BBC cash pile may stop rise in licence

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THE BBC has built up a cash pile of pounds 235m which could threaten its efforts to persuade the Government to impose a higher licence fee on people buying digital televisions.

Even though the broadcaster spent pounds 154m on developing new digital channels and increasing its presence on the Internet this year, an pounds 80m boost from commercial ventures means that the BBC is not as strapped for cash as it has been claiming.

"Given all the savings we've been expected to make in news it comes as a bit of a shock," said one of the BBC's senior newsreaders. "It's a bit of a slap in the face and I can only hope we'll see some of this money next year."

Some believe the cash surplus may damage the BBC's efforts to get a digital levy added to the licence fee to help it fund new channels. That proposal is currently under consideration by a government working committee.

The improvement in the BBC's finances, in stark contrast to indebtedness of near pounds 200m in 1994, is expected to be confirmed when the corporation presents its annual report to Parliament on Tuesday.

The corporation's cash build-up follows the privatisation of part of the BBC's transmission network which raised pounds 244m that the Government said the corporation could keep to develop new services.

Almost half of this has been spent this year with the rest earmarked for this coming year. After that the BBC wants extra funds from the licence fee to run its digital services.

Contributing to the cash reserve is an estimated pounds 105m in savings during the year to March related to administrative, production and working practice reforms. The report will also reveal that Sir John Birt, whose term expires in April 2000, received a 3.6 per cent pay rise to pounds 316,000, but bonus payments took his salary up to pounds 415,000, a total rise of 7.2 per cent - in line with average BBC salary increases. The ten other executive board members shared remuneration of pounds 1.7m.

Total pay within the BBC grew 7.2 per cent with nearly one-third of employees getting performance related bonuses.

The cash reserve is down from pounds 300m a year ago following the pounds 244m sale of the BBC's transmission operation to Castle Communications of the US.

"Our financial strategy is simple," said John Smith, director of finance. "It is to maximise revenue, cut costs to a minimum, manage the balance sheet and invest in production for licence fee payers."

Annual revenue is expected to have grown 7 per cent to about pounds 2.8bn, including turn-over of pounds 420m at BBC Worldwide, the broadcaster's commercial arm, which contributed a net surplus of pounds 80m, up pounds 5m from the previous year.

The spin-off of BBC Resources, the corporation's production and facilities division, resulted in a pounds 12m restructuring charge. The unit earned pounds 1m post-charges on revenue of pounds 230m, though production and facilities service sales from outside the BBC amounted to only pounds 30m.

Spending to develop digital broadcast and production capacity resulted in five new channels being introduced. The cable channel BBC America was also launched to nine million US households. BBC OnLine, the Internet portal which is among the five most visited European web sites, absorbed pounds 23m.