WEDNESDAY 25 NOVEMBER 1999

SIR CHRISTOPHER BLAND, SIR JOHN BIRT, MR GREG DYKE, MS PATRICIA HODGSON AND MR JOHN SMITH

  280. We have had representations made to this Committee by various disability organisations and in the Gavyn Davies Report your subtitling was described as "woefully inadequate" and yet you come before this Committee describing yourselves as a public service broadcaster and yet you have let down a very significant group in our society.
  (Sir Christopher Bland) We would not accept that description. It is not woefully inadequate. We do not think we have let down an important part of society. We are doing a great deal, and perhaps Patricia would like to expand on what we are doing and what we plan to do.
  (Ms Hodgson) We are ahead of the rest of the industry as a matter of policy. The ITC sets targets for the industry which we aim to keep ahead of.

  281. Can you?
  (Ms Hodgson) Yes.

  282. How?
  (Ms Hodgson) Again I would have to give you the precise details in writing. By 2003-04 80 per cent of our analogue output will be subtitled and in prime time that is already the case and we will actually be ahead of the ITC's digital targets. Those were the ones that Gavyn Davies thought were inadequate. They were 50 per cent over ten years and he recommended 100 per cent over ten years and we immediately embraced that and said we would achieve it. We are also working on additional access for signing because digital technology gives you the opportunity within a closed stream to make signing available on screen that does not get in the way of the viewing experience of those who do not want it and our Research Department has been working on that and we will be introducing that as soon as the final bugs have been sorted. We have upped the number of hours of open signed output. I think within the last few weeks we have been running overnight, for example, The Cops with audio description so that those who want to video it and see it later can do so. We are also working on the audio description technology, again something that digital makes possible. Those who have sight impairment get a commentary which tells them what is happening and we are developing with the RNIB a plug-in capsule that will go into your set-top box and will have headphones so that you can listen to that without getting in the way of the rest of the family who is enjoying the service. We are moving as fast as we can to take advantage of the opportunities here.

  283. Obviously that is to be encouraged, but I can only go on the information that I have received and according to the organisations who have made contact with this Committee, you have let down the ITC in terms of your subtitling and so I think we would be very grateful to have your record of that so that it can be a matter of public knowledge. They also draw attention to the Flextech arrangements, where there are subtitling facilities available on this but which you are not using. I would be grateful for an explanation of that either now or later.
  (Ms Hodgson) I am not aware of that, but we will certainly look into it if you would let us have the specific problem that has been brought to your attention.

  284. Okay. We have already talked about News 24, but there are other services provided by the BBC where people draw attention to the fact that perhaps they are not being exploited as much as they should be bearing in mind your pitch for extra resource and the BBC On line and the prospect of advertising on that and whether or not that will provide a revenue stream that would avoid extra taxpayers' resources.
  (Sir Christopher Bland) The exploitation in general terms for the BBC On line, its development and the audience for it is outstanding and we are way ahead of the competition, as we said earlier. I advise you all, if you want an extraordinary experience, to visit the dinosaurs On line site and if you have linked to that you have seen what On line can do. I commend all of you to have a go at GCSE Bitesize. You can test yourself on the exams. I did it this morning. I got four out of five on Advanced French sitting in the office before coming to see you.
  (Mr Dyke) Tell them about the physics!
  (Sir Christopher Bland) The physics was not too good but it was better than yours would be! It is a really extraordinary tool that we have exploited and developed for news and education. There is a problem about our view of the Internet and its future. We genuinely believe that Lord Gordon was wrong when he said "it is not a broadcasting medium". It is one. We believe passionately that that is demonstrably the case now and will accelerate. We will rapidly be getting analogue quality television pictures On line through on the Internet. We are already screening radio very successfully, both World Service and our services in the United Kingdom and that will expand and develop. To fund what effectively are the BBC's main broadcasting services by advertising simply will change the basic rules. You cannot do it by stealth. If it is a conscious decision by Parliament I would regret it greatly, but you cannot separate the Internet from what the BBC does. You can do it abroad, but in the UK the Internet is the third broadcast medium and if the BBC is not to be funded by advertising then it ought to be part of that licence fee proposition.

  285. Do you agree with the Gavyn Davies Report that the people who should fund your new digital services should be those already subscribing to digital or would you have preferred to have seen a blanket smaller increase for everybody?
  (Sir Christopher Bland) Again that is a matter for Government. I would be inclined towards the digital licence fee because of the symmetry between those taking up new services and those paying for them. We believe increasingly we will become an important part of driving that take up, as we keep emphasising.

  286. That is not a principle applied in general to BBC services, is it?
  (Sir Christopher Bland) It is. If you look at colour, it was absolutely the principle that applied then. If you look at black and white, the introduction of the television licence fee, it was a principle that applied then. I think it is applied at moments of major technological change and those are the only three—in fact, one of them was before my lifetime, but I have lived through one and this is the second, the third in the lifetime of the BBC. I am not sure it is a principle, but it is something with common sense on the relationships of which you can see.

  287. The other evidence that we have had so far that I was slightly swayed by was that from Internet providers on the way you use your website. They mentioned the example of Top Gear. I have not seen that website, but the description of it was that obviously you have a huge advertising potential because Top Gear appears on your television services. You then have the site and that site not only talks about what is on that programme but it also, I am led to understand, has the potential to sell cars and does all sorts of other things. I have some sympathy with the idea that obviously you can cross-subsidise using your terrestrial or digital channels for these sites and it will potentially crowd out the market of private providers if you can cross-subsidise in this way and offer all these services beyond what you are actually producing on the television screen. I would be quite concerned about that because it is quite important to have a wide range of other organisations doing this.
  (Ms Hodgson) The overall principle I think they were attacking was one of public service and they were fundamentally saying freeze public service in the current technology and do not allow it to expand into new ways of providing the service and that is a fundamental value judgment about what the BBC can and should provide and what value it is to the nation. On the specific examples they were giving: we are clear that BBC On line, the public service Internet site provides back-up to programmes, more information, more depth. It is not a commercial site and it does not sell anything. I think it is fair to say that at the beginning of our on line services, like everybody else, we were uncertain about the nature of the Net and I think there may have been in the early days some overlap between what was on our worldwide commercial site and what was on the public service site. We have moved to correct that. The principle is that on our public service site it is information and public service based information related to today. Our commercial site will provide information about transactions made through third parties so that BBC Worldwide can provide a shopping guide indeed to where you might get car components, but they will not be selling them themselves. They will be passing on people who want this information to third parties a range of competitive in the marketplace third parties, not for the BBC to get into selling cars.
  (Sir John Birt) May I add something on the first point that you raise about the generality of our provision? We have to be clear that what we do on the Internet reflects our public purposes and I think it does and it needs to continue to do that and provided it does there is going to be lots of room for commercial Internet development in the UK. I think we have got going earlier than anybody else, but there is lots of room just as there is lots of room for commercial radio and there is lots of room for commercial television. There will be lots of room in the UK for enterprising commercial Internet providers. We make no apology for seeing the opportunity and taking advantage of it.

  288. When Gavyn Davies and Lord Lipsey came to see us they told us that they were prepared to give further money "assuming further internal reforms at the Corporation". Can you tell us what those further internal reforms were?
  (Sir Christopher Bland) Simply the continuous process of improving its efficiency that the BBC has been going through for the last seven years at a remarkably strenuous rate and that process will continue. We are in the middle, for example, of looking at the size and cost of our corporate centre. We examine the ways of improving our programme moving efficiencies through the use of good technologies, through virtual sets, through digital editing and so on. This is a continuous process and some very big sums are included in our calculation for further savings as a result of our own endeavours.
  (Mr Smith) Of the total vision which we costed and submitted to the Panel, the total cost by 2006-07 was £1.25 billion. Out of that we expected to fund half of it from our own efforts, i.e. out of a total of 600 million and that would be split as follows: £150 million from growth in licence fee income coming from our collection and anti-evasion efforts, £100 million coming from growing success in Worldwide's commercial areas, i.e. Net cash contributions coming out of the commercial exploitation and £350 million coming from efficiency savings. If I could just amplify the efficiency savings point. We are pretty proud of our record of managing to make the organisation more efficient since this process of reform started and since that point in 1993 the level of efficiency savings which have been delivered up to now is 39 per cent. That is worth almost £600 million a year already. We beat our promise last year to make savings of £100 million and delivered savings of £105 million. We beat the promise from the previous year. We believe now that our programmes and our services benchmark very well against those that are provided by our competitors in the marketplace and we have been quite radical in the things we are willing to do in order to get our costs down. For example, in my own area the outsourcing and joint venturing of our financial systems to a third party was a radical step designed to reduce the cost. I think we had good praise from Braxton when they last were sent in by the DCMS to review our efficiency and the Davies Panel's own Report commented that our savings were remarkable. The DCMS have now got Pannell, Kerr and Forster in reviewing again whether or not we are being radical enough in our savings and I hope they will support that our challenging targets that we forward are indeed challenging. We expect 22 per cent by 2006-07, 20 per cent more efficiency to be delivered between now and then and as I said that is worth £350 million and contributes a significant amount of the total self-help which I have already explained.

  289. Thank you, Mr Smith. Yes, it is truly remarkable, I quite agree with you. Sir John said that you were starting on a journey. It seems to me that the BBC have been travelling on a gravy train for many years and that is why you have got so much money to make out of efficiency savings. I am not very impressed that it seems to have been so badly managed over the years and that all these efficiency savings are now able to be made. Why should we now agree that you need additional money? Why should we trust you with additional money given your inefficiency in previous years and given that we are the only people who appear to be able to ask you about the licence payer and your responsibility towards costs and towards them?
  (Sir Christopher Bland) Chairman, I strongly resent and strongly refute that analysis of the BBC. It is unfair, it is inaccurate and it is misleading. The BBC is far from a gravy train. The BBC like most public organisations in the United Kingdom ten years ago was at a point in time, but to criticise the BBC for changing as radically as it has, for reducing its staff, for changing its working practices, things which have caused great internal problems within the BBC, have not been comfortable—the BBC has gone through a very very radical change in order to achieve those savings which have been re-invested in programming. The BBC—and I speak with the authority of somebody who has been chairman of an ITV company, on the Board of ITN, Deputy Chairman of a cable company, Deputy Chairman of the ITC (IBA as it was then called) and I am Chairman of NFC, I have been chairman of five elemented companies or chief executive of them—is an extremely well-managed organisation compared with public and private sector best practice. The senior managers of the BBC can hold their heads up in any company. It is entirely erroneous and unfair to suggest somehow that we are having it both ways, that the BBC should not be doing what it is doing and that what it is doing is easy. It is not. It is a process of continuous improvement and it is quite right that the BBC should be doing this. It strives to be world class in terms of its practices. It is not yet world class, but it is certainly top of class in the United Kingdom in terms of the way the organisation has run.

  290. It does occur to me that if you are saying things are now better they must have been worse.
  (Sir Christopher Bland) If I may say so, Mr Chairman, that is not a very profound statement.

  291. I am capable of making statements that are not profound, Sir Christopher. I may be noted for them!
  (Sir Christopher Bland) Things are indeed better and will go on getting better, but it becomes increasingly hard to find savings of a level that John Smith has indicated. We have reduced licence fee evasion to 5.9 per cent, its lowest historical level. That is a great deal better than the evasion levels of five years ago and we will get them down further.
  (Sir John Birt) The interesting thing to note is that the BBC experience is not unique, it has paralleled other large organisations in the United Kingdom over the last ten years and it has particularly paralleled those organisations that were in the state sector, British Airways and British Steel and BT. All of those organisations have gone from being managed in a certain way and we now know that they were all very inefficient and all of them have gone on a journey and we have not been alone on that journey. Yes, we were inefficient ten years ago, but so, as I said earlier, was almost all of the public sector and so at that time we now know was a very great deal of British industry. Our journey has received more public attention than others but it has been essentially the same journey as many other organisations.

  292. Though, of course, those organisations you mentioned ended their journey by being privatised. I would not like to draw any implications.
  (Mr Dyke) I ran a number of commercial companies in that period. I certainly ran a commercial television company in the period when we literally took out half the staff and it was possible and I have to tell you that was the same as every other organisation. My theory on organisations is that you are either taking out overhead or you are putting it on. There never appears to be a norm. The moment you stop the purge to take out overheads you start putting it on again. That is why in all organisations every so often you have to go through and you look again. What is interesting about the BBC is that that is factored into the numbers that were given to you and given to Davies.

  293. We heard from Sir Christopher that KPMG have looked at your accounts, but it appears to me that they have been looking at your accounts for quite a while and yet this does not seem to have prompted you to do anything about efficiency until quite recently and that is what concerns me. I see you have also started looking at the portfolio of property, but that was not done until 1998. I understand you called in a firm to look at it. Who deals with the properties at the BBC that quite suddenly you think it should be started to be looked at? Surely property is something that is ongoing. With the property market being as it is surely this should have been done a long time ago.
  (Sir Christopher Bland) Chairman, Mrs Golding is quite right, it has been a continuous process. The major review of our property provision is triggered by the Bush House lease which falls in fairly soon and either has to be renewed or vacated, but the process of looking at the BBC's properties and rationalising and improving our property use has been continuous throughout the last seven years. John, you can probably give the figures. We have reduced the number of properties in central London over the last five years very considerably.
  (Mr Smith) Three points. One, the process of reform that leads to the general efficiency savings I have already given did not start in 1998, it started way before then. In my experience it has been going on for ten years and I believe it started a long before that under a previous Director General. That is something that has been ongoing ever since then and continues to be ongoing and, as has been said, is factored into our forward projections and factored into our submission to the Gavyn Davies Panel, i.e. the presumption that we will continue to be very aggressive in our savings. On the specific question of property, remember, the BBC is a people organisation either through its staff or the talent that works for it. For the BBC to make programmes it needs property. It is wrong to assume that it cannot have property. Nevertheless, since the efficiency campaign has been underway the system put in place internally charges all users for property consumption at the market rate for that property consumption. Why? In order to discourage the use of property and reduce the amount of space that every part of the BBC needs to have. So there is a recognition that we have to have it, but there is a desire to reduce the amount of it. During that period we have released one million square foot of space, realised 20 million from the sale of surplus buildings and reduced our annual property bill by £15 million. I think that is a pretty good achievement. Our own thoughts follow hot on the heels of the DSS deal known as Prime..., where the properties were outsourced in a joint venture. Indeed, only this week TSB have announced that they are also thinking about organising a joint venture with the private sector for properties. So the issue now is whether harnessing the private sector is a way of using the asset of property that is on the balance sheet in a way that means less money is actually tied up in the balance sheet, but that is nothing to do with the amount of property that is consumed.

  294. Who deals with property at the BBC?
  (Sir Christopher Bland) John.
  (Mr Smith) It has recently come to me.

  295. I felt that you were a little reluctant, Sir Christopher, about having the NAO examine the efficiency of the BBC. Am I wrong in that?
  (Sir Christopher Bland) Chairman, absolutely. If the project is clearly defined and we know what is to be looked at the BBC has no objection. Indeed, we have consultants appointed by the Secretary of State in the BBC right at the moment looking at our efficiency savings for the second time in three years. The BBC is crawled over not only by you and this Committee but by external forces in a way that probably no other organisation in the public and private sector is. I think that is entirely appropriate. This is public money. We have this huge privilege. We have no objection to the NAO quite specifically looking at those two projects that were suggested, that is an audit of fair trading compliance and the transparency of our financial reporting.

  296. And nobody in the BBC would be prevented by anyone in the organisation from talking to the NAO—
  (Sir Christopher Bland) Certainly not.

  297.—if the NAO wanted to speak to them?
  (Sir Christopher Bland) If the NAO was appointed by the Secretary of State to carry out those two studies, of course.
  (Sir John Birt) It is important to say that the BBC believes it has got to be accountable in all of these areas. This is not an argument about accountability. We believe we must convince our licence fee payers and Parliament that we spend their money wisely and prudently. We believe that we have to trade fairly. We believe—and you have heard today our conviction—that we do offer value for money. We believe that we work extremely hard to ensure there is fair trading throughout the BBC. We have lots of powerful mechanisms in place, but we recognise that there is a perception that the ability of the public and Parliament to believe that that is the case is in question. So the argument, I hope, is what can we do, are there things that we can do better, are there mechanisms which can vouchsafe that we do indeed offer value for money and that we are compliant with fair trading and other measures. We accept that that is a more than legitimate debate and we would rather have that debate than saying NAO or not NAO. We would rather say what is the best way of ensuring everybody that we truly are accountable in these areas.

  298. Thank you, Sir John. I take it from that answer you would not try and prevent anybody talking to the NAO, which was the original question asked?
  (Sir John Birt) I am not worried about the principle of accountability at all. I think the BBC has become more accountable and must become ever more accountable and must find ever more ingenious ways to demonstrate to Parliament and the public that it is. Like the Chairman, I am also very worried about the NAO and so was Parliament two decades ago. I am regularly visited by my opposite numbers in public service organisations right across the world and almost always they make the point that the BBC is seen to be independent in the United Kingdom and is seen to be independent around the world. It is a national achievement. It did not happen overnight. It did not happen in 1922. If you look at the BBC's history, our independence has been incrementally won over a very long period of time. It is a tribute to democracy in this country that we have been able to create an institution which truly is independent and we have mechanisms about saving the public interest, being trustees of the public. These mechanisms have been built up over a very long period of time. I share the Chairman's discomfort that the NAO both in perception and in practice will tend to seem to undermine the BBC's independence not only in this country but around the world. That is not resistance to the idea of accountability, it is resistance to a particular mechanism for achieving it.

  299. Is that a yes or no answer?
  (Sir Christopher Bland) What was the question?