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Reducing costs through ‘Delivering Quality First’

The BBC’s ongoing cost reduction programme ‘Delivering Quality First’ has so far delivered value for money, according to a report by the National Audit Office. Reported savings of £374 million have exceeded implementation costs and have had a limited impact on audience perceptions.

The report finds, however, that the BBC plans to make around 85% of remaining savings from productivity improvements that will involve more challenging and potentially disruptive changes to structures and ways of working.

The findings from the report include the following:

  • The overall savings of £374 million reported by the BBC up to the end of 2013-14 exceeded its milestone target of £367 million, although annual sustainable savings were 4% less than planned. The BBC has slipped against its interim milestones for making sustainable savings because it made fewer productivity savings and earned less commercial income than it planned.
  • The BBC established a well-designed reporting system with clear accountabilities, supported by external review, to provide assurance that reported savings are genuine.
  • The BBC cut public service broadcasting staff costs by 17% during the first two years of the programme, despite staff numbers falling by only 1% overall.
  • To inform its savings plans, the BBC could make more use of data held by individual divisions about how they have cut costs.
  • The Programme has so far had a limited impact on audiences according to the BBC’s performance measures.
  • Although the BBC has developed plans for most of its remaining savings, these plans involve significantly greater challenges compared to the initial years of the Programme. If the BBC is not able to make the planned productivity savings, it risks having to make further reductions to scope.
  • Some cost reductions secured up to the end of the Programme in March 2017, when the current licence fee settlement ends, might not be sustainable in later years.

“The Delivering Quality First programme has secured significant savings with minimum impact on audiences and today’s report recognises the good progress the BBC has made. The NAO has suggested that the final years will present greater challenges and we agree that there is a limit to the extent costs can be reduced before quality begins to suffer. We believe the remaining targets should be met and will continue to track progress to ensure that savings do not have an unintended impact on the programmes and content which audiences love.”

Nick Prettejohn, BBC Trust Chair of the VFM committee, 10 March 2015

 “The BBC has made reported annual savings of £374 million by such means as renegotiating existing contracts, limiting salary increases and reducing the number of more expensive senior staff.  The BBC has taken a systematic approach to how it can achieve future savings, but it needs to keep the implementation of its plans under review. This will lessen the risk of the BBC’s having to make further reductions to scope by, for example, cutting the number of new programmes it commissions or acquires.”

Amyas Morse, head of the National Audit Office

Notes for Editors

£700m

Annual savings the BBC plans to make by the end of 2016-17 compared to its 2011-12 funding plans

£374m

Savings reported by the BBC in 2013-14

£351m

Sustainable savings in 2013-14 after deducting one-off savings

£145.50

Annual cost of a television licence (fixed until the end of 2016-17)

£576 million

Estimate of savings needed in 2016-17 to absorb the impact of the 2010 licence fee settlement

£124 million

Target for additional savings to reinvest in new content and technologies

£2 billion

Total net savings the BBC forecasts it will make by the end of 2016-17 through its cost-reduction programme

£289 million

Total estimated cost of implementing the cost reduction programme

£10.2 million

Forecast savings that the BBC identified as being difficult to achieve or not yet having a plan as at September 2014

344

Number of planned or ongoing savings initiatives

1.   The BBC designed the ‘Delivering Quality First’ Programme to achieve its financial target whilst minimising the impact on audiences. Starting in 2012-13, the main ways it plans to make savings through the Programme are:

•         making productivity savings, for example by simplifying processes, reducing staff numbers and introducing new ways of working;

•         reducing the scope of its activities, for example by reducing the number of new daytime programmes it commissions or acquires, and providing fewer ‘red button’ television services; and

•         increasing commercial income by increasing the number of programmes being produced that have a high commercial value.

2.   Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained by using the relevant links on our website.

3.   The NAO’s examinations of the BBC’s use of licence fee income are not carried out under statute but under a non-statutory agreement between the Secretary of State for Culture, Media and Sport and the BBC.

4.   The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 employees. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. The NAO’s studies evaluate the value for money of public spending, nationally and locally. The NAO’s recommendations and reports on good practice help government improve public services, and the NAO’s work led to audited savings of £1.1 billion in 2013.

PN: 17/15