Introduction

79.  The Green Paper states that one of public purposes of the BBC should be "representing the UK, its Nations, regions and communities".[31] In evidence to us Ofcom proposed that the BBC should adopt "an enhanced role in meeting the needs of the UK's nations and regions" (p 298).

80.  Many of the BBC's own proposals, notably to move key departments from London to Greater Manchester, to establish ultra-local television services and to procure and produce more of its programmes from outside the M25 suggest that the BBC welcomes Ofcom's (and the Green Paper's) proposal. In principle, we too support an enhanced regional and UK wide role for the BBC. It is entirely right that the BBC, funded by licence fee payers throughout the UK, should source its programmes from producers throughout the UK and should represent the whole of the UK.

81.  However, principle and practice are sometimes difficult to reconcile. Whilst we support an enhanced role for the BBC in meeting the needs of the UK's nations and regions we are also concerned to ensure that the BBC provides good value for money and has a positive impact on the broadcasting market as a whole.

The move to Greater Manchester

82.  The BBC has proposed to move Radio Five Live, new media, sport and children's programming departments to Greater Manchester (to join the religion and ethics department, which earlier moved there from London). These departments (together with the BBC's existing regional operation in Manchester) would form the BBC's contribution to a projected centre of regional excellence in Greater Manchester. The BBC intends to contribute towards a media enterprise zone in the area. In our first report we supported this intention and recommended "that the BBC, ITV and independent production companies should work together to create shared centres of regional excellence". [32]

83.  In the course of this inquiry, we visited Greater Manchester and took evidence from BBC staff working on the BBC North project as well as local stakeholders. Everybody in Greater Manchester from whom we took evidence was certain the proposed move would bring enormous benefits to the area. Susan Woodward, the Managing Director of ITV Granada, told us that a move of the kind proposed by the BBC would add "rocket fuel" to an already well established creative industry cluster in Greater Manchester (Q 549). We learned that approximately 63,000 people from the Greater Manchester area already work in the sector (Q 430). Helen France, the Executive Director for Development and Partnerships at the North West Development Agency, believed that the move would "generate significant economic, social and cultural advantages to the North West" (Q 415).

84.  Pat Loughrey, the BBC's Director of Nations and Regions, said that the Greater Manchester centre "can fundamentally alter the ecology of broadcasting in the UK and deliver better value for audiences" (Q 579). He told us that it would countervail the "gravitational" force in the broadcasting industry which "sucks everything rapidly south" (Q 597). Alice Morrison, the Chief Executive of North West Vision, agreed "we have a North-South divide… I think it is extremely important that we are represented on the screen and use the talent we have and start working with communities that traditionally have been neglected by the media" (Q 514). The local authorities and North West Development Agency support strongly the BBC's proposal (p 106) which they hope will make a major contribution to a Greater Manchester Media Enterprise Zone.

85.  The move to Greater Manchester will only realise the objectives expressed by Pat Loughrey and Alice Morrison if it is designed to make Greater Manchester a decision making centre. It would be all too easy for the move to be a superficial activity whereby a department appears to move out of London without decision making power moving too. This is unfortunately what seems to have happened when the BBC's moved its religion and ethics department to Greater Manchester. The Head of Religion and Ethics at the BBC, Alan Bookbinder, told us that "moving a department from London to Greater Manchester in isolation without moving also a good deal of the commissioning, scheduling and budgeting power has been something of a disadvantage" (Q 206). However, he went on to note that the plans for the next move seem to have taken account of the problems encountered by the religion and ethics department: "The departments that are going to move are going to move with the key levers of power. They are going to be commissioning departments, they are going to be scheduling children's programmes, sport, new media, they are going to have a lot more control over their own destiny" (Q 206). Martin Brooks, Head of Partnerships Strategy for the BBC North Project, told us that the proposed move would move decision making for an estimated £225m of production from London to Greater Manchester (Q 580).

86.  We support the aims of the BBC's move to Greater Manchester and note that the area already has the making of a media hub. We believe that it is of utmost importance that the BBC establish an autonomous decision making centre in the area that is not forever referring back to the "main" London office. We also hope that staff working in the new centre will live locally to maximise the benefits of the move for the region. As we have already stated, it is entirely right that the BBC, funded by licence fee payers throughout the UK, should source its programmes from producers throughout the UK and should represent the whole of the UK to the UK as a whole.

87.  We also support the BBC's intention to contribute towards a media enterprise zone. We note that Sir Howard Bernstein, Chief Executive of Manchester City Council, told us that if the BBC did not make a large scale commitment to the media enterprise zone, it would be a major lost opportunity "in the context of national competitiveness strategies and Government targets around PSA2" (Q 433). However, we also heard that the future of such a centre is not wholly dependent on the BBC and that a viable centre requires all parties, the BBC, ITV and independent producers, to commit to an enduring partnership. Sir Howard recognised that the creation of a media enterprise zone did not rest wholly in the hands of the BBC but added "it seems inconceivable to me that you can have a Media Enterprise Zone that excludes Granada" (Q 461). We recognise that establishment of the media enterprise zone is conditional on the commitment of more than one partner.

88.  Unfortunately, it seems one of the key limiting factors may be the BBC itself. Lord Puttnam told us that the BBC does not have a good reputation as a partner. He was sceptical about the ability of the BBC to make the compromises necessary for a successful partnership: "It will only work if the BBC are prepared to relinquish a fair amount of control and I suppose what I am saying is I think they are going to find that agony" (Q 1793). We heard evidence in Greater Manchester to suggest that the existing partnership between the BBC and ITV in 3sixtymedia had taken some time to bed down into an acceptable working relationship (Q 542).

89.  The media enterprise zone would provide the BBC with the opportunity to demonstrate that it is able to create durable partnerships. We recommend that the BBC should do its utmost to maximise clustering arrangements with other media companies in the Greater Manchester area. Even though the BBC has ruled out participating in a media enterprise zone located at the ITV/Granada site, it is crucial that the BBC works together with ITV and the independent sector to make a success of the Greater Manchester media enterprise zone.

The cost of the move

90.  Although we support the principle of the move to Greater Manchester we are concerned by its projected costs. In its bid for a new licence fee settlement, the BBC estimated that the capital cost of its projected move to Greater Manchester would amount to £600m (or an additional cost to the licence fee payer of £50m annually) and that any savings arising out of the move would not accrue for 25 years. Subsequently, the BBC has revised its estimate of costs downwards and gave evidence to us that it estimates the capital cost of the move to be £400m and that the additional annual cost to the licence fee payer would amount to £25m (QQ 572, 573).

91.  In our first report, we stated that "We find it hard to believe that there are no economies to be gained by moving staff out of London".[33] That remains our view which was strengthened by the evidence we received that wage, housing and office costs in Greater Manchester are significantly lower than in London and that other businesses relocating activities from London to Greater Manchester were able to achieve payback in five years (QQ 445, 449). Moreover, the Manchester and Salford local authorities and the North West Development Agency plan to contribute approximately £50 million of public support to a Media Enterprise Zone (Q 427).

92.  As noted in chapter two we find it surprising that the cost estimates have changed by so much so rapidly and that the BBC does not anticipate any net savings earlier than 25 years after the move. In order to ensure that the BBC's plans realise maximum value for money we recommend that the BBC's proposals for the move should be the subject of an independent examination. An external consultant should be employed to vet the costs of the move and ensure that value is realised from vacated assets in London. The report and findings of this consultant should be made publicly available.

93.  Something that concerned us during this second inquiry was the sense that the BBC is holding back on committing fully to the move until it receives a favourable licence fee settlement. Charles Allen, Chief Executive of ITV, suggested that the BBC's position was "if you don't give us that amount of money we shoot the puppy and we don't go to Manchester" (Q 1226).

94.  The BBC itself has set out all the reasons why the move will benefit both the local area and viewers and listeners across the country. Our visit to Greater Manchester showed how much time and money has already gone in to planning for the move, not just the time and money of the BBC but also of Salford and Manchester Councils, the North-West regional development agency and other local broadcasters. As we have already stated the Greater Manchester area stands to benefit greatly from the move. We do not believe that the move to Greater Manchester, which will bring such obvious benefits, should be used as a bargaining gambit in the BBC's licence fee negotiations. The BBC should fully commit to the move as soon as possible.

Ultra-local television

95.  The BBC has already started to provide strong and innovative local services on its web site. It further proposes to provide "ultra-local" television news services on the same scale as its 40 local radio stations (P. 464). It proposes to establish 60 local news centres. These will be available through broadband and digital, they will not be stand alone permanent TV channels. The BBC has promised this proposal will be subject to the Public Value Test. Currently it estimates the costs of the new local television services to be £310 million and the costs of new local radio services to be £90 million.

96.  In our first report we stated that "We endorse the Government's proposal that strengthening broadcasting in the nations and regions should be a core public purpose of the BBC. We also welcome the BBC's commitment to use new digital technology to provide innovative local programming".[34] There are gaps to fill in provision of local news. Current regional news areas are not based on areas of regional identity but on the position of transmitters. Few viewers in Portsmouth find news of traffic problems in Berkshire of compelling importance, and a better matching of services to local identities and preferences would be all to the good.

97.  However, in evidence to us Ofcom has argued that "ultra-local" is something of a misnomer for the local television news services proposed by the BBC. This is because the BBC's proposals appear to map television onto the areas already established for local radio: areas which are, Ofcom contends, neither "particularly local" nor the "kind of community level services that some local TV stakeholders envisage" (p 299).

98.  We received evidence from Trinity Mirror arguing that the BBC's proposals for ultra-local news will "stifle investment" and lead to a "reduction in pluralism" (p 469). The Newspaper Society also expressed its concern about any possibility of the BBC authorising new services despite "independent assessment that they will have adverse market impact" (p 461). Ofcom also pointed out concern that the BBC's plans could "discourage potential investment in this market, closing it off before commercial and community providers have had a chance" (p 300). We understand such concerns. We believe the burden of proof should lie with the BBC to show that, where there are significant negative impacts of this kind, the public interest is sufficient to justify proceeding with its plans. We therefore welcome the BBC's commitment to subject the proposals for new local services to a public value test which will include the publication of a market impact assessment. As we recommended in our first report this market impact assessment should be carried out by a competent and reputable third party. The results of the Public Value test should be published and interested parties should be entitled to appeal against the findings of the Market Impact Assessment to Ofcom if they are able to show prima facie well reasoned and evidenced grounds for such an appeal.

99.  In the spirit of this transparency the Newspaper Society also argued that full financial accounts relating to the BBC's investments in local services should be published (p 461). We support this suggestion and recommend that the BBC should publish full accounts of its investments in local services.

100.  We took evidence on local services from Lord Puttnam. He told us that he would like to see different community organisations, of different types, getting involved in the production of local television services. He suggested that the BBC could be a key partner with local organisations with the aim of producing truly local services. However he was also doubtful that this would happen because he believed "the BBC traditionally is a horrible partner. It does not partner" (Q 1768). Mark Thompson countered this assertion. He told us that the BBC is currently conducting a trial of local services in the West Midlands. As part of this trial the BBC are already working in partnership with local newspapers, for example by sharing journalism. He told us "we should see ourselves very much in partnership with other players" (Q 2008).

101.  We believe that the provision of local and ultra-local services requires a genuinely local community starting point. We recommend that the BBC should consider the provision of ultra-local services as an opportunity to demonstrate its partnering skills by working alongside a range of local organisations. The BBC may have a contribution to make to such grass roots initiatives by facilitating and partnering rather than by controlling and directly supplying new local services. Accordingly, we believe that any implementation of the BBC's proposals for ultra-local services should be preceded by further pilot initiatives involving strong local, grass roots, participation.

Independent production in the Nations and Regions

102.  In our last report we stated that "We welcome the BBC's aim to devolve programme production and commissioning across the United Kingdom. We do not believe additional regional production quotas beyond the existing "out-of-London" quotas are necessary as long as the BBC keeps to the commitments it has made.[35] We also stated that "We recommend that the BBC should set indicative targets within the Window of Creative Competition for sourcing from small and regional companies".[36]

103.  However, this second inquiry has led us to reconsider whether more should be required of the BBC to ensure that it sources a significant proportion of its programmes from outside London and other media hubs. Talent is not confined to the area inside the M25 (or metropolitan centres outside the M25). It is important that programme makers throughout the UK supply the BBC with programmes. This is not just because it is fair for licence fee payers throughout the UK to see and hear a reasonable number of programmes from and about their experiences but because all of us will be better off if we have access to the best that programme makers UK wide can offer.

104.  During this inquiry we received evidence from Channel 4, which feared that the indicative targets we recommended in our first report would not be strong enough. Andy Duncan told us "it is getting harder and harder in fact to secure quality programming from some of the small- and medium-sized independents and that is a particular issue outside of London. It is almost inevitable that the BBC, unless they are forced otherwise, will put a disproportionate amount of extra spend into the big, strong, London-based independents… My sense is that it has to be an absolute requirement on the BBC, otherwise, if it is just a good intention and they are given some indicative targets, it will get lost (Q 1133).

105.  We acknowledge the seriousness of Andy Duncan's concerns. While we wish to emphasise that the BBC's primary objective should be commissioning high quality content we believe more could be done to source this content from across the UK. We therefore recommend that there should be more transparency in the commissioning process. The BBC Trust should give clear guidance to BBC management on the desired amount of regional production. Management should have to report regularly to the Trust on its progress in this area. The Trust should publish an annual account showing how much regional commissioning has taken place. If regional commissioning does not increase then the Trust should report fully and transparently what measures it has required management to take to address the situation. It important for the BBC to carry out the spirit as well as the letter of a policy of improving representation of the whole of the UK by securing more programmes made outside the M25. We believe that the move of some commissioning departments to Manchester should help secure these benefits.

32   First Report of Session 2005-06, para. 181. Back

33   First Report of Session 2005-06, para. 183. Back

34   First Report of Session 2005-06, para. 176. Back

35   First Report of Session 2005-06, para. 183. Back

36   Ibid, para. 267. Back