Grade: BBC's six-figure bosses are underpaid

Senior executives at the BBC work for a "considerable discount", Michael Grade has insisted, after MPs criticised their salaries as "very big... and difficult to accept".

The BBC chairman defended the hefty pay increases for senior managers announced in last week's annual report to a cross-party committee of MPs.

His comments come as unions representing BBC staff prepare to ballot their members on strike action over a 2.6 per cent pay offer, job cuts and planned changes to the pension scheme.

In the past two years, members of the BBC's executive board have seen their basic pay rise by 30 per cent.

The BBC argues the increase has been necessary to bring their salaries in line with the market median and to compensate for a reduction in the cap on bonus payments to 10 per cent.

At the launch of the annual report last week, Mr Grade said that although BBC executives' basic salaries are 4.5 per cent above the market average, their total pay including bonuses is 20 per cent lower than the median.

Addressing the Culture Select Committee yesterday, he said: "Although the numbers are high because there is intense competition in the media industry, the message should get out that they do work for a considerable discount. People may not like the fact that somebody running a department of the BBC can earn this kind of money but they could earn an awful lot more elsewhere.

"Let me be very, very clear. People work at the BBC for less money than they could command in the private sector and that is as it should be."

He admitted that the changes being wrought at the BBC, including a further 2,000 job cuts this year, were "difficult" for staff. But he added that handling such transformation required "leadership of the highest quality". "We have to be able to attract and retain those leaders," he said.

The Labour MP Janet Anderson said: "To my constituents these are very big figures indeed and they find it difficult to accept."

The BBC's director general, Mark Thompson, backed up Mr Grade's comments. "I'm not sure the public understand just how stark the difference is, particularly in the more senior jobs, between the commercial sector and the BBC," Mr Thompson said.

"The chief executive of ITV earns three times as much as the director general of the BBC."

Mr Thompson, who waived his bonus for a second year running, was paid £619,000 in 2005-06, less than Andy Duncan, his successor as chief executive of Channel 4, who received a total pay package of £686,000. ITV's chief executive Charles Allen took home £1.8m last year.

The director general also defended Jonathan Ross's £18m, three-year pay deal with the BBC, saying that viewers have " a very high level of affection" for the radio and television presenter.

Other broadcasters, including Channel 4 and ITV, courted Ross when his contract came up for renewal, but the presenter "stuck with the BBC even though he could earn more elsewhere," Mr Thompson added. Ross's recent interview with David Cameron, when he asked the Tory leader whether he had ever had sexual fantasies aboutBaroness Thatcher, was "entirely acceptable", Mr Thompson said.

Executive pay

Mark Thompson (director general)

Total pay 2006: £619,000

Total pay 2005: £459,000 (started part way through 2004-05)

Michael Grade (chairman)

Total pay 2006: £110,000 (nominal four-day week)

Total pay 2005: £96,000 (started part way through 2004-05)

Jenny Abramsky (director of radio and music)

Total pay 2006: £322,000

Total pay 2005: £304,000

Jana Bennett (director of television)

Total pay 2006: £353,000

Total pay 2005: £334,000

Mark Byford (deputy director general)

Total pay 2006: £456,000

Total pay 2005: £457,000

Stephen Dando (director, BBC People)

Total pay 2006: £292,000 (resigned in April 2006)

Total pay '05: £313,000