The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
“The BBC did a good job in completing the move to Salford on time, within budget and without disruption to the television and radio services we all enjoy.
“However, the scale of some of the allowances paid to staff to relocate to Salford is difficult to justify. There were 11 cases where the cost of relocating staff exceeded £100,000 per person, with one costing £150,000. And it is not acceptable that the BBC also failed to make a proper record of the exceptions it made to its allowance policy.
“The longer term success of the move to Salford depends on the BBC achieving the wider benefits it promised. These include reducing the gap between Northern and Southern audiences in the BBC’s market share and stimulating economic and other regional benefits, including creating up to 15,000 jobs.
”The BBC risks becoming overly dependent on the Peel Group, which not only owns the BBC’s buildings at Salford but also the studio facilities and surrounding property.
“As an organization funded by the licence fee, the BBC should set clearly defined expectations for its relationships with its commercial partners. It must make clear that it expects the companies with which it contracts to pay their fair share of tax.
“The BBC’s decision to enter into a 10-year contract for studio space at Salford seems to take little account the fast pace of change in the broadcasting industry. The BBC could end up having to pay for studio services it no longer needs.
“We are dismayed at the abandonment of the BBC’s Digital Media Initiative at a cost to the licence fee payer of £100 million. There have been conflicting reports from the BBC and the BBC Trust on what the project did or did not deliver. We will return to this matter later in the year, once the facts have been established.”
Margaret Hodge was speaking as the Committee published its 20th Report of this Session which, on the basis of evidence from the BBC and the BBC Trust, examined the management of the move so far and how the BBC plans to realise the planned benefits.
To help address the fact that most of its decision-making and spending were located in London, the BBC developed plans to relocate several departments to a new regional centre in Salford. The BBC expected the move, which was completed in April 2012, to: serve audiences in the North better; improve quality and efficiency; and provide economic and other benefits to the region.
The BBC completed most aspects of the move to Salford successfully, but longer-term success depends on the wider benefits being achieved. The BBC completed the move on time at a cost of £224 million, some £9 million below budget, without disruption to broadcast services. However, the BBC is not yet in a position to measure progress in achieving some of the wider benefits expected.
It is too early to judge the long-term effects of the move on Northern audiences, the regional economy and the efficiency of the BBC departments that relocated.
Recommendation: The BBC needs to establish clear measures for all the intended benefits of the move, routinely monitor them and keep the BBC Trust informed of progress.
Some relocation allowances that the BBC paid to staff to move to Salford seem excessive and its recording of exceptions, some of which resulted in higher payments, was inadequate. In 11 cases, the costs exceeded £100,000 per person, with one costing £150,000. Around 10% of staff who relocated to Salford received allowances that were exceptions to the BBC’s standard policy. In many cases, these exceptions, and the reasons for making them, were not clearly recorded by the BBC.
Recommendation: The BBC must establish consistent policies and stick to them. Any exceptions need to be properly justified and recorded. In future relocations, the BBC, and the BBC Trust need to achieve a better balance between treating staff fairly and meeting licence fee payers’ expectations about what costs are reasonable.
The BBC risks becoming overly dependent on the Peel Group for long-term success at Salford. The Peel Group owns the BBC’s buildings at Salford, the on-site studio facilities and surrounding property. The future development of the site, and the cost of occupying it, particularly after the BBC’s lease at Salford ends, is therefore dependent on the Peel Group’s future strategy. The BBC’s relationship with significant partner organisations also involves potential reputational risks for the BBC, for example, the extent to which partner organisations are transparent about their tax status in the UK and the amount of tax they pay. We expect the BBC to set clearly-defined expectations for its relationship with commercial partners and to undertake sufficient due diligence to ensure these expectations are met and do not threaten the reputation of the BBC itself.
Recommendation: The BBC needs to demonstrate to the BBC Trust that it has assessed the potential risks of the Peel Group having a dominant position at its Salford site and taken appropriate steps to address them. It should also make clear its expectation that, as an organization funded by the licence fee, it expects companies with which it contracts to pay their fair share of tax.
The fast pace of change in the broadcasting industry means that the BBC’s decision to enter a long-term contractual commitment for studio services was risky. The BBC locked itself into a 10-year contract for studio space at Salford, and committed to a guaranteed minimum annual spend during the contract term. The pace of technological change in the broadcasting sector means that the BBC could end up having to pay for studio services that it no longer needs. In the first year of this contract, the BBC underspent on one type of studio service by £500,000.
Recommendation: The BBC should only enter long-term contracts when its future requirements are predictable or the contracts provide sufficient flexibility to adapt to changing requirements at a reasonable cost.
The BBC Trust should challenge BBC management more effectively. The BBC Trust is prevented by the Royal Charter from exercising, or seeking to exercise, functions of the executive board, which include the operational management of the BBC. However, there is scope for the BBC Trust to be more challenging and robust, particularly when value for money or the BBC’s reputation is at risk. The BBC Trust should alert BBC management when it has valid concerns about management decisions; demand greater assurance that risks are identified and managed; and hold the BBC executive to account for its response to these concerns.
Recommendation: The BBC Trust should be prepared to challenge BBC management vigorously whenever it believes value for money might be at risk.
We are concerned to learn of the abandonment of the Digital Media Initiative at a loss to the licence fee payer of £100 million.
Recommendation: The BBC Trust should complete its investigation of what went wrong urgently so that the National Audit Office can carry out its own assessment and report.