MPs call on BBC to cut ‘staggering’ running costs of its estate

The body which oversees UK public spending has criticised the way the BBC is running its estate following the publication of a National Audit Office (NAO) report. While the report praises certain aspects of the way the estate is managed, especially its strategy of rationalising space, the Public Accounts Committee (PAC) is heavily critical of the BBC’s failure to meet its target of costs capped at 6 percent of licence fee income and the way the costs of some buildings are unacceptably high, including at the revamped Broadcasting House in London (above). According to the PAC, the running cost of the building is significantly more than others in the same area and around three times higher than a UK average. The BBC defended itself, highlighting progress in many parts of its estate and claiming that such comparisons did not stand up to scrutiny.

Margaret Hodge, Chair of the PAC, said in an official statement: “While it is good news that the BBC has made progress in shrinking its estate, it needs to make much better use of some of its most expensive buildings. The huge cost of Broadcasting House is the single most important reason why the overall cost of running the BBC’s main properties is well above external benchmarks. And it’s not just reducing running costs where the BBC needs to take action. It also needs to get more out of its estate and rid of all of the space it no longer needs. I am deeply concerned that the BBC sold Television Centre, a publicly funded asset, to companies that used Luxembourg-based financing structures when we believe so many of these financing structures are used to avoid paying tax. I look forward to discussing how the BBC plans to make better use of its buildings to achieve good value for money for the licence-fee payer when it appears before my Committee on 25 February.”

In response a  BBC spokesperson pointed out that the costs of the estate were distorted by the high costs of Broadcasting House and said: ”Broadcasting House is not comparable to other buildings. It makes around half of all BBC output, houses the biggest newsroom in Europe and broadcasts globally 24 hours a day every day of the week, which requires unique levels of technology and security.”

The key findings of the NAO report include:

• In 2013-14, the BBC spent £273m on running its 475,000 sq. m. estate, around a third of it on Broadcasting House, equivalent to just over 7 percent of its annual licence fee income.
• The value of the estate on the BBC’s balance sheet at 31 March 2014 was £839m of which £712m related to properties leased by the BBC.
• The BBC has reduced the size of its estate by 29 percent over the past 15 years through a rationalisation programme that has included the development of New Broadcasting House and the relocation of a number of services and functions to Media City in Salford. Around half of all BBC employees are now based outside London.
• The average BBC employee occupied 12 sq. m. of workspace in Spring 2013 compared to 14.8 sq. m. five years earlier.
• Ageing buildings in Cardiff, Bristol and Belfast require extensive maintenance and had poor infrastructure that disrupted programme making. The BBC has earmarked many of these for improvement and replacement including the creation of a new centre in Cardiff.
• The BBC did not appear to use the 6 percent target to manage its overall estate costs and it has since adopted a revised target: to keep any increases in estate costs below increases in the retail price index

Nick Prettejohn, BBC Trust Chair of the VFM committee, said: “The BBC has reduced the size of the estate by almost a third while at the same time adding new TV channels and radio stations, and modernising its buildings. These are significant achievements and I am pleased that the NAO have recognised the good progress made. Today’s report also gives a clear steer on where further improvements can be made and the Trust will continue to track progress to make sure the NAO’s recommendations are implemented in full.”

Amyas Morse, head of the National Audit Office, said: “The BBC has made good progress in upgrading its estate but it will need to press ahead with its plans to make better use of space to achieve value for money. The BBC will also need to maintain enough flexibility in its leasehold and freehold portfolio to allow its estate to adapt quickly to the changing needs of an organization operating in a fast-changing sector.”