A cat and mouse game: The National Audit Office and the BBC

The BBC continues to defend the privacy of its accounting from the National Audit Office. The BBC is proud of public trust in the organisation, but doesn't let the public know a great deal about where it spends public money.
David Elstein
14 April 2010

The Conservative election manifesto pledges giving the National Audit Office full access to the BBC. There is a history here, with the BBC for many years having successfully resisted National Audit Office inspection, and then recently conceding limited access, on two strict conditions – that the BBC Trust should decide where the National Audit Office can be involved, and that the Trust has the final say on what figures can be made public.

As we all know, the BBC’s relationship with government is often tense. The confrontation between BBC journalist Andrew Gilligan and Tony Blair’s communications chief, Alastair Campbell, over Saddam’s weapons of mass destruction, led to the forced resignation of the BBC’s chairman and director-general. Likewise, the BBC’s reporting of the Falklands War and the conflict in Northern Ireland caused serious friction with ministers.

By contrast, the House of Commons is often seen as a defender of the BBC’s independence against an overweening executive. However, on National Audit Office access, the two Commons committees that regularly deal with the BBC have been keener than ministers to push back the boundaries. So the publication, just eight days apart, of reports from those committees on the BBC, makes for fascinating reading.

First to publish, on 30 March, was the Culture, Media and Sport Committee, chaired by John Whittingdale MP. On 7 April it was the turn of the Public Accounts Committee, chaired by Edward Leigh MP. Both chairmen are heavyweight Tory backbenchers; both committees have clear Labour majorities. Committee members build up experience over the years, such that the cut and thrust of their interrogation of witnesses can be both expert and daunting.

The evidence sessions, together with follow-up correspondence, committee research and specialist input, provide the meat of the reports. The interpretation of that material becomes the basis for the committee’s recommendations. Typically, the reports are succinct, but the transcripts of the evidence sessions run to many dozens of Hansard pages.

Both reports go to some pains to remind the BBC that the licence fee is not “the BBC licence fee”, but “the television licence fee”; and that the BBC Trust is the guardian, not of “the licence fee” but of the way the BBC spends the licence fee revenue it is allocated.

This may seem like counting the angels on the head of a pin. However, both committees were insistent that the licence fee proceeds, even though they are now collected by a contractor appointed by the BBC, are paid to the Consolidated Fund, with any subsequent allocation of cash to the BBC being an entirely separate process.

   The Culture Media and Sport Committee question their witnesses Michael Lyons, Chairman, BBC Trust, Mark Thompson, Director General, and Zarin Patel, Chief Financial Officer. 16 July 2009

Video courtesy of Parliament Live

The Culture, Media and Sport Committee reminded the BBC that, in the early days of the licence fee, the BBC had received barely 70% of the money collected, with both the Post Office and the Treasury taking their cut (the Treasury continued to do so till 1962). Moreover, licence fee revenue was used to fund S4C (the Welsh version of Channel 4) and the costs of digital switchover.

The BBC Trust’s chairman, Sir Michael Lyons, accepted these points, through gritted teeth. He has been fending off Labour attempts to divert some licence fee cash to supporting public service content on non-BBC channels: the dreaded top-slicing. And if Labour is replaced after the election, the Conservatives are planning to use some of the licence fee to roll out high speed broadband nationally. The battle over control of licence fee revenues is by no means settled.

The Culture, Media and Sport Committee report’s main thrust was to cast doubt on some of the BBC’s figures for audience reach by its services, as well as noting that the BBC had stopped publishing audience share for its channels in its annual report. The MPs re-calculated the cost per viewer hour of BBC3 as 17.3p, rather than the BBC’s 10.6p, and wondered why it – rather than 6Music or the Asian Network – was not slated for closure.

They also criticised the £9.1 million losses on Project Kangaroo (or Project Roadkill, as BBC director general Mark Thompson ruefully dubbed it). The BBC tried to evade that criticism by arguing that the risk and cost of this joint venture to launch a video-on-demand service (subsequently blocked by the Competition Commission) had been undertaken by BBC Worldwide, rather than the publicly funded BBC services; but this did not persuade the MPs that thereby the financial impact on the BBC was reduced.

The Culture, Media and Sport Committee’s strongest criticism was over the refusal to reveal any detail of individual talent costs. The committee was unimpressed by the publication of bands within the overall cost of talent, stated by the BBC as £229 million per annum, especially as the top band of £150,000 per annum and upwards reflected total payments of £54 million. At the very least, the MPs wanted several bands above the £150,000, including £5 million plus – though they expected that band to have no occupants.

The Public Accounts Committee questions Jeremy Peat, Trustee, and Mark Thompson, Roger Mosey, Director, 2012 Olympics, and Tim Davie, Director, Audio and Music, BBC. 8 February 2010
Video courtesy of Parliament Live

The Public Accounts Committee report was altogether more robust. Here, the references to the licence fee were just a taster before a full-blooded assault on the BBC’s resistance to allowing access for the committee’s pet watchdog, the National Audit Office (or the Comptroller and Auditor General, to give the official titles used).

The BBC is a public body, publicly funded. The Public Accounts Committee saw no reason why it should be immune to parliament’s right to audit, through the National Audit Office. “The Trust seems to think it is acceptable to negotiate the terms on which it will do business with Parliament. This is unacceptable, and a discourtesy to Parliament.”

Sir Michael Lyons fell back on the limited access formula that had been negotiated after the BBC’s Charter and Agreement had been renewed for 10 years in 2006. The Public Accounts Committee was disinclined to wait till 2016 for change: the BBC’s intransigence “beggars belief”, said the MPs.

The Public Account Committee challenges Jeremy Peat, Mark Thompson, Caroline Thomson, Chief Operating Officer, and Zarin Patel, Chief Financial Officer, over estate projects. 17 March 2010
Video courtesy of Parliament Live

Jeremy Peat, the Trustee for Scotland, started his session pink-faced, and ended it scarlet, as MP after MP dismissed BBC explanations for alleged cost over-runs on major building projects, the Vienna studio for Euro 2008 and the Siemens technical framework project.

Roger Mosey, the key sports executive representing the BBC, batted away with great skill claims that budgets had been exceeded for Wimbledon, the Olympics and other events. MPs seemed entirely ignorant of the difference between programmes involving huge amounts of equipment (like golf) and those that were studio-based: unsurprisingly – except to the MPs – presenter fees were a higher proportion of total costs in the budgets of the latter.

At one point, the Public Accounts Committee gave a fair impression of the apocryphal McKinsey consultant who allegedly asked the BBC producer responsible for televising Julius Caesar why he could not save money by eliminating the crowd scene at Caesar’s funeral: “why not just use a close-up of Mark Anthony?”. The Public Accounts Committee asked for “assurances that programme costs are the minimum necessary to reach the required quality and intended audience” – as if such outcomes could be calculated by some mathematical formula.

The National Audit Office officials present at the session sneakily demurred from the BBC’s assurances that its relationship with them was friendly and constructive. They complained that they were unable to publish figures, just conclusions, other than with the BBC’s permission. They noted that an external report on talent costs had had all figures within it redacted, by the BBC.

The BBC was least comfortable explaining why it did not use the National Audit Office as its auditor. Without ever saying that the National Audit Office were unqualified – as opposed to being notorious ratfinks – BBC Trustee Jeremy Peat clung to his view that the BBC was very happy with its current external auditors. He even suggested that if the National Audit Office were ever appointed as the BBC’s auditors, its duty of confidentiality to the BBC would then be in conflict with its duty to report to parliament – a neat, if somewhat desperate, argument.

The BBC’s chief operating officer, Caroline Thomson, had had the temerity to cite cost overruns on the National Audit Office’s own new headquarters as exceeding the level on the three new BBC buildings in central London, Salford and Glasgow. When challenged by the MPs, and the National Audit Office, she stuck to her guns, and even corrected the Public Accounts Committee’s reference to her saying this on Newsnight (it was on the 10 o’clock news, she said). Brave, but probably not wise.

The Public Accounts Committee was having none of it. Leigh declined to be categorised as a “poxy parliamentarian” (his words, not the BBC’s). If the Conservatives win the election, the National Audit Office will be through the door at Broadcasting House: in the name, so the Conservatives cheekily say, of preserving the BBC’s independence. Sir Michael Lyons (or his successor) will plead the case for real BBC independence: but this is one retreat under fire that seems destined not have a happy ending.

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