PKF report on the future funding needs of the BBC

DCMS has published an independent report by PKF on the funding needs of the BBC. The report considers (i) the BBC's efficiency and value for money proposals; (ii) the assumptions supporting the BBC's assessment of its funding needs; and (iii) the role of the BBC's commercial services in generating income for the BBC.

PKF raises various questions about the basis for the BBC's proposals for a licence fee settlement of RPI + 2.3 per cent per year for the period 2007/2008 to 2013/2014. These include whether the policy proposals in the Green Paper for the BBC to deliver high-quality programming require an additional £1.4 billion over the next licence fee period, and whether the BBC has under-estimated the scope for achieving ongoing efficiency improvements (PKF finds a low level of efficiency improvement has been realised in the five years 2000/2001 to 2004/2005). The report also seems to suggest that the BBC has been disingenuous in how it presented its proposals: for example, the use made of the term "super-inflation", and the inclusion of increased income due to growth in the number of households as part of the BBC's projected savings under "self-help".

In relation to the BBC's commercial services, PKF recommends that the businesses require a higher rate of return than has historically been achieved and that the BBC reconsiders the rationale for their continuation. Although outside the scope of the PKF report, evidence that specific BBC commercial services were being propped up by licence fee income could indicate the existence of illegal State aid.

For further information or advice please contact Franck Latrémolière.

Filed under BBC, DCMS, Media, Price controls.

Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.

About Reckon