UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1709 -i

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Culture, Media and Sport Committee

BBC Annual Report and Accounts 2010-11

Tuesday 13 December 2011

LORD PATTEN, Mark Thompson and Zarin Patel

Evidence heard in Public Questions 1 - 125

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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 13 December 2011

Members present:

Mr John Whittingdale (Chair)

Dr Thérèse Coffey

Damian Collins

Philip Davies

Paul Farrelly

Steve Rotheram

Mr Adrian Sanders

Jim Sheridan

Mr Tom Watson

________________

Examination of Witnesses

Witnesses: Lord Patten, Chairman, BBC Trust, Mark Thompson, Director General, BBC, and Zarin Patel, Chief Financial Officer, BBC, gave evidence.

Q1 Chair: Good morning. This morning’s session is the annual one held by the Committee to examine the BBC annual report and accounts, and it has been rescheduled from the time it was originally due to be held in July. I would therefore like to thank the Chairman of the Trust, Lord Patten; the Director General, Mark Thompson; and Zarin Patel, the Chief Financial Officer, for coming this morning.

Perhaps I might begin with a more general question about your future target for efficiency savings. This has come on top of the existing requirement of 3% a year. Can you clarify how much is extra, new efficiency savings, and how much is incorporating the existing targets?

Lord Patten: It is new. It carries on from the successful implementation of the present efficiency savings, which themselves, I think, got a modestly commendatory mention from the NAO, but we recognise that more needs to be done. The 11%, which is the major contribution towards the 20% that we want to find in savings, is in addition. Perhaps the Chief Financial Officer would like to add to what I have said.

Zarin Patel: In this current period of value for money, we are achieving just about 3% per annum in efficiency savings, and in the new period, which starts in 2013-14, we will average about 2.75% per annum, which largely recognises that the bulk of the kind of major transformations will have happened in this period, but that the new buildings and the new production technology-for example, DMI-will carry on producing more efficiency savings in the next period as well. i think there are, over time, some natural limits to efficiency. The BBC, over a period of 18 years, has been continually addressing efficiency, so I think over time we have to think about a period in which there are lower levels of efficiencies for the organisation to catch up.

Q2 Chair: To what extent do you foresee a continuing agenda of seeking efficiency savings? Mark, I think you have indicated that we are just about at the end of a road, in terms of what could be achieved.

Mark Thompson: The new plan, Delivering Quality First, has the benefit of a few big structural opportunities for efficiencies. There is the development of new broadcast centres with state-of-the-art technology in Broadcasting House, W1 and Salford, and the so-called DMI-the digital workflow that we are implementing at the BBC. That does give us confidence about being able to achieve efficiencies over this next period without impacting on quality, but there are many parts of the organisation-local radio would be an example, and radio more generally-where, looking on the ground, particularly in those areas where people who make the programmes, such as journalists and producers, are one of the biggest expenses, looking forward we think it is going to be significantly harder, certainly beyond the present programme, to find further efficiencies.

Lord Patten: Can I just add one point? In the Trust, we were determined to ensure that the efficiency savings were credible-were real-so we asked Ernst & Young to do a report on this latest round of efficiency savings, and we will, of course, publish that.

Q3 Chair: When do you expect that?

Lord Patten: Quite soon.

Q4 Jim Sheridan: You have embarked on this Delivering Quality First public consultation.

Lord Patten: Yes. The period of consultation finishes on 21 December, and we will then have to consider the responses that we have had, both in meetings and through individual e-mails and post. We will also have to consider, of course, the debates that have taken place in this House. We will come forward with our conclusions in the early New Year.

Q5 Jim Sheridan: Will those comments or conclusions include Jeremy Clarkson’s hideous points of view?

Lord Patten: I think Jeremy Clarkson has already apologised, as has the programme, for his remarks.

Q6 Jim Sheridan: Is that sufficient, then?

Lord Patten: Short of capital punishment, I am not sure what else-

Jim Sheridan: I think you could sack him.

Lord Patten: That would not be a question for the Trust, but were he to be dismissed for saying something that was pretty stupid, that would set precedents that would mean, I am afraid, that quite a lot of people never got to broadcast.

Q7 Jim Sheridan: Can you sack him?

Mark Thompson: I don’t intend to sack him. In my view, Jeremy’s remarks were absolutely and clearly intended as a joke. If you look at the remarks closely, you will see it is meant to be a joke about the BBC’s obsession with balance, so he demonstrates that by coming up with two daft and extreme views, neither of which were intended to be taken seriously. What Jeremy himself has said, and the BBC has said as well, is that these remarks were not intended to be taken seriously. If they have caused any offence, he is sorry to have caused that offence.

Q8 Jim Sheridan: How many complaints have you had about them?

Lord Patten : A huge number.

Jim Sheridan: How many?

Mark Thompson: I believe the total is 32,000 or thereabouts.

Q9 Jim Sheridan: So 32,000 people were stupid for not believing that these remarks were supposed to be funny?

Lord Patten: No, 32,000 people were right to think that he should not have made them, but frankly, if we sacked everybody who said anything stupid, there would be quite a lot of people who have said things that I find offensive from a different political point of view. There are examples of both left and right-wing senses of humour that I do not share.

Q10 Jim Sheridan: So do you think it is acceptable for somebody to say that people should be taken out in the street and shot in front of their family? You think that is funny?

Lord Patten: No. I have just said that I didn’t.

Q11 Jim Sheridan: You are not prepared to do anything about it. You are looking after taxpayers’ money, and you are not prepared to do anything about it.

Mark Thompson: Crucially, I have to say I believe it is absolutely clear to anyone who actually watches the clip-perhaps not who reads a section of the transcript, but watches the clip-that these remarks were said entirely in jest and not intended to be taken seriously. To be honest, I cannot see how anyone could watch the programme and see the clip and believe that this was being proposed as a piece of public policy.

Q12 Jim Sheridan: Given everything that is going on in the Middle East and Syria and all these other countries, you think it is acceptable for a BBC presenter to say on prime-time television, having warned the BBC that he was going to say it, that these people should be taken out and shot in front of their families? Do you think that is acceptable?

Mark Thompson: I think all I can do is repeat that I am quite clear that the remarks were intended entirely in jest, and that Jeremy Clarkson has made it clear that if anyone has-clearly some people have-taken exception and offence to them, he has been very happy to apologise for it.

Q13 Jim Sheridan: I think my constituents will be extremely disappointed at the reaction that we are getting from the BBC. Lord Patten, you said: "We cannot do everything we want. Some things we would like to do are luxuries we cannot afford." Could I suggest to you that Jeremy Clarkson is a luxury that we can’t afford?

Lord Patten: I am afraid that you would have to explain that to a lot of people who enjoy Top Gear as much as they do. It is probably one of the leading "cultural" exports from this country. Top Gear is widely exported around the world, and I guess a lot of people would be disappointed, but I am sure that most of those people, if they had followed this particular incident, would have noted that, without qualification, it was apologised for afterwards.

Mark Thompson: Indeed, the programme apologised during the programme itself. Well over 20 million people watch Top Gear in a given season of Top Gear. It gets a very high rating from the public for quality-and people, by the way, watch that programme expecting to hear outspoken humour from Jeremy Clarkson. Although clearly he is a polarising figure from the BBC, there are many millions of people who very strongly support and enjoy Jeremy Clarkson. That has to be balanced against a couple of flippant remarks in one programme. If you look at the clip, Mr Sheridan, it is quite obvious that this is a piece of daft flippancy and intended as such.

Jim Sheridan: I have watched the clip. Over 30,000 people watched the clip and wrote to you objecting to it, including me.

Chair: I think we have probably just about exhausted this topic.

Q14 Steve Rotheram: I can understand your defence of Mr Clarkson-not that I necessarily agree with what you said-but what happens when someone’s views were meant to be taken seriously and not just in jest, and when someone lies on the BBC, as Kelvin MacKenzie did with regard to the Hillsborough slur on The Daily Politics last week? What do you do about somebody like that? If you are not going to take any action against somebody like Clarkson, what are you going to do against Mr MacKenzie? Are you going to ban him from the BBC?

Lord Patten: No, because I think that the BBC should be a bastion of free speech.

Steve Rotheram: It is not free speech; it is lies.

Lord Patten: Well, I am afraid that all broadcasting corporations in the world occasionally broadcast interviews with people who are mendacious, or who make jokes that are not remotely funny and are regarded as bad taste. Kelvin MacKenzie is, of course, well known for being a right-wing commentator. There are left-wing commentators whose views I have heard from time to time on the BBC and have not agreed with, but I believe in freedom of speech.

Mark Thompson: I have not seen this episode of The Daily Politics, but I will go and look at it as a result of this. What I do know, because I have seen it myself and heard it myself many times, is that the question of The Sun’s coverage-at the time and afterwards-of Hillsborough, and the continued anger in Liverpool and Merseyside about that, has frequently been the subject of coverage by the BBC. I have heard Kelvin MacKenzie and other leading editorial figures from The Sun being questioned very toughly by the BBC on this topic. I don’t know whether this came up in The Daily Politics-I will look at that-but I have frequently heard this entire story being aired, investigated and explored by the BBC. I don’t believe the BBC itself can be accused of not covering that story.

Q15 Steve Rotheram: Mr Thompson, I did not in any way accuse you of not covering the story, and it is not the broader point; it is the specific point: what has somebody got to do on the BBC before you will take action to sack somebody, even if they lie live on television?

Mark Thompson: I would distinguish between the absolute duty of the BBC’s news and current affairs presenters and producers, of course, to uphold the standards of accuracy and impartiality that the public rightly expect of the BBC. When we are talking about contributors, our job, whether somebody comes in for an interview or for a discussion, is to try to hold them to account by our questioning and by the way we frame their remarks. The BBC is not there to impose political correctness or a kind of unwarranted control on what people can say-I look at Mr Davies for that-but to be a platform on which a range of opinions get expressed. As I say, I will look at the programme in question, since you have raised it. I can’t talk about that programme, not having seen it, but our intention would always be to hold people to account by asking them difficult questions and by exploring their arguments.

Chair: I think we now need to return to Delivering Quality First.

Q16 Mr Sanders: Did you consider proposing the closure of any single BBC service as an option in these cost-cutting times?

Lord Patten: We considered in our discussions with the executive every possible option, but we were pleased at the end of the day that that was not an option that was required. It is worth noting that if you close a service, you don’t necessarily make what appears to be the budgetary saving represented by the cost of the service, because a lot of costs run across the organisation as a whole.

Q17 Mr Sanders: So why did you in the past propose the closure of 6 Music?

Lord Patten: That was a proposal that was made by the executive about 18 months ago, and the Trust, before my time, turned down the proposal.

Q18 Mr Sanders: Was it because of public pressure that you turned down that proposal, and do you fear public pressure from not closing a single BBC service in the future?

Lord Patten: I think, although it precedes my arrival at the BBC Trust, that I can say that the Trust did not regard the case made for closure of 6 as being a good one.

Mark Thompson: Perhaps, as I was right in the thick of that debate, I could briefly talk about it. We did, 18 months or two years ago, a really close piece of work, absolutely in collaboration with and at the behest of the BBC Trust, looking in detail at the value delivered and the perceived value from audiences for every BBC service. All our digital radio services are relatively young services; some of them at the time had quite low audiences and, when we asked the public at the time, relatively low scores for quality and distinctiveness. As it was, 6 Music became a candidate for possible closure because of that. However, it must be said that an extraordinarily successful campaign by the lovers of 6 Music arguing against closure had the effect, through extensive newspaper and media coverage, of bringing many, many new listeners to 6 Music, who have stayed with it and thoroughly enjoy it. The audience of 6 Music doubled, and the case for closure reduced because of the new popularity of the service. Now, that is an unusual marketing plan-I accept that-but it turned out that people, when they listened to 6 Music, thought it was a great BBC service, and now the argument for closing it is nothing like as strong as it was.

Q19 Mr Sanders: But has that frightened you off from perhaps wanting to propose closing a service in the future?

Mark Thompson: Once again, we asked the public what they thought about every service. The honest truth is that for the British public, the BBC provides a range of valuable public services, and every single service that the BBC produces at the moment has very strong supporters. The argument from the public was, "If you believe you can maintain the quality of the services"-I accept that that is a big debate to be had-"we would like you to maintain your range of services," and that is what we have proposed to the Trust that we do.

Q20 Mr Sanders: You are proposing to "refocus" BBC Three and BBC Four. What exactly does that mean?

Lord Patten: I am sure that the Director General will want to add to what I say, but it means that we want to look strategically at BBC Three and BBC Four in their relationships between BBC One and Two, which of course have much larger audiences.

Mark Thompson: That is exactly the point. We think we can deliver a better total portfolio, and have a higher impact and quality across the television portfolio, if there is a much closer working relationship than there has been in the past between BBC Four and BBC Two and BBC Three and BBC One, and if there is more co-ordination in the development of talent and, sometimes, the transition and sharing of content.

Q21 Mr Sanders: Doesn’t it mean more repeats?

Lord Patten: No, that doesn’t itself mean more repeats. It may mean that ideas that are first trialled on Three or Four then make their way to One and Two, and that could be through repeats, or it could simply be through developments of the programme or the programme idea. There will, under DQF, be some more repeats; that is undoubtedly the case. It is one of the consequences of the budgetary changes we have had to make.

Mr Sanders: So the answer was yes.

Mark Thompson: What I would say is that we are acutely aware that the public, on prime-time BBC One, like, as far as possible, a diet of a lot of originated programming-new drama, new comedy; that is clear. On channels such as BBC Four and BBC Three, and even BBC Two, where there is an outstanding documentary-I think of the BBC Three documentaries about Afghanistan, Our War-in the week of its premiere, there are several different chances during the week when you can see this programme, and the public tell us that they think that is an advantage; it adds to convenience, and makes it more likely that they watch it. Often we have had that experience on BBC Four, which has a relative small average audience. Take a programme; we have had a recent series about the symphony on BBC Four. It gets several showings, and the audience, over the week, builds up to a significant number. It is a way, from the public’s point of view, of giving them the chance to catch the best programming on the BBC, and from the BBC’s point of view, it is a chance of making sure that we are really getting the value to the public, and making sense of the investment in the programmes.

Q22 Mr Sanders: When we are fully digital, and most people have access to a video recorder, iPlayer, and other ways of choosing when they wish to watch programmes, do you think people’s tolerance for repeats will be lessened?

Mark Thompson: The current balance on British television consumption is that, net, about 12% or 13% of all viewing is done, in various ways, asynchronously-not at the time of broadcast, but with Sky Plus, a hard disk in a Freesat box, or via iPlayer. 88% currently is done with people turning on televisions and watching them. We expect that to change over time, but our current estimate would be that by the end of the charter-the beginning of 2017-that figure might be 16%, so there would still be 84% conventional television consumption. Although, of course, there may well be a point in the future when, as you say, the whole way we think about television channels and how people consume television changes, this is a period when conventional television viewing is increasing, and people still rely a great deal on conventional television channels to find the TV that they want to watch.

Lord Patten: I went yesterday to watch EastEnders being made at Elstree-I am continuing to stretch my cultural horizons-and I was impressed by the number of people who, I was told, watch the repeat of EastEnders on BBC Three later in the evening. They can’t keep up with the story because they are going out to the pub or they are watching a game of footy, but they can turn on later on BBC Three and not miss the latest fête champêtre in the Queen Vic or whatever.

Q23 Mr Sanders: I understand that current affairs budgets are not being cut in BBC Scotland and BBC Northern Ireland, but clearly are being cut in the regions in England. This is at a time when the need for investigative journalism perhaps is ever greater, given the demise of daily local newspapers, which are going weekly. I know that in the south-west region there are real fears that the Inside Out programme-a half-hour regional broadcast programme that has broken some brilliant stories and scandals, and holds councils, MPs and other decision-makers to account-will not be able to perform that duty at a time when there is less investigative journalism out there in the broadsheets. Is this a wise move?

Lord Patten: It is a move that has been pretty widely criticised, not least by MPs, and it is obviously a move that we will have to look at very carefully when we are considering the whole consultation exercise. I think it is fair to say that we are intending to focus investigative journalism regionally in units that will cover larger areas, but maybe the Director General would like to fill in on that.

Mark Thompson: That is right. The proposal is that there should be more sharing. There would still be Inside Out and the commitment to regional current affairs, including investigations, which I agree are a very important part of what we do in regional TV current affairs, but there would be a sharing of stories-this is a magazine programme-across larger regions of the UK as one of the ways in which we intend to save money. It is worth saying that overall what the BBC spends in English regions is one of the more protected parts of the budget in our plan. Across the BBC as a whole, we have been looking for gross savings of about 20%, and net savings of about 16%; in English regions, we are looking at about 12%, with only 10% from local radio. Nonetheless, these are parts of the organisation where budgets already began pretty tight, and I would accept that these are going to be stretching savings, but I think people will continue to get Inside Out throughout most of the year. The stories will still be, I hope, outstanding journalism and will include lots of investigations, but there would be larger groupings in England, rather than the full range of regions as at present. That is the plan.

Q24 Mr Sanders: That clearly reduces scrutiny and accountability at a local level, doesn’t it?

Mark Thompson: It means that, of course, in any one existing region there will be fewer investigations and reports than at present.

Mr Sanders: That is not good.

Mark Thompson: I think it is worth saying-we should not duck the fact-that taking significant savings out of the BBC has to have an impact somewhere. We hope to take as much as we can in savings away from content, off the air, by reducing senior management numbers and pay, overheads and so forth, but we will be unable to hit the numbers that we need to hit without some savings, which of course affect output.

Q25 Mr Sanders: A final question: it is put to me in my region that just Alan Hansen’s salary on Match of the Day would protect that level of scrutiny and investigative journalism in the far south-west.

Mark Thompson: All I would say is that what the public expect from the BBC is a range of services. They expect outstanding documentaries and news coverage and entertainment and great sports coverage from the BBC. Match of the Day-the story of football through the year, with outstanding commentators and presenters-again is a very popular programme. It is more popular, in many ways, now than it was a few years ago. People want the very best people on it. We don’t discuss individual artists’ pay, but across the whole portfolio of what the BBC does there are many different things. We are about to broadcast Great Expectations over Christmas. I have seen the first two episodes; it is fabulous. It is an incredibly expensive piece of television, as it needs to be to re-create Charles Dickens’ world. Some of the things that we do to get to the standard we want-Frozen Planet absolutely would be an example of that-cost a great deal of money. We have to make sure, as far as we can, that the resources are going properly and in a balanced way across the portfolio. Lord Patten and the BBC Trust are there the whole time scrutinising this and listening to the public to make sure that we have got it right, and if they believe we haven’t, they will change the plan.

Q26 Chair: You said, Mark, that English regions had perhaps not suffered as great a reduction as some other parts of the budget, although obviously there have been cuts in English regions. You also said five years ago that you were going to cut the number of senior managers by 20%. I understand that at the time there were 12 heads of regional programmes in the English regions, and there are still 12 heads of regional programmes. It has been suggested, I think by John Myers, that that number could be considerably reduced.

Mark Thompson: First, the overall target that we set-you are quite right-was to cut the BBC senior management pay bill by 25%, and its numbers by 20%, by the end of calendar year 2011; that is, within the next couple of weeks. We will be reporting in January on our success against that target. I can tell you that I believe that we will meet, and indeed, slightly exceed, those targets, so we will meet those targets.

If I may say so, it is also very important that the BBC has outstanding editorial leadership across England, and I believe that the role of head of regional local programming, combining regional television with, typically, a cluster of local radio stations, is an important part of our chain of command. We are listening very closely to John Myers; he has an extraordinarily astute and experienced eye. We got John in from commercial radio. In the absence of commercial radio being prepared to benchmark with our music networks, we asked John to come in and look and see what he thought about the way we run our music networks at a national level. John is also helping us think through local radio, and again is there just to make sure that our thinking about it is right and is likely to lead to maintaining or improving quality, but with affordability in the mix as well. As it happens, my view is that having front-line leaders of the BBC’s journalism across England remains an important guarantee of the quality and consistency of what we do. So far, we have been able to maintain that and still manage to hit the overall reduction in senior managers we planned so far.

Q27 Chair: I understand that he said that he thought you could make do with two senior managers at that level, and you are still proposing to maintain 12.

Mark Thompson: If you look at the map of England, there are 40 local radio stations and multiple regional television operations that should get the leadership and the management that they need. We are also talking about thousands of staff here. The heads of regional and local programmes are not just managerial figures; they are also editorial and creative leaders for these parts of the BBC. Of course, as we go forward, we have said we have a long-term ambition to take the BBC from an historical, complex hierarchy-it is already much, much smaller than it was-to get to a point where the BBC has around 1% of senior leaders. I don’t want to single HRLPs out; we are looking at the whole BBC to see whether there are further ways of flattening the organisational structure, and spending less of the licence fee on senior managers and spending every penny we can on our content.

Q28 Chair: We are going to come on to local radio shortly, but this is an area where there is a lot of feeling that still you are making cuts at programme level, and of journalists and staff working out in the regions, while the management do not appear to be bearing any brunt of these cuts.

Mark Thompson: I think we have probably dealt with the matter of HRLPs. You can’t look at the steps we have taken across senior management at the BBC as a whole, up to its most senior levels, including the executive board, and not look at very significant reductions. We have made very significant reductions in numbers across the senior management population.

The thing I would want to say about local radio is this: the paradox, which will be familiar to members of the Committee, is that although I have said we are doing everything we can to protect the budgets of, let’s say, local radio at a much lower percentage saving than much of the rest of the BBC, the character of local radio-the high fixed costs, notably in property and technology-means that it is true that the percentage, when you come to the addressable costs, is higher and has a significant impact on employment. One of the debates, and one of the reasons why not just the Trust but I am listening very closely to the public consultation on this, is that I would certainly accept that the proposals do mean significant staff reductions in local radio, even though the headline number is a bit lower than elsewhere.

Chair: We are going to come on to local radio quite shortly, but before we do, I want to finish the more general areas of savings.

Q29 Damian Collins: Mr Thompson, I just want to pick up on a line of questioning from the Chairman. If your priority is to try to protect the budget for original programming, why has the proportion of the revenue that you spend on original programming fallen? I think it has fallen 4% from 2004 to today-from 64% to 60%.

Zarin Patel: I don’t know the exact trajectory of that, but over the last six years we have been taking a proportion of our spend out of overheads and into programming. Over the last 10 years, overheads used to be 24% of the licence fee; they are now under 12%. Under Delivering Quality First, we have another 25% reduction in overheads to under 10%. Steadily over time, we have got leaner, higher-quality support and fewer overheads. I can let you have a note, but I don’t know about that particular time period.

Q30 Damian Collins: Just to help, I can give you the figures that Ofcom produced, which show that in 2002, 64% of BBC revenue was spent on programming. That went down to 62% in 2003 and 2004, 61% in 2005, 58% in 2006, 58% in 2007, 58% in 2008, and 57% in 2009. It was back up to 60% in 2010, but the trajectory was downwards. I understand that in cash terms, as the Director General said earlier, you had to take some money out of programming as part of your savings, but the proportion that you are spending on programming is declining, relative to your revenue.

Mark Thompson: But it is worth saying that that is an extraordinarily narrow definition of programme spend. It doesn’t include paying any artists or actors, for example; it doesn’t include any repeat fees or rights fees. In terms of what it actually costs to make original television, the actual costs are far, far higher than that.

Zarin Patel: We will let you have the note we sent to Ofcom to correct their figures as well.

Mark Thompson: That is literally a production cost without artist fees, without repeat fees, without rights fees. The true cost of actually making television and radio is much higher than those Ofcom numbers suggest-much higher.

Q31 Damian Collins: How much higher?

Mark Thompson: We are talking about numbers that are in the 80-percentile range for what we believe are the associated costs. We would say, furthermore, that it is not just making programmes; it is also delivering to the public. There is no point in making programmes if you can’t show them. The cost of the BBC services-that is, of transmission, of the continuity announcers, of the trails and the whole packaging and presentation of our TV channels-is an inevitable and necessary cost of delivering the services. What that is a model of is literally how much money is spent on production if you take all those other cost lines down. To be honest, I do not think it is helpful guidance at all.

Our intention is to take current total spend on content, which is in the high 80-percentile range, over the 90-percentile range, and to get the non-content costs of the BBC below the 10 percentile range.

Damian Collins: What are the savings that are being highlighted by Ofcom, in the figures that they have produced? Looking at Ofcom’s figures, where are the savings coming from? Are they efficiency savings in programme making and programme commissioning, or are they just cuts?

Zarin Patel: No, they are not cuts. The productivity savings that I talked about earlier-2.75% per year for four years-come from two areas. The first is another slimming-down of overheads across the BBC, reducing overheads to less than 10% of the licence fee. Then there are production areas; for example, going digital in television production is responsible for a huge amount of savings. Moving to Salford, where we have a really modern, joined-up production system, and where we are trying to create the BBC of tomorrow, is responsible for a large number of savings, as will be our move to Broadcasting House; the whole of global news, journalism and television will be in one building. All of those lead to different ways of making content and cheaper ways of making the same quality content.

Mark Thompson: If you take Salford, we now have a position where we are building a single studio with a complete tapeless operation around the studio- a single control room. Breakfast news and North West Tonight come out at different times of the day from the same studio, using exactly the same equipment and technology. Rather than having two operations, you go as far as you can towards having a single operation. The tapeless approach that we are taking means that instead of having dispatch riders running around the country with VHSs from the archives, people will be able to call up anything that the BBC has made and include it in their programme. There are lots of practical ways in which the way we make content and distribute it is going to become easier and cheaper. That is why we can sign up to the next tranche, as it were, of efficiencies believing that we can achieve the efficiencies, and that the programmes we make at the end of the process will be at least as good as those that we make going in.

Q32 Damian Collins: If you could write setting out the difference between your figures and what Ofcom presented, I would be very grateful for that. On efficiency, I wanted to pick up on something else. In terms of the number of staff reductions at the BBC, people have talked about 2,000 jobs going; in Delivering Quality First it says 2,000 posts. How many people are physically going to be leaving the organisation?

Mark Thompson: Delivering Quality First is not a kind of Soviet five-year plan; it depends on choices made by commissioners as to whether, for example, to commission an in-house programme or an indie programme. It would be wrong to give you exact numbers. On the total number of net posts at the end of the process, 2,000 is our best estimate of the number of posts that will disappear. It means that you would expect the actual headcount of the BBC to fall by a similar number between now and the end of 2016-that is, by around 2,000.

Q33 Jim Sheridan: Will that include Clarkson? No?

Mark Thompson: I think I have already addressed that topic.

Q34 Damian Collins: So you think 2,000 people will leave the organisation as a result?

Mark Thompson: Between now and the end of 2016.

Lord Patten: That is with the proposals that are on the table at the moment, which may of course be changed.

Q35 Damian Collins: In Delivering Quality First, you talk about redeployment as being one of the options for staff.

Mark Thompson: The figure that I am giving is a net figure. What will happen over the period is that there will be efficiencies and some scope reduction, some of which will mean that we no longer need some of our colleagues. Those posts will close. There will be some reinvestment, which might lead to some new jobs; for example, we are putting money into political reporting from our local radio stations. We think we want to cover local politics and national politics from a local perspective more from local radio, so money is going back into local radio to pay for that, and there will be some new jobs created. We always try-because it is cheaper and fairer to our colleagues-where we can, to redeploy and retrain; we like to do that. The 2,000 number is a kind of net number.

Q36 Damian Collins: That includes redeployment, so at the end of the process, you expect there to be 2,000 fewer people on the payroll than there are now.

Mark Thompson: Yes.

Q37 Damian Collins: Just to be clear, because there has been some speculation about this, are you including in that net figure people who might come back and work as freelancers or contractors?

Zarin Patel: Absolutely, so it is a net figure. It is worth realising that 60% of the BBC’s spend is outside the BBC. Therefore, as Mark said, that jobs picture is very complicated and will fall across the sector, rather than necessarily just purely within the BBC. It includes redeployment, as well as freelancers and contractors.

Q38 Damian Collins: I want to ask one final question on efficiencies. We have touched slightly on local radio, and I know colleagues want to cover that in more detail later on, but in Delivering Quality First, you want to create a £145 million investment pot to spend by 2016-17. If you reduce that pot by just 10% you would not need to make any cuts in local radio. Is that something you have considered?

Mark Thompson: I think Lord Patten will want to talk about this as well. The whole point is that the judgment call about precisely how much you need to spend to improve quality-for example, to improve political reporting on local radio, and also to make sure that you can respond to changes in audience taste and to new digital platforms-versus how far you squeeze your existing programmes is at the heart of the debate. Our proposals are proposals; that is what we think the right judgment is, but that is absolutely for the Trust to determine once they have listened not just to us but to others and to the public.

Lord Patten: I would like to add a point I touched on earlier: if-a Spartan "if"-there were to be changes in the proposals that are out for consultation, for example on local radio, that would affect the job count figure, and the number of jobs lost might be less unless you made cuts elsewhere in order to pay for restoring what was being done in local radio.

Q39 Damian Collins: On a different subject, Lord Patten, do you think that it is reasonable for the chief executive of BBC Worldwide to be earning the best part of £900,000 a year in his total remuneration package?

Lord Patten: He is in a curious position, because he is responsible for the commercial arm of the BBC, and while you know my views about senior salaries in the public sector institutions of the BBC, to slightly caricature the distinction, in Worldwide, salaries have to take greater account of competitive salaries elsewhere. It is particularly relevant in the United States, given our huge exposure and success in the United States. I am a bit more concerned about how much money Worldwide makes for the BBC, rather than individual salaries, but certainly his salary and other people’s salaries are a matter that we will need to keep an eye on.

Q40 Damian Collins: I don’t have a problem with what BBC Worldwide does. They do a good job, and in some ways I like to see the scope of their commercial activities increasing, but given that a lot of his package is based on performance-related targets, and given that the operating profit for Worldwide was down £121 million on the previous year, do you think he hit his targets? Do you think that was a fair level of compensation?

Lord Patten: I don’t have to hand exactly what targets he is required to hit in order to get extra remuneration for performance.

Mark Thompson: I won’t go into it in detail, but the overall performance of Worldwide this year, in quite tough trading conditions, given the global economy, is very good. The broader story of Worldwide-I think this is a very good year and presumably we will talk about it; I think all the targets were hit-is of a commercial arm that, under John’s leadership, has pretty much doubled its turnover, and where profitability is four times what it was when he took over. The point about performance-related pay is that John’s salary has been what it is because performance has been so exceptional over many years.

Zarin Patel: The Remuneration Committee of Worldwide looks at the underlying profitability of Worldwide, because we are trying to make sure that we have long-term, sustainable profit growth to underpin the dividends that have come back to the BBC public service. On that line, as you will see in the annual report, the underlying growth has been 10%, and that was in excess of the budgets and the targets that we set for them. One of the things that the Remuneration Committee do with Worldwide every year is raise the bar on performance, so you have to beat last year’s performance plus 5% before you are eligible for the bonus. The combination, which is roughly 57% variable pay, 43% base pay, we think is the right mix to incentivise the management team. The other important point is to incentivise them over the long term-over a three or five-year period. It is not shooting the lights out in any one year, but sustained long-term performance improvement.

Q41 Damian Collins: I know you went through this in some detail with the Public Accounts Committee, and I do not want to go over all that ground, but-this is for Zarin Patel-do you not think it is fair to say that if you take into account his salary, his bonus, his remuneration for the last accounting year, plus the contribution to his pension fund, that he is on an annual package that is in excess of £1 million a year?

Zarin Patel: His base pay, at £440,000, has not shifted since 2009 and is below median for a scale-

Damian Collins: I am not particularly interested in his base pay; I am interested in what his package is worth a year. I do not want to go over the ground you have been through, but we know that his remuneration is worth £898,000.

Zarin Patel: In the last year.

Q42 Damian Collins: We know that. You have the contribution to his pension fund on top of that, plus his non-executive job at Burberry, which is £65,000 a year, which he does in company time. His package is worth more than £1 million a year, isn’t it? That is a yes. I just say that because when the Director General was asked in the Public Accounts Committee, he said no, so I just wanted to confirm that for the record.

Zarin Patel: No. To be really clear-you should check Hansard-I said that for the six months that he was on the executive board of the BBC last year, he was paid £348,000, as published in our annual report.

Q43 Damian Collins: Yes, but I was not referring to that comment. The Director General was asked by Stephen Barclay whether there was a BBC executive whose package was worth more than £1 million a year. He said no, and you have just said yes. That is what it says in Hansard.

Mark Thompson: Well, like for like. To be honest, we didn’t, in my conversation with Mr Barclay, go into such detail. For example, I don’t believe that the remuneration that John Smith gets from Burberry is part of his BBC package. You used it to get over £1 million.

Damian Collins: No, I was saying if you add the contribution to his pension fund, his package is worth more than £1 million a year.

Mark Thompson: Depending on how it is defined.

Zarin Patel: And on how you count it.

Damian Collins: You said yes a minute ago. I don’t want need to keep going over it; you said yes.

Zarin Patel: I did, but the real issue is: are we getting value for money from that package, and are we improving the performance of Worldwide in a sustainable way that has returned £182 million to the BBC to make programmes that we would not otherwise have been able to make?

Q44 Damian Collins: I understand that, but what I don’t understand is that if that is fair and above board-if you think that is what he is worth, and what he should be paid-be up-front and say that. Don’t dance around the figures to try and hide something that, to me, it sounds like you are embarrassed about.

Zarin Patel: No, we are not embarrassed because all of these figures are in the public domain, both in our annual report and the BBC Worldwide annual report. They are very clearly disclosed, with all the bases for their calculation set out.

Mark Thompson: With a headline number for John Smith’s package of £898,000, not over £1 million.

Lord Patten: It is a very legitimate subject for public debate and scrutiny. Can I just add one point? We are discussing with the executive at the moment the precise governance arrangements for Worldwide, and the strategy that it should pursue. I want it to be as effective, in a sustainable way, as possible, and if a consequence of that is having to answer, occasionally, awkward questions about how much people are remunerated, then so be it. I totally agree with you that we should be open about these things.

Q45 Damian Collins: I have a question about pension funds. I think you said that you need to find £100 million a year to top up the BBC pension fund. Is that something you are budgeting for on a year-on-year basis through this benefit review period?

Zarin Patel: In our forward projections in 2005, we had been thinking that at some stage there would be a deficit, and therefore we have been regularly saving for a period of time. Combined with savings, asset selling worldwide of Animal Planet, and doing better on our productivity savings, we have managed to find £100 million per annum.

Q46 Damian Collins: You are happy that that is accounted for?

Zarin Patel: Yes, that is settled.

Q47 Jim Sheridan: Chair, can I make a very brief comment? We have just spoken about 2,000 people losing their jobs in the BBC through no fault of their own, yet when I see chief executives like yourself jumping to the defence of your fellow chief executives, who are earning in excess of £1 million-

Mark Thompson: If I may say so, what happens to the profits made by Worldwide is that they go straight into public service programmes. Worldwide also gets many, many tens of millions of pounds beyond that in investment for BBC programmes. The effect of Worldwide is to increase employment in the public service side of the BBC, not decrease it. One of the reasons why we incentivise the people who run Worldwide is so that we get the maximum benefit, which goes to the public-into better programmes on the air. For staff, it goes into more secure jobs.

Q48 Damian Collins: I have a couple of final questions regarding remuneration for the talent. First, with regard to the programming that has been relocated to Salford, there have been numerous reports in newspapers about BBC talent saying that they are not going to relocate themselves. There was a piece in the Observer in which Victoria Derbyshire said that her family were based in London, and she didn’t want to move the children out of school, which is a perfectly reasonable position to take. For BBC employees in that position, are their travel costs to Salford something that they can claim?

Zarin Patel: Yes. We have three relocation packages, if you like: a straightforward move, where there is a relocation package to sell your house, wherever you live, and move to Salford; a remote location allowance that allows you to rent for a period of two years, but that is all you get; and then just your expenses as you travel up. Each one of those packages has been designed, first of all, to be in line with HRMC taxable standards, but also to motivate people to move up there, because with 45% of people moving up there, business continuity was a really important issue for us.

Mark Thompson: Can I just say that having 45% of people choosing to move, by the way, is unusually high for a move? It is often portrayed as a very low figure; it is unusually high. We have had an additional more than 2,000 volunteers from the rest of the BBC volunteering to go, and if you listen to 5 Live, which is coming pretty much around the clock now from Salford, you will discover that all of the big stars that you would expect on 5 Live are still broadcasting; ditto on many of our other programmes.

Q49 Damian Collins: Indeed, and I wanted to ask some questions about the people who have not moved, rather than the ones who have. If I worked for Radio 5 Live and chose to commute every day to Salford to broadcast my programme, is that something that I could claim expenses for?

Zarin Patel: Probably not commute every day, to be fair. Weekly commuting is what some people are doing.

Q50 Damian Collins: But are some people doing more than that?

Zarin Patel: And some people more than that.

Q51 Damian Collins: As you can imagine, we are a group of people who take rather an active interest in exactly how expenses are calculated and processed, so you can understand why we are asking.

Zarin Patel: As you know, because we publish all our expenses, we have a pretty strict expenses policy.

Q52 Damian Collins: What is the limit? How many days a week can I commute to Salford from London if I work for the BBC?

Zarin Patel: I don’t have that information to hand. It will be different for different people.

Damian Collins: Can you write to us about it, please?

Mark Thompson: The test that we would apply is both business need and also common sense.

Damian Collins: That is understood. A member of the public was asking.

Lord Patten: No, it is a perfectly fair point. I have to say I have visited Salford, I think, three times now. What struck me is how smoothly the move has gone, how many people have gone-I think it is now 1,600 or 1,700 out of 2,300-and how happy those who have moved are at their quality of life, having moved out of London to the north-west-housing, education and generally a very high quality of living.

Q53 Damian Collins: Thank you all for that. When you write to us with regard to the frequency with which people can claim, obviously, under tax rules you can’t claim your commute as a business expense, so I would be interested to know about the frequency, and about the modes and class of travel. Can people fly? Do they have to get the train? Is it mileage for driving?

Zarin Patel: For Manchester, from a sustainability perspective, you can only take a train. Our systems don’t allow you to fly.

Q54 Damian Collins: Can you go first-class?

Zarin Patel: You cannot go first-class. It is all standard travel for everyone.

Q55 Damian Collins: If you could write to us about the frequency, I would be very interested in that.

Lord Patten: I use a senior railcard for travel.

Chair: Damian, are you coming to an end?

Q56 Damian Collins: Sorry, one last question, if I may. Has the BBC considered publishing the register of outside interests for employees? I think this could be particularly relevant for people who work on factual and news programming, who may have other commercial interests outside their work for the BBC.

Mark Thompson: We do publish a register of interests of senior managers-people who take decisions about a significant expenditure of the licence fee and so forth. We have, we believe, tight controls in place for monitoring and approving interests of other employees. We do not believe that there is a case for publishing the interests of all employees.

Q57 Damian Collins: If I was interviewed by a news journalist about, let’s say, organic farming-I do not have interests in organic farming-someone could look at the Register of Members’ Interests to see whether I have a commercial interest in that sector, but you can’t do the same for the person interviewing me.

Mark Thompson: By the way, the same would apply to me and to other senior editorial leaders of the organisation. We are an organisation with, as you know, a very large number of journalists, programme producers and other employees. We don’t believe that the balance of argument is in favour of universal publication, and the cost of developing such a disclosure would completely outweigh the public benefit.

Q58 Damian Collins: Is that something that could be reviewed by the Trust?

Lord Patten: It could be, but I must say that I think there is a difference between you being interviewed about organic farming, say, and the journalist asking the questions, because you are a legislator and can make policy. That is not true of the journalist. If the journalist is having to comply with editorial guidelines, which you have probably seen, and are pretty tough, and if his or her senior managers know when he is doing anything outside and can compare that with the editorial guidelines, I think that is a pretty good belt-and-braces system.

Damian Collins: Thank you.

Q59 Paul Farrelly: Just before we move on, Lord Patten, you will recognise that it is a matter of fact that there is a "chiefs and Indians" feeling among BBC staff, or perhaps a "generals and poor, bloody foot-soldiers" feeling. Given that, and given that that will not go away when cuts are being imposed, what sort of signal do you feel it gives for the BBC to pay its departing Deputy Director General compensation of £949,000?

Lord Patten: I don’t imagine that many of the infantry who would not be getting similar payments themselves, while admiring the career that the retiring Deputy Director General has had at the BBC and the extent to which he had exemplified some of the highest values of the BBC, would think that he was being under-remunerated, and they might well wish that they could have the same benefits, but the benefits he get reflect the years he has worked for the BBC and the jobs he has held. The important issue for us for the future, it seems to me, is to ensure that we make a reality of the proposals that I floated last summer for implementing the Hutton proposals on the multiples of senior pay and median pay, and we are on the way to do that. I hope that some other public sector organisations and others will follow where the BBC has made a lead.

Mark Thompson: I agree with all of that. The only thing I would add is that Mark Byford’s terms on departure from the BBC are absolutely standard, as regards notice and months of redundancy in terms of service, with one slight proviso, which is that the general limit on redundancy pay at the BBC is a cap of 24 months-that is, two years of pay. In common with other senior managers and directors, it is capped, in the case of the most senior people in the BBC, at 12 months, but in every other respect, it is calculated in exactly the same way as it would be done with anyone else whose post was closing and who was leaving the BBC.

Q60 Paul Farrelly: Just to be precise, we have Mark Byford, and we also have Sharon Baylay, who has stepped down and received a £392,000 pay-off. In the notes explaining each of the pay-offs for both of them, it says that on leaving the BBC, he or she will receive the "standard BBC redundancy terms". Could you tell us what the standard redundancy terms are?

Mark Thompson: Again, we can provide any amount of detail-

Zarin Patel: It is one month for each full year of service. For senior managers and the executive board, that is capped at 12 months.

Q61 Paul Farrelly: Which includes these two people?

Zarin Patel: It includes these two people. For general staff, the limit was 24 months, and under Delivering Quality First, we have announced our proposal to change that and make every member of staff have a 12-month cap. It is one month’s pay for every full, completed year of service, with an upper cap of 12 months.

Mark Thompson: That proposal is still subject to negotiation with our unions and so forth.

Q62 Steve Rotheram: Despite the overall reduction from £221 million in 2009-10 to £113 million in 2010-11, some talent costs are still rising, especially in the very high bands. Do you have a clear policy on talent remuneration?

Mark Thompson: I will ask Zarin to answer, but to be clear, top talent at the BBC as a whole is coming down, and I expect at the end of this year to report a further reduction. Talent costs across the BBC as a whole have come down a little bit, but at a point when inflation has been running rather high, the real-terms reduction in talent as a whole is, I think, fairly considerable. Although you are going to get variations, band by band, the policy is to try to control what the BBC spends on talent as a whole, and for the best-remunerated talent, to bring the total cost to the licence fee payer down. One of the reasons for the disclosure-you will see that we are disclosing in rather more detail in this report than in previous reports-the plan over time is, first, to control it and, secondly, to show the numbers to the public year after year, so they can see that we are controlling them.

Zarin Patel: I am looking at the table on page 244 of our annual report. You will see that talent earning above £500,000, which we have banded together, is reducing. It has reduced by 6% year on year, and we expect that to continue to reduce over the next few years.

Q63 Steve Rotheram: That is because the number of individuals who are receiving that band have increased.

Zarin Patel: There is an overall net decrease. I can’t talk about individual pay, but you don’t achieve a 6% decrease without pretty much everyone taking a decrease.

Q64 Steve Rotheram: But those at the bottom are taking the bigger hit, percentage wise.

Zarin Patel: I don’t believe they are, because if you look at the band, for those earning £50,000 or less, we have seen an increase, if you look at the per-head figures. Top talent has been reducing, which is in line with the target set for us by the BBC Trust. Overall talent spend is also increasing, but the average talent pay in the BBC is about £3,500. That is at a very low level for contributors. At that level, in line with inflation, there have been some increases, but those have been at the lower levels.

Q65 Steve Rotheram: Will everybody be equally affected by the proposals that you have outlined? For example, will talent take similar reductions in pay to those being imposed on the rest of the BBC work force?

Zarin Patel: Pretty much, I would have said.

Mark Thompson: The broad point, which is that we are trying to control pay across the BBC, including talent and top talent, is absolutely the case. There have been a number of occasions over the past 12 months when we have lost very notable presenters, partly because we were not prepared to meet offers that they received from other broadcasters. One of the things that we are seeing is a pattern of us losing some top talent from the BBC, and we are responding by bringing some new people forward into those places.

More generally, though, the approach that we take to pay at the BBC is to look at the different labour markets in which we are competing, and to see what is going on in those markets. To be honest, it varies not just between talent and general staff, but substantially inside talent. There are different competitive forces playing in different kinds of talent. The overall ambition, though-we have achieved it so far-is to bear down on the aggregate cost but also to keep flexible, so that you are getting the best possible line-up of talent you can for the public.

Lord Patten: One thing that we have to accept, and not be reluctant to accept, is that part of the BBC’s role historically has been to find talent, give talent an opportunity, and then very often to lose it to people who will pay more for it. That is in the business of being a public service broadcaster.

Q66 Dr Coffey: Can you confirm there will not a premium for talent when it comes to the Olympics commentators?

Zarin Patel: I am not aware of a premium at all.

Q67 Dr Coffey: There will not be a bidding war as regards different coverage of the Olympics?

Mark Thompson: Because we have the complete and exclusive rights to the Olympics, it would be different bits of the BBC competing against each other. We will try very hard to stop that happening. There are no rival broadcasters.

Q68 Dr Coffey: What I am trying to say is that I hope people are not saying, "Well, if you want me for the Olympics, you are going to have to pay 20% more".

Mark Thompson: No.

Dr Coffey: No? Okay, fine. Thanks.

Q69 Mr Watson: I should declare that I am vice-chair of the all-party parliamentary group on for the BBC, and I am due to receive a fee from a production company that is contracted with the BBC. May I ask about what safeguards you might be putting in place, or any concerns you have that the necessary drive to be more commercial in your exports could be allowing content producers, particularly in documentaries, to cut corners on standards and ethics?

Lord Patten: That is an issue that came up recently in relation to BBC World and some programmes that they broadcast. We produced a report on it in the Trust, and I think the executive-they will talk to you about this-have taken appropriate measures to ensure that that potential conflict of interest does not happen again. I have to say that I am very keen to see us find more ways worldwide of funding BBC World, because I think it does need and deserve greater investment, but we must do that in ways that do not distort coverage or raise questions about coverage. It is a very important line to hold, because part of the BBC’s credibility around the world is due to the fact that it is thought to tell things as they are.

Mark Thompson: The public service creative leaders-if we are talking about television, George Entwistle, the director of the whole television division, BBC Vision, and the controllers of the television channels-are the arbiters in the end of what they transmit. I believe that there is a very strong culture in the organisation, whereby the service that the British public pay for through the licence fee is the dog, and everything else is a very subservient tail attached to the dog. It is valuable to have partners. Our relationship with Discovery, for example, has put many tens of millions of pounds into high-quality, specialist, factual programmes for the BBC. Programmes such as Great Expectations, which I mentioned earlier, are made to a higher production value than otherwise would be possible because there are international partners co-producing them. You are absolutely right to point to the potential risk of commercial considerations and incentives undermining or clouding editorial decision-making for the public service.

One of the conversations that Chris and I-the Trust and the executive-are having now, but not because we think there are frankly flagrant examples, is about whether, going forward, there is an argument for even stronger public service governance over the editorial decision-making process, to make sure that we don’t fall into the trap.

Q70 Mr Watson: Could I specifically ask you about the role of FBC Media, which produced a series of documentaries that were commissioned by World News and are the subject of what I thought was a very comprehensive Trust report? Am I right in saying that this is a company that produced some documentaries about the palm oil industry in Malaysia, and that also had a $16 million contract with the Malaysian Government?

Lord Patten: It is precisely for those sorts of reasons that the Trust produced the report that it did, and I think that the Trust’s report has led to a greater awareness on the part of the executive of some of the dangers to which you are drawing attention.

Mark Thompson: It is worth saying that the company disputes some of the issues of the commercial relationships and so forth. However, I want to say that I wholly support the findings of the Trust, and that in a number of ways the decision to commission and broadcast these programmes-and indeed some other programmes on BBC World-was wrong; we should not have done it. We are now putting in place much tighter controls to make sure that we don’t have repetition of this kind of relationship. The public, not just in the UK but around the world, have every right to expect that the provenance of the programming you find on the BBC should be known and should be appropriate, so that even if the programmes themselves fully meet the BBC’s editorial guidelines, the reputation of the programmes and of the BBC is not questioned because of the provenance or the other interests of the company making them.

Q71 Mr Watson: I was taken by the line in the report that says that in an early iteration of the FBC Media website, it used the phrase, "FBC regularly creates one off productions as well as series of documentaries that investigate our clients’ issues and subtly position them in a positive space within their target markets". Presumably that set alarm bells ringing at an editorial level in the BBC, did it?

Lord Patten: Absolutely, yes. Can I say why it is really important to get this sort of issue right? We are under pressure, understandably, to maximise the private income that we can generate for our programming on international channels. We have to be very careful that, in achieving that objective, we don’t cut any corners, or risk any suggestion of conflict of interest.

Mark Thompson: It is better to have a blank screen than to broadcast a programme that in any way undermines our reputation for independence and accuracy.

Q72 Mr Watson: I am sorry to labour this, but am I right that some of the documentaries, which were half-hour documentaries, were purchased for £1 per documentary?

Mark Thompson: Yes.

Q73 Mr Watson: I am a layman on this, but wouldn’t it be completely obvious to anyone who commissioned a documentary that the arithmetic of that just does not work?

Mark Thompson: It is fair to say that, without in any way resiling from the conclusions we have reached, and the new steps that we are putting in place, there are sometimes high-quality pieces of programming that are made by international NGOs and foundations that are offered not just to the BBC, but to other broadcasters, at very low or nominal cost, that may be in themselves entirely appropriate. One of the things that we have said is that because of the risk that such a programme will be offered for reasons other than the commercial transaction, which relates to a very small amount of money, such programmes should not be commissioned in the same way in the future. So I absolutely accept, first, that that happened and, secondly, that in the future it should not happen.

Q74 Mr Watson: My general point is-and Government and political parties are not immune to this; we have had the "lobbyists commissioned by foreign powers" story this week-that it seems that some tools of foreign policy are to reach their target audience though cultural content, or through political connections that are informal and uncodified. What I am really looking for is an acknowledgement that you now recognise that that is a new tool of foreign policy, and that you have put safeguards in place.

Lord Patten: Completely, and the sort of anxieties and surprise that you have just enunciated I would entirely reflect myself. It has to be said that it does not just affect commercial organisations; it affects some others as well.

Q75 Philip Davies: Lord Patten, when you came before us last time I asked you whether you thought that the BBC was biased in its reporting in any shape or form, and you gave a customary direct answer, and said no. I am working on the basis that that is still your view. How long has that been your view about the BBC’s reporting?

Lord Patten: It has always been my view, but I have to say that sometimes I think the BBC makes mistakes. I think it has made mistakes occasionally in the past, and I think it occasionally makes mistakes today, and when it does so, it should recognise it and apologise swiftly.

Q76 Philip Davies: It has not always been your view totally, though, has it? As I am sure you know, I did an FOI request to ask for the correspondence that you sent to the BBC when you were Conservative party chairman. In those letters, you referred to some of the coverage of the BBC as being wholly biased, and said that you had been concerned for some time about the way that the BBC reported the Government’s side of the case on the health service. That does not strike me as somebody who has the odd one-off concern about the BBC. It is somebody who was concerned for some time about the way that the BBC covered a particular aspect of Government policy.

Lord Patten: First of all, I think if you go on to read the correspondence, you will see that I got surprisingly fulsome recognition by the then Director General, Michael Checkland, who thought I had raised a fair point and apologised. That was an example of the BBC responding generously to the very sensible criticisms raised by the then chairman of the Conservative party.

Q77 Philip Davies: That is not quite my reading; my reading was that when the BBC failed to apologise, you wrote a follow-up letter, saying, "What I find astonishing is that the BBC, when confronted with a specific and merited complaint like this, cannot bring itself to apologise".

Lord Patten: Do you want to go on and read Michael Checkland’s response?

Philip Davies: I have it all here, absolutely.

Lord Patten: So you would accept that he apologised?

Q78 Philip Davies: I think that eventually there was some kind of acknowledgement; I don’t know if I would call it an apology. Then, of course, you went on to send a legal letter threatening to sue the BBC about their coverage about you.

Lord Patten: That was an argument I had during the election campaign on something that Peter Hain said on Newsnight. Then, do you know what happened? The election was over, the Conservative party won, and calm returned, and I went away.

Q79 Philip Davies: Mr Thompson, can I ask you if you have any idea at all, from any recent opinion polls-there is one out today in The Sun, carried out by YouGov-what proportion of people believe that Britain should leave the European Union?

Mark Thompson: As we know, that is a fast-moving story.

Q80 Philip Davies: As a ballpark figure, what sort of percentage of the population think that Britain should leave the EU?

Mark Thompson: Let us see where we are when we have seen a number of polls after the events of last week. Before, though, clearly, it has been a significant proportion.

Philip Davies: The Daily Politics did a poll about a year ago. I think it was about 50%.

Mark Thompson: There are many polls showing around 50%.

Q81 Philip Davies: How much of the coverage of Europe that the BBC does should include contributors who believe that Britain should withdraw from the European Union?

Mark Thompson: I think that, in common with any other public policy debate and political debate in this country, there should be a significant representation.

Q82 Philip Davies: What if I were to say that between September and December 2010, according to NewsWatch, which is headed up by somebody who worked for the BBC for seven years, the percentage of withdrawalists, so to speak, on the BBC was 1.9%? Between March and June 2011 it was 0.5%, and between October and December 2011 it was 1.6%. Do you think those figures are acceptable?

Mark Thompson: I don’t know if you have ever had a chance to watch or listen to what we do, but if you had been listening to or watching the BBC in recent days, you could not have helped but see extraordinarily rich coverage-in my view, good coverage-of the story. That included any number of people with very strong views-and I know there are many forms of Euroscepticism-and absolutely included those who believe that. There are many people who have been on the air when this has become a very big story, as it has in recent weeks and months-MPs and many others as well-who have been making the case as to why Britain should either step back from or absolutely withdraw from the European Union. I believe that has been extensive. Turn on the Today programme, turn on Newsnight; you can find these voices all the time on the BBC.

Q83 Philip Davies: So you think those figures are acceptable-1.6%?

Mark Thompson: I don’t recognise them, and I don’t believe-

Lord Patten: I think they are figures, aren’t they, which have been much used by the former leader of UKIP and others? Am I right?

Philip Davies: I don’t know if they have been used by the former leader of UKIP or not; I have no idea. I am just reporting the research from NewsWatch.

Mark Thompson: I just don’t believe them. I look at the-

Philip Davies: So what figure have you got?

Mark Thompson: Again, we can have a look but, as I say, if you simply look at the coverage of the BBC over the last 10 days, there has been extensive and very broad debate. By the way, the other significant thing about the BBC is the extent to which in programmes like Question Time and Any Questions?, and indeed in phone-ins on local radio and on 5 Live around the country, the public are frequently on air at the BBC. For the reasons that you give, there is a lot of scepticism, again of different shades of opinion, among the public. You can hear them morning, noon and night on the BBC, as you should.

Lord Patten: Since you are keen on opinion polls, we could share with you a mass of figures from Ipsos MORI and other polls about how trusted the BBC is in comparison with any other news organisation. Since we know that about two-thirds of the public-three-quarters, maybe-consume most of their news from the BBC and the figures are, as you say, about people’s attitudes to Europe, presumably people are making up their own minds on the basis of objective reporting by the BBC.

Q84 Philip Davies: It sounds as if you are making the case that your job is superfluous to requirements, Lord Patten, if the BBC’s content is so hunky-dory.

Lord Patten: My job, if I may say so, is to ensure that the BBC remains fair and balanced-which most people seem to think it is-in its reporting of what happens in the world.

Q85 Philip Davies: In answer to Tom Watson, you were saying how important a lack of conflicts of interest was in reporting. You get a pension from the European Union as being a Commissioner.

Lord Patten: I do. I get a pension from this House as well.

Q86 Philip Davies: Is it true that your pension from the European Commission is forfeitable?

Lord Patten: No.

Philip Davies: It is not true. So when-

Lord Patten: As we made clear when Lord Pearson of Rannoch made that charge in the House of Lords in his own balanced, impartial, fair and accurate way.

Q87 Philip Davies: Funnily enough, Lord Patten, it seems to me that you are also disputing the answer that was given by a Government Minister in the House of Lords when it was raised by Lord Pearson. The answer from Baroness Symons in the previous Parliament, who was a Government Minister-a Labour Minister-was: "Former members of the European Commission and their officials are bound to respect certain obligations arising from the office that they held. In the event of any breach of these obligations, the EU institutions are able to rule…that that person should be liable to a reduction or withdrawal of pension rights." Was that wrong or was that right?

Lord Patten: That would be like, after being a Commissioner, within a matter of days taking a post where there was a clear conflict of interest. Of course there are some things that you can’t do, but expressing vigorous views about the European Union and what it should be doing does not disqualify anybody from continuing to get a pension. I don’t imagine that you have read what I have occasionally written about the European Commission and the European Union. Had you done so, you would have known that it wasn’t-what word can I use-lickspittle in its Euro fanaticism. I don’t use that sort of German language.

Q88 Philip Davies: Mr Thompson, you have been saying how proud you are of the BBC’s coverage in recent days over the EU. Did you see the transcript of the interview of Peter Oborne on the Today programme recently?

Mark Thompson: A few weeks ago? No, but I heard-was it Newsnight or the Today programme?

Philip Davies: The Today programme.

Mark Thompson: Which day was that?

Philip Davies: Would you like me to send you a copy of the transcript?

Mark Thompson: Peter has been on the BBC several times; I wondered which one you were referring to.

Philip Davies: It is about his book, Guilty Men. The BBC was one of them.

Mark Thompson: What is interesting, if I may say so, is the BBC’s response to something like that. We have him on the BBC to discuss his ideas and hear his evidence.

Lord Patten: Including on Newsnight. I watched him on Newsnight.

Q89 Philip Davies: Indeed, and repeatedly deriding him and talking over him. If I send you the transcript of that interview, what I would like is your view about it. One thing that I find, and one of my disputes, is that I often send things to you when I have been concerned about coverage by the BBC, and all I ever get in response is the editor of the programme’s response. You are the editor-in-chief. Can we have a new regime, where if I ask you your opinion of something, we get your opinion of it, rather than the-

Mark Thompson: I would be very happy to sit down with you and watch it and listen to it together. We can have a nice cup of tea and listen, and then have a discussion.

Q90 Philip Davies: I will look forward to that. How about the fact that, in the aftermath of the recent European summit, the BBC started out by saying that Britain had failed to sign the treaty to resolve the eurozone crisis, even though I don’t think the treaty was ever going to resolve the eurozone crisis? That is how the BBC presented it.

Mark Thompson: That looks like a Mail on Sunday print-out rather than a BBC one.

Q91 Philip Davies: It is not a BBC one; I am reporting what the BBC said in their reporting of it. You are happy that that accurately reflected the situation?

Mark Thompson: What does the Mail say was said?

Philip Davies: That you started off by saying that Britain had failed to sign the treaty to resolve the eurozone crisis. That was the way that you couched the report on what happened last week.

Mark Thompson: Where did we say that?

Philip Davies: On the BBC News channel.

Mark Thompson: On the News Channel?

Philip Davies: Sorry, on the one o’clock news.

Mark Thompson: Who said that? Was it a presenter, was it a reporter, was it-

Philip Davies: That was the presenter reading the script that was presumably given to them.

Mark Thompson: So this is the suggestion in the one o’clock news last Friday?

Q92 Philip Davies: Yes. Are you happy that that is the right way of-

Mark Thompson: To be honest, it is one sentence taken out of context. First, I do not know if it is true-whether that is what we actually said-and, secondly, I don’t know the context. The point is that you can’t pluck a single line out-I don’t even know whether that is a complete sentence-and then judge whether or not the coverage of the story on the one o’clock news last Friday was objective or not. Again, it is another cup of tea, I think.

Philip Davies: Better get a pot going. It seems as if we might have a lot to discuss.

Lord Patten: Can I add something? I listened-because I was interested in what had happened, like the rest of us-to the coverage of Thursday night’s negotiations on the BBC on Friday morning. They seemed to me-for example, in particular Nick Robinson-to be exemplary in their balance and accuracy. I then turned on Sky and listened to a political editor whom I hugely admire, Adam Boulton, who I think is one of the best journalists in the business. I heard him saying that he had been going to European summits for 30 years and he had never known Britain so isolated. I imagine that there are lots of people with the views you share who were banging on Jeremy Darroch’s door and saying how disgraceful it was that that was the report put out on Sky.

This is a very, very difficult story for any news organisation to cover. It is particularly difficult for us both to reflect the impact domestically, if there is one, and what is actually happening in Europe to the euro-if it is being saved or not. It is a very difficult balance to strike, but whatever happens, it sure as hell will have an awful lot of impact on this country.

Q93 Philip Davies: Finally, just going back to a point that Damian raised, you were saying in answer to Tom Watson how important the provenance of programmes was, and how important it is not just that they are fair, but that everyone can see that they are fair. That comes back to the point that Damian raised about the register of interests. I am curious; does the BBC not collect a register of interests of its journalists?

Mark Thompson: We have protocols-this is in the editorial guideline, section 15-about procedures that journalists need to follow if they want to join a body or do something that might be considered an interest, and the permissions that they need to seek. They can’t do it unless they get permission; they have to seek permission. Then the responsibility is with editors for ensuring that if they do that, there is an absolute control to make sure that there is no suggestion that that influences the way that they cover stories on the BBC.

Q94 Philip Davies: Why can’t all that be published? It does not cost anything to publish what has already been done.

Mark Thompson: I am just referring to my earlier answer to Mr Collins. As I said to Mr Collins, although we accept it in the context of senior editorial and managerial leaders at the BBC, we do not accept that the balance of advantage is in favour of publication for every other employee of the BBC.

Q95 Philip Davies: So when Roger Harrabin, as a BBC journalist, makes reports about climate change, having accepted £15,000 in grants from the university at the heart of the climate change scandal-the University of East Anglia’s Tyndall Centre, does he not think-

Lord Patten: Do you mean received himself?

Philip Davies: He received it.

Lord Patten: Received it for what? Are you saying he received it himself? It is an important charge if you are saying-

Philip Davies: . No, he is not receiving it into his own bank account, but h e received it.

Lord Patten: For what?

Philip Davies: For his work, so does he not think that when he-

Lord Patten: So he helped to organise a conference that was attended by the Department of the environment, among others?

Philip Davies: Yes, absolutely. So when he does a report , does he not think that that should be declared?

Mark Thompson: He didn’t receive the money.

Q96 Philip Davies: It was received for the conference. He got the money out of the University of East Anglia . It did not go into his bank account, but if somebody gets a grant from somebody for something that they are working on , do the people not expect that that should be declared?

Lord Patten: The conference involved a number of participants, including the BBC, the Department of the environment, and a lot of other organisations.

Q97 Philip Davies: So why is the BBC so appalled at the idea that it should be declared? What has it got to hide? Why should it not be in the public domain?

Lord Patten: It is in the public domain.

Philip Davies: No, it wasn’t in the public domain. It wasn’t on a register of interests declared by the BBC.

Mark Thompson: To be honest, I don’t believe that, in this case, there is an interest involved. I don’t believe he received any money.

Philip Davies: Not him personally , but it was for his-

Chair: Order, order.

Lord Patten: What is the conflict of interest? He is the environment correspondent of the BBC.

Q98 Philip Davies: So you think that if somebody asks an organisation for some money for a conference that they are orga nising , and the organisation give s it to them , that does not need to be declared?

Mark Thompson: Roger Harrabin has not received or benefited from funds from the Tyndall Centre, or any other organisation that contributed to Real World seminars, as was wrongly and defamatorily suggested at the weekend. What Roger Harrabin did-I think it was an association that ended in 2005-was that he was a member of a very, very broad advisory board for the Tyndall Centre, which was one of the organisations that sponsored these conferences. Other organisations included the Department for the environment and BG, a large energy group. It was a very broad spread of people. On the Tyndall Centre itself, this is years before any questions were asked about any aspect of the University of East Anglia and climate change. The idea that people in the BBC should sometimes take part in general advisory boards and academic advisory boards is not unknown. There is simply no case to answer here.

Q99 Philip Davies: Nobody is saying anything about that ; it is about declaring it. If an MP organised a conference that was sponsored by a big commercial organisation, would the BBC say that that MP did not have to declare that they had received that money for that conference, even though they had not benefited themselves financially?

Mark Thompson: I am slightly going in circles here, but we say that public officers of the BBC are in a very similar position to MPs and that, therefore, the register of interests for myself and for other senior managers in the BBC should be published. We don’t think, for the other 24,000 people who work for the BBC, there is a strong public interest case for doing so.

Chair: I think we should move on.

Q100 Dr Coffey: I really enjoyed watching the Frozen Planet series, yet I was one of the people who did believe that the extraordinary coverage of the polar bears was genuine, as opposed to being filmed elsewhere. I understand the reason why the BBC may have chosen to do that, but will you be arranging for the commentary to be redone, so that people are clear that that was not being filmed out in the frozen planet, but was actually being filmed in a German zoo?

Mark Thompson: No.

Dr Coffey: I am just thinking of your six BBC things: trust, impartiality, integrity-

Lord Patten: Like you, Dr Coffey, I was a huge admirer of the programmes. Look, it seems to me overwhelmingly likely that some of the journalists who got this story got it because from 7 November it has been on the website of the programme that this was how that scene was shot. The alternative would have been dead bears or dead people with cameras. Secondly, this has been an issue that we have discussed over a long period, including with members of this Committee. We have run seminars on how you should handle these really difficult issues in natural history programmes, and we have not departed, in this instance, from the ways of handling the issue that we have discussed on training programmes, I think with at least two members of the Committee, one of whom, to his eternal credit, thought that we should be more explicit about the way that programmes are made. You have raised an important issue, Dr Coffey. It has to be said that out of almost 8 million people who watched the programme, 32 raised an objection.

Chair: That is because they had not looked at the website.

Lord Patten: That they raised the objection?

Chair: The people who raised the objection had clearly looked at the website, but the 8 million who watched the programme did not look at the website.

Mark Thompson: Let’s be quite clear: the reason why the story appeared in the Mail is because we disclosed it all on the website. Some years ago we asked the public the specific question of whether-this is audience research done three or four years ago-they would prefer it if there were on-air mentions, either captions or labels, and the overwhelming response from the public was that they did not want us to do that. They were quite happy with the idea of us simply explaining where we can, after the programme-and always on the website-how we do it, so those who want to know how it is made can find out.

It is really important to say that we thought very hard about this. We talked to the public and sought their advice about it. One of the reasons why not 32,000 but 32 people, so far, among the public have expressed concern about this is because they understand that the commentary is written extremely carefully to be generic where it needs to be, and not to give the impression of falsity in the way it is shot. All I would say is that there is a leader in today’s Mirror that is quite interesting: "The national broadcaster's quick on the draw when it comes to pointing fingers at others. Perhaps when it comes to their own editorial standards and ethics a little more action and a little less pontificating would be handy." I do rather wonder whether this is really about polar bears or about Lord Leveson and other matters.

Q101 Dr Coffey: I don’t talk on behalf of the Mirror, Mr Thompson. I feel that it was a lovely scene, but if that extra 20 seconds, or whatever it was, of footage hadn’t been there, I don’t think the documentary would have been any less fantastic. I am wondering why the artificial nature of that scene was added to the programme but not mentioned. For me, I will probably never look at a BBC nature programme in the same way: "Was it trick cameras?"

Mark Thompson: We have done entire series of programmes about how we capture natural history, and we have shown in detail how quite often close-ups of animal behaviour and of animals are shot in laboratories or in other conditions, not least because, in the nicest possible way-and I think that we did want to see the polar bear mother and her cubs-the idea of actually going down there with a camera is, according to David and others, a highly ill-advised venture. This is a very pure piece of natural history. We know, again, from talking to the public that the public want to see as much as they can, and one of the reasons why the popularity and the quality ratings for natural history have gone up in recent years, really since Planet Earth, has been that we are showing more and more of nature, and every part of the behaviour-

Dr Coffey: But that isn’t nature.

Mark Thompson: The circumstance under the snow-

Dr Coffey: The rest of it was fantastic. It just spoiled it.

Mark Thompson: All I would say is that for the overwhelming majority of the public, there is no suggestion at all that it was spoilt for them and, moreover, when we asked them the question about whether they want to be reminded constantly of how the programme is made as it goes along, they said that they would prefer that we didn’t. You can say, "Ignore the public", but that is not our job.

Chair: We will move on.

Q102 Paul Farrelly: I want to move on to local radio, but I had not heard about this polar bear story, and I certainly shall not be asking David Attenborough to resign over it. I want to make my position on this important story really clear.

Chair: If you hadn’t heard about it, you wouldn’t be in a position to.

Paul Farrelly: It has been a fabulous discussion. The consultation on local radio closes just before Christmas. It has been going on for pretty much three months. Clearly the BBC has, as always, been subjected to some very vociferous representations. Previously , the BBC has changed its mind over certain radio stations. Without pre-empting next year, are there any early indications that a change of mind on local radio might be possible?

Lord Patten: Without pre-empting final decisions taken by the Trust, let me just say this. First of all, the future of local radio is the issue that has attracted by far the largest and most articulate public response. Secondly, I understand why that has happened. Even though we hoped that we were preserving the majority of the most important programming on local radio-radio that was listened to by 86% of the audience-nevertheless there are real concerns that I think reflect the importance of local radio as a glue in the community. They also represent the fact that, here, the BBC is playing a role that the market simply does not play. It really is an example of a market failure, local radio with a lot of speech in it. Thirdly, there is no question that there are issues of reach, and the sort of people who listen to local radio are some of those whom we want to ensure get proper benefits from paying the licence fee. For all those reasons, we have to take very seriously the reactions that we have heard.

I think the extent of trust in local radio is something we need to recognise too, and it is not just in this country. After the tsunami in Japan, there was a lot of evidence that the agency that people most trusted on nuclear information was the local FM radio station in Fukushima. I think these are serious issues. I have read, of course, the debate in the House of Commons, and I have had more letters on this issue from MPs than on any other.

Q103 Paul Farrelly: If a change of mind is possible-if the BBC has perhaps misjudged the mood-is that change of mind possible without making like-for-like savings anywhere else?

Lord Patten: No. If we have to make changes, given that the licence fee is not going to increase, given that there have been no demonstrations, so far as I know, in favour of a higher licence fee, and the press has not been full of letters from the public saying, "We want to pay more", we will have to find a similar amount of money from elsewhere-not necessarily in scope savings, but we will have to find those savings in some other way. This has been a serious exercise, and we can’t simply conjure the money out of thin air.

Paul Farrelly: That is very clear, Lord Patten.

Lord Patten: Can I just add one point? I have visited several local radio stations and appeared on several. The reactions vary from area to area. I think the most vociferous reactions have been in some of the cities that are particularly keen on their local radio, and Cumbria, for obvious reasons. In Cumbria, both the mass-killings and the floods made local radio really important in the community, and it is not surprising there have been so many reactions there.

Q104 Paul Farrelly: I remember very well when you visited Keele University to give a lecture a few years ago and the visit was covered on my local radio station, Radio Stoke. I know most about Radio Stoke, so I shall mention it as an example; I am not simply being parochial. Radio Stoke is going to lose possibly eight of a complement of 36 people. There are 20% cuts, and it loses the early breakfast show. In particular, it will lose the afternoon show to a West Midlands generic show from Birmingham. Yet at the same time, five stations across the country are keeping their shows-Cumbria, Solent, Manchester, Merseyside and Lancashire. I think it is fair for people across the country-everybody who is affected-to ask why. They do not understand what criteria have been used in making those exceptions.

Lord Patten: I was in Northern Ireland two or three weeks ago, and I appeared on Radio Foyle, which, of course, broadcasts in the north-west of Northern Ireland. Their reactions to proposals weren’t as vociferous as in other places, but that is partly because they had already had some cuts in services, so it does vary from one place to another.

Mark Thompson: The answer is, first, that the team who were thinking about local radio visited every single local radio station, and there are 40 across England. They looked at a range of things: the size of the operation, and the number of people employed, which varies somewhat around the country. These radio stations serve communities. Some are very big cities; some are very big geographical areas like Cumbria, where you need more people, so they looked at the operation. They looked at the local competitive context-the other forms of media available to the public-and at some cultural questions about those parts of England where the pooling of programming, let’s say in the afternoon, might feel relevant, or those perhaps in more isolated parts of the country, or those with particular strong cultures, where it would be less so.

In a sense, one’s experience is that if you apply the same kind of criteria to everyone, people say, "That is salami-slicing". If you try to go carefully and target differently, people sometimes say, "Well, is that fair?" but it was done objectively. What we are going to do now is the Trust are going to complete their consultation. I am sure that the Trust will be coming back to us with feedback from the consultation. We will look at our plans in the light of what the public have to say about it, with an open mind but recognising, as Lord Patten said, the economic realities of life.

There was a significant debate in the BBC about whether we should either abolish local radio or in some way merge it with 5 Live. A number people, and I am one of them, very strongly believe that local radio has a unique responsibility, and there are a significant number of people who are particularly well served by local radio and without it would not be as well served by the BBC or anyone else. Although you are right that the levels of cuts in some of the cash budgets of local radio are 20%, the overall number is much lower than that. There is no question but that we are looking for significant savings in local radio, and we have to look carefully at how the public have responded to that suggestion, look at our plans and see whether or not they need to be amended. That is a matter for the Trust.

Q105 Paul Farrelly: Again, for people to understand the process, the focus, as has been stated, is very much on breakfast, mid-morning and afternoon drive-time programmes.

Mark Thompson: Yes, and Saturday afternoons, which are, again, another important moment.

Paul Farrelly: One of the briefing notes from one of your advisors, Julia Ockenden, to us as MPs stated that you wanted , through this , to protect those periods of the day whe n the audience was highest , and not target low audience periods. Again, that is confusing in an area like mine, Radio Stoke, where the afternoon programme audience is bigger than the drive-time audience. They simply can’t understand what is going on, and the reach is one of the top five stations.

Mark Thompson: Stoke is a really good example of a really strong local radio station in a part of the country where the rest of the media is not particularly strong, and where there is a real sense of identity that is very different from some of the big conurbations near it. What I would like to say to that is that I will go back and look specifically at the plans around the afternoons in Stoke, in the light of what you have said.

Lord Patten: I should have mentioned that another issue we have to take account of, which touches on market failure, is that in most communities in the country, local newspapers have either disappeared or gone from daily or evening to weekly. The decline of the local and regional press is something that we definitely have to take account of.

Q106 Chair: Before you give too much special treatment to Stoke, can I just make clear on behalf of the Committee that every single one of us cares passionately about our own local stations? I don’t want to have each Member of the Committee in turn asking for special treatment for theirs.

Mark Thompson: Lord Patten has already said this, and I want to echo it: that is loud and clear from the parliamentary debates, and from many, many other contacts. It is worth just saying that Delivering Quality First is a plan for around £17 billion or £18 billion of BBC spend over five years, involving all the services that something like 96% of the UK population use-television, radio, the web, and so forth. What is striking about the public response to it is that there are one or two absolutely important hotspots to look at carefully. The overwhelming majority of the plans, however, broadly seem to have received broad public acceptance.

Q107 Paul Farrelly: Chair, I know lots of people want to come in on this , and I don’t want to monopolise it. I am citing Radio Stoke not to give it special treatment , of course , but just to exemplify some of the anomalies in what is being said is the rationale. In terms of like-for-like cuts elsewhere, there are other parts of the BBC that have not been affected. I learned only when I read our briefing that Radio 1’s Newsbeat has 52 people.

Mark Thompson: For the time being.

Paul Farrelly: For the time being, yes.

Mark Thompson: That will be affected. It is worth saying the reason why there are 52 people working not just on Newsbeat, but on news programmes for both Radio 1 and Radio 1Xtra is that, again, we think this is an important audience-two audiences-who are relatively shallow or light users of other news services, and we wanted news that worked for them. However, one of the things that came out of John Myers’ work with us on music radio was thinking hard about whether you could still provide a very good news service, but with a smaller team, so 52 will become about 33.

Q108 Paul Farrelly: I have a final question: I don’t want to offer anybody up for redundancy, quite frankly, but you have a process that you are going through. One area that has not been affected has been regional television news; it is The Midlands Today in my area. I would like a response on this point: areas like Stoke-on-Trent, and other cities that are not the Birminghams, the Manchesters, or the Leeds-are areas where regional television news programming does not really touch on people very much at all. It tends to be conurbation-centric, yet at the same time you are getting those big conurbation-centric programmes displacing the radio programmes that are relevant to people’s lives in areas like Stoke-on-Trent.

Mark Thompson: It is a very interesting tension. Taken together, the regional 6.30 programmes are the most popular news programme that the BBC provides. There is still enormous appetite and interest for regional news, but of course the relevance of regional news partly depends on where you live-geography-and also this business of a metropolitan bias, which is sometimes not restricted to London. Lots of big cities across the UK also tend to suck in a lot of media.

There are two or three things to say. We have, over time, been trying to develop better news-gathering in metropolitan and rural centres outside the big cities. Secondly, one of the possible benefits of the present Government’s plans for local TV is the provision of a large amount of new news-gathering resources, some of which may help us cover smaller towns and cities across England and across the rest of the UK, although I can’t promise it is going to include Stoke. I think it is a fair point; making sure that, with limited resources, you have the granularity of your regional coverage right, and the balance between spend on TV, web and the radio is right, is a fair consideration. One of the reasons why I was against the idea of merging local radio stations was that I think they are sometimes rather a thin red line, particularly in terms of coverage of local events, politics and debate, which we cannot replicate with regional television.

Q109 Paul Farrelly: I have one final question for Lord Patten, and it picks up on what my colleague Adrian Sanders said about various costs of the BBC compared with costs of delivering regional content. It is a translation of the "chiefs and Indians" issue to what you might call "artists and grunts", and the way people perceive that. When Adrian mentioned the alleged salary or appearance fee of a television football pundit, Mark Thompson moved swiftly on to say that he didn’t discuss individual artists’ pay, and then straight on to Great Expectations. Football pundits are now talent, or artists, in the same mould as everybody else. When those enormous sums of money are mentioned, and at the same time, relatively low-paid journalists on local news are facing redundancy, do you not think that people are entitled to ask, "Where is the market here?" Is the BBC simply paying these people so much money so they don’t go to Sky? Where is the market that is driving these sorts of salaries when these cuts are being made elsewhere?

Lord Patten: When you look at the figures for spending on sport-it would be quite an interesting subject for us to discuss sometime-the market is mainly created by the principal spender on sports broadcasting, which does it very well but has a lot more money to spend than we do, which is Sky. If you are a football fan, you want to have very good analysts on the football shows that you watch. I think if I was to replace one or two of the Match of the Day analysts, there would certainly be more balanced coverage of Arsenal, but overall I doubt whether the audience would think it was an improvement.

Mark Thompson: We have just, literally in recent days, lost our entire Formula 1 commentary team to Sky, and there has been, over the years, a regular traffic of sports presenters and commentators from the BBC to ITV, Sky and other broadcasters. What the BBC attempts to do, again, is to get the best value and best impact from its sport. In the current year, we account for around 2% of all the hours of sport broadcast in the UK and 41% of the viewing-2% of the amount broadcast and 41% of the viewing. People still want great sport from the BBC, and the BBC is a surprisingly good and cost-effective way of getting sport to everyone, whether they have the ability to pay for it via a subscription or not.

Chair: I think we have strayed somewhat from the question.

Paul Farrelly: My plea -and it is a plea- to the Chairman , with respect to local radio and other local services, is for a bit of perspective when taking on football pundits, to take one example, who are in relatively good supply.

Q110 Dr Coffey: I want to give Mark Thompson credit: I think that you have gone out of your way in this process to try to get feedback from MPs, and I think you have listened quite strongly to a lot of what has been said about local radio, so I will give praise where it is due. One of the things that surprised me-I have my iPad here-was that I couldn’t listen on the BBC iPad application to local radio. I have to go through another app to get to it, and even if I try to go online to bbc.co.uk/suffolk and all the rest of it, I still can’t do it. I was shocked and surprised. I thought, "That just shows; they don’t actually really think a lot of local radio when it comes to the future of the BBC, in terms of IT." I wonder if that will be rectified.

Mark Thompson: In that rather sinister phrase, it is in the road map. The current overlap between people who have iPads and who listen to BBC local radio is quite small. The BBC’s broad belief is that the public pay for the BBC, and they should be able to get its services, within reason, on the platforms and channels that are most convenient to them. Ensuring that the level of desktop-PC-type access to BBC services, including BBC local radio, is replicated on iPads and other smaller smart devices is definitely part of our plan.

Q111 Steve Rotheram: May I pick up on two points from previous answers by Mr Thompson? You highlighted the difficult decisions being made because of the settlement that you negotiated in regard to the BBC, and you are going through a public consultation process at the moment, which ends on 21 December. Why didn’t you consider seeking the views of licence fee payers prior to accepting the settlement from the Government?

Mark Thompson: In the run-up to the settlement-we were in the middle of a big look at our strategy-we had done a great deal of work, talking to and asking the public about the licence fee, about their sense of value for money, and what they wanted from the BBC in terms of services. We went into that negotiation armed, we thought, with a pretty good idea of what the public wanted, which is, to be honest, a full-service BBC and strong support for the licence fee. Support for the licence fee has been growing, but I have to say that there was no appetite for a licence fee going up.

Q112 Steve Rotheram: I think that, demonstrably, you don’t understand what the public want, because earlier you said that you need to listen to the public. Why aren’t you listening to them in regard to BBC local radio? Why aren’t you revisiting the proposals?

Lord Patten: That is exactly what we are doing at the moment. We are listening to their views, not only on local radio but on other issues. It is a genuine consultation. If at the end of this consultation we were simply to put back on the table exactly what we had announced at the beginning of the consultation period, I guess the public and this Committee would give us a pretty frosty reaction.

Q113 Steve Rotheram: But you have already stated on record that you have not had the volume on any other issue that you have on local radio.

Mark Thompson: I think you are pushing at an at least partly open door here. What we are saying is that once the consultation is over, the Trust will examine it and everyone, including myself and my colleagues, will look at what has come out of it with an open mind. If it feels appropriate to adjust the plans because of what they have said, and that can be made in an affordable way that does not involve a more damaging cut somewhere else, we will change the plans.

Lord Patten: I would have thought that my responses to your colleagues’ questions did not suggest that I was entirely cloth-eared on this subject, but if I gave that impression, it just shows what an incompetent old hack I have become.

Chair: No, I think we have got the message.

Q114 Mr Watson: Mr Thompson, my heart sank when you said that there was a local radio solution for the iPad in the roadmap. I felt sorry for the small entrepreneur that has found an online solution to providing local radio to iPad users. It opens up a general point: you want a rationalisation programme for BBC online. Could you update us on where the cost-cutting is being applied on that, and where services are being reduced as a result of that?

Mark Thompson: Yes, absolutely. I think we are on track by 2013 to reduce the service licence spend, in our jargon, by 25%. We are doing that by, in a sense, taking what was a collection of over 400 websites into the idea of a single BBC service with 10 products, which are very big, straightforward things-the things that people will most expect from the BBC digital environment: news, sport, weather, the iPlayer and so forth. Those will then be deployed in as good and as focused a way as we can across the range of modern digital screens and devices, which, of course, in the last two or three years have changed out of all recognition; that means smart phones and tablets-Dr Coffey’s point-as well as PCs, and increasingly also connected TVs. It is about focusing on what the public most want, and focusing on quality and depth, rather than quantity, but also having a continued commitment, as far as we can, to making sure that we are using outside partners, as well as making it ourselves.

Q115 Mr Watson: In monetary value, I understood the 25% cuts to be £200 million. Do I have that right?

Zarin Patel: The published service licence budget in March 2011 was £137 million, following the Trust service licence review of online, and it is that that will reduce by 25%, or just under £100 million, in 2013-14.

Q116 Mr Watson: So essentially that is the content creation part of it. Do I have that bit right?

Mark Thompson: Yes.

Q117 Mr Watson: Where is the reduction being applied, in terms of new content or existing content that is being cut? Is it in a specific area? Is it news?

Zarin Patel: The 400 individual pages that we had are now down to 10 products, so that is a really significant scoping-down.

Mark Thompson: Some of the entertainment and general content has been reduced. We are focusing more on a diet of news, learning and support. As you know, iPlayer-our catch-up service-has been something of a phenomenon, with something like 2 billion programmes being be streamed this year to the UK alone. It is focusing on the development of iPlayer as a resource by which people can see our great television and hear our great radio via digital devices.

Q118 Mr Watson: Do you have plans to monetise iPlayer in other jurisdictions?

Mark Thompson: We have begun a pilot for global iPlayer-a launch pilot just on iPads-which has launched in some countries, and we will continue that roll-out. Early indications are quite promising for the pilot. This is not an exact equivalent of the UK iPlayer, because for a variety of reasons that does not make sense, but it is a gathering or collection of high-quality TV from the BBC that you can subscribe to.

Q119 Mr Watson: Do the cuts apply to the digitisation of the archives as well? Is that a separate budget?

Mark Thompson: That is separate, as is research and development. We have moved a significant part of our R and D up to Salford. We want to go on investing, again with partners-universities, and academic and commercial partners-to go on developing new platforms and new standards. YouView, our partnership with ITV, BT and others, is an example of a partnership to develop a new platform.

Q120 Mr Watson: Finally-I know that the Committee wants to move on-when we have talked previously, you have talked about how hard it is to apply proper cost centres to the digital realm within the Beeb. I think in the accounts, the spend last year did not appear to reduce that much. Is that essentially because you have been completing that process?

Zarin Patel: No. It is because it is the first year of the changes. That figure reduces pretty dramatically this year; it is a three-year programme. Roughly 360 posts are being closed as we speak.

Q121 Chair: You mentioned YouView. It has, of course, been subject to a large number of delays. Can you give us an assurance as to when it will be available?

Mark Thompson: The plan-I believe that we are on track to deliver the plan-is that it should be delivered in the first half of next year. There are already YouView boxes out in homes being tested now. More homes will get it early in the New Year, but I expect boxes to be available in the shops to buy in the first half of next year.

Chair: Before the Olympics?

Mark Thompson: Before the Olympic Games-the 2012 Olympics. It is worth saying that the IPTV deployment-the deployment of web-based services on televisions-is difficult, and there are some very, very, large and well-funded global companies that have struggled to get this right, because it is intrinsically difficult. I do not believe that it is going to be anything like too late for YouView next year. Actually getting YouView right, and giving people the confidence that it is going to work, and work in the way that iPlayer works-when you switch it on, it works immediately-is very important. The BBC’s commitment to IPTV is by no means limited to YouView. We are working very closely with Virgin. We are in conversations with Sky. Freesat, our partnership with ITV, has an IPTV deployment ready to go. More broadly, with YouView as part of the story-a significant part of the story-I think that 2012, with the Olympics, is going to be a big year for IPTV, in which the public will see editorially what we can do when we can bring the strength of television and the strength of the web together to offer very rich experiences that are great television and have an interactive depth to them. It is an exciting year, next year.

Q122 Chair: Just before we finish, I have one final question. I suspect that you, like members of this Committee, had a very large postbag when the decision was announced about Formula 1 coverage. There has been some dispute about precisely how this decision was reached, and in particular on whether or not you spoke to any other broadcasters other than Sky in reaching a decision, and on where the impetus came from. Was it from the BBC or was it from the Formula 1 association?

Mark Thompson: The idea of sharing the rights under the remainder of the current contract and of potentially extending that contract was our idea. There was a negotiation that led to all the parties involved in the conversation being happy with the idea. The effect will be to save the BBC well over £150 million between now and the end of the contract-money that obviously means that only half of Grand Prix will be live on the BBC, but it has enabled us to keep a very good position in Formula 1, and to make savings that otherwise might have meant deeper cuts in other services.

As for the considerations for us, we know that Formula 1 has only fairly recently come back to the BBC; it has been very popular on the BBC. Secondly, we know that Formula 1 fans ideally do not want Formula 1 to be interrupted by advertising, because of the character of the sport. Nor, of course-for the subset of Formula 1 fans who do not have Sky subscriptions-would they, ideally, like Formula 1 to go entirely behind a paywall. I believe that the arrangements that we have reached offer very good value to the licence payer, and the experience of Formula 1 on the BBC will still be very rich. The first Grand Prix next season, when this new arrangement starts-the Australian Grand Prix-will be live on Sky in the very early hours of the morning. There will be a 75-minute highlights package in peak time on the BBC, which we would expect to reach many more people than the live coverage.

Talking about changing the arrangements in the existing contract and the extension of that contract, all I would say-and I have of course heard the arguments that perhaps this could have been picked up by another free-to-air broadcaster-is that what we have done has guaranteed that a very large amount of Formula 1 will still to be free-to-air to the British public for many years to come. Had we simply stopped the contract and decided to walk away from Formula 1 after that, there was a real danger that all of Formula 1 would have gone behind a paywall.

Q123 Chair: Both of those things are undoubtedly true, but did you actually talk to any other free-to-air broadcasters?

Mark Thompson: No, and to be honest I think that I would have already been on the edge of the limits of what it is appropriate to do, in terms of the appropriate separations of sports buyers in the market under the Enterprise Act.

Q124 Chair: But if you were able to talk to Sky about sharing it, why couldn’t you talk to Channel 4 about sharing it?

Mark Thompson: We were quite clear that, to get the economics to work for us, it was going to have to be a pay partner, and this was the only pay partner, credibly, whom we thought we could involve in it-indeed, a pay partner who had expressed interest in this very topic of conversation previously. It was an example of a free-to-air pay partnership, which is not by any means unknown in the market.

Q125 Chair: I am not saying it is unknown, or that you should not have talked to Sky, but even if it was a 10-second conversation, you might have picked up a phone to Channel 4 and said, "Are you interested? Could you possibly pay the kind of money that we are looking for?" They would have said no, but you did not even do that.

Mark Thompson: It seems to me that it was not required of us, and given that, in a sense, what we were trying to achieve on behalf of the licence fee payer was a significant saving, actually keeping the confidentiality of the process until it was clear whether the thing was viable and whether all parties to it-including, of course, the rights-holder-were happy, militated in terms of doing it the way we did it.

Q126 Chair: Do you intend to do it for any other sport?

Mark Thompson: We have already talked about competition and sports rights; our mission, when we are seeking either to extend or acquire sports rights, is to do it absolutely in the way it is done in our industry, which is typically on a confidential and commercial basis, as every other buyer and seller does and expects of counterparties.

Chair: Okay. I think we should probably draw a line, as it is five minutes to 1 o’clock. Thank you very much for coming this morning.

Prepared 21st December 2011