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Background to the ´óÏó´«Ã½ settlement

Michael Crick | 10:56 UK time, Wednesday, 20 October 2010

As I reported yesterday, in future the cost of the ´óÏó´«Ã½ World Service - currently £272m a year - will have to come from the ´óÏó´«Ã½ licence fee rather than the Foreign Office budget, and the licence fee has been frozen for six years.

Here is some background to how the story and the deal unfolded.

I'm sure he won't mind me saying so, but it Chris Bryant MP who first mentioned the possible wheeze to me.

It was late one night during the Labour conference, that the he suggested this government might try to make savings in the Foreign Office budget by transfering the £272m annual budget of the ´óÏó´«Ã½ World Service directly to the ´óÏó´«Ã½, to paid out of income from the licence fee.

When a Newsnight colleague tested this idea with a senior minister several days later - ie. less than two weeks ago - he was surprised to be told that the ´óÏó´«Ã½ itself had actually proposed the idea, but it had subsequently been rejected.

Why should the ´óÏó´«Ã½ suggest an idea which would only add a huge extra burden to ´óÏó´«Ã½ budgets? Quite simple, ´óÏó´«Ã½ managers realised they were in bad odour with many leading Conservatives, what with all the talk of high ´óÏó´«Ã½ salaries, inefficiency, waste and so on.

Far better for the ´óÏó´«Ã½ to come up with a way for the corporation to contribute its bit to the Spending Review process than have something far worse imposed from above.

Then suddenly, on Monday of last week, the World Service idea was back on the agenda, as negotiations started between the Culture, Media and Sport Department (DCMS) and ´óÏó´«Ã½ big-wigs.

The idea was to agree the World Service budget transfer as part of a bigger deal which would freeze and secure the licence fee until 2017. The move also made logical sense in that World Service journalists will soon be housed in the same "West One" building as other ´óÏó´«Ã½ journalists.

But the new urgency on the government's part seemed to stem from the realisation last week that cuts in both defence and the schools budget would not be as great as the Treasury had hoped. The hunt was on for more economies. (Indeed the Justice Department, having "settled" with the Treasury many weeks ago, was among a few departments asked to cough up more cuts.)

Then on Monday, as first reported on this blog, ´óÏó´«Ã½ bosses were hit by the bombshell that the Treasury now instead planned something far more burdensome to the ´óÏó´«Ã½ - transfering the £556m cost of providing free TV licences for over-75s from the books of the Department of Work and Pensions to the ´óÏó´«Ã½.

Indeed, I'm told that for several hours on Monday ´óÏó´«Ã½ bosses thought this decision had actually been made by the Treasury and was about to be imposed on them. As I reported here, they planned to fight it "tooth and nail".

Several government sources have said this was a genuine plan, though others suggest the free TV licence transfer idea was merely a negotiating ploy.

On Monday evening ´óÏó´«Ã½ bosses suddenly sensed the free licences for the elderly option had gone away. Instead they were invited for more talks at the DCMS, and the ´óÏó´«Ã½ Director-General Mark Thompson had to be summoned back from the train he was taking home to Oxford.

Talks went on late into the night and resumed early on Tuesday morning, with negotiators getting very little sleep. And the deal was struck - a complicated package which normally would have taken months to settle.

What's odd is that Downing Street was insisting on Monday afternoon that all the departmental settlements were "complete", and the CSR documents were about to go to the printers. And yet this huge saving to the Foreign Office budget from having lost responsibility for the World Service wasn't agreed for almost another 24 hours.
.

Comments

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    Also, given that the UK public already paid for the WS via taxes, moving it to Licence Fee funding certainly removes the taint of "state broadcaster" from the WS, which was happening.

    Also, the ´óÏó´«Ã½ will be able to decide which WS services make sense, not the FO, which is also, despite the cost, a plus.

  • Comment number 3.

    'Fungibility' (ie 'swings and roundabouts') means, however, that the net benefit to the FCO budget as a result of this noble gesture by ´óÏó´«Ã½ execs
    offering to load the costs of the (excellent) ´óÏó´«Ã½ World Service onto the
    backs of willing licencepayers like myself may still end up being wasted
    by the FCO and William Hague, and DCMS's Jeremy Hunt, on continuing the
    state subsidy to the dreadful, bloated British Council - which continues
    to screw up public diplomacy and promotion of UK's education and culture
    overseas from a privileged position in relation to FCO overseas missions,
    and now with taxpayer-funded exchange rate protection restored (?) and a
    further licence from FCO, DCMS & HM Treasury to be even more aggressively
    'commercial' in its money-grabbing operations which are anti-competitive,
    unfair to the genuine private sector, cut across the role of the devolved
    Governments in overseas promotion of education & culture (devolved under
    the 1998 Acts), and - as in the case of British Council's tax-evasion in Russia and last week's toadying support for a fashion show organised by
    the daughter of the Uzbekh dictator! - generally bring this country into
    disrepute. Still: at least The British Council can no longer claim that they are a genuine 'arm's length body' 'like ´óÏó´«Ã½ World Service' as they
    tried to do immediately after this Quango was reprieved in the 'Review
    of Public Bodies' last week which they immediately rebranded as an 'Arm's
    length bodies review' in their selfserving British Council press release.

    And given the close business relationship between the Culture Secretary's
    old company 'Hotcourses' and British Council's 'Education UK' - and Ffion
    Hague's previous role as a British Council Trustee, is it any wonder that
    this chameleon 'Quango' escapes again as an even more commercial charity?

  • Comment number 4.

  • Comment number 5.

  • Comment number 6.

    A reminder for ´óÏó´«Ã½'s Newsnight about The British Council's 'Gravy Train'
    and Martin Davidson's fatuous claims that they are 'a bit like the ´óÏó´«Ã½'!

  • Comment number 7.

    rejoice, rejoice, that you are blessed with the best broadcasting organisation in the world.....so count your blessings....

  • Comment number 8.

    Interesting too that, in response to much external and Parliamentary criticism, the ´óÏó´«Ã½ is now being required by the Tories to curb its activities in the regions so as to allow room for commercial radio
    - yet British Council which still receives a hefty FCO subsidy has
    to become even more commercial (according to the Spending Review)
    even if this continues to upset the private sector, real charities
    and the devolved administrations of Scotland, Wales & N Ireland not
    to mention other arts bodies whose grants from DCMS are being cut??

    The problems associated with the anomalous status of this bloated
    Quango are laid bare for all to see in a fascinating exchange of
    letters posted on this website where FCO Minister of State Jeremy
    Browne MP (who is a Liberal Democrat) tries to explain away this
    to the Tory FCO Under-Secretary of State Henry Bellingham MP who
    as recently as September 2010 was raising this anomaly with FCO
    on behalf of one of his constituents who's posted up the letter!



    As for the reference to Scotland in this letter between FCO Ministers,
    in which Mr Browne suggests that The British Council is regulated in
    England and Wales by the (recently reprieved) Charity Commission and
    the Office of The Scottish Charity Regulator whose numbers British
    Council feature on their websites across the world, the line from
    OSCR in Scotland is that they are powerless to act on complaints about British Council as they are not the 'lead regulator' for BC - which is the English Charity Commission. Frustration over OSCR's lack of powers
    over 'cross-border' charities - such as British Council - has recently
    prompted the Chief Executive of The Office of The Charity Regulator in
    Scotland to seek additional powers.

  • Comment number 9.

    I see 'The Telegraph' is reporting that £40 million of ring-fenced DfID
    budget is being used to shore up the finances of the British Council? If
    true that is a damned disgrace ...

  • Comment number 10.

    ...which normally would have taken months..

    that's the bbc bureaucracy mindset for you. a land of endless meetings. Creatives have often complained of that bbc culture that buries and kills imagination?


    the bbc now look like deckchair shufflers pretending the end is not in sight?

    bbc will probably wreck the world service projection of the 1950s Home Service England propaganda the FO liked so much. The ´óÏó´«Ã½ will want to make it edgy and aimed at yoof where 'talent' can 'shift the paradigm'. How exciting that will be. not.

    the good news for the bbc is that there will be a licence fee for 6 years. but the writing is on the wall?

  • Comment number 11.

    Tory Culture Secretary and 'Hotcourses' founder Jeremy Hunt MP has of course recently stepped back from his role in this company, which has
    intimate links with British Council and BC's so-called "Education UK":



    So questions should I guess be addressed to .... Estelle Morris, the former Labour Secretary of State for Education? 'Big Society' - or a
    cosy wee Whitehall world ......??? I think we should be told ......!!

  • Comment number 12.

    One question, for example, for Culture Secretary Jeremy Hunt MP and all the other apologists for British Council and their Education UK website
    might be: 'Since when has Wolverhampton been in Wales, Jeremy?'!

  • Comment number 13.

    ´óÏó´«Ã½ - THE VENICE OF THE NORTH (#7)

    There is a difference however. The ravages of time have degraded Venice but the rampaging of the pisserati has besmirched the ´óÏó´«Ã½'s fair face.

    It hurts all the more that we once had guaranteed excellence - even elegance (like Venice) but now we have edgy fun, going forward.

  • Comment number 14.

    With all these cuts for ´óÏó´«Ã½ people and the DCMS, next year's 'débutante'
    balls may turn into real cat-fights as 'hot job-seekers' try to find the right hot courses to get themselves new jobs? Nice work if u can get it:



    The new ruling class!

  • Comment number 15.

    Michael, I keep reading about the ´óÏó´«Ã½'s "16% cut". But is it really only 16%?

    Apparently if you add the six extra costs that the ´óÏó´«Ã½ is expected to take on that represents a 9% cut (the fig came from David Elstein, ex-C5).

    Plus we must add whatever the inflation figure is.

    But how do we know what inflation will be over the coming years? You'll have heard talk in the financial papers recently about possible QE2 in the UK and US. I think it was the Wall Street Journal (20th Oct?) talked of Britain deliberately inflating away some of its debt. If true, the government will know this. If real inflation figure turns out to average 5-6% (quite possible) do the maths on the compound interest over 6 years!

    The final figure is very unlikely to be less than a 25% reduction (16% + 9%) but could be a lot worse.

    Better prepare those re-runs of "Whatever Happened to the Likely Lads?" and "Steptoe and Son"!


  • Comment number 16.

    Note the way the FT reported this (front-page story) - yesterday morning:

    "The ´óÏó´«Ã½ has stunned its staff by agreeing to a funding cut of at least £340m, or one-tenth of the licence fee, equivalent to the budget of all
    of its national radio stations combined."

    Yet FCO continues to pick up a tab of several hundred millions for the useless freeloaders at The British Council .. who are also to get £40m
    from the ring-fenced UK DfID aid budget for poncing around the world??

    And foreign-exchange rate cover .. plus freedom to engage in aggressive
    anti-competitive commercial activity trading as a 'charity' ..........
    while Britain (according to yeasterday's Guardian) 'is to double to
    £3.8 billion the amount of 'aid' money spent on war-torn countries such as Afghanistan, raising fears among charities that national security priorities will determine development spending' as 'An Oxfam policy adviser also expressed concerns about aid being delivered through 'military structures' that could risk civilian workers.'

    In the cold light of dawn, we all need to sit down and start asking some serious questions about the departmental detail and full implications of all the paper released yesterday - including some of the above issues ..

  • Comment number 17.

    I think it was, as it certainly was for me and millions of other investors around the world, that when Alistair Darling, by his own admission, blocked the Barclay's Bank (who have never taken a penny of bail-out government paper) take-over of the investment division of Lehman's Bank, which because his decision was understandably deemed to be irrational by the players on the global markets, caused the markets to collapse, that the nature of reality changed.

    Of course for some that realisation would be slower than for others, who like me saw a six figure loss in a single figure hourly timescale, than for others. I guess it was predictable that the ´óÏó´«Ã½, cocooned in it's undemocratic and, as some would say extortion-enforced niche, would go into total denial about the new global economic reality Darling had created.

    It consoles me greatly when I consider that in order to watch ITV or Sky but still am obliged to pay the Beeb's protection money, that their day will come! Something so utterly monopolistic and economically indefensible cannot last.

  • Comment number 18.

    PS- Really, why does the UK have to preach it's tarnished and sanctimonious message to the rest of the world anyway? Blair destroyed the credibility of anything enlightened and meaningful this country could possibly ever say, and tragically destroying so much more, including Dr. Kelly's life and his family's happiness, that I truly believe that the world would be a better place if we shut up and let the rest get on with it.

    More than any other nation on this planet, or even the entire galaxy for all I know, we seriously need to get over ourselves. As we have already seen, the Iranians are well prepared to humiliate us at every opportunity!
    Let's suck up the shame our politicians have inflicted on us and walk the path of humility from now on. Hopefully then no-one will bother to invade us and thus acquire our budget deficit for their troubles!! LOL.

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