LONDON — Like many other countries around the world, the British economy is currently under severe pressure with politicians of all parties attempting to come to terms with the changes in circumstance brought about by the global banking crisis and broader economic downturn.
In the United Kingdom, a new government was elected early in 2010 after an election campaign dominated by economic issues. The new right-of-center Conservative–Liberal Democrat coalition government embarked on a series of major spending cuts.
Chancellor of the Exchequer George Osbourne The October “Comprehensive Spending Review” saw cuts averaging 19 percent across departmental budgets and, although BBC domestic radio and television services have always been funded independently through a license fee, as a public sector organization, the corporation soon found itself sharing in the financial pain.
According to Chancellor of the Exchequer George Osbourne, the government “struck a deal” that will see the corporation’s budget subject to reductions “similar to the savings made by government departments.”
In addition to announcing that the BBC will have its “license fee frozen for the next six years,” Osbourne also confirmed that the corporation will take over responsibility for the funding of the World Service and the BBC Monitoring Service, two operations historically funded separately, directly by the government.
In addition, the BBC will also have to take on the part-funding of the Welsh-language television service, S4C, and contribute to meeting the cost of rolling out broadband Internet access to rural areas.
All domestic BBC television and radio services are already funded by the BBC license fee, which is levied on all television viewing in the United Kingdom (there is no radio license).
Currently, the cost per household is set at £145.50 a year (about $225 U.S.). For this, viewers are able to receive several national radio services, local radio output and six national television services.
The BBC also runs one of the country’s most popular websites, although it has previously agreed to reduce its online presence, which has been the subject of considerable criticism from commercial competitors.
The combined impact of the additional financial responsibilities and the six-year license-fee freeze is the equivalent of a 16 percent cut in the corporation’s overall budget. Over its lifetime, the agreement, which runs until April 2017, will allow the government to save some £340 million ($530 million).
Sir Michael Lyons, chairman of the BBC Trust, said he thought that the license fee settlement was “tough,” but that it would give the corporation “stability” over the coming years. In a statement about the agreement he explained that: “The BBC is not government-funded, but these are pressing times for the nation as a whole, and we believe license fee payers would expect us to see what contribution we can properly make.”
For his part, the person responsible for the day-to-day management of the BBC, Director General Mark Thompson, took the view that:
“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 [on] providing distinctive, high-quality programs valued by the public. This deal will safeguard that until 2017.”
Negotiations over the funding of the BBC normally take several months to complete. This time however, the process was a brief one, with some commentators suggesting that the corporation had been “bounced” into agreeing a less-than-satisfactory settlement.
However, others suggest that achieving a long-term settlement, which continues to beyond the last possible date for another general election provides a great deal more certainty and stability than would have been the case if the government had insisted on a rolling annual program of license fee cuts.
The BBC also managed to avoid the very real possibility of having to pay the cost of providing free television licenses for those aged over 75. This provision currently costs some £550 million ($857 million) per year, and would have been the equivalent of a 26 percent budget cut for the corporation. Worse, with an ageing population the cost of this provision would have increased in real terms year-on-year.
The revised funding agreement for the BBC is detailed in a public letter from Jeremy Hunt, secretary of state for Culture, Media and Sport, to the chairman of the BBC Trust. The letter provides further detail about issues such as the future funding of the BBC World Service, which come into effect from the financial year 2014/15 onwards.
In the meantime, the amount of government “grant-in-aid” support provided for the BBC World Service will be gradually reduced, resulting in a 16 percent budget cut by the end of the financial year 2013/14.
The BBC will be entirely responsible for the funding of the World Service from 2014 onwards, and will, according to the letter, be “independent in all matters concerning the content of World Service output, the times and manner in which this is supplied and in the management of its affairs.”
However, in terms of overarching strategy, there will continue to be political oversight of its international activities, as the corporation will have to “... set the objectives, priorities and targets for the BBC World Service with the Foreign Secretary and to obtain the written approval of the Foreign Secretary for the opening or closure of any language service.”
Now that the BBC knows its responsibilities and budget for the next few years, the trick will be to make the two elements balance. Some savings will undoubtedly be achieved through various efficiency measures, and according to Thompson “will mean a leaner BBC, one which operates with fewer managers and with much simpler processes and structures.
However, there is little doubt that some impacts will be noticed by listeners and viewers and of course, the next round of negotiations over the next 10-year Royal Charter which is due to come into effect in 2017 is not that far away.