BBC Annual Report and Accounts 2008/09

The BBC is funded in a unique way, with most coming from the licence fee paid for by households across the UK. This funding gives the BBC exceptional privileges and we have a responsibility to ensure this money is spent well.

Unlike profit-making organisations we are not focused on the bottom line. Instead we need to ensure the BBC delivers real and tangible value both for the licence fee payer and for the wider UK economy. This translates into five key financial objectives:

• maximising the BBC's income by collecting the licence fee as efficiently as possible
• making the BBC as efficient as possible, and providing good value for money
• maximising the returns the BBC makes on programmes paid for by the licence fee
• spreading the benefit of the licence fee across the whole of the UK
• ensuring the licence fee supports the wider creative economy

The BBC's performance against these financial objectives is set out opposite, and you can read a detailed commentary in the financial review in Part Two of this Annual Report. We comment below on the financial risks facing the BBC and our response to them.

Managing financial risk in the recession

Although the licence fee provides the BBC with considerable security, the BBC is not immune to wider pressures in the economy. These include:

• the effect of falling property values on plans to make the BBC estate more efficient
• lower growth in the number of new households paying the licence fee
• the trading environment for BBC Worldwide, whose profits go back to the BBC to be used for the benefit of licence fee payers

You can find out more about these specifics risks in the financial review in Part Two of this report. With more uncertainty over future income it is important for the BBC to live within its means. Accordingly the Executive has identified further potential savings within the current licence fee period, beyond the 3% pa (net) efficiency target we had previously set. These include:

• reducing the scale of ongoing expenditure
• freezing senior executive pay in 2009/10
• not paying bonuses in that year

We have approved these further cost savings, although we have made clear that they must not compromise programme quality, which we will be monitoring closely.

Measuring performance

The BBC Trust and Executive have developed a measurement framework to help us make an informed judgement as to how well the BBC is delivering against the strategic objectives set out in the six-year plan, and also to assess the BBC's effectiveness in driving efficiency while maintaining quality.

In particular we will be considering the quality measures in the context of the financial savings made in order to reach a judgement as to whether the savings being achieved under the BBC's continuous improvement programme represent real efficiency gains, ie that they have not impacted on the performance of the services the BBC is delivering.

In order that we can make informed judgements on BBC performance we wanted some assurance on the data used to report performance. Accordingly we asked the National Audit Office (NAO) to consider the quality of the data systems underpinning the reporting of the performance aspect of efficiency savings. The NAO has confirmed to us:

"The BBC uses well-established systems for measuring performance which have been in use for some time and predate its continuous improvement programme. They provide the BBC with a good level of assurance that performance data are accurate and reliable. The BBC is using these performance measurement systems to support its reporting on the impact of its continuous improvement programme for the period 2008/09 to 2012/13.

"The BBC's measurement arrangements, however, can give only limited assurance on the direct impact of the continuous improvement programme as many factors, not just efficiency initiatives, influence performance. The arrangements should, however, give accurate and reliable information on performance overall, and, over time, could identify recurring adverse impacts on performance."

The NAO work focused on the non-financial data since, the BBC ’s external auditors KPMG, review the financial savings declared each year.

At this stage of the continuous improvement programme we recognise that it is too early to make a judgement as to whether the savings being achieved are real efficiencies in terms of the impact on services, for example because of the time between commissioning decisions and delivery of content. However we are pleased that the performance data systems in place provide a sound foundation on which we can make our judgements in the future.

 

Licence fee collection

We want to make it easier for people to pay their television licence – online and telephone transactions now account for over one third of the total, and have helped us keep collection and evasion costs at 2007/08 levels.

Licence fee collection/evasion %

 

Licence fee spend in the nations and regions

Spend outside London is down very slightly year-on-year as we deliver efficiencies and implement plans to make 50% of our network television production outside London by 2016 – up from just over one third this year.

Licence fee spend in nations/regions £m

 

Spend in the creative economy

Once more, we spent over £1billion in the UK’s creative economy – commissioning programmes from independents (37% of total eligible hours over the year) and collaborating with other creative partners.

Spend in creative economy £bn

 

BBC Worldwide

Despite difficult trading circumstances for the industry, BBC Worldwide increased its sales to over £1billion for the first time (including its share of joint ventures and intra-group sales), however its statutory profit was down – partly due to continuing investment as well as cost write-offs in relation to the collapse of Woolworths and the Competition Commission’s rejection of Kangaroo, its video-on-demand proposal.

BBC Worldwide statutory profit before interest and tax £m

 

Efficiency savings

We started our new efficiency programme in April 2008 – and have already saved £237million (£192million net of costs). We have a target to achieve 3% cumulative savings of £1.9billion, which will be reinvested in better content and services.

Gross efficiency savings £m