The BBC is entering one of the most challenging periods in its history, dealing with a licence fee frozen until December 2016 while taking on new financial commitments: the extra broadcasting-related activities of BBC World Service, BBC Monitoring, an expanded partnership with S4C and support for new local television services and broadband roll-out.
In 2014/15, these new obligations alone are estimated to add £388million to the BBC's licence fee-funded cost base. We are determined to rise to this financial challenge while maintaining or improving the overall performance and audience appreciation of BBC services
2011/12 was the penultimate year of the BBC's Continuous Improvement productivity programme, introduced after the 2007 licence fee settlement, to make 3% efficiency savings a year over a five-year period. By the end of last year, cumulative efficiency savings are close to £1.5billion, equivalent to 3.6% each year, and we are on course to deliver £2billion in savings by the end of the programme.
Savings have mainly come through improvements in the way the BBC operates, through implementing technological change or by making different investment choices. The BBC has continued to:
Over the last year, the estimated overall Cost per User Hour of the BBC's television and radio services has fallen from 4.3p to 4.0p, largely the result of lower spend and improved reach in television. Radio cost per listener hour has remained stable at 1.6p, whilst online cost per user reached has improved to 6.1p from 8.5p.
One way in which the BBC Trust fulfils its duty to ensure that value for money is achieved by the BBC is by commissioning a series of independent value for money reviews each year from the National Audit Office (NAO).
In November 2011, the BBC Trust published an NAO report which looked at the BBC's progress to date in delivering its target rate of efficiency savings. The NAO concluded that "The BBC is delivering value for money from its efficiency programme in that it is on track to exceed its target of delivering £487million sustainable, cash releasing net savings by 2012/13, whilst its overall performance in terms of audience measures has not declined. The efficiency programme is therefore proving a clear success in the terms set for it."
The NAO also reported on the BBC's management of its support functions, concluding that the "BBC has reduced the costs of most of its support functions over the last five years and plans to make further savings. Its current approach to challenging the cost of its support functions is broadly effective in improving value for money."
The BBC will fully implement the NAO's recommendations from both reports.
The BBC believes that the future of public service broadcasting in the UK depends on a vibrant UK creative community. Without this, the existing range, quality and plurality of UK public service broadcasting, content and services would be impossible to sustain. Much of the licence fee is spent outside the BBC, on independent producers, talent, suppliers, freelancers and productions.
Over the years, and bolstered by the 25% quota, the independent television sector has grown in size and in confidence. Today it is responsible for supplying some of the UK's most valued programmes, such as Earthflight, Call the Midwife and Birdsong.
The BBC operates its own additional Window of Creative Competition (WoCC), further increasing opportunities for independents to be commissioned for entertainment, comedy, drama, factual and children's output. Performance against the television WoCC can be found in Performance Against Public Commitments in the Download section of this Annual Report.
In radio, the BBC operates a voluntary quota of 10% of eligible radio programming by broadcast hours from external radio producers, and has now put in place a WoCC for the radio programme market, opening up the available programming hours to independent producers by a further potential 10%, across the BBC's national networks. The preferred supplier list has also been dropped to ensure the best ideas get to air, wherever they come from.
Overall this year the BBC commissioned 42% and 19% of eligible television and radio content respectively from external producers.
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