Second Report - BBC strategic financial management

The BBC’s plans for an increased presence in the nations and regions seem unclear and disjointed. In March 2021, the BBC announced that it would increase programming spending outside of London by £700 million by 2027–28. However, the BBC is … Read more The BBC’s plans for an increased presence in the nations and regions seem unclear and disjointed. In March 2021, the BBC announced that it would increase programming spending outside of London by £700 million by 2027–28. However, the BBC is also planning a number of efficiency measures around the UK, including making 600 redundancies in its Nations & Regions division and reducing its regional news output. As a result of this inconsistency, it remains to be seen whether this means that the number of people it employs outside of London will increase or decrease. We are also sceptical about the BBC’s claim that viewers outside of London will have more of a voice as a result of relocating jobs to the regions, where these jobs are of national relevance, such as the production of national news. More generally, we are not clear how the BBC intends to find an additional £700 million for the nations and regions, given that it does not yet know the outcome of its licence fee negotiations, or how it will rationalise its estate in line with its new regional plans. We are also concerned that due to the apparent lack of clear, joined-up plans, there may be a risk that the BBC could end up making staff redundant in one area only then to rehire them in a separate area down the line, leading to unnecessary voluntary redundancy pay-outs. Recommendation: The BBC must be clear and transparent about what it is trying to achieve with its plans to increase its presence in the nations and regions, in terms of, for example, the value that this is designed to generate, both locally and nationally. These plans appear to be contradictory and muddled; we recommend that the BBC write to the Committee with a new, clear, achievable plan, within 6 months. Show less

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There is considerable uncertainty over the BBC’s financial future, which its financial plans do not appear to address adequately. The BBC Director-General has four new strategic priorities for the organisation—delivering high-quality 6 BBC strategic financial management content, developing the online … Read more There is considerable uncertainty over the BBC’s financial future, which its financial plans do not appear to address adequately. The BBC Director-General has four new strategic priorities for the organisation—delivering high-quality 6 BBC strategic financial management content, developing the online presence further, growing commercial income, and a renewed commitment to impartiality. These will require increased investment, but the BBC was short on detail on how these will be paid for, other than through commercial returns and the BBC taking tough choices in areas such as content where it will probably have to make fewer programmes but ensure that their impact is high. The BBC is committed to making further savings in future, but appears unable to achieve its existing £1 billion savings target in full. In parallel, the BBC is currently negotiating with government on the future level of the licence fee. The BBC has not, however, modelled the impact on its finances of potential fundamental changes to the licence fee from 2022–23. We would expect to see clearer financial plans from the BBC, including how future investment will be paid for. Recommendation: The BBC should set out how it will achieve its £1 billion savings target by March 2022, and produce a revised financial plan on completion of the licence fee negotiations, incorporating the outcome of these negotiations and detailing how it will pay for new investment while continuing to make savings. Show less

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At times, the BBC has deferred difficult measures and ducked the hard choices necessary over cuts to frontline content. The BBC is candid about its view that, having driven down costs in back-office functions, it now sees no scenario in which it can avoid making tough choices about frontline services …

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The BBC appears unambitious about setting targets for the financial returns generated by its commercial subsidiaries. The BBC’s net returns from its commercial activities, at under 6% of licence fee income, are not at a level to make a significant contribution to its overall income position. The BBC has recently …

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On the basis of a report by the Comptroller and Auditor General, we took evidence from the BBC about its strategic financial management.1

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The growth of streaming has given people greater viewing and listening choices. According to the BBC, this change in behaviour has been reinforced by the pandemic as it has given people more opportunity to discover choice elsewhere.8 We asked the BBC what new plans it has to respond to the …

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The BBC also plans to reintroduce BBC Three to terrestrial TV, five years after making it an online-only service.10 We questioned why BBC Three is the answer to falling audience share among young people when it did not work last time. According to the BBC, ‘linear viewing’ proved to be …

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The BBC has recently announced that it plans to reach out to audiences across the UK by increasing its spending on programming outside of London by £700 million by 2027–28.13 We asked the BBC how this ties in with the ongoing need to make significant financial savings, such as the …

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The BBC told us that the move out of London has been designed to improve its representation in and portrayal of the regions, which will have a direct impact on audiences’ appreciation scores for the BBC. We queried whether the viewing public will notice any difference from the plans to …

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In recent years, the BBC has entered into complex ‘sale and leaseback’ arrangements to develop and finance its estate.19 To determine whether the new regional plans are joined up with these existing arrangements, we asked the BBC whether it could find itself in a position where it has sold off …

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As part of its new regional plans, the BBC is intending to hire new staff. At the same time, the BBC is making hundreds of staff redundant across the UK. We challenged the BBC on how exactly the two align and whether the BBC risks offering voluntary redundancy packages to …

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The BBC faces a number of emerging financial challenges. These include:22 • A significant change in policy for over-75s TV licences which the BBC estimates will leave it £200 million a year worse off. Under the 2015 licence fee settlement, the government gradually withdrew its funding for free TV licences …

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The BBC is currently approaching the end of a five-year savings programme, which targeted £1 billion annual savings by the end of 2021–22 to address the shortfall in its finances created by these challenges. The BBC’s net commercial income is not at a level to make a significant contribution to …

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On taking up his new role in September 2020, the BBC Director-General outlined four new strategic priorities for the organisation—delivering high-quality content, developing the BBC’s online presence further, growing commercial income, and a renewed commitment to impartiality.25 We considered that these priorities will require investment and we pressed the BBC …

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In February 2017 the BBC introduced a programme to deliver £800 million savings annually by 2021–22, in order to help address the estimated shortfall in its finances resulting from the 2015 licence fee settlement and trends in inflation and licence fee payments. In 2020 it increased this annual savings target …

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By the end of March 2021, the BBC expects to be more than £800 million through its savings programme, leaving around £200 million of savings to be achieved in 2021–22. However, it now appears that the BBC will only deliver around £950 million of its savings by the end of …

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The settlements that emerge from licence fee negotiations typically result in the BBC making some financial gains and some losses.30 We asked the BBC why, going into its latest negotiation, it was not better prepared, for example, by modelling potential fundamental changes to the TV licence such as a licence …

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The BBC told us that its savings programme to date has focused primarily on support and back-office functions, with its indirect costs now among the lowest of comparable media companies. It said that, because those functions have now been cut to the bone, it is increasingly having to look at …

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The BBC indicated that, in general, it will also need to make tough choices on programming, making less content but ensuring that the impact is high.34 The BBC has 27 C&AG’s report, para 12 28 Qq 32, 68, 71, 73, 74 29 Qq 72 to 74 30 C&AG’s report, para …

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In addition to this uncertainty surrounding future frontline cuts, the BBC has delayed more than once planned changes to its News and Nations & Regions divisions which involve significant post closures. The BBC had identified early on in its efficiency programme the need for change in these divisions. However, it …

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Staff pay is another high-profile area where the BBC has recently attempted reform. In 2018–19, the BBC introduced new terms and conditions for staff. The BBC calculated these changes would result in a net saving of £4.9 million in its pay bill over the seven years from 2017 to 2023, …

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In 2019–20, the returns paid by commercial businesses for the BBC to use on its programme-making were £208 million, equivalent to under 6% of licence fee income.41 The BBC Director-General has identified increasing commercial income as one of the organisation’s four strategic priorities.42 In March 2021 the BBC’s main commercial …

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We asked the BBC if it had explored how it could increase income from BritBox, the streaming service it runs overseas and in the UK in partnership with ITV, and expanding its use of the BBC archive. The BBC responded that the number of subscribers to the overseas BritBox service …

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DCMS restricts the BBC’s total borrowing limit for commercial activities to £350 million, a level set in 2003.47 We asked the BBC if this limit holds it back from increasing commercial revenues and to what extent it is exploring this in current negotiations with DCMS. The BBC considers the current …

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