Caroline Thomson, Chief Operating Officer

Date: 28.06.2010     Last updated: 18.03.2014 at 18.00

Speech given at IEA Future of Broadcasting Conference
Monday 28 June 2010

Check against delivery

This morning, I spoke at the IEA's The Future of Broadcasting conference and participated in a lively panel discussion alongside Mike Darcey, COO, BSkyB; Sue Robertson, Director of Corporate Affairs, FIVE; and Seamus O'Sullivan, Chief Consultant, Cognizant, covering a range of topics including the drivers of innovation in the media industry and the threats and opportunities presented by new digital platforms.

I spoke about the progress the BBC has made in becoming more efficient and how we intend to build on this, to deliver the maximum value to licence fee payers. I also discussed the BBC's mission and purpose and how the proposals and priorities we recently set out in the strategy review will put us on the right course for the future.

The full text of my speech is below.

Caroline Thomson, Chief Operating Officer.

Caroline Thomson speech to IEA Conference

Maximising value for licence fee payers: examining the changing role of the BBC.

I am very pleased to be here today to speak to an audience with such a depth of knowledge about the economic challenges the country faces.

When preparing a speech like this you always look for that killer fact that can help you win your argument. I aim to persuade you of the real public value the BBC provides. On Friday, I think I found the statistic to do just that. And it is this. Experts have worked out that since 1982 England have won more than twice as many World Cup games when screened on the BBC.

After yesterday however, I have a got a feeling that this may not cut any ice. Anyway, I hope everyone has got over the real disappointment of yesterday – perhaps we should all have a group hug in the coffee break.

More seriously, in the week that follows the emergency budget, it is an extremely timely moment to reflect on the environment that we are all operating in.

For its part, the BBC understands it must change in how it delivers its mission. It must reflect on the many profound changes to the world around it. It must recognise the tremendous financial strain that many people are facing.

In this context, I want to tackle two key areas where I believe the BBC needs to change still further.

First, I want to talk about the progress the BBC has already made in becoming more efficient and how it intends to build on that progress. We must work the Licence Fee even harder to maximise the value we deliver to licence fee payers.

Secondly, I want to examine what exactly the BBC's mission and purpose should be in this changing world. In doing so, I will address head on the debate around our size and scope and explain why I believe the proposals we recently set out in the strategy review put us on the right course.

The tough financial environment for all publicly funded organisations requires us to deliver more for less and show greater restraint in areas like pay. We must never forget that the licence fee is a privilege and we must spend it wisely.

But this certainly isn't year zero for the BBC. We started this journey several years ago – taking many tough decisions on cuts.

Efficiency programmes going back 10 years have resulted in major changes already to the size and shape of the BBC. For example, overheads as a proportion of the licence fee have reduced from 24% in 1999 to 12% today.

As Whitehall looks at how to cut 25%, I could point as an example to our news operation where, with savings of 5% per annum for five years starting in 2007, we are well on our way to achieving the same target. We are closing 500 posts and will save £150 million. And the key point is that this has been done without a reduction in the quality of our journalism.

We have achieved it by process re-engineering, creating one big central newsroom servicing all our outlets. Of course, the benefit we have is that the money saved doesn't have to go to pay off debt, some of it can be reinvested in areas such as foreign coverage (such as Afghanistan), online and on-demand news.

Progress on much of this will be documented in our annual report, published soon. And we're making moves to cut talent costs too but, let me be clear from the start, our on-air talent are the lifeblood of the BBC. Without them we could not create the programmes and content that our audiences love.

At the same time, we have a responsibility to get value for money for licence fee payers. These are difficult economic times and, as I think we have recently demonstrated, we are not scared to walk away from deals that don't offer value.

Then there is the vexed issue of senior managers' pay. Here, again, I believe we have listened even if progress is not as fast as some of our critics may want.

In October, in response to a request from our governing body, the BBC Trust, we announced a plan to cut the BBC senior management pay bill by a quarter – to be achieved by a mixture of cutting the number of senior managers and by freezing pay and suspending bonuses until August 2011. The BBC's most senior directors will feel the biggest impact on their pay packets. By the end of the third year, a typical executive director will have had an effective pay cut of 14.5% compared with their take home pay in 2008.

The problem for the BBC on pay is that, like a number of other public organisations, we operate on the boundary between the public and commercial worlds. Our service is publicly owned and works to public values, but our sector, the media, is predominantly commercial and our staff can and do move between both worlds.

Once upon a time BBC staff joined for life, you never got to the top unless you had been there at least 30 years and the whole ethos was strong on culture but with an air of exclusivity. As we modernised and became more open (and I have to declare an interest here – I am a product of this openness having come back to the BBC after a long spell outside) so our pay structure had to make moves to reflect the commercial world, even though everyone who came and worked for the BBC did so at a discount.

We were not alone in this – the NHS, Royal Mail, the Universities have all been through the same process with the same impact on pay structures. The prize has been a more open culture, more responsive to change, importing the best management learning from the commercial world. The downside is a perceived unfairness as pay has risen and when it is funded from the public purse.

So, alongside these pay and bonus freezes for senior managers, we need to push the culture back a bit. There are two key elements to this again, agreed with the BBC Trust. First, a new transparent remuneration policy which will be published and will set out the clear and explicit discount against the private sector that is expected when setting senior manager pay.

Secondly, more management talent will be trained within the BBC to senior management level rather than rely on external hiring. So, for both on-air talent and senior managers, "grow our own" will increasingly be the policy from now on.

The BBC's drive to become more open, transparent and accountable has put us in the vanguard of public sector disclosure policy. It is 12 months since we first announced a step-change in the amount of information we would disclose to the public on how the BBC spends the licence fee. Since then, inexorably, quarter by quarter, we have made routine disclosures covering executive expenses, executive salaries, on-air talent and artist pay and in many other areas.

So, we have listened. We are getting leaner in size and meaner on pay but we realise this is just the start. We want to cut the running costs of the BBC by a quarter – from 12p in a licence fee pound today to under 9p by the end of the Charter.

And the result will be to reinvest savings in new UK programmes for our audiences. From 2013, at least 90p in every licence fee pound will be spent on high-quality content and getting it to audiences.

This stable investment through the privilege of the licence fee is absolutely vital to sustaining the creative economies through tough times.

Research carried out by Deloitte has shown that the BBC contributed at least £7.7bn to the UK economy in 2008/09. This means we generate over two pounds of economic value for every pound of the licence fee.

So to my second key question – what should the BBC's mission and purpose be in this changing world and "age of austerity"?

We carried out a fundamental review of our strategy last year. In doing so, the key thing was to first start with the right question.

Not with: How big should the BBC be, or which way is the political wind blowing? We started with: What is the BBC for?

Get the answer to that right and everything else – editorial priorities, size and scope, role online – everything else flows from it.

The answer is simple, we have a constant and enduring mission: to inform, educate and entertain audiences with great programmes – content of high quality, originality and value.

That is not up for debate and must always drive everything we do.

We must never forget the idea of the BBC still matters – and what it does is arguably more important in tough financial times.

And contrary to what might sometimes be written in the papers, the public still hugely value the BBC.

A survey for the BBC Trust last year showed 85% of adults said that they would miss the BBC if it wasn't there.

And an overwhelming majority, 77%, think the BBC is an institution people should be proud of – up from 68% in an equivalent ICM poll carried out five years ago. Most, 63%, also think it provides good value for money – up from 59% in 2004.

This doesn't mean of course that we can simply rest on our laurels.

As I think I have indicated today, we recognise we are not perfect, we should be scrutinised and at times we should have done better – but the BBC does deliver something important to Britain ( and I don't just mean World Cup coverage!). Our audiences vote with their feet – or should I say eyes and ears? Well over 90% of them use us at least once each week despite all the increased competition.

The BBC is different because it is owned by the public and it carries out its mission within a public space – its programming can be independent of pressures from commercial considerations or from government.

The BBC's public space is one where everyone can enter, no matter how wealthy or poor they are, and within which they can share ideas, cultures, experiences and debate the great issues of the day. It provide the great "water cooler" moments, whether from the live Eastenders or the 11.5m who watched David Cameron enter Downing Street on the evening of 11 May.

There are no pay walls in public space, no barriers between the public and the news, services and information they need. The BBC is like our libraries, universities, museums, national parks – it is one of a plethora of institutions without which Britain would not be Britain.

The BBC has achieved this position by embracing change – from radio, through television, from analogue to digital. The widespread prediction that we would lose relevance amid a new ubiquity of content has proved false. Indeed, our role as a trusted guide and setter of standards may even have become more important.

Because the external environment has changed beyond recognition – we must respond and change, too. We need to articulate our public service mission and our values more clearly and consistently than ever before. And that also means being clearer about our boundaries and knowing our limits.

So, what does the strategy review mean for audiences and how must we maximise the value of their investment?

First, and most importantly, it recognises that our public space has to be populated with outstanding output.

We will re-focus licence fee investment around five clear priorities: world-class journalism; inspiring knowledge, culture and music; ambitious UK drama and comedy; outstanding children's content; and events of universal resonance – like Sunday's England World Cup game, for example.

We will prioritise the areas which most clearly build public value and which are most at risk of being ignored or under-invested in by commercial players. We will curtail our spending on acquired programmes and invest in UK production.

Creatively, I believe what the BBC provides is consistently strong and often exceptional. But we can go even further in lifting quality and ambition and delivering more innovative ideas.

Secondly, we will do fewer things better. And we will be clearer about our limits and boundaries.

In the debate about size and scope, it is, however, important to put in some context.

What is rarely acknowledged is that the BBC's size relative to the rest of the industry is actually falling. Forget about the last century where the BBC went from being a monopoly to one of three and then more players. Just focus on the last 10 years. In 2000, the licence fee accounted for about 30% of total broadcasting revenues – today it is only around 25% and soon it could be less than a fifth.

However, in striving to stay relevant, we have sometimes strayed from our purpose or crossed boundaries we should not have. The strategy review has put us firmly on track.

And after years of expansion of our services in the UK, we have proposed some important reductions. The review is ambitious in its aim to set boundaries and leave space for others.

Take the online space, for example. Our BBC online site is widely admired – and we will remain absolutely committed to free online news as a core feature in our public space.

However, our online services have sometimes grown in too many directions for their own good. Our critics have a point when they say that the limits of what the BBC will and won't do in the online space are unclear.

Our proposals will cut planned investment and impose a clear remit on BBC Online, re-shaping the service with a focus on the five editorial priorities, and those alone.

This will re-balance BBC Online with an emphasis on distinctive content and services.

The point of all our reductions is not to diminish the service we offer to the public, but rather to focus the licence fee and the creative energy of the BBC on delivering the highest quality and the maximum public value.

Finally, we are also pledging to guarantee access. This is an important point as distribution channels proliferate. We will ensure that the public always has access to independent, impartial news and other forms of high quality content, free at the point of use, across a range of platforms.

We will back open standards and get behind projects like Freeview, Freesat and Canvas to make sure that we end up with a digital world which is open to all.

We will work in partnership with others in the media, but also in the creative and voluntary sectors and in the world of arts and science to ensure the power of the BBC means that together we deliver more than the sum of our parts.

We will open up the BBC's programme library – this is one of the big themes in the strategy – and work with other institutions like the British Library and the BFI to help them open up their archives as well.

The fact of the matter is that we can only do all this if we make the licence fee work harder.

So, if we are to continue to maintain the public's trust, we have to accelerate the changes we are making – by openness and honesty, by listening carefully to audiences and by delivering even greater value for money.

By travelling even faster on this journey of change, we can make sure the BBC remains a touchstone for great British creativity.

In difficult times, the British public want us to remain central to their lives and the life of the whole UK – accurate, impartial, creative, original and passionate about what we do – even if we can't always get England to win!