Cautious welcome for BBC funding plan

BECTU has cautiously welcomed a government announcement that lifts an immediate threat of BBC privatisation.

The Culture Minister Chris Smith has announced increases in the licence fee of 1.5% above inflation for the next seven years. This means a £3 increase in the licence fee in April 2000, two years before the "RPI-minus" formula imposed by the previous government was due to expire.

However, the government's plans for BBC funding include significant amounts of "self help", under which every pound of extra licence income is expected to be matched by another pound's worth of internal savings.

The self help target is for £600m savings by 2006, which was already budgeted by the BBC, together with an extra £490m of cash over the seven year period to be raised by disposal of BBC assets, partnerships and joint ventures with commercial companies, and further efficiency savings.

The £490m figure comes from a consultants' report commissioned by Chris Smith before last Christmas, which recommended that the BBC could raise more internal cash than it had originally forecast, if it sold BBC Resources for £250m, raised target income from BBC Worldwide by £50m and made an extra £190m of efficiency savings.

Chris Smith did not accept the recommendation in full, and in particular did not instruct the BBC to dispose of Resources Ltd, leaving the Corporation with an obligation to raise the £490 by 2006 through "efficiency savings, reduced bureaucracy, and...public-private partnerships."

This leaves the BBC free to decide whether it should sell assets like BBC Resources, and BBC Worldwide in order make up the funding shortfall it faces after a disappointing licence increase.

BBC Resources provides most of the Corporation's technical facilities, like studios, editing suites, communications switching and outside broadcast vehicles. Worldwide, which the accountants recommended should not be sold off, is responsible for marketing and distribution of BBC programmes, magazines, and related merchandising. Both companies are currently wholly-owned subsidiaries of the BBC.

The Government's funding formula offers a modest increase in income, but will still come as a disappointment to programme-makers and other staff whose morale was just beginning to lift with the arrival of new Director General Greg Dyke

Corporation executives had previously called for an extra £700m income per year to fund an expansion of digital TV and on-line services, a figure ten times higher than the £65m per year that will be raised by April's £3 increase. Much of the additional revenue was expected to be raised by a £24 per year extra licence fee for homes with digital TVs, and the Minister's decision not to approve the digital supplement will come as a blow to the BBC's ambitious expansion plans.

The £490m target for asset sales and joint projects represents more than one third of the £1.4bn worth of fixed and current assets declared in the BBC's 1999 accounts, and may prove to be unachievable. This would leave the BBC with a stark choice of either scaling back its plans for new services, or raising extra cash through more internal savings, and a sell off of Resources and Worldwide - key areas that BBC bosses have publicly said should stay in-house.

Privatisation of BBC Resources and Worldwide was first suggested by the Gavyn Davies Committee in August 1999, and BECTU has fought a political campaign against the proposal ever since. The lobbying campaign culminated in a report from a back-bench Parliamentary Select Committee which savagely condemned the proposal.

However, the Culture Minister Chris Smith, pressed on with a research project under which a team of accountants was sent into the BBC last December to establish the economic impact of privatisation on the BBC's budgets.

Their report was considered by the Minister during early January, but a final announcement on the BBC's future was delayed by a major re-think among senior ministers of the digital supplement proposals, another Davies recommendation. Commercial broadcasters threatened to withhold their lists of digital subscribers, making it impossible to police the extra digital licence fee.

BECTU has welcomed the Minister's decision to rule out immediate privatisation, but plans to take any steps it can to prevent the BBC selling off Resources and Worldwide in order to close the funding gap.

Union representatives from across the BBC will be meeting in March to consider their full response to the government's plans.

The Minister's announcement carried several warnings for BBC executives. Chris Smith expects the BBC to shed some of its bureaucracy, and will subject the Corporation to periodic reviews of its finances, conducted by independent consultants.

Some strands of programming like specialist film channels are, according to the Minister, expected to be self-funding, and should not draw on the licence fee.

A review is also planned for the BBC's News 24 channel, which came under heavy criticism from politicians during the public debate on the licence fee last Autumn.

The government has promised that all documentation used to reach the licence decision will be put into the public domain, including a formal response from the Minister to Gerald Kaufman's Select Committee, and the report from consultants Pannell Kerr Forster, who studied the possible impact of efficiency savings and privatisation on BBC budgets.