BBC savings outweighed by Salford move, says report
Savings in the cost of backroom functions at the BBC over the past five years have been outweighed by an increase in spending on buildings, largely due to the move of many programmes and staff to Salford, according to a report.
A drive to cut spending on support functions had been successful in many areas but there was scope for more savings as the corporation did not have a "co-ordinated and consistent approach" to driving costs down, the National Audit Office (NAO) found.
Spending on BBC Workplace, which manages the corporation's property estate, rose by 39% from £205 million in 2006-07 to £284 million in 2010-11, at a time when the BBC was trying to save money behind the scenes.
The report said this was because the BBC is in the middle of a 20-year strategy to rationalise its properties. Spending rose in 2010 because new buildings came into operation at MediaCity in Salford and London's redeveloped Broadcasting House, leaving the BBC with a larger estate than it needs until the planned disposal of properties such as Television Centre.
Auditors found a 4% increase in total spending on support functions, from £473.7 million to £491 million between 2006-07 and 2010-11. But if the cost of property was removed, the overall bill showed a reduction of almost a quarter (23%) in spending on areas like procurement, finance, personnel and marketing.
Spending on director general Mark Thompson's office fell from a peak of £6.4 million in 2007-08 to £4.6 million in 2010-11, thanks in part to the abolition of the post of deputy director general. The cost of the BBC Trust governing body dropped 24% from £18.4 million to £14 million.
The BBC plans to make 25% cuts in spending on support services by 2016-17 to help it cope with the six-year freeze in the level of the licence fee, and has pledged to reduce overhead costs to 10% of its £3.6 billion licence fee income, down from 12% in 2010.
The report, commissioned by the BBC Trust, found that the overhead target was "of limited practical use" because the BBC did not know whether 10% was the right level to aim for.
The NAO warned that the BBC had set targets by calculating what savings it needed to make in order to meet the real-terms reduction in its income from the licence fee, rather than trying to establish how much the services should cost.
Comparing BBC costs on service functions with those in other public bodies "gives a mixed picture and suggests that there is scope for savings", found the report.
Auditor general Amyas Morse said: "The BBC has successfully reduced the cost of most of its support functions. But its approach to challenging those costs should be further strengthened in the future.
"To be certain that it is achieving the best possible value for money for the licence payer, the BBC needs to be consistent and rigorous in defining the service it requires from its support functions; identify what that service should cost; and adjust its costs accordingly."
The BBC Trust's Anthony Fry said: "We're pleased the NAO has judged the BBC to be broadly effective in improving value for money, given the success it has had in cutting its support costs in the past five years.
"We accept that there are improvements to be made to understand exactly what each support function should cost and to make future cost savings in a more co-ordinated and consistent fashion.
"We have set the BBC management a target to deliver 11% of efficiency savings by 2016-17 and the NAO's recommendations will help us achieve that target in the right way."
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