All about ... BBC spending review

How hard was the BBC hit by the Government, Maisie McCabe asks.

Mark Thompson: the BBC's licence fee will be frozen for six years
Mark Thompson: the BBC's licence fee will be frozen for six years

There was some tense horse trading last week as the BBC and the Department for Culture, Media and Sport battled it out ahead of the spending review, after the larger-than-expected budgets for defence and education meant the Government needed to find savings elsewhere.

With only overseas aid and health ring-fenced from cuts, it seemed inevitable that the BBC, which has long been accused of profligacy, would also have to share the pain.

Presumably aware of its precarious position, the corporation has been in a conciliatory mood: last month, Sir Michael Lyons, the chairman of the BBC Trust (a body that the Culture Secretary, Jeremy Hunt, has stated he wants to abolish), announced that he would not be seeking reappointment when his four-year term ends in May. Then, two days later, it emerged that the BBC had offered to surrender its right to licence-fee increases in 2011 and 2012.

There subsequently followed a slimming down of the BBC's executive board, including the departure of Mark Byford, its deputy director-general (albeit with a very generous severance package and an eye-watering pension pot).

Although Hunt said at the time that he was "pleased" with the proposal to freeze the licence fee, and that it would be implemented during the 2011/12 financial year, he said a decision about 2012/13 would be taken at a later date.

The corporation gave further ground when Don Foster, the Liberal Democrat culture spokesman, announced that the National Audit Office will be given full access to the BBC's accounts, despite the director-general Mark Thompson's posturing to the contrary.

1. Ahead of the spending review, initial reports suggested the BBC was going to be forced to take over the £500 million cost of subsidising the free TV licence for over-75s from the Department for Work and Pensions. However, this idea was scrapped, with Lib Dem support, during tense late-night negotiations last Monday.

2. Thompson told staff in an internal e-mail that the BBC has also agreed to provide £25 million of funding in 2013/14, and up to £5 million every year from 2014/15, to support local media initiatives, one of Hunt's priorities, in a commitment "similar in scope" to the partnership proposals explored with ITV last year.

The exact details have not been made public but, in March 2009, the BBC and ITV signed a "memorandum of understanding" mooting the idea of co-locating the ITV and BBC regional news centres, sharing technical facilities and resources, and pooling some of the video pictures gathered by BBC crews.

3. The BBC is to take on the bulk of the responsibility for funding the Welsh language channel S4C from 2013/14, which costs the public purse around £100 million a year. Thompson said the partnership would be on "similar principles" to the BBC Alba Gaelic service in Scotland.

However, S4C is an independent broadcaster and the S4C board is to launch a judicial review of the decision that it said will "effectively merge" S4C with the BBC and "pose a serious risk to the provision of Welsh language television".

4. Another of Hunt's key policies is superfast broadband and, as part of this settlement, the BBC will help fund its roll-out to the tune of £830 million by 2016/17. The BBC's contribution will come from the £230 million surplus from the digital switchover fund and by continuing to set aside £150 million for the four years from 2013/14.

5. These new commitments will add approximately £340 million a year to the BBC's costs, which the corporation will find by saving 4 per cent from its cost base each year from 2013/14 to 2016/17, a total of 16 per cent.

In return, the BBC has received a promise of a licence-fee freeze for the six years from 2012/13. Though a cut in real terms, the settlement keeps it at £145.50 and the Government has promised to impose no new requirements on the BBC or the licence fee in this period.

The settlement also confirms the BBC Trust's responsibilities for decisions affecting the scale and scope of the services, ending the air of uncertainty prompted by Hunt's comments in April.

In a letter to Hunt, Lyons said he welcomed the "certainty and stability" it provided the BBC. "In particular," he added, "I welcome the strong messages about the editorial independence of the BBC and the Trust's responsibilities."



- The Culture Secretary, Jeremy Hunt, believes the settlement will benefit the commercial sector as the BBC has promised not to expand its magazine, local and online activities. Hunt said the assurances should give "some comfort" to the BBC's commercial rivals that the licence fee will not be used to "blast them out of the water".

- Essentially, the BBC will have to find savings, which should be good for its commercial rivals, but the speed of the settlement negotiations prevented much debate about the role of the BBC. BSkyB's chief executive, Jeremy Darroch, said "questions remain" about the BBC's footprint, scope and where public money should be spent.

- It is unclear whether the Government will honour its promise to stay away, or whether BBC airtime will be used to promote government messages, as suggested by the Cabinet Minister, Francis Maude. Maude's plan would take millions of pounds out of the commercial sector and hints at a desire to influence the activities and content of the BBC.

- Geoffrey Russell, the director for media affairs at the IPA, says: "The last person to try that with any sort of passion was Winston Churchill, who took on Lord Reith in 1926 - and lost - over the General Strike."


- The BBC already faces criticism for acting like a commercial broadcaster. Earlier this month, the BBC Trust published new guidelines to protect against the cumulative effect of numerous mentions of the same product, following complaints from the commercial sector.

- As commercial media will benefit from the BBC sticking closer to its remit, advertisers will be able to take advantage of the opportunities, and possible greater audiences, offered by commercial platforms. Russell thinks this will provide a "hard financial rationale for what otherwise tended to be a philosophical debate".

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