Publication - Corporate report

Policy Paper on BBC Charter Renewal (September 2016)

Published: 9 Sep 2016
Culture and Major Events Directorate
Part of:
Arts, culture and sport

Our updated policy position on BBC Charter Renewal.

Policy Paper on BBC Charter Renewal (September 2016)
Annex A

Annex A

Part 1: Summary of Revenue in Scotland

Licence Fee

  • Total Licence Fee income from Scotland in 2014/15 is approximately £323 million. [1]

TV Licences for over-75s

Impact of new arrangements for the over-75s

  • The UK Government announced on the 6 July 2015 that the BBC is to cover the cost of providing free television licences for over-75s. This will be will be phased in from 2018-19, with the BBC taking on the full costs from 2020-21. It is understood that this settlement is still open for further negotiation during BBC Charter renewal process.
  • According to the Office of Budget Responsibility ( OBR) [2] , over the period 2015-16 to 2010-21 there will be a 19.9% reduction in the BBC budget in real terms - from £3.9 billion in 2015-16 to £3.1 billion in 2020-21 [3] - compared to a 0.8 per cent real fall in assumed total public services spending over the same period. This is largely driven by the withdrawal of funding for free TV Licences for the over-75s. (See Figure 1)

Figure 1 Real BBC Current Expenditure, £ Billions, 2015-16 Prices

Figure 1 Real BBC Current Expenditure, £ Billions, 2015-16 Prices

Source: Office for Budget Responsibility's Economic and fiscal outlook published on 8 July 2015.

  • At the end of March 2014 approximately 4.33 million free over-75 TV Licences had been issued at a cost of approximately £607.8 million to the Department for Work and Pensions ( DWP).
  • When the UK Government begins to withdraw compensating funding for the over 75s, the OBR assumes that the BBC will reduce its spending by almost the same amount, albeit with some small and diminishing offsetting contribution from its reserves.

Policy responses

  • As part of these new arrangements, the UK Government will also look to the BBC modernising the TV Licence fee (to eventually cover public service broadcast via catch-up TV) and anticipates that the TV Licence fee will increase in line with consumer price index ( CPI) over the next BBC Charter period.
  • In the BBC report BRITISH BOLD CREATIVE, the BBC reveal that they anticipate that they will have to save £700 million a year by 2022 to offset the cost of free licence fees for the over-75s plus covering a £150 million funding gap from the so-called 'iPlayer loophole'. This represents the close to 20% expected BBC spend in 2016/17 (an average annual savings of around 3.5 per cent a year over the next five years). [4]
  • It has been reported in the media that the over-75s could be asked to make a voluntary contribution towards their TV licence under an initiative by the BBC. [5] Independent experts are expected to advise on how the BBC can go about attracting voluntary contributions from people over the age of 75.

Impact of demographic change

  • Scotland's UK share of over-75s is largely stable looking forward. However, the TV Licence tax base (both in terms of population and households) is likely to broaden at a slower pace in Scotland, than compared to the rest of the UK.

BBC Scotland Studios

  • At the BBC Scotland's headquarters in Glasgow, the BBC offer a full range of HD studio and post production facilities and production support areas tailored to client programme requirements. The BBC Scotland Studios and post production teams offer their wealth of experience working across a full range of network and local productions. [6]
  • BBC Scotland work with BBC clients as well as many independent production companies, and offer a flexible, client-focused approach to help deliver client programme needs.

BBC Worldwide Sales and Shareholder Returns to the BBC

  • BBC Worldwide Limited is the main commercial arm and a wholly owned subsidiary of the BBC. BBC Worldwide exists to support the BBC public service mission and to maximise profits on its behalf. It does this through investing in, commercialising and showcasing content from the BBC around the world, in a way that is consistent with BBC standards and values. [7]
    • In 2014/15, BBC Worldwide invested £94.4 million in BBC commissions (up from £88.9 million in 2013/14) from both BBC Production and from UK independents.
    • In 2014/15, BBC Worldwide generated headline profits of £138.6 million and headline sales of over £1 billion and returned £226.5 million to the BBC (up from £173.8 million in 2013/14), with shareholder returns up by almost one-third. This is equivalent to 12.6 per cent of total BBC Television content spend, up from 10.1 per cent in 2013/14.

Part Two - Current expenditure by BBC in Scotland

BBC Scotland Spend in Scotland

  • BBC Scotland provided the Education & Culture Committee, in their submitted evidence, spending figures for BBC Scotland in Scotland for the financial year 2014-15.
  • According to the evidence presented, expenditure by BBC Scotland in Scotland was £190.5 million in 2014.15. This spend is comprised of two broad categories:
    • Network Content - where editorial control and budgets lie with the BBC; and,
    • Local Content - where editorial and budget control lie with BBC Scotland.
  • Table 1 below provides a summary of the financial information provided by BBC in their response to a request for additional information by the Education & Culture Committee.

Table 1 BBC Scotland Expenditure in Scotland for 2014-15

BBC Commission Network Content £'m* Notes (Provided by BBC Scotland)
Television 74.1 All OFCOM compliant.
Radio 4.9 Drama for R4. Orchestra for R3
Online 3.3 Knowledge & Learning, Arts Online
Network Total 82.3
BBC Scotland Commission Local Content by Service
BBC One 49.4 River City, News/Current Affairs, Events, Comedy & Sport
BBC Two 18.5 Include Factual Documentaries, Scotland 2015 and Sport
BBC ALBA 6.0 Include An-La, Eorpa & Childrens
Radio Scotland 21.7 Multi Genre
Radio Nan Gaidhael 3.7 Multi Genre
Online & Red Button 4.6 Multi Genre, Knowledge & Learning (Bitesize etc.)
Scottish Symphony Orchestra 4.3 Costs of SSO excluding R3 income
Local Content Total 108.2
Total 190.5

* Expenditure figures reflects the full cost of providing content services across the identified platforms.

  • Expenditure figures present in the Table 1 presents the BBC Scotland spend in Scotland and reflects the full cost of providing content services across the identified platforms.
  • BBC Scotland report that any allocations of central support & distribution costs are additional to these figures. Such costs would include distribution, central policy & strategy, finance & operations and costs of facilitating external sales of studios and facilities.
  • When these allocations of central support and distribution costs are added to BBC Scotland spend in Scotland the total BBC spend support the BBC's activities in Scotland sums to over £200 million. [8]

Local Content by Service

Local TV Production

  • The BBC reports that BBC Scotland spend £108.2 million on local content. This is the BBC spend on all 'local' Scottish output by BBC Scotland on TV, radio, online, etc.
  • Within this, BBC Scotland spent £73.9 million in 2014/15 on TV production in Scotland delivering 'Scottish' programming for the BBC Scotland opt-out slots; that is local content for BBC One, BBC Two and BBC ALBA.
    • Within the budget to deliver 'local' Scottish opt-out programming, BBC Scotland's expenditure on original production for Scotland was £35 million in 2014/15. This is the 'cash spend', otherwise known as the 'above the line expenditure' on commissioning original TV productions for the local market from both in-house and independent production teams ( i.e. for the writers, creative, talent, etc.).
    • In Committee evidence on 12th January, this information was confirmed by Anne Bulford, Managing Director, Finance and Operations, BBC Scotland ( BBC):
      • "£35 million of cash spend - that number has been spoken about quite a lot - which is for above-the-line commissioning for writers, directors, artists and production team talent."
    • The difference between the £35 million for 'above the line' commissioning of original TV content for Scotland and the overall local TV content budget for Scotland of £73.9 million is that the larger sum includes overheads for production (including studio costs, rights, outside broadcast, property, IT etc). This information has been confirmed by Anne Bulford in committee evidence on 12th January:
      • "The other half of that money [£38.9m = £73.9m - £35m] is the costs of production studios, post production, outside broadcast rights, executive producers, property and IT; all of that spend is integral to the production budget."

Local Radio and Other Local Content

  • BBC Scotland spent £25.4 million in 2014/15 on BBC Radio Scotland, BBC Radio Nan Gaidhael.
  • BBC Scotland spent £8.9 million in 2014/15 on BBC Online (including Red Button) and the Scottish Symphony Orchestra.

Network Content

  • In 2014/15, BBC Scotland spend in Scotland on network content was £83.2 million. The bulk of this which was for BBC network TV production.
    • In 2014/15, BBC Scotland spend in Scotland on network TV content was £74.1 million. This is TV content commissioned by the BBC One and BBC Two networks which is defined as 'Scottish' and produced by BBC Scotland.
    • In 2014/15, BBC Scotland spend in Scotland on network radio and online content was £4.9 million and £3.3 million respectively.

'Scottish' Network TV Production

  • Expenditure on network television spend in Scotland is calculated by summing the value of network content produced in Scotland according to the definition set by the independent regulator and competition authority for the UK communications industries (Ofcom).
  • Eligible 'Scottish' network spend is defined as first-run, UK-made Network-commissioned programmes, excluding News, content produced in Scotland which meets the Ofcom definition of what qualifies as 'Scottish'. Ofcom notes that, in order to qualify as a Regional Production, two out of the three of the following criteria must be met:

i) The production company must have a substantive business and production based in Scotland. A base will be taken to be substantive if it is the usual place of employment of executives managing the regional business, of senior personnel involved in the production in question, and of senior personnel involved in seeking programme commissions;

ii) At least 70% of the production budget (excluding the cost of on-screen talent, archive material, sports rights, competition prize-money and copyright costs) must be spent in Scotland; and,

iii) At least 50% of the production talent ( i.e. not on-screen talent) by cost must have their usual place of employment in Scotland. Freelancers without a usual place of employment in Scotland will nonetheless count for this purpose if they live in Scotland.

So-called 'Lift and Shift'

  • It is important to note that the BBC spending figures in Scotland include so called `lift and shift` which can sometimes mean staff are brought in just to use studio space at Pacific Quay and then return back to London.
  • Scotland needs investment in production that maximises the economic impacts to the Scottish economy rather than BBC Scotland simply being the `name on the cheque` for administrative reasons.
  • The economic impact of BBC output produced in Scotland would be far greater if the production processes were truly embedded with local suppliers. With 'lift and shift', there can be little or no embedding within the creative industries in Scotland and the wider Scottish economy.
  • Although 'lift and shift' does generate economic activity in Scotland, changes to the existing system, such as simply realigning all of the network spend the BBC currently spend on network production in Scotland to BBC Scotland commissioning content from indigenous producers, could ensure that this expenditure generates as much as £30 million further spending across the wider economy in Scotland.

Expenditure in Scotland by In-house & Independent (Indie) Production Houses

Table 2 BBC Scotland Expenditure in Scotland, 2014-15, In-house & Indie

BBC Commission Network Content Total (£'m)* In-house (£'m) Indie (£'m)
Television 74.1 14.5 59.6
Radio 4.9 4.6 0.3
Online & Red Button 3.3 3.3 0.0
Network Total 82.3 22.4 59.9
BBC Scotland Commission Local Content by Service
BBC One 49.4 42.8 6.6
BBC Two 18.5 14.6 3.9
BBC ALBA 6.0 6.0 0.0
Radio Scotland 21.7 21.2 0.5
Radio Nan Gaidhael 3.7 3.6 0.1
Online & Red Button 4.6 4.4 0.2
Scottish Symphony Orchestra 4.3 4.3 0.0
Local Content Total 108.2 96.9 11.3
Total 190.5 119.3 71.2

* Expenditure figures reflects the full cost of providing content services across the identified platforms.

  • Note that expenditure on BBC ALBA (above) reflects BBC Scotland funding only.

BBC Scotland Annual Accounts and Statement

  • Financial information relating to Scotland is contained with the BBC's Annual Report but only BBC as a consolidated Group produces annual accounts.
  • The BBC's accounts are subject to an annual external audit (currently performed by Ernst & Young).
  • Consideration by the BBC is currently being given as to how statistical information pertaining to each of the nations, including Scotland, may best be incorporated and presented within the BBC Annual Report and Accounts in the future.


Email: Jo Ewesor,