House of Commons Culture, Media and Sport Committee BBC Annual Report 2008–09 Fifth Report of Session 2009–10 Report, together with formal minutes, oral and written evidence Ordered by the House of Commons to be printed 24 March 2010 HC 515 Incorporating HC 945-i, Session 2008–09 Published on 30 March 2010 by authority of the House of Commons London: The Stationery Office Limited £13.50 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 and East Chelmsford) (Chairman) Mr Peter Ainsworth MP (Conservative, East Surrey) Janet Anderson MP (Labour, Rossendale and Darwen) Mr Philip Davies MP (Conservative, Shipley) Paul Farrelly MP (Labour, Newcastle-under-Lyme) Mr Mike Hall MP (Labour, Weaver Vale) Alan Keen MP (Labour, Feltham and Heston) Rosemary McKenna MP (Labour, Cumbernauld, Kilsyth and Kirkintilloch East) Adam Price MP (Plaid Cymru, Carmarthen East and Dinefwr) Mr Adrian Sanders MP (Liberal Democrat, Torbay) 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. Publications 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/cmscom. Committee staff The current staff of the Committee are Tracey Garratty (Clerk), Elizabeth Bradshaw (Inquiry Manager), Jackie Recardo (Senior Committee Assistant), Ronnie Jefferson (Committee Assistant) and Laura Humble (Media Officer). Contacts All correspondence should be addressed to the Clerks 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]. 1 Contents Report Page 1 Introduction 3 BBC response to the Committee’s report on the BBC Annual Report and Accounts 2007–08 3 2 BBC Annual Report and Accounts 2008–09 4 The allocation of the licence fee 4 Audience reach 6 Audience share 10 Quality and distinctiveness of the BBC’s output 11 Spending in nations and regions 12 Acquired and imported programming 13 BBC Three and younger audiences 14 Project Kangaroo 16 BBC staff and talent costs 18 Conclusions and recommendations 21 Formal Minutes 24 Witnesses 25 List of written evidence 25 List of Reports from the Committee during the current Parliament 26 3 1 Introduction 1. The BBC Annual Report and Accounts for 2008–09 is the third to be published under the current Royal Charter (“the Charter”) and Agreement between the Secretary of State for Culture, Media and Sport and the BBC (“the Agreement”). The Charter and Agreement set out governance arrangements for the BBC, including the establishment of an independent BBC Trust, which has responsibility for setting the overall strategic direction of the BBC, and a separate Executive Board with responsibility for delivering the BBC's services in accordance with the priorities set by the BBC Trust. 2. On 16 July 2009, we held an oral evidence session with the BBC on its Annual Report and Accounts for 2008–09 (“the Annual Report”). We took evidence from Sir Michael Lyons, Chairman of the BBC Trust, and from Mark Thompson, Director General, and Zarin Patel, Director of Finance, BBC Executive. We carried out a similar scrutiny exercise on each of the previous BBC Annual Report and Accounts published under the current Charter and Agreement, publishing a short Report on both occasions.1 3. The Committee covered a range of issues and questions at the July 2009 oral evidence session. In a number of instances, however, the BBC’s replies were not as complete as we would have liked or raised additional points that merited follow-up. There were also questions that we were unable to raise in the limited time of the session. We therefore wrote to the BBC on 3 September 2009 with further questions about its Annual Report and Accounts and matters raised at the oral evidence session. On 4 December 2009, the BBC submitted its response to these questions. Our follow-up questions and the BBC’s responses are attached to this Report.2 4. In March 2010, after the conclusion of our correspondence with the BBC, the BBC Trust published the BBC Strategy Review,3 which discusses what the future direction of the BBC ought to be in the remainder of this Charter period. As we did not take evidence on the Strategy Review the Committee is not yet in a position to comment in detail on its proposals. BBC response to the Committee’s report on the BBC Annual Report and Accounts 2007–08 5. When we published our Report on the BBC Annual Accounts for 2007–08,4 the BBC Trust immediately released a press statement in response. It stated that “The Trust [...] does not accept the findings on the Trust’s consideration of Project Kangaroo”,5 and promised 1 Culture, Media and Sport Committee, Fourth Report of Session 2007–08, BBC Annual Report and Accounts 2006–07, HC 235; Culture, Media and Sport Committee, Fourth Report of Session 2008–09, BBC Annual Report and Accounts 2007–08, HC 190 2 Ev 26 3 BBC Trust, BBC Strategy Review, March 2010 4 Culture, Media and Sport Committee’s Fourth Report of Session 2008-09, BBC Annual Report and Accounts 2007-08, HC 190 5 “Statement from the BBC Trust in response to the Culture, Media and Sport Select Committee’s report into the BBC’s Annual Report 2007-08”, BBC Trust press release, 28 January 2009 4 “The Trust will submit a full response to the select committee in due course and at that time respond to all of its conclusions and recommendations.”6 6. No such response was received, however. We raised this matter with Sir Michael Lyons during the 2008–09 Annual Report session, and he promised that “we will fill that gap as a matter of urgency.”7 We did not in fact receive the response until 4 December 2009, nearly five months after Sir Michael’s assurance and more than ten months after the publication of our Report on the BBC Annual Report 2007–08. It is incorporated into the BBC’s response to our written follow-up questions for the 2008–09 Annual Report session, and is published as part of this Report.8 7. We are disappointed that the BBC Trust, having made a public statement rejecting some of the Committee’s findings and undertaken to submit a full response to our conclusions and recommendations in respect of the 2007–08 Annual Report, did not provide that response for nearly a year. 2 BBC Annual Report and Accounts 2008–09 8. The BBC has a public service remit and also commercial interests in the UK and abroad. Our oral evidence session was wide-ranging, covering many aspects of the BBC’s work, as well as the role of the BBC Trust as the body that oversees the BBC. We now consider a number of issues raised at our oral evidence session, and in written follow-up questions, in more detail. The allocation of the licence fee 9. One important issue that we discussed with the BBC was the idea of allocating some of the television licence fee to organisations other than the BBC. This is often referred to as “top-slicing”, and has been a matter of some concern to the organisation. 10. Following the publication of the Digital Britain: Final Report in June 2009,9 the Department for Culture, Media and Sport (DCMS) published a consultation document seeking views on the proposal to provide public funding for regional news consortia through a contained, contestable element to be introduced in 2013 as part of the next licence fee settlement.10 6 “Statement from the BBC Trust in response to the Culture, Media and Sport Select Committee’s report into the BBC’s Annual Report 2007-08”, BBC Trust press release, 28 January 2009 7 Q 119 8 Ev 26 9 Department for Culture, Media and Sport and Department for Business, Innovation and Skills, Digital Britain: Final Report, Cm 7650, June 2009 10 Department for Culture, Media and Sport, Sustainable independent and impartial news; in the Nations, locally and in the regions, June 2009 5 11. In the BBC’s Annual Report 2008–09, Mark Thompson, BBC Director General, stated that “unique receipt of the licence fee is critical to maintain the BBC’s political and editorial independence.”11 In evidence to us Sir Michael Lyons, Chairman of the BBC Trust, described top-slicing as “a matter potentially of constitutional significance to the BBC”12 and said he believed “top-slicing was not in the interests of licence fee payers.”13 12. We asked Sir Michael whether he accepted that the setting of the licence fee and the use to which it is put was a matter for Parliament and not the BBC. He replied: “Absolutely.”14 However, he added the following caveat: “It is a matter of some public moment, I think, if, after 50 years of the licence fee having been collected solely on the premise that it is to fund the BBC and nothing else, that any change in that is a matter that the public need to be very clear about the pros and cons of and the risks that might flow from it.”15 13.