BBC bosses defy Dyke's economy drive

Just weeks into Greg Dyke's reign as director-general, the BBC's senior executives are running rings round his policy of cutting costs.

A purge on executives' luxury cars, proudly announced in April, has netted the surrender of not a single vehicle or even the handing in of one chauffeur's cap. Other perks and benefits have remained in place, and, most seriously of all, the army of highly paid executives which Mr Dyke promised to slim down is resisting all attempts to reduce their number.

One strategy officer, when faced with a projected cull, demonstrated his strategic skills by rapidly turning into a marketing boss. In another instance, according to sources at the corporation, the reduction of executive editors in news from eight posts to three has backfired with half a dozen chiefs still drawing top salaries. "There are definitely parts of the BBC where jobs have been scrapped, but people are paid to be on 'gardening leave'," a programme-maker said.

Other top executives have had their responsibilities changed or downgraded but they have kept their high salaries. After Matthew Bannister's job as chief executive production was scrapped, he was made director of marketing and communications, remaining on the 17-strong top team.

Patricia Hodgson, the former director of strategy, has been moved to a reduced role as director of public affairs, but has retained her £200,000 income. Now Mr Dyke has had to come up with a similar amount to recruit a new boss to take up the strategy portfolio removed from Ms Hodgson. "Heads are trickling rather than rolling," says one insider.

The BBC's institutionalised high spending now threatens Mr Dyke's aim to streamline the corporation and deliver the £1.1bn savings over seven years demanded by the Culture Secretary, Chris Smith.

So effective are the BBC's managerial classes at defending their salaries and perks that progress in making the savings looks increasingly likely to be at the rank and file's expense - just as under Sir John Birt.

"Greg has had an extraordinary honeymoon period," said one executive, "but he is going to have to get tough soon, and his love affair with the staff and the press will doubtless come to an abrupt halt."

The BBC acknowledges that it will be closing studios in Manchester and doing a deal with Granada to use the commercial company's more up-to-date facilities. Job losses are inevitable among BBC Manchester's 150 studio staff.

Such measures, though painful, still go only a short distance towards finding the cash Mr Dyke needs. Sir John Birt has left him with a behemoth BBC with a finger in every pie, and drastic measures are required if Mr Dyke is to carry on at the head of an organisation with an astonishing 50 hours of broadcast material on air every hour of the day.

Some big sources of funds are, fortunately, available. The BBC owns more than 500 properties, together valued at £430m. Some of these could be sold. The "unthinkable" measure of selling Broadcasting House in central London would raise an estimated £10m. Other properties could be developed, such as the one at White City - where three-quarters of the site, some 6.5 acres of land, is totally wasted. A lucrative office building of 600,000 square feet would be worth £28m.

The BBC has a long history of bad property management, but is now trying to patch things up by bringing in a commercial partner to help manage the portfolio. Mr Dyke is sitting on a host of other slumbering assets that can be exploited to supplement the licence fee, which brings the BBC more than £2.1bn a year.

A share of Beeb.com, the BBC's commercial internet site, is up for sale. But Mr Dyke knows the worth of this is tiny compared with the incredible value of the BBC's News Online site - valued at £4bn, but bringing the BBC no income at all. In the longer term, a "third way" will probably be found to gain some value from the service, without bringing about the demise of the licence fee. Similarly, the BBC is developing a youth entertainment digital television channel which, with a fair wind, it hopes to promote as BBC3. In time, could this be a highly lucrative commercial proposition?

All that stands in Mr Dyke's way are the regulators. The rest of the industry, unsurprisingly, wants to keep the BBC off its turf and is lobbying like mad to restrict his ambitions by having the Corporation's Board of Governors abolished and the BBC brought into the remit of a proposed single regulator for the industry.

Inside the BBC, top executives are preparing for battle on such issues. They are struggling to come up with a new, narrow definition of "public service" for the digital broadcasting age. If they succeed, they hope to be given a green light for a new, more commercial BBC.

The alternative is massive cuts all round - not just chauffeur-driven cars and market researchers, but whole digital television channels, news services, costly regional centres and even the odd public service internet project or two.