2010 Spending Review

September 25, 2016 Education

Fda Leadership and Management
Module ??“ The Organisation??™s Environment (TOE)
Investigating the impact of the 2010 October Spending Review on the British Broadcasting Corporation (BBC)
Word count – 1927

On October 20th 2010 the United Kingdom was given the details of the Comprehensive Spending Review. This is when the Treasury allocated resource to all government departments informing them of their future budgets. Along with this came details on spending within social security, local authority and other non-departmental sectors such as tax credits. Responsibility then falls on these departments to manage these available resources.

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The Spending Review is a relatively new process with the Government introducing it in the late 1990s. It covers a four year budget period which counteracts the inaccuracies and lack of foresight that an annual budget can bring. The October 2010 Spending Review details the future budget up until the end of the 2014-2015 tax year. The previous June budget was set out by the Treasury to detail total public spending for this four year period. The October Spending Review designated portions of this total budget to each area of public spending.

In the financial year 2009/10 the UK recorded general government net borrowing of ?159.8 billion, which was equivalent to 11.4% of Gross Domestic Product (GDP). The interest alone on this debt is estimated at ?120 million per day. At the end of March 2010, general government debt was ?1000.4 billion, equivalent to 71.3 per cent of GDP (O.N.S, 2010). In order to eliminate this deficit the Chancellor of the Exchequer, George Osborne pledged to achieve the reduction according to a simple formula: 74% will be paid for by spending cuts, while the other 26% will be taken care of by means of tax rises. This equates to ?81 billion of spending cuts and a further ?29 billion in tax rises (Telegraph, 2010a).

Appendix A is a good indication of which departments have seen cuts and which have seen increases in budget. Some significant cuts have been in education, defence and transport as well as the justice system and investment into the environment. One particular area of reform was the Department of Culture, Media and Sport (DCMS) with a reduction in budget to ?1.3 billion by 2014-15. There will also be a 24% reduction in overall resource spending with the department??™s administrative costs reduced by 41 per cent. (Directgov, 2010). One organisation that is effected by this cut in funds is the British Broadcasting Corporation (BBC).

The BBC was founded in 1922 with John Reith, then General Manager, leading the way in public radio broadcast. The Corporation pioneered through the decades seeing the first television broadcast in the 1930??™s and today stands as the world??™s largest broadcasting organisation (BBC, 2010a). The BBC is a public service broadcaster that is funded primarily through a licence fee paid by UK households set by the British Government. The BBC uses the income from the licence fee to provide services including 8 national TV channels plus regional programming, 10 national radio stations, 40 local radio stations and an extensive website. A non licence fee funded service is BBC World Service which broadcasts to the world on radio, on TV and online, providing news and information in 32 languages. The BBC also has a commercial arm, BBC Worldwide Ltd which deals in magazines including the Radio Times, book publishing and programme and format sales. Its profits are returned to the BBC for investment in new programming and services (BBC, 2010b).

The BBC operates under a Royal Charter which is granted for a limited time of 10 years with the current Charter due for renewal in 2017. Accompanied with the Charter is an agreement that recognises the BBC??™s editorial independence and sets out its public obligations (BBC, 2010c). Under the Charter, the BBC is governed by the BBC Trust, which sets the strategic direction of the BBC and has a clear duty to represent the interests of licence fee payers. The mission is to enrich peoples lives with programmes and services that inform, educate and entertain with a focus in becoming the most creative organisation in the world (BBC, 2010d). The Corporation is dependant on government support and is heavily influenced by any changes in legislation. The 2010 Spending Review is a prime example of the impact the Government can have on organisations like the BBC.

Anybody that watches or records television programmes as they are being shown on television must, by law, be covered by a television licence. This was first introduced in November 1922 licensing radio broadcasts and cost 10 shillings (50p) per year. Since 2000 the licence fee has annually increased from anywhere up to 5% to the most recent 2010 increase of 2.1% which currently costs UK households ?145.50 per year. In 1991 the BBC became the Licensing Authority which gave them the responsibility for the administration of the television licensing system (BBC Press Office, 2010).

In January 2007 the licence fee was agreed for a six year period with annual costs and increases being agreed by Parliament. The 2010 Spending Review intercepted this agreement and placed a price freeze on the licence fee until the end of 2016. During 2008/2009 financial year the BBC collected over ?3.5 billion in revenue from licence fee payments. The pay freeze will see a cap on this revenue and effect how the BBC develops. John Simpson, the BBC??™s world affairs editor commented in the Guardian (2010a) that the licence fee settlement was an ???unprecedented attack on the BBC??™ and further went on to explain that ???The rules were thrown into the rubbish bin, and Mark Thompson (current BBC Director General) was forced to agree to a deal which puts the BBCs future as an independent public service broadcaster into serious question.??™ With inflation bound for annual increase, the loss of revenue per year could halt any future innovation for the BBC.

BBC Director Mark Thompson said:

???This is a realistic deal in exceptional circumstances securing a strong independent BBC for the next six years. It means that efficiency and reform will continue to be key issues for us. But our focus remains providing distinctive, high quality programmes valued by the public. This deal will safeguard that until 2017.??™ (BBC Trust, 2010)

Of the 25.459 million licences recorded during the 2008/2009 financial year, 4.008 million were paid for by the Government. The majority of this percentage was made up of the over 75 year olds within the UK who receive their television licence free of charge. The 2010 Spending Review proposed that this funding be withdrawn and left to the BBC to manage. This shortfall in funds equates to just over ?500 million per year which is the equivalent to the budget put aside for BBC 2 and BBC 3 combined (Telegraph, 2010b).

At a time when the Prime Minister??™s pledge to limit cuts on benefits for the elderly is possibly in jeopardy, the transfer of the free television licence from the Department of Work and Pensions (DWP) to the BBC is seen as vital. The Mail Online (2010) commented that ministers want to impose the move as a penalty for the BBC overpaying its presenters and executives. The Mail goes on to explain that while government departments and public bodies are facing massive staff cuts, the BBC increased its staff levels from 17,078 to 17,238 within the last year. Sources said that given the broadcaster??™s commitment to fund radio and television and its obligations to pay pensions to its staff, the only solution would be a licence fee increase.

On September 2010 the Guardian (2010b) reported increased prospects of strikes within the BBC ahead of George Osbourne??™s Spending Review for the following month. The proposed strikes were in response to the Corporation??™s attempt to overhaul the pension scheme in order to plug a deficit estimated at ?2 billion. The Guardian (2010b) goes on to estimate the BBC??™s current pension scheme is costing them around ?140 million per year with this balloning to around ?350 million per year when considering deficit repayments.

On November 5th 2010 the National Union of Journalists (NUJ) headed a 48 hour strike following 70% of the union rejecting the BBC??™s ???final??? offer on pensions, which the union desribed as making journalists pay more, work longer and receive lower pensions. The Telegraph (2010c) stated that the original proposal was for employees to give up their ???gold plated??? final salary pensions in favour of the kind of ???defined contribution??? scheme that is common among private sector employers. The threat of strikes forced Mark Thompson to back down and propose a guaranteed pension based on the employee??™s average salary across their careers at the BBC. The strike caused numerous scheduling problems with some broadcast cancellations. A BBC spokeswoman in the Telegraph (2010c) said:

???We are dissappointed that the NUJ have gone ahead with today??™s industrial action??¦It is the public who lose out and we apologise to our audience for any disruption to services??™

As well as freezing licence fees and requiring the BBC to fund licencing for the over 75??™s, the 2010 Spending Review has withdrawn the budget for the BBC World Service, BBC Montoring and some of the funding for Welsh language television channel S4C. This had previously been funded by the Foreign Office.

The BBC World Service is a commercial free international broadcaster, broadcasting worldwide via the radio and internet. It has an annual Foreign Office grant of ?272 million but already this has been cut to ?261 million following the government cuts (Guardian, 2010c). The director of BBC Global News, Peter Horricks said that ???We are a very staff-heavy organisation, most of our costs are in people??¦ It will be hundreds of jobs that need to go.??™

BBC Monitoring is an open source news and information publisher. The service compiles political news, comment and reaction from the world??™s press, radio, TV and the internet and translates them into English from more than 100 languages. BBC Monitoring receives no licence fee funding and has a budget of around ?25 million
received from the Cabinet Office (Telegraph, 2010d). Further cuts in this may see the service diminish.

It is understood that the BBC will be contributing around ?76 million to the running of S4C by 2013-14, while the government??™s contribution will only be ?1-2 million. S4C chairman John Walter Jones said:

???The effect of the financial cuts agreed between Jeremy Hunt and the BBC will have a disastrous effect for viewers across Wales, and this at a time when the BBC has already cut spending on both English and Welsh language programming in Wales??™

Mr Jones also goes on to state that “we will not put up with the loss of independence of S4C in this place.??™ (BBC News Wales, 2010).

It is clear to see that the October 2010 Spending Review has had an impact on the BBC. The Corporation is heavily reliant on government support in terms of the television licence fee being set at an appropriate rate for the BBC to continue to broadcast to the public, develop as a public service and remain current and innovative within the broadcasting world. The BBC is also reliant on government grants to extend its coverage and range of services. The licence fee freeze, the funding withdrawal for over 75??™s television licences and the withdrawal of funds for the BBC??™s multitude of services equates to a real terms budget cut of around 16% for the Corporation. The beginning of November 2010 also saw strikes within the BBC unions, disrupting television and radio broadcasts. With more to do with less money, it can be suggested that the British Broadcasting Corporation have a tough time ahead, which could result in a substandard service for the paying public.


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