22 S4C 25 BBC Monitoring 28 Broadband 28 Local TV 29 5 Content 30 Strategic Review: Initial conclusions 30 Strategic Review: Outcome 31 The Strategic Review and the new settlement 32 6 Transparency and accountability 35 Transparency 35 Accountability 36 7 Salford Quays 40 8 The way ahead 42 Conclusions and recommendations 43 Formal Minutes 48 Witnesses 49 List of printed written evidence 49 List of Reports from the Committee during the current Parliament 50 BBC Licence Fee Settlement and Annual Report 3 Summary In October 2010, a comprehensive licence fee settlement was unexpectedly agreed between the BBC and the Secretary of State for Culture, Olympics, Media and Sport as part of the Comprehensive Spending Review. We recognise that the Government made the first move, that time was of the essence and that the BBC seized the opportunity to pursue a wider settlement, securing its immediate future. This meant, however, that the opportunity to consult licence fee payers and Parliament was lost, undermining confidence in both the Government’s and the BBC’s commitment to transparency and accountability. We recommend that this model for setting the licence fee is not used again. In the current climate, we believe that the financial terms of the licence fee settlement are reasonable. However, some of the additional responsibilities that the BBC has taken on under the terms of the settlement widen the scope of licence fee spending beyond any previous interpretation of the BBC’s mission and purposes. The BBC and Government will need to demonstrate how this will benefit the licence fee payer. We believe that there is a very strong case for reversing some or all of the planned reduction in funding to the BBC World Service. We agree with the Foreign Affairs Committee that part of the funding requirement could be met by the Department for International Development. There is a risk that domestic services and content might be adversely affected if additional BBC funding is diverted to the World Service and we undertake to monitor very closely how the BBC strikes a balance between these important but competing claims. A formal concordat between the Foreign Office and the BBC World Service might provide helpful clarity of roles so long as it did not undermine BBC editorial independence. There may be benefits to both the BBC and S4C from their new partnership but we remain unclear as to how S4C can retain its independence if the BBC Trust is involved at a strategic level. We find it extraordinary, however, that the Government and the BBC should agree such wide-ranging changes for another statutorily independent broadcaster without consultation and without S4C having any notice or say at all. Substantial public funding otherwise available for other BBC content and services will be diverted to S4C and we undertake also to monitor this aspect of the settlement. The plans for local TV, however, are still in their formative stage and it remains to be demonstrated that the admittedly modest funds the BBC has undertaken to commit to this project represents good value for the licence fee payer. The BBC Trust has made public commitments on transparency. This makes it all the more disappointing that banded information on talent salaries is still not in the public domain. We urge the BBC to increase the speed with which it implements this, and other, changes. Having originally made a clear commitment to allow the National Audit Office unfettered access to the BBC, we are very concerned that the Government’s proposals fail to deliver this. We urge the Government to address the concerns expressed by the Comptroller and Auditor General and to reach an agreement that will give the National Audit Office all the powers it needs to provide independent assessments of the value for money of BBC 4 BBC Licence Fee Settlement and Annual Report expenditure. These should be reported to Parliament rather than to the Secretary of State through the BBC Trust. We assess that the new development at Salford Quays should deliver the creative and employment benefits which were hoped for, if not the immediate financial ones. We expect the BBC to keep under review the scope for transferring further production to its new home in the North West where there are clear benefits from doing so. The employment of a “migration manager”, based in the US, opened the BBC up to ridicule. This lowers the esteem of the BBC, its senior management and the Trust in the eyes of the public and its own staff. The main outcomes of the BBC Trust’s strategic review do not move the BBC on to the extent required by current circumstances. Important questions remain as to how radically the BBC will need to re-configure both its content and the way in which it delivers its content in the years ahead. There is much for the incoming Chairman of the BBC Trust to get to grips with. BBC Licence Fee Settlement and Annual Report 5 1 Introduction 1. The Culture, Media and Sport Committee conducts annual scrutiny of the British Broadcasting Corporation (BBC) and its Annual Report and Accounts on behalf of Parliament and the licence fee payer. Our role in holding to account the BBC Trust (the independent governing body responsible for setting the overall strategic direction of the BBC) and Executive — and the part played by the Government in relation to them — has been of particular significance over the last year. During this time, pivotal decisions about the future direction of the BBC have been made without consultation or significant Parliamentary debate. 2. When we began our annual scrutiny of the BBC in September 2010, it was already clear that this was an important year for the BBC, given the anticipated publication of the outcome of the BBC Trust’s review — entitled Putting Quality First — of the BBC’s overall strategy. The BBC Trust initiated the first stage of this review by tasking the BBC Executive to submit its own proposals. In its own words, the BBC Trust: […] challenged the Director General to undertake a review of the BBC’s overall strategy in July 2009 to address questions about the scope of the BBC’s activities, focusing on how the BBC can most effectively deliver its public service mission and meet audience needs and deliver value for money.1 The Strategy Review also offered the BBC the opportunity to address criticisms that it was straying too far from its public service broadcasting remit; was being too profligate with licence payer money; and was insufficiently transparent, particularly with regard to the salaries of senior staff and talent. During the last Parliament, our predecessor Committee had highlighted some problem areas, including the expansion of BBC Worldwide;2 the level of expenditure on Project Kangaroo (a now-defunct proposed joint venture video- on-demand service with ITV and Channel 4 that was blocked by the competition authorities);3 and the need for greater transparency on pay.4 3.