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Executive pay - explaining the figures

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Lucy Adams Lucy Adams | 12:43 UK time, Tuesday, 3 November 2009

Not surprisingly, the BBC Trust's announcement last week that they had agreed to the DG's proposals to cut the total pay bill of senior managers at the BBC by 25% attracted quite a bit of comment. I was particularly interested to read David Elstein's blog yesterday in which he argued that "the sums don't add up" - I'm happy to respond to his challenge and explain how they do.

First of all, who are we talking about here? It is the nine Executive Board directors and 634 senior managers who are employed in the BBC's public service operations, and so whose salaries are paid for out of the licence fee. The supposed "missing" managers Elstein refers to are those who are not funded by the licence fee at all, but whose costs are met entirely by the BBC's commercial operations - not just BBC Worldwide, but also at BBC Studios and Post Production.

Next, how will cutting 114 jobs from this total save £20m? The answer is that it won't. Cutting the total number of senior managers was only one part of our proposal. The £20m being saved is from the BBC's total senior managers' pay bill, not managers' basic salaries alone. Alongside the reduction in the total number of managers - a large proportion of which will of course be achieved through natural churn, retirements and the conclusion of major projects such as managing the transition to Salford - we are also freezing bonuses for between two and four years at least, depending on grade. Where we do recruit replacements for senior managers who leave, which will only be after a stringent review of the post, it will be at a substantially lower salary as we reflect the realities of the current economic climate.

David Elstein concludes that "no one currently employed takes a cut at all". In fact, senior managers will earn 11-14.5% less in real terms by August 2013 than they did last year. Last week's report showed the BBC is already paying between 25% and 65% less than our commercial equivalents. In future we anticipate this could be up to 80% less.

We believe this is an achievable way of delivering greater value for money for the licence fee payer - whilst still providing the type of outstanding public service broadcasting the BBC is renowned for across the world.

(Lucy Adams is Director of BBC People. This post is a transcript of a response sent to today's Guardian)

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