BBC Annual Report and Accounts 2005/2006

British Broadcasting Corporation
Broadcasting House
London W1A 1AA
bbc.co.uk© BBC 2006

Annual Repor t andAccounts 2005/2006

Purpose, vision and values

The BBC’s purpose is to enrich people’s lives with programmes
and services that inform, educate and entertain
The BBC’s vision is to be the most creative organisation in the world
Values■ Trust is the foundation of the BBC:

we are independent, impartial and honest■ Audiences are at the heart of everything we do■ We take pride in delivering quality and value for money■ Creativity is the lifeblood of our organisation■ We respect each other and celebrate our diversity

so that everyone can give their best
■ We are one BBC: great things happen when we work together

Contents
2 Chairman’s statement
4 Director-General’s report
6 The BBC now and in the future
10 Board of Governors
12 Executive Board
14 Governors’ review of objectives
22 The BBC at a glance
Governors’ review of services
24 Television
32 Radio
40 New Media46 News
50 BBC World Service & Global News
54 Nations & Regions
58 Governors’ review of commercial activities
60 Being accountable and responsible
68 Performance against Statements of Programme Policy commitments 2005/2006
76 Compliance
92 Financial review
95 Financial statements
140 Broadcasting facts and figures
151 Getting in touch with the BBC
152 Other information

BBC Annual Report and Accounts 2005/2006

1Chairman’s statement

This is the last annual report from the
BBC Board of Governors, which is tobe replaced under the new draft Royal
Charter by the BBC Trust. I would like to
pay tribute to the work of all Governors
over the last 80 years. The fact that theindependence of the BBC endures isdue in no small part to their robust
stewardship – sometimes in the faceof fierce onslaught from political andcommercial vested interests.
The pressing need for modernisationof the BBC’s governance arrangements
was recognised by my predecessor as
Chairman, Gavyn Davies, and the Board
has been able to build on the work heand his fellow Governors began. This work
will be completed by the Trust using the
new tools at its disposal under the newCharter: Purpose Remits, Service Licences
and Public Value Tests (for the detailsof these, see The BBC now and in the
future, page 9).
At the heart of the new arrangements
is an explicit recognition that the Trust exists
to represent the interests of licence fee
payers, not the narrow interests of the
BBC as an institution. Although the new
structures will not be in place until the newCharter takes effect, in January 2007, thepresent Board of Governors fully supports
the changes and is already operating within
the spirit of the new Charter.
As a result, the relationship between the
Board and the Executive – those charged
with the day-to-day running of the BBC –has begun to change.There is now real
separation between the two bodies, enabling
the Board to exercise independent oversightof the work of the Executive.This will
intensify in the future as the Trust uses
its new powers to ensure rigorous,
independent and fully transparent scrutinyof the work of the Executive.
2

BBC Annual Report and Accounts 2005/2006

The main function of the Trust will be toensure that licence fee payers’ expectationsof the BBC are fulfilled in terms of thequality and value for money of its services,and that the BBC remains focused on
fulfilling its six public purposes as set out
in the new draft Charter. In representing
the interests of licence fee payers, the Trust
will recognise that these interests gobeyond their direct interest in the BBC.
Licence fee payers do not exist solely on a
media diet provided by the BBC.They value
the choice of services provided by others,
and the Trust will ensure that the BBC
operates in a way that fully recognises this.
I have no doubt that the BBC Executive
will sometimes be disappointed by theoutcome of a Public Value Test – just as
private sector interests will sometimes
be disappointed. Our job as BBC Trustees
will be to ensure that the widest interestsof licence fee payers take precedence overeither of those interests.
The White Paper published earlier this year
after two years of public debate, researchand evidence-gathering represents a voteof public confidence in the BBC.The new
ten-year Charter and the maintenanceof licence fee funding offer the BBC an
enviable degree of stability in a fast-changing
media landscape.The missing piece in thejigsaw is the licence fee settlement.
For the first time, the BBC has been
completely open with the public about
the licence fee bid. Its size was based ona fully costed business plan at the timeof publication, reflecting the Government’s
plan for the BBC set out in last year’s Green
Paper. In the subsequent discussions with
the Government, the BBC has made clearthat its overriding concern is to be able tomeet the needs and expectations of licencefee payers at the lowest possible cost.
Achieving the highest possible settlement

should not be regarded as a badge ofhonour for those representing the licencefee payers on the Board of the BBC.
Much of our work as Governors thisyear has been focused on financial andorganisational change in preparation for
the new Charter. As a result I am confident
that the BBC is in good shape structurally
to begin the next stage of its development.
The BBC will end the current Charter
having met its commitment to achievea broadly zero debt position.The self-help
target of £3.3billion imposed by theGovernment for the period of the current
Charter is on track and will be exceeded.
And the Director-General’s additional
value-for-money savings target for
2005/2006 has been exceeded, making
more secure his overall target of achieving£355million of ongoing gross annual savingsby 2007/2008.
In this report we give an objective
assessment of management performance
during the year under review. Where moreneeds to be done we say so. But thegeneral picture is encouraging.The overall
reach of the BBC’s television and radio
services is broadly stable at 92.7%, andthe reach of the BBC’s online services
continues to grow rapidly. In an increasinglycompetitive context, where audiences arepresented with much increased choice, thisis a real achievement. And the achievement
is greater because it reflects no lessening ofoverall quality – indeed quite the contrary.
The BBC can take justified pride in thegrowing high quality of its overall output
this year – a judgement reflected in the
many awards it has won.
This performance has been deliveredagainst a background of understandable
staff concern over the job reductions andchanges in working practices flowing fromthe Director-General’s value for money

programme, which is designed to releasemoney to invest in more and better
output. It has also been delivered in thecontext of the exhaustive – and sometimes
exhausting – process of Charter Review.
This is not to say that the picture iscompletely positive. One issue repeatedly
raised with us in our consultations withaudiences around the UK this year is the
problem of limited digital coverage.Thoselicence fee payers affected have expressedjustified disquiet that while they contributeto the cost of the BBC’s digital output they
are unable to receive the services. We haveencouraged management to speed up theirplans – working with commercial partners– to develop a satellite equivalent of
Freeview that would solve these problems.
I’m proud to be the last Chairman ofGovernors and to have been appointed
as the first Chairman of the new Trust.
At the heart of my vision for the BBC
is the recognition that the survival of alicence-fee funded BBC depends not on
economic theory or political dogma buton the ability of the BBC to retain the
support of the overwhelming majorityof the people of the UK through thecontent and services it offers.

a brilliant comic actor, he was also an
exceptionally talented writer. He was amodest man, and even as an establishedstar he would sometimes submit scripts
to the BBC under an assumed name – hesaid he wanted to make sure they were
accepted because of their quality, notbecause of who had written them.
Ronnie Barker’s contribution to the BBCproved beyond doubt that quality andpopularity are not mutually exclusive.
Maintaining support from licence fee payers
over the ten years to come will dependon the BBC remembering that this is what
distinguishes BBC output.

Michael Grade
Chairman
14 June 2006

These can take many forms as the BBC
delivers its historic public service remit
to inform, to educate and to entertain.
But they must all share the aspiration
to set new standards of quality, whatever
the genre or distribution mechanism.
Earlier this year I took part in the memorialservice for Ronnie Barker, whose longcareer with the BBC exemplifies what I
mean.The list of his BBC hits is astonishing:
The Navy Lark, The Frost Report, The Two
Ronnies, Porridge, Open All Hours – these
are among the greatest achievements of
BBC comedy. Ronnie Barker was not just
BBC Annual Report and Accounts 2005/2006

3

Director-General’s report

The BBC is living between two worlds: theworld of traditional radio and television
broadcasting and the dizzying new worldof digital media. Our challenge is to strikethe right balance of resources and creative
energy between these two worlds and to
set the right pace of change.
Move too quickly and we risk underserving
the millions of licence fee payers who
still rely on us first and foremost foroutstanding television and radio. But move
too slow and we may find ourselves fallingbehind and losing contact with some of
our audiences altogether.
2005/2006 was a year in which the digital
revolution shifted up another gear. Monthafter month, the BBC’s website set newrecords for reach. Page impressions are
now more than three billion a month.
Live streaming, downloads, podcasts…
the public seized on each new technology
and each new trial – not for the sake ofthe technology itself, but as a new wayof receiving outstanding BBC content.
On 7 July 2005, the story of London’sagony and fortitude was told brilliantly
across the BBC’s services, from BBC
London 94.9 and Radio Five Live to BBC
News 24 and the Ten O’Clock News. But
7 July marked a new high-water markboth for bbc.co.uk as a whole and for richaudio-visual content – sound and pictures
streamed live to users across the internet.
Interestingly, what the public most wanted
to access that day was not the BBC’s own
professional reports but shaky images oftube tunnels and a shattered bus captured
on mobile phones.
The BBC’s journalism used to be a largely
one-way form of communication. Now
eyewitnesses can uplink their testimony
within seconds and bloggers can take any
national or global debate far beyond the4

BBC Annual Report and Accounts 2005/2006

radio or television studio. BBC News
remains the most popular and trusted
provider of news in the UK and – through
BBC World Service, bbc.co.uk and BBC
World – around the globe. Its reach now
exceeds 250 million people every week.
But technology and audience expectations
are changing the rules of the game by
the week.
That is why, despite the constant pressureof events – a General Election, the terrible
earthquake in Pakistan, the ongoing dramain Iraq and more besides – many of
our editors and journalists took timein 2005/2006 to think hard about whatcomes next for BBC News.Their conclusions
formed part of what we called Creative
Future, an attempt to scope the story ofeach of our major areas of content overthe next five years or so.
Creative Future has plenty to say about
technology and its creative impact: theneed, for instance, for commissioners
to think about projects across television,
radio and the web, to explore usergenerated content, to think about how
on-demand should affect what we makeand how we make it.
But it also reminded us that what counts
most of all for audiences is creative
ambition and integrity. Technology is themeans: for the BBC, the end should always
be the quality of the content itself.
There were plenty of programmes on
BBC television this year which showed
what we can achieve when we combine
innovation with talent and conviction.
Bleak House was a phenomenon, a
Dickens adaptation with as much depth
as any the BBC has ever made, butconceived as an edgy, contemporaryfeeling serial earning its place in the
midweek BBC One schedule next toEastEnders, itself in the midst of a creative
revival. And those were only two highlights
in the strongest year for BBC television
drama in more than a decade, which
included To The Ends of The Earth, Bodies,Life on Mars, ShakespeaRe-Told, and Dr Who
with a brilliant new Doctor.
Despite another heady series of Little
Britain, BBC One comedy breakthroughsproved elusive, although across television
there was a real sense of new talentand new ideas arriving on the scene:
The Catherine Tate Show, Extras, BBC
Scotland’s Still Game and The Thick Of It
stood out in a strong year on BBC Two,Three and Four. From Jonathan Ross to
Strictly Come Dancing, entertainment
remained potent on BBC One, while BBC
Two’s line-up of panel shows such as QI
and factual entertainment formats suchas The Apprentice continued to strengthen.
Of our digital services, BBC Four in particularthrived during 2005/2006, discovering abroader, bolder mix of programmes withdrama and comedy complementing its
main diet of documentary and culture.
Factual output was strong across theBBC. Planet Earth was another brilliant
combination of technical innovation withvisual artistry and storytelling of thehighest order. Arena’s ravishing two-parter
about the young Bob Dylan, No Direction
Home, and Facing the Truth from BBC
Northern Ireland, which brought together
those thrown into confrontation by thetroubles, were highlights from a powerfuland diverse documentary offer.
Of all of the BBC’s services, in some ways
Radio 1 has the hardest mission: striving
to offer a distinctive and valuable line-up
in one of the most crowded parts of thebroadcasting market – and to what inmany ways is the UK’s most discerningand demanding audience. The station’s

new strategy helped it to feel more
confident and more relevant in
2005/2006. Radio 2 consolidated its
position as the country’s most popularradio station, while Radio 3 built on the
success of The Beethoven Experience
with A Bach Christmas. The story of theBrixton Angels – convicts inside one ofBritain’s toughest jails coming together tosing Bach – was one of the most touchingbroadcast moments of the year.
Meanwhile, Radio 4 experimented
successfully with more topical debates
and more distinctive and high-profile
drama. In deciding to abandon its earlymorning medley of UK themes, thestation also sparked off a classic BBC
row as an apparently minor change at
the schedule’s margins came to standfor something much larger and more
important for listeners. After careful
reflection, the Radio 4 team decided
to stick to their original judgement, andin my view they were right to do so.
But there was an important lesson here
for the BBC: you cannot hope to please
all of the people all of the time, but –especially at a time when they have somuch choice – the BBC must never takeits audience for granted.
Our digital radio services continued tobuild their relationships with listeners,
and there was strong, innovative content
around our sports coverage and children’soffering, as well as from our nationaland regional services. There have beenlaunches too: the first modules of theDigital Curriculum (now named BBC jam)
are receiving a very positive response
from students and teachers alike, and in
the last two months we have begun apilot BBC high-definition TV service –another broadcasting first, and anotherway of trying to improve the quality thatthe public receives from the BBC.
BBC Annual Report and Accounts 2005/2006

It was also a year when the debate about
the future of the BBC reached a climax
with the publication of a Government
White Paper. This presents a picture ofa strong BBC, but not one which exists
in isolation from the rest of the market.
Despite the picture some of the BBC’s
rivals like to paint, we see the future asincreasingly dominated by partnerships –with other public bodies, with independent
producers, with other public broadcasters
and with our audiences. The transformed
relationship with PACT and the memorandaof understanding signed with various
bodies over the course of the past year
are evidence of this new approach.
Although the BBC has a good deal to be
proud of in 2005/2006, we cannot afford
to sit back and congratulate ourselves.
Audiences are urging us on: rightly, theyraise their standards all the time. We
have Creative Future to implement, digital
switchover to lead, and we have changes
to make to our own management systems
to respond to the introduction of the
BBC Trust.
We have just had one of the busiest years
in our history. But in many ways the real
challenge starts now.

Mark Thompson
Director-General
14 June 2006

5

The BBC now
and in the future

Overview
The draft Royal Charter signals far-reaching change at the
BBC.The new BBC Trust which will replace the Governors
has an explicit duty to represent the interests of licence fee
payers. As a result, there will be much sharper separation
between those charged with the oversight of the BBC andthose charged with delivering its services.
Another significant change is that, for the first time, the
new Charter will include a definition of the public purposesof the BBC.These are:■ Sustaining citizenship and civil society■ Promoting education and learning■ Stimulating creativity and cultural excellence■ Representing the UK, its nations, regions andcommunities■ Bringing the world to the UK and the UK to the world■ Building digital Britain (helping to deliver the benefits ofemerging communications technologies and services andtaking a leading role in the switchover to digital television)
However, some things, such as funding the BBC via a licencefee, will stay the same.This section outlines the current
arrangements and the changes ahead.

6

BBC Annual Report and Accounts 2005/2006

Licence fee

BBC governance

BBC Trust

Licence fee payers provide by far the greatest
part of the money the BBC spends –including concessions there are 25 million –and the new governance structure(see below) will significantly strengthen
the influence of licence fee payers in the
direction of the BBC. The level of thelicence fee is set by the Government.

The new draft Charter and Agreement
impose radical changes on the governanceof the BBC.

The BBC Trust will have ultimate
responsibility for the licence fee. It will
embody the public interest, represent
the views of licence fee payers, safeguard
the independence of the BBC and ensurethat the BBC fulfils its distinctive public
purposes.The Trustees will approve or
reject broad BBC strategies, determine
top-level annual budgets, and assess theperformance of the BBC Executive Boardand hold it to account.The Trustees will
issue Service Licences setting out the remit
and budget of each BBC service, and willcommission Public Value Tests (see page 9)
when the Executive Board proposessignificant changes to existing services
or the introduction of new services.

Parliament
Parliament scrutinises BBC affairs throughdebates on the floors of both Houses
and through select committee hearings,
where BBC Governors – in future,
BBC Trustees – and members of BBC
management are called to account for theBBC’s performance.The Charter renewal
process has been subject to parliamentary
scrutiny throughout its course.

The Royal Charter
The BBC is incorporated under a Royal
Charter that sets out the BBC’s objects
and constitution. An accompanying
Agreement sets out its obligations ingreater detail.The current Royal Charterand Agreement are due to expire at
the end of 2006.The new Charter andAgreement will run for ten years until theend of 2016 and licence fee funding will
also continue for that period.The newCharter explicitly recognises theindependence of the BBC.

Under the current Charter, there are
12 BBC Governors, appointed by the
Queen on advice from ministers inaccordance with Nolan principles thatpublic appointments should be made on
merit. All are part-time.They bring a broad
range of experience and expertise to
the BBC Board. National Governors for
Scotland, Wales and Northern Irelandeach chair Broadcasting Councils, and theGovernor with special responsibility for the
English Regions chairs the English National
Forum.The views of people in the nations
and regions on BBC programmes andservices are made known through thesebodies.The World Service and Global
News Consultative Group gives theGovernors an independent review of therange and quality of the output of BBC
World Service and BBC World.
Under the new Charter, the Board ofGovernors will be replaced by the BBC
Trust and there will also be a new formallyconstituted Executive Board with its roleand responsibilities defined in the Charter.
The functions of the two bodies will
be clearly separated with operational
responsibility resting with the Executive
Board.The Trust, as the body responsible
for the strategic direction of the BBC, will
scrutinise the strategies put forward by the
Executive Board.The Trust will set Purpose
Remits, issue Service Licences (see page 9)
and hold the Executive Board to accountfor its performance in delivering BBC
services against the terms and conditionsof these documents.

BBC Annual Report and Accounts 2005/2006

There will be 12 Trustees, appointed by
the Queen on advice from ministers inaccordance with Nolan principles.The
Trustees will include members dedicatedto the interests of England, Scotland, Walesand Northern Ireland assisted by Audience
Councils. The Trust will be expected to
be open and transparent in everything
it does, and actively to seek the viewsof, and engage with, licence fee payers.
Its independence will be underpinned bya full-time Trust Unit, based on the existing
Governance Unit (see page 8).
Ofcom, the communications regulator,
already regulates some aspects of the BBC
and will continue to do so. For example,
the BBC follows Ofcom’s standards andfairness codes (except for due accuracy
and impartiality, which remain the soleconcern of the Governors – and, in future,of the Trustees). Under the new Charter,
Ofcom will conduct the Market Impact
Assessments when the Trust commissions
Public Value Tests.

7

The BBC now
and in the future

BBC Governance Unit
The Governance Unit supports thework of the Board of Governors,
providing independent and objective
advice. It will continue this service
for the BBC Trust, renamed the Trust
Unit.The Unit is independent of BBC
management. Its director is appointed
by the Board of Governors – infuture, by the BBC Trust – and theUnit’s staff are outside the BBC
management chain.The Unit provides
support across a range of BBC
activity including accountability toaudiences, performance oversight,
financial scrutiny, compliance, andcomplaints and appeals – both
editorial and fair trading.
In addition, the Unit uses external
advisers for specific projects.
For example, during 2005/2006,
independent advisers carriedout a review of coverage of theIsraeli–Palestinian conflict, andaccountants from PA Consulting
advised on the progress of BBC
management’s efficiency measures andscrutinised the BBC’s licence fee bid
prior to its approval by the Board.
The Governance Unit has a staff
of 33. In 2005/2006, the total
cost of the Governance Unit was£8.3million (£8.4million 2004/2005).
This included £1.3million for thenational and regional advisory
councils (£1.2million 2004/2005).
The Director of Governanceis currently reviewing the Unit’s
budget and resources against
the responsibilities of the new
BBC Trust.

8

Executive Board■

Under the current Charter, the operationsof the BBC are managed by an Executive
Board made up of BBC executive directors.
It is chaired by the Director-General, whois the BBC’s chief executive and editor-inchief.The Executive Board answers to theBoard of Governors, which appoints the
Director-General.

■

Under the new Charter the Executive
Board will be reconstituted andstrengthened by the appointment ofa significant minority of non-executive
directors, nominated by the Board andapproved by the Trust.Their role is tosupport the Executive Board as ‘criticalfriends’ and to bring an external
perspective and expertise to its work.
The Executive Board will be responsible
for the delivery of services, the directionof editorial and creative output, theoperational management of the BBC,and delivering value for money.

BBC
The BBC’s 14 divisions produce orcommission all BBC output.There are ninebroadcasting divisions.They manage the
BBC networks and their programmecommissioning and production.These
divisions are:■ Television■ Radio & Music■ News■ Nations & Regions■ Sport■ Factual & Learning■ Drama, Entertainment & Children’s■ New Media & Technology■ Global News (including BBC World
Service and BBC World)
In addition, there are five divisions
providing professional support:

BBC Annual Report and Accounts 2005/2006

BBC People
Finance■ Marketing, Communications & Audiences■ Strategy■ Operations
The BBC’s commercial subsidiaries – whichsell goods and services around the world
to maximise licence fee investment – areheld under an umbrella company, BBC
Commercial Holdings Limited:■ BBC Worldwide Limited■ BBC Resources Limited■ BBC World Limited
The profits these subsidiaries produce
are returned to the BBC for investmentin programme making.

Television, radio, online
Across the UK, the BBC operates eight
television channels and ten radio networks,
46 local and national radio stations, and theinteractive services bbc.co.uk and BBCi.
Internationally, BBC World Service
broadcasts on radio in 33 languages; BBCWorld delivers a global television news
service; and the online site bbcnews.com
offers news and audio for international
audiences. BBC Worldwide also operates aportfolio of commercial television channels
in international markets, some BBCbranded, some operated as joint ventureswith other broadcasters.These services are
not supported by the licence fee but arepaid for either by Grant-in-Aid from theGovernment or by advertising.
In addition to broadcast and online
services, the BBC works in the community
in many different ways, including through
BBC Children in Need which raises large
sums to help disadvantaged children in
the UK.

Delivering the BBC’s public purposes
Purpose Remits
For each of the BBC’s six public
purposes (see page 6) the Trust
will publish a Purpose Remit settingout high level pan-BBC priorities for
the BBC in delivering the purposes
and how success will be measured.
In developing these remits the Trust
will consult publicly.
Service Licences
The Trust will also issue Service
Licences detailing the budget andremit of each BBC service, how they
contribute to the delivery of the BBC’s
public purposes, and how performance
should be measured. All the licences
will be published.
Performance measurement framework
To ensure that BBC services aredelivered in line with remits and Service
Licences, a new performancemeasurement framework has beendeveloped.This is based partly on
measuring licence fee payer perceptions
and partly on empirical measurementsof financial and audience data.The aim isto reach assessments that are objective,
rigorous and transparent, taking into
account four factors: reach, quality,
impact, and value for money.
■

Reach is a measure of usage. It
records the percentage of the
population who view, listen to or use
a service for a given time over a given
period (for the BBC, usually 15
minutes over the course of a week).
Reach differs from the traditional
audience measure: share. Share is
the percentage of the total audience
watching or listening to a particularchannel or service over a given periodof time. However, reach is generally

accepted as a better measure ofuniversality and therefore more
appropriate to the BBC, which has
always made universality (for everyone
and freely available to everyone) one
of its key principles.
■ Quality is largely a measure ofaudience perception, but also includes
some empirical data. It is tracked
through surveys that record the
proportion of the audience who
believe a particular programmeor service is of “high quality” andcontains “fresh ideas and approaches”.
Assessments of quality also include
empirical measures of originality inthe sense of the proportion of hours
that are new and UK-originated.
■ Impact is another measure of audience
perception. It is tracked throughsurveys that record the proportion of
the audience who believe a particular
programme or service is “enjoyable”
and “stimulating”. Impact attempts tomeasure the effect that BBC output
has on enriching the lives of individuals
and citizens.
■ Value for money is primarily anempirical financial assessment. It ismeasured in two ways. One is todivide the total cost of a programmeor other output by the number ofviewers, listeners or users to produce
a cost per viewer/listener/user.
The second way is to divide the total
cost by the number of viewing or
listening hours to produce a cost
per viewer/listener hour. Broader
measures are also taken into account,such as audience perceptions of how
wisely the BBC spends the licence fee.
The new performance measurement
framework started to come into use
in autumn 2004 and continues to be
developed. The framework was assessed

BBC Annual Report and Accounts 2005/2006

by the National Audit Office in 2005.
When the new Charter is in force, the
new measurement framework will form
the basis for the BBC’s Annual Report.
Public Value Test
Public Value Tests will be applied by
the Trust if BBC management wishes
to introduce new services or makesignificant changes to existing services.
The tests are a recognition that while
BBC services aim to create positive
public value, they may also impact themarket.The tests will assess thepotential positive public value of the
proposed change and weigh it against
an assessment of its potential negative
market impact. Only if the potential
public value created outweighs thepotential negative market impact will
the Trust agree to the proposed change
being implemented.The Market Impact
Assessments will be conducted by
Ofcom and overseen by a joint steeringgroup including Ofcom and the BBC
Trust.The Trust will publish the evidence
and reasoning behind its decisions.
Public value survey
In addition to regular performancemonitoring, the BBC Trust will, every
three to five years, commission a major
independent survey involving around
10,000 respondents.The surveys will
provide valuable indicators of important
trends and needs.The Trust will publish
the results, together with any action
they choose to take as a result.

9

Board of Governors
The BBC Governors, led by the Chairman of the BBC,represent the public interest.They hold management toaccount and ensure the BBC’s independence.They areappointed by the Queen on advice from ministers inaccordance with Nolan principles that public appointments
are made on merit.The Governors are accountable tolicence fee payers and to Parliament. Under the new BBC
Charter, the Governors will be replaced by a new body,the BBC Trust (see page 6,The BBC now and in the future).

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BBC Annual Report and Accounts 2005/2006

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1 Michael Grade CBE
Chairman
BBC Chairman since May 2004 andChairman Designate of the BBC Trust
since March 2005. Chairman of Pinewood
Shepperton and Chairman of HemscottGroup both since 2000, Director ofCharlton Athletic FC since 1997. Former
journalist and theatrical agent. At LWTfrom 1973 to 1981, latterly as Director of
Programmes; President, Embassy Televisionin Hollywood from 1981 to 1984; at the BBCfrom 1984 to 1987, latterly as Managing
Director of Television Designate; Chief
Executive, Channel 4 from 1988 to 1997;
at First Leisure Corporation from 1997 to
2000, latterly as Chief Executive; Chairman,
Camelot from 2002 to 2004; Director,
SMG from 2003 to 2004; at The TelevisionCorporation, latterly as interim Chairman
from 2003 to 2004. Broadcasting Press
Guild Harvey Lee Award for outstanding
contribution to broadcasting 1997. Fellowof the RTS and BAFTA, and Vice-Presidentof BAFTA since June 2004. Born 1943.
2 Anthony Salz
Vice-Chairman
Vice-Chairman since August 2004.
Chairman of the Fair Trading Compliance
Committee; Chairman of the Remuneration
Committee and member of the Financeand General Purposes Committee. Until
January 2006 joint senior partner of thelaw firm Freshfields Bruckhaus Deringer,
continuing as a partner until April 2006.
Chairman of the Tate Gallery’s Corporate
Advisory Group from 1997 to 2002
(continuing as a member of that group) anda trustee of the Tate Foundation.Trusteeof the Eden Project. A director of Habitatfor Humanity GB.Trustee of the Paul
Hamlyn Foundation. Born 1950.
3 Deborah Bull CBE
BBC Governor since August 2003. Memberof the Governors’ Programme Complaints
Committee and the Remuneration
Committee. Principal Dancer, Royal Balletfrom 1991 to 2001. Director, Artists’Development Initiative, Royal Opera House
from 1999 to 2001. Creative Director,
ROH2 since 2002. Former member ofArts Council England. Has written andpresented programmes and series for BBC
Television and BBC Radio, including The
Dancer’s Body in 2002, and published bookson the arts and nutrition. Born 1963.
4 Sir Andrew Burns KCMG
The BBC’s International Governor since July
2005. Member of the Audit Committee.
Non-Executive Director of J P Morgan
Chinese Investment Trust since 2003
and Chairman of the Council of Royal
Holloway, University of London since 2004.
Former diplomat – posts held include
Ambassador to Israel 1992–1995, Deputy
Under Secretary of State FCO 1995–1997,
Consul-General Hong Kong and Macau
1997–2000, High Commissioner to

Canada 2000–2003. President Canada UK
Colloquia and Chairman Hestercombe
Garden Trust, both since 2004. Born 1943.
5 Baroness Deech DBE (Ruth)
BBC Governor since October 2002.
Member of the Audit Committee andthe Fair Trading Compliance Committee.
Independent Adjudicator for Higher
Education since 2004. Principal of St Anne’s
College, Oxford from 1991 to 2004, having
been a Fellow and Tutor in Law there
since 1970. Honorary Bencher of the Inner
Temple, a Mandela Rhodes Trustee, andFellow of the Royal Society of Medicine.
Former Chairman of the Human Fertilisationand Embryology Authority. Born 1943.
6 Dermot Gleeson
BBC Governor since November 2000
(reappointed August 2004) and BBC
Trustee Designate. Chairman of the
Finance and General Purposes Committee;
member of the Audit Committee;
Alternate Chairman of the BBC Pension
Scheme Trustees. Chairman of M J Gleeson
Group plc. Chairman of the Major
Contractors Group from 2003 to 2005.
A former director of the Housing
Corporation and of the Construction
Industry Training Board. Former Headof the Home Affairs Section of theConservative Research Department anda member of Christopher Tugendhat’s
cabinet in the European Commission
1977 to 1979. Born 1949.
7 Professor Merfyn Jones
The BBC’s National Governor for
Wales since January 2003. Memberof the Fair Trading Compliance Committee,
the Governors’ Programme Complaints
Committee, and the Councils and Advisory
Bodies Committee. Historian andbroadcaster. Professor of Welsh History at
the University of Wales, Bangor, specialisingin the modern and contemporary historyof society and politics in Wales. Pro-ViceChancellor of the University from 1998 andVice-Chancellor from 2004. Author of anumber of books and articles. Born 1948.
8 Professor Fabian Monds CBE
The BBC’s National Governor for Northern
Ireland since August 1999 (appointed fora second four-year term from July 2003).
Member of the Governors’ Programme
Complaints Committee, the Fair Trading
Compliance Committee, and the Councils
and Advisory Bodies Committee. Chairmanof the trustees of BBC Children in Need.
Specialist in communications, information
systems and entrepreneurial studies.
Chairman of the Northern Ireland Centre
for Trauma and Transformation in Omagh.
Former Chairman of Invest Northern
Ireland and former Pro-Vice-Chancellorof the University of Ulster. Born 1940.

BBC Annual Report and Accounts 2005/2006

9 Jeremy Peat
The BBC’s National Governor for Scotland
since January 2005 and BBC Trustee
Designate. Chairman of the Audit
Committee, member of the Finance andGeneral Purposes Committee and of theCouncils and Advisory Bodies Committee.
Chairman of the BBC Pension Trustees. Panelmember of the Competition Commission
and Director of the David Hume Institute.
Former Group Chief Economist at theRoyal Bank of Scotland. Former economic
adviser to the Treasury and the Scottish
Office. Visiting Professor, Edinburgh
University School of Management;
Honorary Professor, Heriot Watt University;
Fellow of the Royal Society of Edinburgh;member of the Council of the Scottish
Economic Society. Born 1945.
10 Angela Sarkis CBE
BBC Governor since October 2002.
Member of the Governors’ Programme
Complaints Committee. Independent
consultant; member of the House of Lords
Appointments Commission, and adviser tothe Department for Education and Skills onteacher workload management and schoolleadership. Former non-executive director
on the National Offender Management
Board at the Home Office. Former Chief
Executive, Church Urban Fund and former
Vice-President of the African Caribbean
Evangelical Alliance. Chairman, NCVO
Diversity Project and a founder member of
the Social Exclusion Unit. A former trusteeof BBC Children in Need. Born 1955.
11 Ranjit Sondhi CBE
BBC Governor since August 1998
(appointed for a second four-year termin August 2002) with special responsibility
for the English Regions. Chairman of the
English National Forum and of the Councils
and Advisory Bodies Committee. SeniorLecturer at the University of Birmingham’s
Westhill College.Trustee of the National
Gallery and Chairman of the Heart ofBirmingham Primary Care Trust. Previous
positions include Deputy Chairman of theCommission for Racial Equality and memberof the Independent Broadcasting Authority
and the Radio Authority. Born 1950.
12 Richard Tait CBE
BBC Governor since August 2004 and
BBC Trustee Designate. Chairman of
the Governors’ Programme Complaints
Committee. Professor of Journalism andDirector of the Centre for Journalism
Studies, Cardiff University. Former Editor-inChief of ITN and Editor, Channel 4 News.
At the BBC, edited Newsnight, The Money
Programme and the 1987 General Election
results programme.Vice-Chairman,
International Press Institute; Fellow, Societyof Editors and the Royal Television Society.
Born 1947.

11

Executive Board
The Executive Board manages the operations of the BBC.
It is chaired by the Director-General.The Executive Board
answers to the Board of Governors, which appoints the
Director-General.The Executive Board is supportedby three sub-groups: the Executive Direction Group, theJournalism Board and the Commercial Board. Under the
new BBC Charter, a significant minority of non-executive
directors will be appointed to the Executive Board(see page 6,The BBC now and in the future).

12

BBC Annual Report and Accounts 2005/2006

1

2

3

4

5

6

7

8

9

1 Mark Thompson
Director-General since June 2004.
Chairs the Executive Board and the
Executive Direction Group, made up of
all the BBC’s divisional directors. Previously
Chief Executive, Channel 4 since 2002.
Former BBC positions include Directorof Television; Director of National &Regional Broadcasting; Controller BBC Two;
Head of Factual; Head of Features; Editor,
Panorama, and Editor, Nine O’Clock News.
2 Mark Byford
Deputy Director-General since January
2004. Chair of the Journalism Board whichbrings together all the BBC’s journalism
at an international, UK, national, regional
and local level.Trustee of the BBC Pension
Scheme. Former BBC positions include
Director, Global News and World Service;
Director of Regional Broadcasting; Headof Centre, Leeds, and Home Editor,
Television News.
3 John Smith
BBC Chief Operating Officer sinceJune 2004, responsible for all the BBC’scommercial and resourcing subsidiaries, aswell as leading its property strategy. From
March 2005, also Chief Executive Officer
of BBC Worldwide Limited. Formerly BBC
Director of Finance, Property & Business
Affairs. AccountancyAge Financial Directorof the Year in 2001. Non-executive
director at Severn Trent plc and Chairmanof their Audit Committee. Previously with
British Rail Group, overseeing demergers.
Member of the Accounting Standards
Board until November 2004.
4 Jenny Abramsky CBE
Director of Radio & Music since April
2000. Responsible for BBC Radio 1, 2, 3, 4,
Five Live, BBC Asian Network, BBC 6 Music,
1Xtra, Five Live Sports Extra, BBC 7,
television classical music, Music Live, theBBC Proms and the three BBC orchestras
based in England. Previous BBC positions
include Director of Continuous News;
Director of Radio; Controller, BBC Radio
Five Live; Editor, Radio News & Current
Affairs, and Editor, Today.
5 Jana Bennett OBE
Director of Television since April 2002.
Responsible for the BBC’s television
channels – BBC One, BBC Two, BBC Threeand BBC Four; related interactive
programming; and overseeing content
on the UKTV joint venture channels and
BBC America and BBC Prime. Previously
General Manager and Executive VicePresident at Discovery Communications
Inc. in the US; Director of Production at
the BBC; Head of BBC Science; Editor,
Horizon, and Senior Producer onNewsnight and Panorama.

6 Tim Davie
Director of Marketing, Communications& Audiences since April 2005. Responsible
for all the BBC’s marketing, publicity, press
and PR, audience services and audience
research activities.Trustee, BBC Children in
Need since September 2005. Director of
Freeview and also Digital UK. At PepsiCo
from 1993, latterly as Vice-President,
Marketing and Franchise, PepsiCo Europe.
Joined Procter & Gamble’s marketing
department in 1991.
7 Ashley Highfield
Director of New Media & Technology
since October 2000. Responsible forbbc.co.uk, interactive television services,
new platforms (broadband, mobile, etc),
the BBC’s technology portfolio, technicalinnovation, and research and development.
Previously Managing Director of Flextech
Interactive, the pay-television company’s
new media division. Former positions
include Head of IT and New Media for
NBC’s European Channels.
8 Zarin PatelGroup Finance Director since January
2005. Responsible for financial strategy,planning, control, corporate reporting
activities and licence fee collection.
Trustee of the BBC Pension Scheme.
Former BBC positions include Headof Revenue Management and Group
Financial Controller.Trained as a charteredaccountant with KPMG, where she spent
15 years before joining the BBC in 1998.
Governor, University of the Arts London
and member of their Audit Committee.
9 Caroline Thomson
Director of Strategy since April 2005,
incorporating previous responsibilities as
Acting Director, Strategy and Distribution
since December 2004, and Director
Policy and Legal (formerly Public Policy)
since May 2000. Lead Director of theCharter Renewal Task Force since June
2004.Trustee of the BBC Pension Scheme.
Director of Freeview and also Digital UK.
Non-executive director of The Pensions
Regulator. Former positions include
Director of Strategy & Corporate Affairs,
BBC World Service; Commissioning Editor,
Science and Business at Channel 4, andpolitical assistant to Roy Jenkins.
Stephen Dando, former Director, BBC People,
announced his resignation in January 2006
and left the BBC in April 2006. Jeremy
Nordberg was appointed Acting Director
during the recruitment of a new Director.

BBC Annual Report and Accounts 2005/2006

13

Governors’ review
of objectives

Overview
Our responsibilities as Governors include setting
annual objectives for the BBC. We review management’s
performance against these objectives periodically in thecourse of the year and publish a formal assessment in
the Annual Report. This Report follows that pattern andin this section we report on performance against our
2005/2006 objectives.
In future, however, the Trust that will replace theGovernors will use a new set of tools to hold the BBC
to account (see page 6,The BBC now and in the future).
The Trust will have to decide if it wishes to continue
the current system of annual objectives in addition to
the new accountability tools.
In the meantime, we have rolled forward many of lastyear’s objectives – amended as appropriate – into
2006/2007.These objectives can be found on page 21.

14

BBC Annual Report and Accounts 2005/2006

408,415
hours
of BBC Television and Radio broadcast
in 2005/2006 – 46.6 hours of output forevery hour of every day

Beethoven
Thinking cross-platform: Beethoven, BBC Two’s
drama-documentary complemented Radio 3’s
Beethoven Experience which broadcast all thecomposer’s music over a single week

ExtrasBringing fresh comedy to the BBC: Ricky Gervais
and Stephen Merchant, creators of The Office, wrote,
directed and appeared in their new comedy, Extras

These noted the extremely rapid paceof change in audience expectations andin technology and examined how theywould affect key areas of output:
journalism, drama, music, sport, comedy,
entertainment, children and teens, andknowledge-building. Major themes fromthe work included: a need to think ‘crossplatform’ – that is, across TV, radio andthe internet for audiences at home andon the move; a need to shift investment
and creative focus towards 24/7 services;a need to recognise that on-demand will
be a key driver of how the BBC delivers
content in the future and also how it
commissions it; a need to re-invent theBBC’s approach to the internet; and finally,a need to develop a new relationship withaudiences as partners and participants.

(to below 8.5%) and this is reflected in
our amended objective for 2006/2007.

Further work will be done in the coming
year to translate the findings into innovative
service strategies. We and subsequently theTrust will scrutinise these as they develop
and ensure that, where appropriate, Public
Value Tests are carried out. Innovation is,of course, not an end in itself. Audiences
expect high quality from the BBC as well as
innovation and we will ensure that audienceviews on the quality of any new output are
fully taken into account by management.

For some time we have been concerned
about a decline in audience perceptionsof quality of BBC Television output and
we are pleased to see some evidence thatperceptions are improving – the numberof people disagreeing with the statement:“the BBC sets the standards for programme
making in the UK” fell from 26% to 23%
between Q4 2003 and Q4 2005.

Objective one
Programme strategy
Ensure that BBC management
develops a five-year editorial
strategy for BBC programmes
and services focused on
maximising public value.
In 2005/2006 this will include:■ Beginning to reduce thevolume of repeats on
BBC One in peak time
■ Undertaking work to better
understand audience
concerns regarding
derivative programming, andspecifically, reducing thevolume of makeover andlifestyle programmes on
BBC One in peak time
■ Beginning to increase overall
investment in original UK
comedy and drama

We are encouraged by the goodstart made in achieving this objective.
In March 2005 the Director-Generallaunched Creative Future, an ambitious
and broad-ranging review of key
programme genres.This aims to translate
the BBC’s public commitments on
quality, creativity and excellence into an
editorial strategy covering the next five
to seven years and embodying the public
purposes of the BBC as set out in the
new Charter. Emerging insights fromthis work have been presented to theGovernors for discussion during theyear. In April 2006 the first publicannouncements from the Creative Future
project were made.

In the meantime, we note that BBC One
continues to make progress towards
reducing repeats in peak time.The level in
2005/2006 was 8.9% (9.7% in 2004/2005).
In the longer term, significant further
reductions are expected – cutting BBC One
repeats in peak time to around 5%. But
these reductions will not show in full onscreen until 2008 because of the time ittakes for the results of new commissioning
to come through and for the results of
the Director-General’s efficiency drive to
produce the new investment funds needed.
In the current year we do not expect tosee a reduction of much more than 0.4%
BBC Annual Report and Accounts 2005/2006

Research under way by BBC Televisionshows that audiences have positive as
well as negative feelings about repeats.
While there is a low tolerance ofpeak-time repeats on BBC One, nearly
half the respondents say they appreciate
an opportunity to catch up on missed
programmes, and nearly two-thirds agree
that there are some programmes theywould always be happy to see repeated.
In taking forward its work in this area the
BBC needs a clear repeats policy that takes
full account of licence fee payers’ attitudes
and changes in technology – particularly
the move towards on-demand.
Management are working on this.

One factor affecting perceptions of quality
is audience concern over derivative
programming. In an effort to achieve a
better understanding of the issues, theGovernance Unit asked BBC Audience
Research to re-examine existing data –in particular the BBC’s Pulse survey(a daily online questionnaire involving
15,000 representative television viewers).
The findings were presented to us in
March 2006.The research made clear thataudience concern reflects not just copycat
programming but also tired and worn
formats demonstrating a lack of originality
and innovation. Management had alreadybegun to develop a long-term strategy torefresh and raise the ambition of the early
15

Governors’ review
of objectives

Total broadcasting spend 2005/2006 (£million)
2006
1,443
218
72
36
18
370
338
315
107
320
3,237

TelevisionRadio
bbc.co.uk
BBC jamInteractive TV (BBCi)
Local radio and regional television
Programme related spend
Overheads and Digital UK
Restructuring
Transmission and collection costs
Total

2005
1,456
221
69
8
17
356
339
282
51
309
3,108

For further explanation of these figures see Note 2b on pages 106 to 107

Objective twoevening part of the peak-time scheduleon BBC One and we asked them to takethese findings into account in this work – byconcentrating their efforts on programmes
or formats that may have reached the endof their creative life.This is reflected in therevised wording of our objective for2006/2007.
In line with our 2005/2006 objective,the volume of makeover and lifestyleprogramming in BBC One peak time
fell to 6.5% in 2005/2006 (from 7.7% in
2004/2005).This reflected, in particular,
management’s decision not to re-commission
Changing Rooms and Groundforce. However,
we believe that some lifestyle programmingshould remain part of the mix on BBC One– it holds particular appeal for audiences the
BBC finds hard to reach, including 25 to 34
year olds and some ethnic minority groups.
Also in line with our objective, work isunder way to deliver increased investment
in comedy and drama. In comedy, BBC One(where six pilots have already beenannounced) and BBC Two will see thegreatest benefits. In drama, the investment
is beginning to show on screen, but
the longer lead times here mean that
substantial change will not be evident
until 2007/2008. More than half the extra
investment is going to BBC One, withsome additional investment in BBC Three.

Driving digital
Ensure that BBC management
drives the market for free-to-air
digital television, digital radio
and new media whilst
continuing to serve the needs ofthe analogue-only audience by:■ Raising awareness of how

the BBC’s digital services
add value to the overall
portfolio■ Improving their availability■ Working in partnership withthe commercial sector todrive take-up

The key role of the BBC here has been
underlined by the Government’s decision
to place a sixth public purpose on the BBC
in the new Charter, that of “building digital
Britain”, and we can report positive
progress made during the year.
The BBC has a number of roles to play.
These include: continuing to encourage
take-up through the provision andmarketing of high quality digital content;
raising public awareness of, and providing
public information on, all aspects ofswitchover; and maintaining active supportof Digital UK, the body coordinating theswitchover to digital television in the UK.
The UK now has the highest digital
television penetration of any country
in the world and the BBC’s marketing
efforts have undoubtedly helped in thisachievement. By the end of 2005, some
70% of homes in the UK had at least one
set capable of receiving digital televisionand 24% had converted all their sets.

16

BBC Annual Report and Accounts 2005/2006

Of the remaining analogue-only homes,
more than three-quarters were aware of
Freeview. However, awareness of the BBC’s
digital channels in these homes has showna slight fall.This almost certainly reflects theprobability that these homes, by definition,
now contain a higher proportion of those
hardest to convince.
About one in three homes in the UK had
become fully digital (that is, able to receive
all BBC services through television andbroadband) by the end of 2005. Reaching
this figure is a significant milestone, butthere is much still to do. For example, thegrowth of broadband has been impressive;
however it appears that most of thisgrowth comes from narrowband
households upgrading, rather than newhouseholds gaining access to the internet.
In other words it does not signal much ofa lessening of the internet digital divide.
For the BBC there is a growing issue of
how best to focus its marketing effort. On
the one hand there is the pressing need toencourage people to take their first steps
into the digital world; on the other thereis the need to encourage those who havealready made the move to go further andbecome fully digital.There is some concernthat the latter group may become irritatedby messages designed for the former.
We are encouraged to note from survey
evidence that the BBC digital channels areseen as “good use of the licence fee” byan increasing proportion of audiences.
BBC News 24 in particular is seen as “gooduse of the licence fee” by nearly 70% of
the audience (although this has decreasedslightly this year). Awareness of digital radiois growing and sales of DAB sets are
growing rapidly – more rapidly than theincrease in reach of BBC digital stations.
This perhaps reflects the fact that sets arebought primarily for improved reception,

5.4p
cost per hour of viewing/listening to
the BBC, based on average consumption

BBC News 24
Driving digital: Simon McCoy and Kate Silvertonpresenting BBC News 24, one of the BBC’s portfolioof extra channels available to digital viewers

Urban Classic
Building bridges: MC Purple with the BBC Concert
Orchestra – a collaboration between 1Xtra, oneof the BBC’s digital stations, and Radio 3, making
connections between very different audiences

Objective threeand listening behaviour does not
automatically change with the purchaseof a set. We have therefore asked formarketing effort to include some focus
on the content of the BBC’s DAB services
and their unique value to licence fee
payers as well as on access to the services.
bbc.co.uk has maintained high levels ofawareness and we are pleased to see
an increase in awareness of BBCi 24/7 –
48.2% (42.4% 2004/2005) – reflecting themarketing effort put into promoting its
core news and children’s output.
Technical and financial constraints are
restricting opportunities for improving
the availability of digital services. Coverageof digital terrestrial cannot be increased
beyond the current 73% until digital
switchover. Significant further increases
in the BBC’s DAB network depend on
the licence fee settlement. Where digital
television is concerned, the BBC iscontinuing its efforts – with commercial
public service broadcasters – to launcha free-to-air satellite service.This would
extend the BBC’s digital channels to areas
not currently reached by Freeview.
In the meantime we are encouraged by theBBC’s efforts to drive take-up by building
partnerships with manufacturers, retailers
and broadcasters across television, radio,
mobile and broadband ISPs. In addition,
the BBC has been active in the Freeview
consortium to ensure that Freeview’s
technology and content are in good shapefor switchover.The BBC has also beenclosely involved in the set up, launch andcommunications strategy of Digital UK(formerly ‘SwitchCo’).

Value for money
Ensure that BBC management
implements the findings of thevalue-for-money review by:■ Making savings of £105million

in 2005/2006 towards thetarget of annual savings of£355million by 2008
■ Developing a detailed, threeyear plan to transform theBBC’s processes and make it
more efficient and effective inproviding services that meetthe needs of licence fee payers

Good progress has been made towards
this objective. In March 2005 the DirectorGeneral announced a three-year efficiency
programme which aims to deliver£355million of ongoing gross annual cash
savings by 2007/2008.The BBC exceeded
its savings target for 2005/2006, comprising£99million of ongoing cash savings and afurther £7million of one-off programmegenre mix changes. It remains on track todeliver its three-year target of annual savings.
The majority of the cash savings wereachieved through post closures acrossboth content and professional service
divisions which reduced headcount by
917 and 215 respectively. The second
year of the programme is expected to see
more savings derived from transformationalchanges to ways of working.

from increased pension augmentation costsof post closures. Although actual spend on
implementation costs in 2005/2006 waslower than forecast, at £34million, this is a
result of timing differences in post closuresand the overall one-off implementation costs
are expected to remain at £241million.
The savings reported above go beyond
the cumulative seven year self-help targetsof £3.3billion by 2006/2007 agreed with
the DCMS for the current Charter period.
The value-for-money targets are ambitious
and require strong change management.We
engaged PA Consulting to provide us withassurance that management’s three-yearplans were sufficiently detailed and robust todrive the transformational change needed toachieve the targets. Management have acted
on recommendations from PA Consulting:they have taken full and appropriate
ownership for the change programme andintroduced a monitoring framework; andstrengthened their central change team who
engage with leaders at all business levels.
Detailed divisional change plans include
roadmaps, key milestones and measureswith regular reporting of progress against
these to both management and Governors.
Progress towards developing a fullbusiness architecture – establishing theprinciples underlying the execution ofagreed BBC strategy – has been slower
than initially expected. However, significant
progress has now been made and it isexpected the full framework will becompleted in the autumn incorporating
the Creative Future recommendations
and the licence fee settlement.

One-off implementation costs in the originalplan were forecast to be £197million over
the three-year programme. During theyear this forecast rose by £44million to£241million, the increase resulting mainly
BBC Annual Report and Accounts 2005/2006

17

Governors’ review
of objectives

1.7
millioncontacts from members of the public
to BBC Information in 2005/2006

Newswatch
Being open and accountable: the Newswatch
website gives audiences who may be unhappy with
BBC News a way to be heard

Objective four
In terms of impartiality, the first major
challenge of the year came in May with the
General Election. In the event, the numberof complaints about impartiality, unfairness
and balance was low.The most high-profile
complaint came from the Conservative
Party and related to The Heckler on
BBC Three, a study of political heckling
produced by BBC News.The programme
makers had sent three hecklers to a
public meeting addressed by the thenConservative leader Michael Howard.
The hecklers had been fitted with radio
microphones to record their interventions
and these were spotted by the meetingorganisers who seized the equipment.
The Conservative complaint alleged
bias and breach of BBC guidelines.
Management rebutted both charges,
the complaint was not referred to theGovernors, and the programme wasbroadcast without further complaint.

Guidelines (the text of the guidance note isavailable on the advice page of the Editorial
Guidelines section of bbc.co.uk).

During the course of the year wecommissioned a study of the impartialityof BBC News’ coverage of the IsraeliPalestinian conflict (see box), and asked
management to update us on the progressof implementing the findings of our earlier
impartiality study on coverage of the EU(see page 65).

The Neil Report was the result of amanagement review led by Ronald Neil –a former Director of BBC News andCurrent Affairs – to consider the editorial
lessons of the Hutton Inquiry into thedeath of Dr David Kelly.The report was
published in 2004 and we endorsed its
recommendations, which included changes
to journalistic practice, the handling ofeditorial complaints, and the way BBC
journalists are trained. In particular itrecommended the establishment of a
BBC College of Journalism and progresshas been made here (see page 64).
The other recommendations had alreadybeen implemented.

The suicide bombings in London on 7 July
sparked an intense public debate on the
BBC use of the word ‘terrorist’.The BBC’s
published Editorial Guidelines do not ban
use of the word but take the position
that: “The word ‘terrorist’ can be a barrierrather than an aid to understanding. We
should try to avoid the term, without
attribution. We should let other people
characterise while we report the facts
as we know them.” A number ofcommentators took issue with this,suggesting that the BBC was, in effect,
condoning terrorism by being hesitant
about using the word. In the light of thispublic debate, management reviewed
the published guideline.They decided
not to make any change to the guideline
but to publish a guidance note for BBC
programme makers providing additional
context on the value of precision andconsistency of language. We endorsed
this approach, and it was published tosupplement the advice in the Editorial

18

BBC Annual Report and Accounts 2005/2006

Impartiality and independence
Ensure that the BBC meetsthe highest standardsof accuracy, fairness andimpartiality expectedby audiences in all its
programmes.
In particular, strengthen
editorial processes todeliver high-quality, trusted
journalism by implementing
the recommendations of the
Neil Report and acting on
the Governors’ independent
reviews of impartiality.

In overall terms we are satisfied withperformance against this objective. During
the year under review BBC news coverage
met high standards of accuracy, impartiality
and independence, and substantial
progress was made in implementing therecommendations of the Neil Report and
the Governors’ impartiality reviews.

In the summer, a further editorial challenge
was created by Live8, the global music event
staged to focus attention on issues of Third
World debt in the week of the G8 summit.
The BBC had to find a way to serve its
audiences – who rightly expected to see
and hear this event – but also to uphold its
commitment to impartiality by not allowing
the BBC to be perceived to offer a free ride
for a political campaign.The impartiality
issues were aired in editorial policy forums
within the BBC in the run up to Live8, andraised with us in a report from the DirectorGeneral.The outcome was that, in addition
to the event itself, a range of material was
broadcast that set it in context and enabled
viewers and listeners to make up their own
minds about the issues involved.

In terms of audience perceptions, results froma regular tracking survey conducted by MORI
show that around three-quarters of theUK public (76%) say they trust BBC news
programmes the most to give a fair, informed
and balanced view on important eventsand issues compared to any other news
programmes.When asked to consider all of
the services that the main broadcasters offer,and not just news, over half of those surveyed
believe that the words ‘Fair’,‘Accurate’ and‘Trustworthy’ are most applicable to the BBC.
In a separate survey, around three-quartersof opinion formers (73%) believe the BBC
is impartial and independent.

Programme spend by genre 2005/2006 (£million)
2006
394
485
253
372
140
427
241
182
2,494

Factual and learning
News and current affairs
Entertainment
SportChildren’s
DramaMusic and arts
Speech – Local Radio
Total

2005
351
458
267
438
134
398
245
175
2,466

Education for children is included in Children’s; Film is included in Drama; Religion is included in Factual and learning

Governors’ roadshow
Listening to licence fee payers: BBC Chairman
Michael Grade and fellow Governors taking
questions at a public meeting in Cardiff. Public
accountability activity is an important part of theGovernors’ role

The proportion of Conservative supporters
who believe the BBC is biased against theConservative Party has fallen from 26% in
Q2 2005 to 21% in Q1 2006.
As highlighted by the BBC Chairman in his
Goodman Media Lecture in May 2005, theBBC faces new challenges on impartiality
as a result of technological and socialchange. We, in collaboration with BBC
management, are leading a project to deliver
a set of principles underlying impartiality
in the 21st century.The project will seek
to identify how to deliver impartiality inways that are relevant and convincing
to the BBC’s many different audiences.
The focus will be on UK audiences anddomestic output and will consider the
implications for all genres of programming.
See pages 89 to 90 for further information
about editorial compliance.

BBC News coverage of theIsraeli-Palestinian conflict
In October 2005 we commissioned
an independent panel chaired by
Sir Quentin Thomas, President of the
British Board of Film Classification, to“assess the impartiality of BBC Newsand Current Affairs coverage of
the Israeli-Palestinian conflict withparticular regard to accuracy,
fairness, context, balance and bias,
actual or perceived.”
The panel presented their report
to us in April 2006 and we published
it in full shortly afterwards. Its main
finding was that there was nodeliberate or systematic bias.
The panel went on to say, however,that the audience feel they do
not understand the conflict and,perhaps for that reason, do notsee it as important or interesting.
The panel’s view was that
impartiality required a full andfair account and in that regard
they found the BBC coverage to
be inconsistent, not always providing
a complete picture and in that sensemisleading.The panel made a numberof recommendations, including thatthe BBC should provide licencefee payers with greater context
to assist their understanding of
the complexities of the conflict.
We passed the report tomanagement and asked them torespond to us by June 2006, withthe response set in the context
of the Neil Report.The panel reportis available on the BBC Governors’
website: www.bbcgovernors.co.uk.
Management’s response will also be
published there, together with ourown conclusions.

BBC Annual Report and Accounts 2005/2006

Objective five
Accountability to audiences
Deliver greater transparency
and accountability to licencefee payers in 2005/2006 by,in particular:■ Management ensuringthat the changes to thecomplaints handling process
are being implemented acrossthe organisation■ Governors developing
Service Licences as the
key tool for exercising
effective stewardship of
the public’s money

We are encouraged by progress on thisobjective and look forward to further
moves to increase transparency andaccountability when the Trust is established.
Changes to the complaints handling systemwere made in February 2005 and are now
well established across the BBC.The aimof the system is to ensure that the BBC
handles editorial complaints effectively,
including responding to complainants
within ten working days. Initially, complaints
are handled either by the programme
concerned, or by BBC Information.
Complainants unhappy with the response
have recourse to the independent Editorial
Complaints Unit, and, if still unsatisfied, to
the Governors’ Programme Complaints
Committee, the final court of appeal.
In 2005/2006, 91% of all complaints to the
BBC received a response within ten working
days – an improvement from 88% at the startof the year. For the full report of editorial
complaints in 2005/2006, see page 62.
19

Governors’ review
of objectives

Audience approval of the BBC

2005/2006
2004/2005
2003/2004
2002/2003
2001/2002
2000/2001

Combined monthly reach of
BBC Television, BBC Radioand bbc.co.uk (%)
6.6
6.5
6.7
6.8
6.8
6.5

Source: Pan-BBC Tracking Study age 15+
Note: Figures are a mean score out of ten

This system, however, is for editorial
complaints only and does not cover suchthings as TV licensing or complaints against
off-air events.The new draft Agreement,
published alongside the new Charter,
requires the Trust to develop and consult
on a complaints framework that includes aclear definition of the different categories
of complaints.This will be developed during
2006 and consulted on once the Trust isin place.
We have sought to increase our public
accountability activity this year.We held our
first ever AGM, in London, and since then we
have held public meetings in Glasgow, Cardiff
and Belfast. During the year we launched
our own website: www.bbcgovernors.co.uk.
Public consultations have also been a key
development this year with a number being
launched since summer 2005. Details ofthese – and of the issues raised by licencefee payers at our public meetings – can befound on the Governors’ website.
One area where we wanted to know
more about licence fee payers’ opinions
was their response to the BBC’s own
licence fee bid (a licence fee rising to£150, in 2005 pounds, in 2013/2014).
We also wanted to understand licencefee payers’ reaction to the Government’s
plan to fund targeted help via the licencefee. We commissioned Professor Patrick
Barwise to carry out an independent
investigation of these two areas. His report,
published in April 2006, concluded that:to, pay substantially more than the current£10 per month for existing BBC services■ If the licence fee increased to £150 a
year (in 2005 pounds) in 2013/2014 theproportion of people willing to pay forexisting services would fall from about
75–80% today to about 65–70% in
2013/2014.This rises to 70–75% if the
proposed new services are added■ When asked about a licence fee
supplement to pay for help for thevulnerable during digital switchover, 53%
support and 47% oppose. However, if theGovernment proceeds with this proposal
it would not be the straw that broke thelicence fee’s backService Licences are one of the
key accountability tools currently indevelopment. The licences will detail thebudget and remit of each BBC service,
how they contribute to the deliveryof the BBC’s public purposes, and how
performance should be measured.
Our work on these included a public
consultation on the framework in the latterpart of 2005.The responses to this (which
can be found on the Governors’ website)
are being taken account of in the draftingof the Service Licences themselves.
Service Licences are part of the new
governance arrangements that will comeinto force with the arrival of the Trustand the new Charter.

There is no ‘tipping point’ above which
willingness to pay would drop dramatically■ The more consumers know about theBBC’s proposed new services, the morepositive their attitude■ When asked to think about it, and if reallyforced to choose between paying thelicence fee and losing the BBC’s services,most licence fee payers would, if they had

We have done a good deal of work todevelop our accountability in preparation
for handing over to the Trust. Accountability
to licence fee payers is an imperativeacross the BBC and will be a particularfocus for the Trust. Since his appointment,
the BBC Chairman has regularly madehimself available for questioning by licencefee payers on BBC radio phone-ins and weare developing other new ways to reachout to the audiences with accountability
activity. Progress will be monitored over20

BBC Annual Report and Accounts 2005/2006■

2005/2006
2004/2005
2003/2004
2002/2003

94.3
95.6
96.6
96.2

Source: Pan-BBC Tracking Study age 15+,
claimed usage

the current year as part of the Governors’
Accountability to Audiences Objective
for 2006/2007.

Governors’
objectives for
2006/2007

The existing BBC Charter requires us
to set and report on annual objectives.
The objectives for 2006/2007 focus on
major pan-BBC priorities.
Under the new Charter the BBC Trust
will have a new set of tools for holding the
BBC to account based on Purpose Remits,
Service Licences and Statements ofProgramme Policy.
The Trust will take a view on whether or
not there is a continuing role for annual
corporate objectives for the BBC. In themeantime we have decided that the
2006/2007 objectives should cover thesame strategic priorities as those for2005/2006, updated to reflect progress
made during the year as well as new
initiatives for the coming transitional
year – to be approved where necessary
by the Governors or the Trust.
1 Programme strategy
Ensure that BBC management continue
to develop and begin to implement
the five-year editorial strategy for BBC
programmes and services by translating
the findings of Creative Future into service
strategies and pan-BBC proposals.
In Television, continue progress towards
the detailed objectives set in 2005/2006:
Reducing the volume of repeats in
BBC One peak to below 8.5% in
2006/2007 (towards a target of 5%
in 2008/2009)1■ Continue to increase overall investment
in original UK comedy and drama■ Refresh BBC One’s early evening output,
paying particular attention to the lifecycleof programmes or formats■

1

Definition of repeats to include digital transfers from
BBC Three and BBC Four, but not digital premieres(eg Spooks)

2 Driving digital
Ensure that BBC management prepare for
digital switchover and drive the market
for free-to-air digital television, digitalradio and new media whilst continuing
to serve the needs of the analogue-only
audience by:Raising awareness of how the BBC’s
digital services add value to theoverall portfolio■ Improving their availability■ Working in partnership with thecommercial sector to drive take-up■

3 Value for money
Ensure that BBC management deliver
value-for-money savings whilst retaining
quality output. In 2006/2007, this will bemeasured against the following goals:
Headcount: Achieving headcountreduction targets of 2,055 in 2006/2007,
towards the target of 3,763 for the three
years to 2007/2008■ Savings: Making gross cumulative cash
savings of £211million in 2006/2007,
which includes new gross cash savings of£112million, towards a target of annual
gross cash savings of £355million by
2007/2008 (after three years)■ Implementation costs: Incurring
implementation costs of no more than
£148million in 2006/2007 from the totalof £241million one-off implementation
costs included within the three-year plan
■ Business model: Developing a coherent
business architecture which underpins
the BBC’s transformation■ Financial planning: Implementing a financial
plan that ensures the most effective
allocation of BBC funds to meet theneeds of the licence fee payer, begins to
set targets for continuous improvement
and has the flexibility to deal with newaudience priorities and cost pressures.
In particular:■

BBC Annual Report and Accounts 2005/2006

Worldwide to improve return to the
BBC by providing double digit growth inunderlying profit (ie excluding exceptional
items) plus ongoing sales growth and toachieve competitive performance levels,
delivering a return on sales of at least
10% and EBITDA (earnings before
interest, tax, depreciation andamortisation) margin of at least 22%■ Net licence fee sales to increase by
1.04%, with evasion falling from 4.7%
in 2005/2006 to 4.6%■

4 Impartiality
Ensure that the BBC meets the highest
standards of accuracy, fairness andimpartiality expected by audiences. In
particular, respond to the Governors’
independent reviews of impartiality
to ensure strong editorial processes
and training that deliver high quality,
trusted journalism.
5 Accountability
Focus on improving the BBC’s
accountability to audiences. In particular:
The BBC Governance Unit to:■ Develop and conduct a major public
survey looking at attitudes towards
the BBC, for consideration by the
BBC Trust■ In readiness for the Trust, work with the
Broadcasting Councils and English
National Forum to develop an action
plan to engage more widely withaudiences, build the profile of theCouncils, and contribute advice acrossthe range of the BBC’s public purposes
BBC Management to:■ Develop new service strategies in
response to the Creative Future project
ensuring that all audiences are wellserved and in particular to provide
adequate focus on improving perceptions
among those audiences less favourable
towards the BBC
21

The BBC at a glance
TelevisionRadio

BBC One aims to be the UK’s most valued
television channel, with the broadest rangeof quality programmes of any UK
mainstream network.

BBC Radio 1 aims to offer a high-quality
service for young audiences combining thebest new music, a comprehensive range of live
studio sessions, concerts and festivals, andtailored speech output.

BBC Two aims to bring challenging, intelligent
television to a wide audience by combining
serious factual and specialist subjects withinventive comedy and distinctive drama.

BBC Three aims to offer innovative
British content and talent, providing a broad
mix of programmes aimed primarily at
younger audiences.

BBC Radio 2 aims to bring listeners a broad rangeof popular and specialist music focused on British
talent and live performances, complemented bya broad range of speech output.

BBC Five Live Sports Extra is a part-time network
providing additional sports coverage throughrights already owned by BBC Radio Five Liveto deliver greater value to licence fee payers.

1Xtra aims to play the best in contemporary
black music, with a strong emphasis on deliveringhigh-quality live music and supporting new
British artists.

BBC Radio 3 is centred on classical music,
and also aims to provide a broad spectrum ofjazz and world music, drama and arts, and includes
live and specially recorded performances.

BBC 6 Music aims to engage with lovers of
popular music by offering the best music from the
BBC sound archive together with current releases
outside the mainstream, complemented by music
news and documentaries.

BBC Radio 4 uses the power of the spoken word
to offer programming of depth which seeks toengage and inspire with a unique mix of factual
programmes, drama, readings and comedy.

BBC 7 is a speech-based digital radio service
offering comedy, drama and readings mainly fromthe BBC speech archive. It is also the home ofchildren’s speech radio.

BBC Radio Five Live broadcasts live news andsport 24 hours a day and aims to present eventsas they happen in an accessible style, with particularemphasis on targeting 25 to 44 year olds.

BBC Asian Network aims to offer acontemporary mix of music and speech,with particular emphasis on challenging debate
and live performance, to young British Asians.

BBC Four aims to be British television’s mostintellectually and culturally enriching channel,
offering a distinctive mix of documentaries,
performance, music, film and topical features.

The CBBC Channel aims to offer a distinctive
mixed schedule for 6 to12 year olds, encouraging
the development of existing and new interests,
helping children to understand and embrace
the world around them.

CBeebies aims to offer a mix of high-quality,
UK-produced programmes designed to encouragelearning through play for children aged five andunder, in a consistently safe environment.
22

BBC Annual Report and Accounts 2005/2006

New MediaNews

Nations & Regions
BBC English Regions serves a wide range of urban
and rural communities on television, radio andonline and aims to be the most trusted andcreative local broadcaster in England.

bbc.co.uk aims to provide innovative anddistinctive online content, promoting internet use
to develop a deeper relationship with licence fee
payers and to strengthen BBC accountability.

BBC News seeks to provide the best journalism
in the world and aspires to be the world’s
most trusted news organisation: accurate,
impartial and independent.

BBCi offers digital television audiences
all-day, up-to-the-minute content including
news, weather, learning, entertainment andinteractive programming.
BBC News 24 aims to deliver news, analysis andinsight, supported by the BBC’s newsgathering
operations, all day, every day of the year.

BBC jam is a free online service providing
high-quality interactive resources structured
around key elements of the school curriculumfor 5 to 16 year olds.

BBC Parliament is the only UK channel
dedicated to the coverage of politics, featuring
debates, committees and the work of thedevolved chambers of the UK.

BBC Scotland aims to produce a broad rangeof distinctive television and radio programmes
for all age groups that properly reflect thediverse nature of Scotland.

BBC Cymru Wales is committed to
producing services which reflect the uniqueculture and history of Wales, and its socialand political landscape.

BBC Northern Ireland aims to provide somethingof value for everyone in the community throughits broad portfolio of programmes and services
that reflect local interests and experiences.

BBC World Service provides international news,
analysis and information in English and 32 otherlanguages on radio and the internet.

BBC World is the BBC’s commercially-fundedinternational 24-hour television news andinformation channel.

BBC Annual Report and Accounts 2005/2006

23

Governors’ review
of services – Television

Overview
BBC Television is facing sharply increased competition as
the number of digital channels grows rapidly.Audiences to
BBC One and BBC Two have fallen and the rising numbers
watching the digital channels BBC Three and BBC Four have
not yet made up the losses.Younger viewers have been lostin disproportionately large numbers – when they switchfrom analogue to digital they show an increased tendency
also to switch away from television.We are reassured by
the Director-General’s clear focus on winning back younger
audiences as a priority for the coming period.
Creatively speaking, BBC One has had an outstanding year.
BBC Two is continuing to refine its schedule in order toincrease its appeal and reach while staying true to its remit.
BBC Three’s audience is continuing to grow strongly –the challenge is to broaden reach by appealing to young
audiences. BBC Four has had a very good year and its
audiences rate it very highly indeed. In children’s television,
The CBBC Channel is in strong creative health and has
continued to increase its audience. CBeebies recorded a
reduction in reach, a reflection of both the pressing needfor creative renewal of the channel and of the increasing
competition for its audience.
BBC Television now draws its material from a wide rangeof sources inside and outside the BBC. BBC Cymru Wales
has made a particularly strong contribution to the BBC’s
drama output this year.

24

BBC Annual Report and Accounts 2005/2006

20
millionpeople watched at least 15 minutes ofPlanet Earth (BBC One, March–April 2006)

Remit
BBC One aims to be the UK’s mostvalued television channel, with thebroadest range of quality programmes of
any UK mainstream network.The channel
is committed to widening the appeal of all
genres by making a range of subjects
accessible to a broad audience. BBC One
is committed to covering national andinternational sports events and issues,
showcasing landmark programmes andexploring new ways of presenting
specialist subjects.

Bleak House
Showing high quality classic drama: cast-members
from Bleak House – BBC One made a big
impact by running this Dickens serialisation asa soap, an approach in tune with the original
publication of the novel

Strictly Come Dancing
Making strong family entertainment: cricketer
Darren Gough, winner of the 2005 Strictly Come
Dancing, with partner Lilia Kopylova.The series
format has won international success as a British
television export

reach of the BBC’s own digital channels
is going some way to replace (though
not yet wholly) BBC One’s lost viewers.
Nevertheless, given the size of thechannel’s budget and its importancein building licence fee payers’ overallsatisfaction with the BBC, there is noroom for complacency.There is a particular
problem with younger viewers who show
an increased tendency to move awayfrom television when they switch fromanalogue to digital.We note management’s
commitment in the Statements ofProgramme Policy to tackle declining
reach with popular drama and family
entertainment that brings in a younger
audience.This will mean continuing totake creative risks, and maintaining strong
resolve when they do not succeed.
For example, BBC One was ultimately
unsuccessful in its attempt to establish
Davina McCall in an unfamiliar setting,but the attempt was worth making.

Programmes such as this define the notionof quality on the BBC.

The continuing modernisation of BBC One,the Corporation’s flagship television service,remains a key priority for the BBC. During
the year under review the channel has had
some outstanding creative successes.
However, these have not prevented afurther erosion of overall audience reach.
In all homes, BBC One’s average 15-minuteweekly reach to viewers aged 4+ fell
by 2.2 percentage points, or nearly one
million people. Average reach in 2005/2006
was 79.7% or 44.5 million people(81.9%/45.4 million in 2004/2005)1.

The creative successes have come froma broad range of genres including drama,
entertainment and factual. In drama, three
titles – all very different in kind – stand out:
Bleak House, Doctor Who and Life on Mars.
They have helped BBC One maintain its
clear lead among all UK channels as the“channel best for drama” in the BBC’saudience research.

These figures do need to be seen incontext. In an increasingly competitiveenvironment BBC One continues to reachmore viewers than any other television
channel in both analogue and multichannel
homes. In multichannel homes, where thechoice of viewing is by definition far wider,
BBC One is still watched by more than
three out of four viewers.The rapid spreadof digital, and the inevitable audiencefragmentation that accompanies it, meansthat some degree of erosion of reach may
be inevitable over time, and the growth in

Bleak House had everything that audiences
expect from a BBC classic costume drama:fine acting (and imaginative casting), strong
writing, intelligent direction and the highest
production values. What made it different
was the decision to run it as a soap, withhalf-hour episodes stripped across theweek and an omnibus edition at weekends.
This was an inspired idea that went withthe grain of the original publication of
Dickens’ novel in instalments, each one
ending with a cliffhanger, and it helped to
draw in large and appreciative audiences.
BBC Annual Report and Accounts 2005/2006

Doctor Who has continued to delightearly evening family audiences on Saturdays– a reinvention of real wit and flair.
The potentially problematic departureof Christopher Eccleston from the title role
was seized as an opportunity and David
Tennant was in place in time to provide
a successful Christmas special before startinga new series in 2006/2007. Dr Who’s
television output is extended by a richwebsite and there have been imaginative
experiments with interactive elements –the Christmas special was supported bya specially written interactive adventure
accessed via the red button.The audience
for this approached half a million. In ourconsultations with viewers and listeners,
they often cite programmes such as
Dr Who as good BBC family entertainment.
Strictly Come Dancing, which had anothersuccessful series, is another programmethat draws similar unprompted praisefrom audiences.
Life on Mars also used the idea of time
travel – this time to reinvent one of thestaple television genres, the detective series.
It brilliantly played 21st-century sensibilities
against 1970s realities (including 1970s
fashions) through the plot deviceof sending a modern-day detective backin time. Its grip on the public consciousness
was evidenced by the number ofnewspaper opinion pieces that used
the series title as a jumping-off point
for nostalgic articles comparing pastand present ways of doing things.
One of the great strengths of BBC One is its
range – not just drama and entertainment,
but religion, factual, documentary, news andcurrent affairs, children’s, sport and more –and the fact that it can demonstrate quality
right across the range, not just in a handful25Governors’ review
of services – Televisionof genres. Memorable factual output
included Planet Earth, narrated by David
Attenborough, which exploited newtechnologies in film-making to bring rarely
seen facets of nature into astonishing closeup. Cameraman Mark Smith’s sequence ofa snow leopard hunting a mountain goathigh in the Himalayas – the culminationof a year’s quest – was an extraordinary
achievement. David Attenborough’s great
gifts as an ambassador for and interpreterof the natural world were also on display
in his BBC One series on the world ofinsects, Life in the Undergrowth.
There were a number of major set-piece
events during the year. The 60th
anniversaries of VE Day and VJ Day were
well marked with a mixture of outside
broadcasts of the major public events andoutput exploring the historical context.
The ability of the BBC to mount big
outside broadcasts at short notice andcope with complex logistical problems wasdemonstrated over 48 hours in April with
exemplary coverage of the funeral of PopeJohn Paul II in Rome, followed the next dayby equally memorable coverage of thewedding of Prince Charles and Camilla
Parker Bowles in Windsor. Later in the year,
Live8, the Hyde Park concert highlighting
poverty in Africa in the week of the G8summit, was organised at extremely short
notice and the BBC’s coverage was all themore notable for that.
Africa was also the theme of the BBC’s
Africa Lives season.This celebration andexploration of African life and culture
spread across all BBC channels andplatforms but was led by BBC One. It
included output from many different
genres, including The Girl in the Café, aromantic comedy written by Richard
Curtis; Geldof in Africa, a personal journey
by Bob Geldof, and a story line in Holby
City that sent two characters to Ghana.
26

Live8
Showcasing big events: the Live8 concert in HydePark, mounted at short notice, was a big – but notinsurmountable – test for the BBC

Planet Earth
Bringing natural history into sharp focus: David
Attenborough’s latest series, Planet Earth, broughta close-up view of nature, including unique picturesof a Himalayan snow leopard, rarely seen and neverbefore pictured like this

Although the output was of variable
quality, overall this was a public service
enterprise of admirable ambition, and ofa scale and scope that only the BBC could
have delivered. By chance, Live8 coincidedwith the Africa season and raised some
impartiality issues as a result – our reporton page 18 shows how they were managed.

some question marks over its performance.
This year it seems to have stabilised.
This was reflected in the steadying ofscores for BBC One when audienceswere asked which was the best channel forsoaps – these scores had declined sharply
in 2004/2005 – and by the awards won,
including a Bafta. However, ITV maintains
a very large lead in this area, reflecting
in part its much larger output of soaps.
Viewers expressed strong and unprompted
appreciation of a special EastEnders
episode marking Armistice Day.

Notable popular arts coverage included
A Picture of Britain, a celebration of the
British landscape as seen through the eyesof artists, writers and composers.This series,
a collaboration with Tate Britain, waspresented by David Dimbleby, whodemonstrated that his distinctive approachworks well on material far removed fromhis usual fare of politics and current affairs.
He brought a fresh audience to arts
programming on BBC One. Just as
memorable, The Queen, by Rolf brought
BBC cameras into Buckingham Palace
to observe Rolf Harris painting an 80thbirthday portrait of the Queen – oneof the more remarkable combinationsof access, cast and occasion to feature
anywhere on British television during
the year.
Little Britain returned to BBC One foranother successful series. However,
although the channel has maintained its
position among all its UK competitors
as the “channel best for comedy” in BBC
audience research, there is a pressing needto deliver other new comedies that work
for mainstream audiences and meet
audience expectations from BBC One inthis key programme genre.The DirectorGeneral has made BBC One comedy ahigh priority for additional investment anda number of new pilots are in the pipeline.
EastEnders continues to be an importantpart of the BBC One schedule and an
important driver of perceptions of thechannel as a whole. Last year we noted
BBC Annual Report and Accounts 2005/2006

In a relatively quiet year for sport on
BBC One, coverage of the Six Nations
Rugby and the Commonwealth Games
demonstrated once again that major
sporting events remain hugely popular.
The issue of repeats is one that audiences
often raise in our consultations and weare encouraged by BBC One’s continuing
progress in reducing repeats in peak time.
For more on this, see our report on
pages 15 to 16.
The population aged 4+ rose by 400,000 between
2004/2005 and 2005/2006

1

6
millionaverage audience to the final episode of
The Apprentice (BBC Two, February–May
2006)

Springwatch
Tracking the changing seasons: Bill Oddie andKate Humble involved the audience in recording
the coming of spring – many thousands helped
build a detailed picture of the season unfolding
across the UK

The Catherine Tate Show
Investing in distinctive comedy: Catherine Tate’ssketch show, which had its second season in 2005 –part of the BBC’s response to audience pressure todevelop fresh UK comic talent

the implementation of the strategy with aview to broadening its appeal.The results
were presented to us in July 2005.

Remit
BBC Two sets out to be a mixed-genre
channel combining serious factual andspecialist subjects with inventive comedy
and distinctive drama to bring challenging,
intelligent television to a wide audience.
In 2003 we approved a new strategy
for BBC Two which aimed to underline
its distinctive public service role as achannel offering a more challenging mix
of output than BBC One and, in particular,
with a strong and distinctive factual core.
This was achieved by shifting funding awayfrom entertainment, reducing the volume
of lifestyle programmes and increasing
the amount of arts and current affairs inpeak time.
The repositioning was achieved but atsome cost in terms of audience numbers,
exacerbated by increasing competition forviewers from the growing number of digitalchannels. Audience reach has continued tofall, although the rate of decline has slowed
and this may be a sign that audiences arestabilising, although there are problems
reaching younger and ethnic minority
audiences. In 2005/2006, average weekly
15-minute reach to viewers aged 4+ in
all homes was 59.1% or 33 million people(61.4%/34 million in 2004/2005)2. However,these figures are averages. Reach is higher inanalogue-only homes, but very significantly
lower in satellite homes.This suggests that
BBC Two faces further threats to its
audience position as the UK moves towards
analogue switch-off.
In last year’s Annual Report we noted thatthe new channel controller was reviewing

The key challenge identified was connectingwith digital audiences and anticipating the
expansion of on-demand technologies.
While audience appreciation was high, andthere had been innovation in music, arts
and religion as well as growth in current
affairs at 9pm, the amount of originaldrama and comedy had declined.To
counter this, further investment wasplanned in these two genres, alongsidefurther innovation in factual programmes.
At the same time, trials began to explore
the potential benefits of on-demand by
making programmes available on
broadband via the redesigned website.This
should increase reach as audiences will beable to watch outside the scheduled slot.
We endorsed these proposals for thefurther evolution of the channel and willcontinue to monitor progress.
In the year under review, BBC Two carrieda broad range of outstanding output.This
included Elusive Peace: Israel and the Arabs,
a three-part series exploring the last eight
years of the Middle East peace process
through interviews with key protagonists.
Coast, the result of a collaborative
partnership across the BBC, was anambitious series exploring the maritime
history and geography of the UK coastline.
Strong comedy included Extras, Ricky
Gervais’ latest excursion into the comedyof self-delusion, and Catherine Tateconsolidated her reputation with a newseries of The Catherine Tate Show which
pushed more of her catch-phrases into
general usage. William Golding’s epic trilogy
of novels To the Ends of the Earth was
adapted into a memorable classic drama.
Martin Scorsese’s illuminating documentaryon Bob Dylan, Arena: No Direction Home,
created enormous interest. Holocaust –BBC Annual Report and Accounts 2005/2006

A Music Memorial Film from Auschwitz wasa moving tribute to the Jewish musicians
who died in the death camps.The WinterOlympics were the highlight of sport on
the channel during the year.
Springwatch, presented by Bill Oddie, drew
large audiences with its fresh approachto natural history for family audiences.
It successfully encouraged viewers tocontribute their own observations of
nature through its national survey ofspringtime phenomena.
The Monastery drew large and appreciative
audiences as it followed five laymen
spending 40 days and nights in a Benedictinemonastery trying to discover if the monastic
disciplines had something to offer them.
This was a surprising, thoughtful and tactful
use of reality television techniques to
explore serious spiritual themes. Top Gear,a longstanding cornerstone of the schedule,
brought wit, verve and imaginative
production styles to its coverage ofcars and everything to do with them.
The Apprentice and Dragon’s Den returned
for successful second series, inventively
opening up the world of business andentrepreneurship to new audiences. The
Apprentice has been one of the successesof the broadband trial on bbc.co.uk/bbctwo,
where entire programmes have been madeavailable for downloading – initial publicdemand has indicated the potential appeal
of non linear programming.
The population aged 4+ rose by 400,000 between
2004/2005 and 2005/2006

227

Governors’ review
of services – Television

Remit
BBC Three is dedicated to innovative
British content and talent aimed primarily
at younger audiences.The channel iscommitted to a mixed schedule of news,
current affairs, music, arts, factual
knowledge-building content and coverageof international issues, as well as to highquality, distinctive new drama, comedy
and entertainment.
Audiences to BBC Three are continuing
to grow. In 2005/2006, average weekly
15-minute reach to viewers aged 4+ in
multichannel homes was 16.1% or 6.8 million
people (14.8%/5.6 million in 2004/2005)3.
At its launch in 2003, BBC Three was given
an extremely demanding remit – theconditions for approval laid upon it by the
Secretary of State were much more detailed
than for the other BBC digital television
channels. In general terms it has done
well and has maintained its commitment
to UK-produced content and its remit for
innovation and risk-taking. However, it was
clear that some parts of the schedule were
not delivering value for money, in particular
the 7 O’Clock News. As we noted in lastyear’s Annual Report, we asked management
to consider the future role of news on
BBC Three and their conclusions were
presented to us in June 2005.

FunlandCommissioning innovative drama: Ian PulestoneDavies and Frances Barber in the dark comic
thriller Funland – part of BBC Three’s commitment
to bring its audiences distinctive new drama

Naked City
Reporting cutting-edge art: 1,700 volunteers
assembled naked on the Quayside at Gateshead tobe photographed by the US artist Spencer Tunick –a collaboration between BBC Three and the Baltic
Centre for Contemporary Art

news offering, 60 Seconds, which has proveda successful format for delivering news to
the younger adult audiences targeted by
the channel. Experiments with changing
the transmission time of the longer bulletin
and altering its format and presentation
were not successful in significantly increasing
its impact.

BBC Three has continued to perform
strongly with home-grown comedy. Two
Pints of Lager and a Packet of Crisps,
Tittybangbang, Man Stroke Woman, Ideal anda further series of the channel’s established
hit Little Britain are good examples of thechannel’s vigour in tackling this difficult andrisky genre. Strong drama included the dark
comedy Funland.

A second recommendation frommanagement was to alter the channel’s
remit.The original wording committed
the channel to a number of specific factual
sub-genres including education, science,
religion and ethics, and business. In practice,
the channel management discovered that
this large number of narrow commitments
was a hindrance rather than a help indelivering high-quality factual content to
its audiences. Some of BBC Three’s mostsuccessful factual output did not fit easily
into the specified sub-genres. For example,
it was unclear whether Little Angels(on parenting skills) or Body Hits (on healthissues) should be classified as educationor science. In management’s view, it would
be more productive to consolidate its
commitments into a single ‘knowledgebuilding’ category and to increase its hours
commitments in this area.
We endorsed both recommendations.
With the agreement of the Secretaryof State the wording of the remit waschanged (the new wording is at the headof this review).

The main recommendation was to drop
the 7pm news and close its website.
Although admirably innovative, the bulletin
had not succeeded in generating asubstantial audience nor had its associatedinteractive news services.This has not been
the case with the channel’s other hourly

The channel’s commitment to factual
knowledge-building output has produced
some notable successes in the year underreview on the general theme of selfimprovement.They include Honey We’re
Killing the Kids (on parents’ role in theirchildren’s unhealthy eating habits, with alinked exhibition at the Science Museum);
Spendaholics (on personal debt); andDog Borstal (on training pets).

28

BBC Annual Report and Accounts 2005/2006

The Flashmob – the Opera format was
successfully repeated, this time in Sheffieldwith a version of the Faust story
performed in front of the shoppers in the
Meadowhall shopping centre. Naked City, acollaboration with the Baltic Centre forContemporary Art on Tyneside, recorded
the artist Spencer Tunick’s project toassemble 1,700 naked volunteers on the
Quayside and photograph them.
BBC Three has done innovative work toextend its output beyond broadcast, forexample by premiering the new series of
its comedy The Mighty Boosh on broadband
via bbc.co.uk.
The channel’s overall success is to beapplauded. However, there are areas forconcern. The channel has a specific remit
to appeal to younger audiences but the
average age of its audience is towards
the older end of the target age-range.
Management are looking to refocus on
younger audiences, and a re-emphasis
on risk-taking, distinctive and highquality origination may hold the key
here. The channel cannot afford any
long-term decline in audience perceptionsof its originality.
The number of individuals in multichannel homes
grew by 5 million to 42.5 million between
2004/2005 and 2005/2006

3

127
hours
of new educational programming broadcast
on BBC Three in 2005/2006

The Jitterbug Years
Tracing history through music: BBC Four used
contemporary hits and archive footage to bringalive the story of post-war Britain – part of thechannel’s Lost Decade season examining British
culture from 1945–1955

Remit
BBC Four aims to serve audiences insearch of even greater depth and range
in their viewing. With an ambition to
be British television’s most intellectuallyand culturally enriching channel, BBC Foursets out to balance a distinctive
mix of documentary, performance,music, film and topical features tooffer a satisfying alternative to moremainstream programming.
Audiences to BBC Four continue to rise.
In 2005/2006, average weekly 15-minutereach to viewers aged 4+ in multichannel
homes was 6.1% or 2.6 million people(4.8%/1.8 million in 2004/2005)4.
BBC Four has continued steadily to build
its reputation for unashamedly literate,
intelligent and challenging output. BBC
audience research suggests that BBC Four
viewers rate the channel ahead of all its
UK competitors, terrestrial as well as digital,
for the high quality of its programmes.
The channel has made an impact bydeveloping one-off dramas oncontemporary themes and personalities.
Fantabulosa was a memorably bleak
portrait of the comedian Kenneth
Williams based on his diaries, and
The Chatterly Affair an engagingly obliquedramatisation of the 1963 trial for
obscenity of D H Lawrence’s novel.
The Quatermass Experiment was thefirst live drama on BBC television formany years. A View from a Hill broughta satisfying chill to Christmas with afine adaptation of M R James’ classic
ghost story.

Fantabulosa
Drama to make you think: Michael Sheen
as Kenneth Williams in Fantabulosa,a compelling portrait revealing the brilliant
comedian’s darker side

Documentaries are a particularly strong
feature of the channel. The Storyville strand(shared with BBC Two) has drawn justified
praise for its eclectic commissioning.
Outside the Storyville strand, memorable
documentary has included Monsoon
Railway, an evocative portrait of theAssam and Bengal railway and someof the lives it touches.
BBC Four is the home of international filmon the BBC.The channel showed all threeparts of Heimat (Edgar Reitz’s monumental
chronicle of modern German history) andhas continued its commitment to the World
Cinema Awards.This sits alongside supportof the Grierson Awards for documentary
and the Samuel Johnson Award for nonfiction as part of the channel’s wider
engagement with these genres.
Innovative comedy is one of the ways thechannel seeks to broaden its appeal whilestaying true to its remit, and the second
series of the sharp political satire The Thickof It demonstrated what can be achieved
here.The channel also seeks to increase
its impact with seasons of linked output.
The Lost Decade was an eye-opening
series of documentaries examining different
aspects of life in Britain between 1945 and1955; the subjects covered included sex,
censorship, food, politics, sport, leisureand culture.The Bob Dylan season built
imaginatively on the momentum createdby the Scorsese documentary on BBC Two
with a collection of new and archive films.
Folk Britannia celebrated the traditionalmusic of the UK through a linked series of
documentaries, archive programming andlive performances.
The number of individuals in multichannel homes
grew by 5 million to 42.5 million between
2004/2005 and 2005/2006

4

BBC Annual Report and Accounts 2005/2006

29

Governors’ review
of services – Television

56%
of children in Great Britain aged 7–15
accessed bbc.co.uk/CBBC in December 2005

Jonny’s Hotshots
Encouraging sports participation: Englandinternational Jonny Wilkinson shares the secretsof rugby with CBBC viewers

Remit
The CBBC Channel aims to offer adistinctive mixed schedule for children
from 6 to 12 years old, encouraging
them to find out more about existing
interests or inspiring them to develop
new ones, and helping them tounderstand and embrace the world
around them. The channel puts anemphasis on encouraging participation.
Audiences to The CBBC Channel havecontinued to rise. In 2005/2006, average
weekly 15-minute reach to viewers aged
4+ in multichannel homes was 6.0% or
2.6 million people (5.6%/2.1 million in
2004/2005)5.

formally to us.Their report was presented
to us in July 2005.

primarily for use in the classroom and arefocused on the school curriculum.

Management identified some specificproblems with inexperienced presenters(although making the point that thechannel is required to develop new on-air
talent) and accepted that occasionallyboundaries of taste had been crossed in
the Saturday morning show Dick and Domin da Bungalow. However, they assured
us that proper controls were in place,including induction training, editorial
guidelines and programme review forums.
We endorsed their approach to tone andpresentation style and supported theoverall performance of the channel, which
has been a very successful addition to the
BBC portfolio and prompts very positive
feedback from parents.

The launch of new digital channels aimed
at sections of CBBC’s heartland audiencemeans that the channel may have to work
hard to maintain its reach in the coming
period. However, on the evidence of the lastyear it is well placed to meet the challenge,
and management have embarked on a
programme of refreshing the channel,
including ending some long-running andsuccessful titles.

The channel’s presentation style is lively
and energetic and it works hard to stay intune with its demanding audiences. In lastyear’s report we noted the reservations
raised by Professor Patrick Barwise in his
independent review of the channel
commissioned by the Department for
Culture, Media and Sport (DCMS) about
the tone of voice of The CBBC Channel,
and we asked management to respond

The CBBC Channel’s philosophy is“learning through fun”. An elementof learning and life skills development
pervades a large part of its output
including drama and factual. Blue Peter,
Newsround and Short Change demonstratethat there is a serious thread to thechannel. Short Change deals with consumer
issues and equips children to makeinformed choices. Newsround now has aninvestigative strand, examining problems
such as underage drinking in the UK.
The Newsround Press Pack website waslaunched, enabling children to learn thebasics of journalism and see their work
published, and the site has proved
extremely popular.The channel also
launched Sportsround, a weekly sports showthat encourages children to take partin sport. In Jonny’s Hotshots, the Englandinternational Jonny Wilkinson gave rugby
masterclasses to a group of children.
The schedule also includes Class TV, afour-hour block of schools programmes
transmitted every weekday during term
time.These programmes are designed

30

BBC Annual Report and Accounts 2005/2006

The distinctiveness of the channel remains
its high quality, its range (including news,
education and drama), its low level of
repeats, its freedom from adverts and its
high proportion of quality UK-originatedmaterial throughout the day. During theyear more quality content, particularly
drama, received its premiere on The CBBC
Channel – and CBeebies – rather than
BBC One or Two.

The number of individuals in multichannel homes
grew by 5 million to 42.5 million between
2004/2005 and 2005/2006

5

Weekly reach of BBC Television services 2005/2006 (% individuals)

BBC Television
BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

2005/ 2004/
2006 2005
85.3 86.6
79.7 81.9
59.1 61.4
11.8
9.4
4.5
3.0
4.2
3.5
6.4
5.8
5.4
4.2
0.2
0.2

Source: BARB,TNS/Infosys, age 4+ in All Homes, average 15-minute weekly reach 2005/2006

Charlie and Lola
Learning about life: Lauren Child’s award-winningchildren’s books about family relationships, brought
to CBeebies in a new UK animation

Remit
CBeebies aims to offer a mix of newand landmark, high-quality, UK-produced
programmes to educate and entertain
the BBC’s youngest audience.The service
provides a range of programming designed
to encourage learning through play forchildren aged five and under, in aconsistently safe environment.
Reach to CBeebies fell slightly during theyear, although because the number ofhomes where the channel can be received
is rising, the number of people watching
the channel rose6. In 2005/2006, average
weekly 15-minute reach to viewers aged
4+ in multichannel homes was 8.8% or
3.7 million people (9.0%/3.4 million people
in 2004/2005). As many viewers are aged
under four these figures underestimate thetrue size of the audience.
The channel’s philosophy is “learning
through play” and almost all the
programming is linked to the Government’s
Foundation Stage Curriculum. New
programming this year included Lazytown,
encouraging health and fitness, and Charlieand Lola, a new UK animation looking at
family relationships through children’s eyes
– a production of great charm andfreshness. Muffin the Mule was revived,
giving its viewers insight into the value offriends and teamwork. Strong returning
series included Boogie Beebies (dance andsing-along); The Roly Mo Show (drama andstorytelling); and Tweenies (communityand social skills).

News and the channel continues to findinnovative ways to exploit the educational
possibilities of online.The Something Special
website and associated programmes aredesigned to help children with learning
difficulties.The language used in the
programmes is supported by Makaton signs
and symbols, designed to be understoodby children in the early stages of language
development and recognised as an effective
way of building the communication skills of
people with learning difficulties.
CBeebies’ success is recognised by parents
who consistently rate it as the best channel
for children. However, although it remains
the market leader among all children’schannels, the fall in reach during the year
under review is a clear sign that it isstarting to face problems in an increasinglycompetitive digital world. Some of its
programme titles have reached the endof their creative life and there is a pressing
need to refresh the portfolio. Management
have made clear their awareness of theissue in their Statements of Programme
Policy and we note their commitment
to provide more content for the older
age range among CBeebies’ viewers.
The number of individuals in multichannel homes
grew by 5 million to 42.5 million between
2004/2005 and 2005/2006

6

CBeebies’ interactive service is the second
most-used BBC interactive service after
BBC Annual Report and Accounts 2005/2006

31

Governors’ review
of services – Radio

Overview
The radio landscape continues to change at great speed,with consolidation in the commercial sector, and therapid spread of new ways of listening. Increasingly, younger
audiences are listening via digital platforms, leading to
expectations that they will be offered not just music
but also supporting visual materials, and BBC Radio has
begun to experiment using interactive television. It has
also extended its podcasting trial – this will be includedin the Public Value Test to be applied to the BBC iPlayer.
Overall, BBC Radio continues to perform strongly – indeed
its top performing output attracts audiences on a par with
hit television shows. In general terms audiences arestrong, although the picture varies across the portfolio andthe rising popularity of downloaded music threatens reachto younger listeners who now have somewhere else togo for their music other than radio.The BBC’s digital-only
stations are generally in good health and are beginning to
make a contribution to the overall reach of BBC Radio.
We agreed a new remit for BBC Asian Network to deal
with some problems there.
We have always regarded distinctiveness as lying at theheart of the remits for Radio 1 and Radio 2. Under thepresent governance system we believe we have beensuccessful in ensuring that management have delivered
distinctive output for the two networks. Using the tools
available to the Trust we believe it will be easier both tomaintain this – and to provide further objective measuresof performance in this regard.

32

BBC Annual Report and Accounts 2005/2006

356
new sessions and Live Lounge performances
broadcast on Radio 1 in 2005/2006

Sunday Surgery
Promoting safer sex: The Radio 1 Sex Tour, acollaboration with the Open University, travelledround the UK investigating sexual attitudes as partof Radio 1’s Sunday Surgery – here, in Londonderry,with Big Brother star Kemal

Remit
BBC Radio 1 aims to offer an exciting,high-quality service for young audiences.
It is committed to playing the best new
music and delivering a comprehensive
range of live studio sessions, concerts
and festival broadcasts.The network aims
to cover all the significant youth music
genres with a wide-ranging playlist anda diverse team of specialist DJs. It alsodelivers tailored speech output including
news, documentaries and advice
campaigns, with integrated online
and interactive services.
Radio 1 plays a key role in enabling the
BBC to reach young audiences and thesuccess of the station is critical to thesuccess of BBC Radio as a whole. We arepleased that the new strategy we approved
for Radio 1 in 2003 continues to bear fruit.
The station has reversed the annual
declines in audiences recorded between
2000 and 2003. In 2005/2006, Radio 1 had
an average 15-minute weekly reach toadults aged 15+ of 10.2 million people or
20.6% (10 million/20.4% in 2004/2005)1.
This has been achieved with no diminutionof Radio 1’s commitment to a distinctive
schedule with a strong commitment tospecialist music, to UK music, to new music
and to live music. In order to ensure that
distinctiveness is maintained, Radio 1 carries
out continuous monitoring of its output
and in addition Radio 1 and Radio 2 aremonitored by an external agency for asample week twice a year to assess their
distinctiveness – against each other andagainst key commercial stations.The
Governance Unit has studied the external
agency’s findings which show that Radio 1

One Big Weekend
Taking music to the audience: Zane Lowe, one of
the hosts of Radio 1’s Big Weekend in Sunderland,
taking the best new music to an area often
overlooked by the major festivals

retains a distinctive schedule. When
compared with key commercial stations,Radio 1’s daytime output (which includes
peak listening times) carried many more
new songs and with less repetition of
tracks, a higher proportion of new musiccoming from UK acts and a much greatercommitment to live music. We are stronglyof the view that this distinctiveness should
be maintained, including in peak time, andthat any overlap with Radio 2 should be
kept to a minimum.
The station has extended the range anddiversity of its live events. Particularly
noteworthy was Radio 1’s Big Weekend
from Sunderland, bringing the best new
music to an underserved area.
Strong presenters are one of the keys toRadio I’s success and the group assembled
in recent years underpins the station’s
range and creative strength. Presenterssuch as Zane Lowe (recognised this yearwith a Sony Gold Award) helped to
draw listeners to new music. However,there is evidence that some specialist
programming has low awareness and wenote management’s commitment to tackle
this in the Statements of Programme Policy.

health. It broadcast live from Wrexham,
Glasgow, Sunderland and Londonderry, andincluded live audiences, celebrity guests,
contributions from listeners via texts, emails
and phone calls, and a live online chatroom debate.The Open University
supported the tour with short online
courses. Don’t Panic was a three-weekcampaign run during the exam resultsseason offering expert help and advice.
The campaign was run in conjunction with
the Department for Education and Skills(DfES) helpline.The DfES received almost
12,000 calls, with Radio 1 given as the main
reason for calling.
A key challenge for Radio 1 is theincreasing popularity of downloaded music
which gives fans a destination other thanradio for the music they want.The station
is experimenting with its own digitalofferings as part of the BBC’s podcast trial.
For the first time content has been madeavailable via mobile phones and there havebeen experiments with visual material tosupport the on-air offer.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

1

Although music will always lie at the heartof Radio 1, a substantial proportion of theoutput is devoted to speech. Newsbeat,
which provides UK and international news
and analysis specially tailored for a young
audience, continues to do an excellent
job of bringing BBC editorial values toan audience the BBC finds hard to reach
via other channels. During the General
Election, Newsbeat ran three extended
specials with party leaders.
The station also continues to run effective
social action campaigns. The Radio 1 Sex
Tour was an ambitious attempt to tackle
ignorance among young people on sexual
BBC Annual Report and Accounts 2005/2006

33

Governors’ review
of services – Radio50
the average age of listeners to Radio 2

Live and Exclusive
Showcasing the best international talent: thegreat Motown singer-songwriter Stevie Wonder
performing at the Abbey Road Studios forRadio 2’s Live and Exclusive series

Remit
BBC Radio 2 aims to bring listeners abroad range of popular and specialist
music, with particular support for new
and established British artists; live music,
through concerts and studio sessions; andsongwriting.The network also offers news,
current affairs, documentaries, comedy,
readings, religious output and social action,
designed to appeal to a broad audience.
Radio 2’s audience has fallen a little, but
it remains the UK’s most listened-to radio
station with average 15-minute weekly
reach to adults aged 15+ of 13.1 million
people or 26.5% in 2005/2006(13.3 million/27.2% in 2004/2005)2.
We note management’s commitmentin the Statements of Programme Policy tocontinue to seek a more ethnically diverse
audience for the station through the choiceof topics, contributors and interviewees.
As with Radio 1, we are strongly committed
to maintaining the distinctiveness of Radio 2,
including in peak time. As far as the station’smusic output goes, its distinctiveness lies
largely in the breadth of music played –more than 20 genres of music are offered,including rock, pop, soul, country, jazz, folk,
brass band and musical theatre – and inits commitment to live, mostly UK, music
throughout the schedule.To ensure that
this distinctiveness is maintained, Radio 2
is monitored by an external agency fora sample week twice a year to assess
distinctiveness against Radio 1 and against
key commercial stations.The Governance
Unit has studied the external agency’s
findings which show that Radio 2’s daytime
ouput (which includes peak listening times)
carried many more individual tracks than any
34

other station sampled, had a much lower
repetition rate, and played a very highproportion of tracks not played on any
other station.The overlap of tracks with
Radio 1 was very small. More than 50 live
tracks were played – the non-BBC stations
sampled played little or no live music.The
introduction of Service Licences will provide
a further assurance that the distinctivenessof the station will be maintained.
Notable music output included Stevie Wonder
Live and Exclusive and Paul McCartney Soldon Song – both recorded live at Abbey Road
Studios.The McCartney session was partof Radio 2’s impressive Sold on Song initiative
to encourage the art of songwriting, which
includes a rich website offering advice andguidance for budding songwriters. Anotherspecially recorded session, David Gilmour
Live and Exclusive, drew 400,000 online
downloads. Radio Ballads – a powerful blendof memory, speech and music – revived aform pioneered by the BBC Home Service
in the 1950s and used to it to bring to lifesocial issues including HIV/Aids, the declineof the steel industry, and the sectarian
struggle in Northern Ireland.
A high proportion of Radio 2’s output is
speech and this also seeks to be distinctive,
including documentaries, arts programming,
comedy and high-quality news, current
affairs and discussion. Notable speech
output included Amadeus, one of Radio 2’s
wide-ranging contributions to the 250th
anniversary of the birth of Mozart. Peter
Shaffer’s play was adapted into a powerfuleight-part dramatic reading narrated
by F Murray Abraham, recreating his
Oscar-winning film role as Salieri. Malcolm
McLaren’s Musical Map of London was asurprising and atmospheric portrait of
the capital from the godfather of punk.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

2

BBC Annual Report and Accounts 2005/2006

Remit
BBC Radio 3 is centred on classicalmusic, and also aims to provide a broad
spectrum of jazz, world music, drama
and arts programmes. It focuses onpresenting live and specially recorded
music from across the UK and beyond,including contributions from the BBC
performing groups.
Radio 3’s audience is broadly stable: average
15-minute weekly reach to adults aged 15+
was 2 million people or 4.1% in 2005/2006(2 million/4.2% in 2004/2005)3.
Editorially, Radio 3 has had a year full of
innovation, ambition and achievement.Twoof the highlights of its year – indeed twoof the highlights of the BBC’s year – were
The Beethoven Experience (all the musicover seven days) and the Bach Christmas(all the surviving music over ten days).
The Beethoven Experience caused some
controversy.The nine symphonies, playedby the BBC Symphony Orchestra, weremade available for free downloading fora limited period and resulted in 1.4 million
downloads – far more than had been
predicted. As a result, some in the record
industry complained that the BBC was
unfairly damaging their business by giving
away what they were in business to sell.
Management accepted that while somestakeholders in the industry had been toldof the plan and had not expressed any
reservations, there had been no formal
consultation – which there would havebeen had the scale of take-up beencorrectly anticipated.The download
experiment was not repeated during
Bach Christmas.

321
hours
of original comedy broadcast on Radio 4
in 2005/2006

Pitch Perfect
Breaking new ground: schoolchildren taking partin a new choral and instrumental workcommissioned by Radio 3 in collaboration
with BBC Sport as a celebration of football

The Raj Quartet
Making classic radio drama: Prasanna Puwanarajah,
Mark Bazely and Anna Maxwell Martin in Radio 4’sdramatisation of Paul Scott’s novel, The Raj Quartet

This controversy – from which importantlessons were learnt – should not beallowed to overshadow the astonishingambition of the two projects themselves.
The performances – a mixture of historic
recordings and specially commissioned
concerts – were supported by thoughtprovoking commentaries from a wide
range of speakers, both musicians andnon-musicians. For the Bach Christmas,
Radio 3 invited organists throughout the
UK to play the Toccata and Fugue in
D Minor on 18 December, and more than
500 did so.There was also a memorable
and moving concert from Brixton Prison
with prisoners singing the chorale froma Bach Cantata to mark the composer’s
own brief spell in jail.

more responsive to events.The samedesire can be seen in the move towards
fast-turnaround topical drama and a greater
sense of timeliness in features.

The playwright Harold Pinter and thecomposer James Clarke collaborated on
Voices, a piece commissioned by Radio 3.
The cast included Pinter himself.This dark
and disturbing piece – the words of
torturers and the tortured set to a
haunting radiophonic score – was ascompelling as it was uncompromising.
In sharp contrast, Pitch Perfect was a new
choral and instrumental work involving alarge number of schools and two footballclubs, commissioned as a celebration ofsoccer in partnership with BBC Sport.
The BBC Singers and the BBC Concert
Orchestra rehearsed with the school
students – including two mammoth
sessions at Highbury Stadium and Stamford
Bridge – for a performance on 18
November as part of Children in Need night.
The BBC Proms had another strong year,
despite the London bombings. Highlights
included the Proms debuts of Placido
Domingo and Ravi Shankar.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

3

Remit
BBC Radio 4’s remit is to use the powerof the spoken word to offer programmesof depth which are surprising, searching,revelatory and entertaining.The network
aims to offer in-depth and thoughtful
news and current affairs and seeks toengage and inspire its audience with aunique mix of factual programmes, drama,
readings and comedy.
Audiences to Radio 4 are broadly stable. In
2005/2006, average 15-minute weekly reachto adults aged 15+ was 9.5 million people
or 19.2% (9.4 million/19.3% in 2004/2005)4.
The loyalty of Radio 4 listeners is legendary– and so is their determination to maketheir views known when changes areproposed to parts of the schedule thatsome listeners particularly value. Whenmanagement announced that the ‘UK
Theme’ (a medley of folk tunes played at
5.30am each day) was to be axed to makeway for a news briefing, it provoked many
newspaper editorials, a vociferous campaign
to keep the music, and even questions in
Parliament. We did not believe this was amatter of sufficient significance to justify
intervention by the Governors. However,this intense sense of ownership by its
listeners means that modernising urges forthe network have to be handled withparticular care and tact.
However, no schedule is incapable of further
development and refreshment, and this is astrue of Radio 4 as it is of any other part ofthe BBC. Innovations such as the weekly
obituaries programme Last Word and theintroduction of a Profile slot are part ofan overall move to make the station
BBC Annual Report and Accounts 2005/2006

At the same time, however, many of thefamiliar landmarks of the schedule arestill in place and still performing strongly.
The Archers – the world’s longest-runningradio drama – marked its 55th anniversary
in January 2006.
Journalism – both mainstream and specialist –continues to provide the spine of theschedule. In Coming Home, part of the BBC’s
output marking the 60th anniversary of theend of World War Two, Charles Wheeler
presented five personal interpretations ofwhat the moment meant. In The Race is On,
Peter White told the story behind thesuccessful London Olympics bid, gaining
remarkable access to the decision makers.
Outside journalism, the range of theRadio 4 schedule remains one of its
great strengths.This year, for example, saw
Melvyn Bragg attract much attention for
his In Our Time listeners’ poll to find thegreatest philosopher (the unexpectedvictor being Karl Marx). Strong new
comedy included Ed Reardon’s Week, thediaries of a failed but admirably undefeatedwriter; memorable classic serials included
a fine dramatisation of Paul Scott’s novel
about India in the 1940s, The Raj Quartet;and the network began an ambitious andengagingly narrated 90-part history of the
British empire, This Sceptred Isle: Empire.
The latter series is supported by arichly detailed website which includes
a valuable archive of listeners’ personal
Empire histories.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

435

Governors’ review
of services – Radio

Olympic victory
Being where the story is: Radio Five Live gave
extensive coverage to the competing bids to stage
the 2012 Olympics – and was there in Trafalgar
Square when London’s victory was announced

Remit
BBC Radio Five Live broadcasts live
news and sport 24 hours a day, aiming
to present events as they happen in amodern, dynamic and accessible style.
It sets out to cover national andinternational subjects in depth, using
wide-ranging analysis and debate to
inform, entertain and involve news andsports fans of all ages, with particularemphasis on 25 to 44 year olds.
The network also provides extensive
live events coverage, supported by theBBC’s global newsgathering operations
and portfolio of sports rights.
Audiences to Radio Five Live have slipped.
Average 15-minute weekly reach to adults
aged 15+ was 5.9 million people or 12.0%
in 2005/2006 (6.2 million/12.7%
in 2004/2005)5.
Radio Five Live has had a good year
editorially, in both its sports coverage and its
news and current affairs output. Its coverageof the July bombings in London wasparticularly strong.The station was in the
middle of its weekday morning phone-in
when the news broke.The presenter,
Matthew Bannister, reacted with calmauthority and intelligence as he led theoutput into a rolling news format lasting
many hours. All broadcasting is a team effort,
but Bannister’s performance gave the Five
Live team a real edge that day.The strengthof the network is demonstrated by thefact that on only the previous day it had
broadcast a day of memorably ambitious
and vivid multi-location coverage of theannouncement in Singapore of the winner ofthe competition to stage the 2012 Olympics.
36

The station also carried strong General
Election campaign reporting, collaborating
usefully with 1Xtra and the Asian Network.
Weekend Business, presented by Jeff Randall,
scored a notable coup with its interview
with Rupert Murdoch.The FIFA President
Sepp Blatter, who rarely gives long, live,
wide-ranging interviews, gave one to Brian
Alexander on Sport on Five – and thecontents made headlines.
Notable sports event coverage included
Wimbledon, the Champions League, andFive Live’s commentary on the Oval Test –the decider in the gripping Ashes series.
All the station’s daytime programmes camelive from the Oval and the coverage, which
encouraged strong interaction with theaudience through text messages and emails,
complemented to good effect the more
traditional coverage on Radio 4’s Test MatchSpecial. Fighting Talk continues to build its
reputation for lively and engaging discussionof sports issues and events.
The main issue for Radio Five Live is its
dependence on medium wave wherereception is poor in some parts of the UK.
We note management’s commitment in
the Statements of Programme Policy to
put greater effort into encouraging theaudience to listen via digital platforms.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

5

Weekend Business
Making news: international media tycoon Rupert
Murdoch gives a rare full length interview to Five
Live’s weekly business show Weekend Business

Remit
BBC Five Live Sports Extra is a part-time
extension of BBC Radio Five Live, aimed
at bringing a greater choice of action tosports fans. It extracts more value forlicence fee payers from sports rights
already owned by the BBC by offering
alternative commentaries to those
provided on Five Live.
Five Live Sports Extra has establisheditself as a valued sister station to Five Live,delivering extra value to licence fee payers
from existing BBC sports rights.The BBC
does not buy additional sports rights solely
for use on Five Live Sports Extra. Its
audiences are rising: in 2005/2006, average
15-minute weekly reach to adults aged
15+ was 0.47 million people or 1.0%
(0.41 million/0.8% in 2004/2005)6.
The service has enabled the BBC towiden choice for listeners, for example
by continuing to broadcast sportscommentaries when sports coverage on
Five Live is curtailed to enable full coverageof breaking news. It also enables the BBC
to offer sports fans a greater choice ofmatches and events, for example analternative Premiership match to the one
broadcast on Five Live on most weekends.
It has also offered uninterrupted coverageof Test Match cricket and of the qualifying
rounds of Formula One.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

6

BBC Annual Report and Accounts 2005/2006

Weekly reach of BBC Radio services 2005/2006 (% adults age 15+)

BBC Radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC National/Local RadioBBC Five Live Sports Extra
1Xtra
6 Music
BBC 7
BBC Asian Network
BBC World Service

Carnival coverage
Extending the experience: 1Xtra extended
its reporting of the Notting Hill Carnival byexperimenting with interactive television coverageavailable via the red button

Remit
1Xtra aims to play the best ofcontemporary black music, with a strongemphasis on delivering high-quality live
music and supporting new British artists.
1Xtra also brings listeners a bespokenews service, regular discussion
programmes and specially commissioned
documentaries, plus information andadvice relevant to the young target
audience, particularly – although not
exclusively – those from ethnic minorities.
1Xtra’s audiences are rising: in 2005/2006,
average 15-minute weekly reach to adults
aged 15+ was 0.36 million people or 0.7%
(0.31 million/0.6% in 2004/2005)7.
1Xtra has continued to build its confidence,
ambition and reputation – and to reachaudiences the BBC has traditionally found
it very hard to attract. It plays a wide rangeof contemporary black music, the great
majority new (ie less than a month fromrelease) and a high proportion of it UK
music. Its live music coverage is a notably
strong element of the schedule, ranging
from small club nights to stadium tours byinternational stars and events such as theNotting Hill Carnival. Specialist music is wellcovered, including extended output such as
Hip Hop Weekend.

2005/ 2004/
2006 2005
66.5 66.6
20.6 20.4
26.5 27.2
4.1
4.2
19.2 19.3
12.0 12.7
20.5 20.8
1.0
0.8
0.7
0.6
0.6
0.5
1.2
0.9
0.9
1.0
2.6
2.6

Source: RAJAR, age 15+, average 15-minute weekly reach for 2005/2006

programming. In particular, thedocumentary strand in the weekday
current affairs programme, TX Unlimited,
has broadcast some distinctive journalism
on a range of sensitive subjects including
anorexia, child soldiers in Africa, and deathrow in the US.The station did useful workin its first ever full social action campaign,
Between the Sheets, a month-long seriesof programmes, interviews, features anddocumentaries examining all aspects ofsexual health.
The station’s contribution to the BBC’s
Africa season was admirably ambitious,
broadcasting live from South Africa, Kenya
and Ghana, and using music as a way into
other subjects.
1Xtra has made good use of its website,which is the most popular of those of theBBC’s digital stations. It hosts all the BBC’s
black music message boards – a new project
aimed at bringing musical communities
together. Taggerz, an innovative online
animated drama about a gang of graffiti
artists, attracted 200,000 unique users over
six months. 1Xtra has also experimented
with interactive TV – coverage of theNotting Hill Carnival was available via thered button on digital television.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

7

In our last two Annual Reports we raised
concerns about the quality of some of
1Xtra’s speech output. We are encouragedby the good progress made over thecourse of the year under review andnote management’s commitment in theStatements of Programme Policy to continue
to enhance the depth and range of speech
BBC Annual Report and Accounts 2005/2006

37

Governors’ review
of services – Radio

510
hours
of current affairs programming broadcast
on 1Xtra in 2005/2006

Curator of the day
Giving talent free rein: Franz Ferdinand singer Alex
Kapranos with BBC 6 Music DJ Nemone. Franz
Ferdinand members curated the station for a day,choosing music of special significance to the bandof John Lennon – including an exclusive
interview with his widow,Yoko Ono, anda showing of Lennon archive material on
the BBC’s Big Screen in Liverpool.
Remit
BBC 6 Music aims to engage with loversof popular music, offering them current
releases outside the mainstream,
new concert and session tracks, andmusic from the BBC sound archive.
It concentrates on music and artists thatare not well supported by other radio
stations, and is committed to providing
context for the music it plays, throughmusic news, documentaries, debate andstimulating interactive content.

One issue of concern is the strong
gender imbalance in the audience, which
is approximately 70% male.The station
aims to appeal to all music lovers, and wenote management’s commitment in theStatements of Programme Policy to broaden
the appeal of the network, particularly
in respect of the male/female balanceof listeners.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

8

Audiences to BBC 7 are rising and it is themost listened to of the BBC’s digital-only
stations. In 2005/2006, BBC 7 had an
average 15-minute weekly reach to adults
aged 15+ of 0.59 million or 1.2% (0.44
million/0.9% in 2004/2005)9.

Audiences to BBC 6 Music are rising.
In 2005/2006, average 15-minute weekly
reach to adults aged 15+ was 0.32 million
people or 0.6% (0.25 million/0.5% in
2004/2005)8.
The growth of 6 Music’s audience
confirms its place in the BBC Radio
portfolio as a distinctive service highly
valued by its listeners. Its standing in thewider music business is demonstrated by
its ability to attract big names. Both Franz
Ferdinand and Kaiser Chiefs agreed tocurate the station for a day – choosing
the album of the day, selecting sessions
and concert tracks from the BBC archive,
and playing music that had influenced
them. The station’s strong roster ofpresenters – including Phill Jupitus, Steve
Lamacq and Tom Robinson – adds to its
authority. Stuart Maconie’s Freak Zone,
catering to more experimental tastes,
brings a knowledgeably eclectic flavour
to Sunday output.

The bedrock of the output remains the
BBC archive and the station has foundimaginative ways of scheduling this to gain
maximum impact. An Oscar Wilde season
mined a rich seam of work including
drama, fiction and letters; an Alan Bennett
season included 40 Years On, Kafka’s Dickand An Englishman Abroad; the actor
Bill Nighy introduced a selection fromhis impressive range of radio work; andthe station broadcast the entire canonof Sir Arthur Conan Doyle’s work.
In addition to archive-based output, BBC 7
is tasked with commissioning some original
output. New comedy is a specialisation.
The BBC New Comedy Awards included asearch for new stand-up talent throughout
the UK, with the winners given the chance
to write for a radio comedy show.
A discussion programme, Serious About
Comedy, was also launched. Science fiction
and fantasy is an area where BBC 7 aims

The station has done well with anniversary
specials, among them four days of output
marking 30 years of punk, and a day
marking the 25th anniversary of the murder
38

Remit
BBC 7 is a speech-based digital radio
service offering comedy, drama andreadings, mainly from the BBC archive.
The network is zoned around typesof programmes so people know thatat a certain time of day a particular
type of output will always be available.
BBC 7 also aims to be the home ofchildren’s speech radio, with regular
live programming for children.

BBC Annual Report and Accounts 2005/2006

37%
of adults have listened to the radio via
digital television (Q1 2006)

BBC Comedy Award
Searching out new talent:Tom Allen, chosen from400 contestants as BBC New Talent Stand Up
Comedian of 2005. He and five finalists won the
chance to write for a BBC Radio comedy show

to provide for an underserved audience
and, working with the BBC writersroom
initiative, the station broadcast ten original
15-minute dramas from UK writers new tonational network radio. More than 20 new
readings were broadcast, and Boxing Day
became Narnia Day, with an eight-hour
dramatisation of the first four of C S Lewis’Chronicles of Narnia. Its star cast included
Paul Scofield and David Suchet.
The children’s service has continued todevelop well, with new opportunities forchildren to write for radio and appear on
air. A Storyteller competition drew 2,000
entries and the winners came into theradio studio to help produce the readingsof their stories.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

9

The Hype Show
Making distinctive music: DJ Kayper, one of the
UK leading female DJs, has a regular weekly slot,
The Hype Show, on BBC Asian Network. Changes
have been made to increase its appeal to young
British Asians

Remit
BBC Asian Network aims to entertain
and inform young British Asians with acontemporary mix of music and speech.
While the primary target audience is
British Asians under 35, the network
strives to have a broader appeal amongst
all who share an interest in British Asianissues, music and culture.The network is
committed to being the definitive forum
for informed debate about news andissues related to British Asians. It plays
a broad range of South Asian-influenced
music, with a particular emphasis on
live performance and new British Asianartists. Programming is provided ina range of South Asian languages, toreflect the linguistic influences on young
British Asians.
In 2005/2006, BBC Asian Network had an
average 15-minute weekly reach to adults
aged 15+ of 0.44 million people or 0.9%
(0.5 million/1.0% in 2004/2005)10.

Key initiatives include measures to increase
the distinctiveness of the music output,
particularly in daytime programming,
including investing in live music anddeveloping new talent; transforming thelevel of journalism by building strong links
with BBC News and emphasising original
stories and investigative journalism; andrepositioning the tone and style of thelanguage programmes to increase theirappeal to the target audience.
We have welcomed these changes, whichwere the result of widespread consultation
with audiences and staff.
There is already some evidence of thejournalism becoming more ambitious – forexample, the Asian Network sent its own
reporters to cover the Pakistan earthquake.
Other parts of the output also continue todo well, including the innovative daily soap
Silver Street. We will keep the progress of
the Asian Network towards its new remit
under review during the coming year.
The number of adults 15+ rose by 0.5 million to49.4 million between 2004/2005 and 2005/2006

10

Some criticisms of the Asian Network weremade in the Government’s independent
review of the BBC’s digital services, andduring this year BBC management havedeveloped a series of programme changes
that took effect in April 2006.The remitof the service has been changed to takeaccount of this (the new remit is at thehead of this section).
The main thrust of the changes is to clarify
the primary target audience (British Asians
under 35) and to establish three areas
where performance must improve: editorial
ambition, the level of innovation, andensuring distinctiveness from commercial
Asian radio stations.
BBC Annual Report and Accounts 2005/2006

39

Governors’ review
of services – New Media

Overview
The future of broadcasting looks increasingly to lie in‘on-demand’ – the provision of programmes and othermaterial when, where and how audiences want them,often with an inbuilt interactive element.
During the year under review, management have carriedout a large-scale trial of the BBC’s experimental BBC
iPlayer, which allows users to access BBC television
programmes for up to a week after transmission.This will
be subject to a Public Value Test before we or the Trust
decide whether or not to approve a full launch.There havealso been new developments in the provision of BBCmaterial to mobile devices such as phones and PDAs.
bbc.co.uk has made good progress towards re-shaping
itself to meet the new tighter remit we set for it last year
to ensure a clearer focus on delivering the BBC’s public
purposes. BBCi – the interactive services in text, video andaudio available via the red button – continues to develop.
BBC jam (formerly the Digital Curriculum) was launched.
BBC management have a good record of partnership withprivate sector new media operators and we welcome theircommitment to continue to develop this.We have made it
clear that the Governors, and in future the Trust, will pay
close attention to the BBC’s new media activities to ensurethat the BBC operates in a way that does not inhibit UK
entrepreneurial activity in this sector.

40

BBC Annual Report and Accounts 2005/2006

Monthly reach of bbc.co.uk, BBCi 24/7 services and BBCi enhanced television
services (millions)bbc.co.uk*
BBCi interactive television**
BBCi enhanced television***2005/2006
13.7
10.7
3.2

2004/2005
10.6
n/a
3.5

Source: *BMRB Access (monthly reach age 15+ in GB) **TNS/Interactive Television Tracking Study (monthly reach GB
adults age 16+ in digital satellite, Freeview and digital cable homes.This new measure was only available from October 2005)***BARB, viewers age 4+ in digital satellite homes. Digital satellite peformance only of BBCi enhanced television programmes(eg Winter Olympics, Chelsea Flower Show)

Coast
Supplying new platforms: Coast, the BBC Twomaritime history series, was supported with
innovative content available via mobile phone toviewers who wanted to follow the programmeroutes on footNew Media division
The Director-General’s Creative Future
project proposes considerable changes
for the BBC online services. A key
recommendation is to relaunch the BBC’s
website to include more personalisation,richer audio-visual content and moreuser-generated content. New ways offinding content will be necessary in the
coming on-demand world and the BBC
is developing better search tools andways of navigation. In addition it isconsidering creating easy access points
for audiences via broadband portals for
key content areas such as sport, music,
knowledge building, health and science.
We will ensure that these developments
undergo the appropriate level of scrutiny
and approval.
Broadcasting is already moving rapidly
towards ‘on-demand’ – enabling audiences
to access content when, where and how
they want. One of the most interestingdevelopments from BBC New Media
during the year under review was its trialof the proposed BBC Integrated Media
Player or iMP, now part of the BBC iPlayer
project.This allows users to download
BBC TV programmes on demand for
up to seven days after transmission.
The trial, using a panel of 5,000 people
from across the UK, ran from November
2005 to February 2006 using a selectionof BBC programmes, including soaps,
comedy, drama, news and factual, andit drew a very positive response.
The technical trial of the BBC iPlayer was
carried out in partnership with a numberof internet network operators – part ofthe commitment by bbc.co.uk to develop
partnerships with the online community inorder to support innovation and growth inthe online market by sharing BBC learning.
The results are still being assessed by the
BBC and its partners.

Early findings already made public showthat individuals watched on average two
programmes a week – about an hourof content, equivalent to 6% of a typicalhousehold’s weekly viewing.The main
reason for usage was, unsurprisingly, tocatch up on favourite programmes, but,
significantly, many individuals also used theplayer to watch unfamiliar output – nearlya third used it to watch a programme they
had never heard of.This suggests that the
BBC iPlayer could bring new audiences toniche output.
The BBC iPlayer raises significant policy
issues, and it will be subject to a Public
Value Test, including a Market Impact
Assessment by Ofcom, before we or the
Trust decide whether or not to approvea full launch.
The New Media division is also doing
innovative work with emerging platforms,
including the delivery of BBC content tomobile devices.
The popular BBC Two maritime history
series Coast, for example, was supportedwith mobile content. Details of 12 coastal
walks could be downloaded as MP3 files
to use as an audio guide. BBC plaques
were also placed at selected coastal
points giving a number that mobile phoneusers could call to hear the history of
the site, sometimes including dramatic
re-enactments of key historical moments.

Trials were also carried out of the Creative
Archive concept – which is designed toopen selected content from the BBC
archive for free non-commercial use bylicence fee payers.The BBC has worked
with other broadcasters to agree common
licensing arrangements under whichmaterial is released.
Part of the creative archive trial, Superstar VJs,
was a collaboration with Radio 1 and 1Xtra,
under which 100 programme clips werereleased.The 15,000 people who registered
were invited to use the material in theirown compilations and enter them for acompetition – with the winner featured
on the Radio 1 website. Since then, a rangeof clips from the BBC News archive havebeen released and material from othergenres, including science and nature is also
being released. Users are encouraged to
add their own material – pictures, soundand text.The project has obvious potential– not least in education – but also raises
significant policy issues in terms of its
impact on commercial suppliers of archive
material. A Public Value Test will be carriedout before we or the Trust approve afull launch.

Another example was the temporary WAP
site rapidly set up when the London suicide
bombers struck in July. It offered headlines,
emergency contact information, transport
updates, comments from the BBC News
Have Your Say site – and images of theaftermath.The site was kept in operationfor 18 days and seemed to meet a realneed – it generated more than 2.5 million
page impressions.
BBC Annual Report and Accounts 2005/2006

41

Governors’ review
of services – New Media

13.4
millionpage impressions to the Glastonbury 2005
website (19 June–2 July 2005)

Jamie Kane
Bringing new content to new audiences: Jamie Kaneis an innovative web-based interactive fiction aimed
at teenage girls – an audience the BBC can findhard to reach with more traditional content

Remitbbc.co.uk aims to serve the BBC’s six
purposes, with an emphasis on democraticand educational value, through theprovision of innovative and distinctive
content, available to all.As a starting
point on the internet and a guide to themedium, bbc.co.uk promotes internet
use to develop a deeper relationshipwith licence fee payers and to strengthen
BBC accountability.
Usage of bbc.co.uk continues to show
strong growth. Average monthly reach
was 13.7 million or 53% of the British
online audience in 2005/2006, and by theend of that period had reached 56%.This
compares with the 2004/2005 average of
10.6 million or 46%.The site is the sixth
most popular in the UK based on uniqueaudience reach to home internet users.
In 2004 the Department for Culture,
Media and Sport (DCMS) published its
independent review of the BBC’s online
services, carried out by Philip Graf. One key
recommendation was that a new and tighter
remit, closely aligned to the BBC’s public
purposes, should be drawn up for the
online services (the remit at the head of
this section reflects this recommendation).
In our response to the Graf Report, wemade it clear that one of the cornerstonesof this new remit should be the provisionof innovative and distinctive content available
to all.We have been encouraged by theenergy with which this goal had been
pursued during the year under review.

a whodunit about a young pop singer
killed in a helicopter crash.The narrative is
structured as a game – it takes two weeks
to play – and the story unfolds throughclues in emails, message boards, fakeweblogs, and real telephone calls.The story
is supported by fictitious entries about
Kane on BBC music sites and a selectionof specially composed music available todownload from Jamie Kane’s own ‘official’
website. Jamie Kane is a noteworthy
achievement, both in terms of its creativeuse of the videogame format, and of its
technical sophistication.
The BBC has made a public commitment
to increase its activity with external
partners as part of its digital mission –taking advantage of the ability of digitaltechnology to open up content and enableassets to be shared, bringing benefits
for licence fee payers and for theBBC’s partners. A good example is thecollaboration between the BBC and the
UK film industry that lies behind the Film
Network site launched in 2005.The site
is a platform for new British filmmakers.
It publishes three new short films eachweek and encourages viewers to discuss
the output and to exchange informationand ideas, building a community supporting
the UK film industry and nurturing newtalent.The Film Network can also beaccessed by mobile devices – users cansee very short films specially created formobiles. In a similar vein, another new site,
Comedy Soup, encourages users to maketheir own comic videos and animations
and see them published on the site.
bbc.co.uk/comedysoup contains free source
material from the BBC archive, including
images and sound effects available for use
by the public.

A good example is Jamie Kane. This
‘interactive fiction’ for teenage girls is

Another example of the BBC actively
reaching out to partners is the BBC
Backstage project.This gives web

42

BBC Annual Report and Accounts 2005/2006

developers and designers outside the
BBC access to BBC content and APIs
(application programme interface – thecomputer protocols and tools for building
software applications).The aim is topromote a constructive and open dialogue
with the online development community
using BBC content and tools to deliver
public value.The site actively encourages
people inside and outside the BBC to shareknowledge, ideas and prototypes and it has
generated a large number of new ideas.
One of these, the BBC Homepage Archive,
has been commissioned and is now live
(bbc.co.uk/homearchive).The site records
how the BBC homepage changes hour byhour and day by day; by giving permanence
to an inherently evanescent product, ittransforms it into a curiously compellingchronicle of how the world was viewed
through a BBC prism at any one momentin time.
An associated development has been the
publication online of the BBC Programme
Catalogue – an astonishing source of
information on more than 900,000
programmes going back to the 1930s.
The site – at present still in an experimental
form – is searchable, so users can find what
programmes, including news bulletins, werebroadcast on a given day and who appearedin them.This data can be used in creative
ways. One external software developer,
for example, has used the catalogue data
to design a graphical way to compare
the number of BBC appearances by
two people over time – an indicatorof the individuals’ comparative fameor newsworthiness.
The Graf Report noted that the
management structure of the BBC could
make it difficult for an outsider to engage
constructively with the organisation, andchanges have made to meet this criticism.
These include the appointment of a head

575,000
people in digital satellite homes accessed
Proms Interactive 2005 via the ‘red button’on their TV remote control

RaW
Promoting literacy: RaW (Read and Write)a three-year BBC campaign to encourage literacy,
is supported by the RaW website containing
games, quizzes, background material and links
to local activities

Comedy Soup
Finding new way to encourage talent: the Comedy
Soup website lets users make comic videos andanimations using free source material from the BBC
archive and see the results published on the siteof External Supply to act as a single
point of contact for external content
and technology suppliers. bbc.co.uk iscommitted to a voluntary quota of 25%
eligible spend on external production
from 2006/2007. For a report on progresssee page 150.

Our remit for bbc.co.uk makes reference
to the important role the service shouldplay as a starting point on the internet anda guide to the medium. In its 2005/2006
Statements of Programme Policy, bbc.co.uk
committed itself to a major digital media
literacy campaign working with partners
to increase awareness of the internet andhow to get connected. In the event, thisparticular campaign was not delivered
although activity during 2005/2006 included
the launch of Webwise/Computer Tutor, auser-friendly on-screen guide for those
new to the internet which is being usedby public libraries hosting learning sessions.
During the year, the Factual & Learning
division was given overall responsibility for
coordinating and delivering the BBC’s workon media literacy and in the year ahead
they will need to consider how thiscommitment should best be delivered.

An important part of the BBC’s digitalmission is to open up access to theinternet for everyone and valuable
work has been done during the year to
improve access for people with disabilities.
The My Web, My Way site is based ona partnership between bbc.co.uk andAbilityNet, a leading UK computing anddisability charity.The site provides advice
and help to anyone who would benefit
from making changes to their browser,
operating system, or computer in orderto make the internet more accessible.
It provides guidance on hardware suchas alternative keyboards and mice, andsoftware such as voice recognition,screen reading and word prediction.
A different kind of access is promoted by
Action Network which provides a way forpeople to organise community campaigns
via the internet. It puts concerned
individuals in touch with others in theirarea who might feel the same way, andprovides information, advice, and sharedexpertise from successful campaigns
elsewhere in the UK.The site now contains
information on a very wide range of
campaigns, including crime, housing,transport and education, and is developing
real civic value.The potential editorialrisks are well-managed and there is clear
labelling to underline the fact that the
BBC is an impartial facilitator and does
not endorse any of the campaigns itself.
A useful by-product is that the site has
become a valuable source of news
stories for the BBC’s local and national
news programmes.

In our response to the Graf Report we
promised a major review of bbc.co.uk asa whole every five years and a mid-term
review after three. The mid-term review
is due in 2007 and we would anticipate
the Trust would fulfil this commitment,
being informed by detailed audience
research, and public consultation and takeaccount of work being done as part of
the Creative Future project.

BBC Annual Report and Accounts 2005/2006

43

Governors’ review
of services – New Media

Remit
BBCi aims to offer all-day, up-to-theminute news, weather, education,entertainment and other non-linear
content to all digital television audiences.
It aims to enhance the value of the BBC’s
television and radio proposition to digitalaudiences through interactive video, audio,
pictures and text.
The BBC offers two kinds of interactive
television services: BBCi 24/7 and BBCieTV (enhanced television). BBCi 24/7
offers news, weather, sport, programme
information and so on.These are available
all the time. BBCi eTV offers services
related to specific television programmes
and events – for example, additional
coverage of sports events or interactive
general knowledge tests.
Average monthly reach in digital TV
homes for BBCi 24/7 was 11.05 million
in Q1 2006 (there is no comparable
data for 2004/2005 due to changes inmethodology – see below). BBCi eTV had
an average monthly reach of 3.2 million(3.5 million in 2004/2005). Usage in
2004/2005 had been boosted by the
Athens Olympics.
The editorial content of the enhanced
interactive service has continued todevelop well.The lessons from thenotable success with Wimbledon and theAthens Olympics were applied not justto sport (the Winter Olympics and theCommonwealth Games) but also to news
(the General Election) and to live music
events such as Live8 and Glastonbury.The
application meant viewers were offered
greater choice – for example to see Live8
coverage from other international venues,
or Wimbledon play from a range of courts.
44

Winter Olympics
Delivering greater choice: the BBC’s eTV service
gave Winter Olympics viewers more control overwhat they watched – they could choose which
events to follow from the onscreen menuYour Stories
Encouraging audience creativity: the BBCi Your
Stories platform on digital satellite publishes four orfive stories a day produced by viewers and linked
by a common theme

The other major application is the so-called‘playalong’ format which enables viewers ofgeneral knowledge and quiz programmes
to take personalised tests or compete
against studio contestants via interactive TV.
This application has been imaginatively usedduring programmes such as Test the Nationand the National Lottery quiz Come andHave a Go.

year on year, we are pleased the new
approach is a more robust measure andearly indications show a growth in reachover the last six months since the new
tracking survey was introduced.

BBCi produces a number of successful
services for children. For CBeebies, theservice offers a range of stories andgames, all fulfilling the channel’s philosophyof “learning through play.” During the year
under review, BBCi launched a service
for older children with CBBC Extra.This
offers interactive content, including talent
competitions, in a magazine format. BBCi
was also the interactive hub for the
General Election. It offered news, analysis
and constituency results in an innovative
mix of video, text and interactivity. Your
Stories is a BBCi platform for stories
produced by the audience. Four or fivepersonal stories are published each day
linked by a common theme.The service
is available only on digital satellite.
A commitment to improve access time was
not met and continued reduction in accesstimes will require additional investment.
New Media believes that public value can bebetter delivered by focusing new investment
on other areas. We have however, sought
a commitment that access times are at least
maintained at 2005/2006 levels.
During the year, New Media introduced
a new methodology for measuring reachof BBCi 24/7 to include Freeview anddigital cable in addition to digital satellite(the only platform that previously allowed
for accurate measurement). Following avalidation period the previous methodology
was discontinued. Although the new
methodology prevents direct comparison
BBC Annual Report and Accounts 2005/2006

5.3
millionusers per week to bbc.co.uk/news in
March 2006

BBC jam
Supporting formal learning for 5 to 16 year olds:
BBC jam uses characters such as Earwax to attract
the youngest learners to its high quality educational
content developed in partnership with teachersand private sector educational suppliers

BBC News weblog
Opening up the BBC: the internet diary or
weblog kept by the BBC political editor Nick
Robinson gives audiences insight into the way
news judgements are arrived at and encourages
debate about themwere set. We take regular reports toensure compliance with these conditions
as well as conditions set by the European
Commission when it approved the service.
A compliance report can be found on
page 90.
Remit
BBC jam is a free online service centred on
the learner, aiming to provide high-quality
interactive resources which can be usedat home, at school or in the community.
Structured around key elements of theschool curriculum for 5 to 16 year olds,
it aims to offer resources that add value
to learning for children of all abilities.

bbc.co.uk/news
The online BBC news site has continued
to build on its formidable reputation.
Increasingly it is becoming the immediate
first port of call when big stories break –witness the day of the London suicidebombings when it generated nearly 116
million page impressions – more than twice
its previous record.
The service, which is managed by BBC
News, and supported by news from local
teams around the UK and across theworld, continues to innovate with initiatives
such as Iraq Day (see our review of BBC
News, pages 47 to 48). It is also developing
a valuable dialogue with licence fee payers,
enabling them to interact with key decision
makers in BBC News.The weblogs now
written by a number of BBC reporters,
including the BBC political editor Nick
Robinson, are a good example of BBC
News’ praiseworthy attempts to achieve
greater openness and transparency about
the way it operates.

BBC jam, formerly known as the Digital
Curriculum, was launched in January 2006.
This delivers via the internet – ideally bybroadband – high quality video, audio, games
and animations linked to key areas of thecurriculum and designed to bridge the gap
between school and home.
The service is still in its infancy. It was
launched with four subjects, building up to acomplete portfolio by 2008. It is planned toinclude some material in languages otherthan English and Welsh. Reaction to theinitial group of subjects is being closely
tracked and the findings incorporated into
the later releases.
The service has enormous educational
potential and complements other successful
BBC learning sites such as BBC Bitesize(revision) and BBC Blast (encouraging
creativity) as well as non-BBC e-learning
products already on the market.The service
is being developed with the education
profession and other industry providers –half the content budget will be spent withprivate sector suppliers.
When the Secretary of State approved
the project in 2003 strict conditions
BBC Annual Report and Accounts 2005/2006

45

Governors’ review
of services – News

Overview
BBC News output across television, radio and online hasremained strong and confident, with notable responses tobreaking stories and set-piece events at home and abroad,and some fine pieces of investigative reporting.
However, the ways audiences use BBC News, and their
expectations of the services provided, are changing rapidly
and we are encouraged by the division’s moves during
the year to understand these changes fully so that it can
respond appropriately through its Creative Future work.
The move to place News 24 at the heart of the BBC
television news operation is already paying dividends.
The impartiality and editorial independence of the BBC
is something that licence fee payers feel very strongly
about, as they made clear to us on many occasions in our
accountability work during the year.We are encouraged
by BBC News’ continuing drive to ensure its journalists
adhere to the highest standards of impartiality, accuracy
and independence.We have continued our own series
of independent reviews of coverage of particularly
contentious issues (see pages 18 to 19) and plan, withmanagement, to carry out a major study in this areain 2006/2007 to ensure that the BBC’s impartiality andindependence are not threatened by some of the newdevelopments made possible by the digital revolution.

46

BBC Annual Report and Accounts 2005/2006

40.5
millionadults accessed BBC News across BBC
television, radio and online in 2005/2006

One Day in Iraq
Providing context: One Day in Iraq went behindthe daily headlines and used television, radio andonline to bring alive the events of a single day as
seen through the eyes of people living in Iraq

Panorama Special – Undercover Nurse
Investigating abuse: Margaret Haywood,a state-registered nurse, went undercover for
Panorama to investigate complaints from patients
about conditions on an acute medical ward ina failing hospitalin 2004/2005); 49.1% is equivalent
to 22.9 million adults

Remit
BBC News aspires to be the world’s
most trusted news organisation:accurate, impartial and independent.
It aims to be truthful and fair, offering
journalism that explores multiple
viewpoints and gives voice to a wide
range of opinions in order to serve allaudiences. BBC News seeks to act in
the public interest and to resist pressure
from political parties, lobby groups andcommercial interests.
Overall audiences to BBC News havefallen somewhat, although the picture
varies sharply between media. In verybroad terms, audiences for traditional
BBC television news bulletins and current
affairs programmes are falling, althoughaudiences to BBC News 24 are growing;audiences for online and on-demand news
continue to surge, and audiences for BBC
radio news remain strong.
Taking all its output together across
television, radio and online, BBC News
recorded a claimed weekly reach in2005/2006 of 79% of the UK adult
population aged 15+ (81% in 2004/2005);
79% represents 40.5 million adults.
Claimed weekly reach reflects thenumber of respondents who recall
having seen/heard/used BBC News in
the previous week.
Average weekly 15-minute reach for
BBC News (network services only, ie
not nations and regions services) was:■Television – BBC One’s four mainnews programmes: 49.1% (50.6%■

Television – BBC News 24: 8.6% in multichannel homes (7.8% in 2004/2005);
8.6% is equivalent to 2.8 million adults■

Radio – 47.6% (47.5% in 2004/2005);
47.6% is equivalent to 23.5 million adults■

Online – 15% of the population(9% in 2004/2005); 15% is equivalent
to 8.6 million individuals aged 4+

In news terms the year will be
remembered for two stories in particular:
the suicide bombs in London, andHurricane Katrina on the Gulf coast of the
US. Overall, BBC News responded wellacross television, radio and online – bothto the initial events and to the subsequent
political and social aftermath.The BBC
Ten O’Clock News was awarded the Bafta
for Best News Coverage for its reportingof the 7 July events.The suicide bombings
sparked an editorial debate over theBBC’s use of the word ‘terrorist’ (seeGovernors’ review of objectives, page 18).
There was strong coverage too of othermajor events, including the death of PopeJohn Paul II, a devastating earthquake inPakistan and Kashmir, and the election of
new leaders by the Conservatives and theLiberal Democrats.
Of the set-piece events, coverage of theGeneral Election stands out. For the firsttime a special edition of Question Timebrought the three main party leaders
face-to-face with a studio audience inthe same programme. Jeremy Paxman’sleader interviews successfully brought his
challenging style to BBC One. BBC News
used the General Election to pilot a new
system of measuring the audience impact
of BBC journalism in terms of promoting
informed citizenship. It found that 85% of
BBC Annual Report and Accounts 2005/2006

respondents agreed that “watching,listening to or reading news and current
affairs from the BBC enables me tobecome better informed about current
events and issues facing the country”.
The coverage drew strong public backing
for its fairness and impartiality.
BBC Television News faced a difficult
editorial decision in reporting thewidespread protests by Muslims that
followed the decision of a Danish
newspaper to print cartoons depicting
the Prophet Muhammad.The question
was whether or not to show the cartoons.
On the one hand: could the story be told
properly without doing so? On the other:would showing the cartoons not risk
causing grave offence to some viewers?
In the event, news bulletins used a brief
sequence of moving pictures of a French
newspaper that had reprinted thecartoons in order to give some idea ofthe context in which the cartoons were
published without dwelling on themgratuitously, and bbc.co.uk/news did
not show the cartoons, although it did
provide links to newspaper websites that
had published them.
These decisions provoked many complaints
from a number of different viewpoints.
Some criticised the BBC for not showing
the cartoons in full. Others criticised the
BBC for showing any part of them. Others
attacked the BBC for – in their view –showing more concern about thesensitivities of Muslims to the portrayalof Muhammad than had been shown to
Christians over the portrayal of Christ in
Jerry Springer – the Opera. We received areport on the coverage from the DirectorGeneral at our Board meeting in February.
Because this is a matter which could
come before the Governors’ Programme
Complaints Committee, we did not express
a view on the central issues.
47

Governors’ review
of services – News

976
millionpage impressions to bbc.co.uk/news in
July 2005

User-generated content
Finding fresh sources of news: when the Buncefieldoil storage depot went up in flames viewers sent inmany images taken on mobile phones – some wereused in BBC News output

Although audience appetite for traditional
current affairs television programmes
appears to be diminishing, this is still a genrethat can deliver impact both editorially andwith audiences. On BBC Two, Children of
Beslan was a moving and sober re-creationof the school massacre in North Ossetia as
recalled by the young survivors one year on– it drew the highest appreciation score of
any BBC programme that month and hassince won a number of awards. Panorama
Special – Undercover Nurse revealed
disturbing failings in the treatment of elderly
patients in an acute ward of an NHS
hospital in Sussex.The programme, which
provoked widespread press follow-up, waswatched by 4.6 million people and drew thehighest audience appreciation score everachieved by an edition of Panorama. When
Satan Came to Town, an edition of Real Story
that investigated wrongful allegations ofsatanic abuse of children in Rochdale, drew
extensive press attention. In orderto mount this salutary and importantinvestigation the BBC had to fight a legal
battle to have a longstanding gagging
injunction lifted. In Facing the Truth on BBC
Two, Archbishop Desmond Tutu brought
face-to-face victims and perpetrators ofNorthern Ireland’s sectarian violence.This
BBC Northern Ireland series caused some
controversy – before filming began, anumber of organisations representing victims
and survivors expressed reservations over
the wisdom of the enterprise. Archbishop
Tutu met them privately to discuss theirconcerns before the programmes wererecorded. In the event, this series, moving
and painful by turns, was achieved withadmirable integrity, sensitivity and care forthe participants.

with a Sony Gold Award. Edward Stourton’sseries A Year in the Arab-Israeli Crisis provided
compelling insight into the day-to-day
management of events in the Middle East,
based on extensive contact with Israeli
and Palestinian cabinet ministers, diplomats
and advisers. Other Radio 4 current affairs
highlights included a strong series, Koran andCountry, exploring the contemporary impactof Islam; and Frank Gardner’s Analysis Special– How Islam got political, a thoughtful
exploration of the roots of the radicalisationof some British Muslims.
One Day in Iraq was an innovative attempt,
led by the News Interactive team, to getbehind the headlines of a long-running story
using the combined resources of online,
radio and television to report the eventsof a single day – 7 June 2005 – through theeyes of people living in Iraq. Online, there
were diaries from a wide range of people
including a medical student in Basra, a water
engineer in Baghdad and a British contractor
in Mosul, as well as selections from Iraqi
newspapers and weblogs. Radio Five Livebroadcast audio diaries from Iraq, and BBC
News 24 also included coverage. Fromthese widely varied fragments an illuminating
picture of daily life in Iraq was constructed –a worthwhile project that added colour
and texture to the daily reporting of thisimportant story.The experiment has since
been successfully repeated and a similar
exercise carried out from Afghanistan.

On Radio 4, the consistent excellence of
the Six O’Clock News – authoritative, broadranging, dispassionate, concise and wellcrafted, and for many years the gold standard
for radio news bulletins – was recognised

One potentially significant development
during the year was the rapid growth innews material supplied by viewers andlisteners – so-called “user-generated
content”.The development is largely aby-product of mobile phone technology,
enabling audiences to alert the BBC to news
events by text message, and increasingly tosupply images and video clips from mobile
phone cameras too.The rapidly increasing
scale of the phenomenon can be seen from48

BBC Annual Report and Accounts 2005/2006

the statistics: in July the London suicidebombs produced about a thousand images
and clips emailed in by members of the
public on the day of the attack; inDecember, the huge fire at the Buncefieldoil storage depot outside London produced
five times that number by lunchtime alone.
User-generated content and “citizen
journalism” are valuable both as a sourceof material and as a way of demystifying
the processes by which news is produced.
But they also pose potentially significant
ethical problems.Verification is an obvious
issue and, beyond that, impartiality. BBCNews is right to embrace user-generated
content both as a new and valuable sourceof material and as a way of opening up its
processes to its audiences.The challenge
is to build robust editorial frameworks toensure that while maximum editorial value
is delivered back to licence fee payers
from these contributions, BBC journalism’s
core values of impartiality, accuracy andindependence are not put at risk.There
are also important health and safety issues
to be considered – the BBC should notencourage untrained people to takeunnecessary risks to provide material
for its news bulletins.
BBC News faces some big challenges.
Although it remains editorially strong it will
have to work hard to keep up withchanging audience expectations – inparticular the sharply growing appetite foron-demand news, delivered to audiences
when and how they want. It will also haveto develop new formats to enable it toreach audiences it now finds hard toconnect with – the young, those in digital
homes, and those in lower socio-economic
groups. And it will have to make progresson these fronts without losing its grip on
its core editorial values.These are issues
that BBC News has begun to grapple withthrough its Creative Future work.

Average audience for network news bulletins 2005/2006 (millions)

BBC One O’Clock News
ITV1 lunchtime news

2005/
2006
2.7
1.2

2004/
2005
2.7
1.4

BBC Six O’Clock News
ITV1 early evening news

4.5
4.1

4.8
4.3

BBC Ten O’Clock News
ITV1 nightly news

4.6
2.7

4.8
2.8

Source: BARB,TNS/Infosys, age 4+

The London bombs on BBC News 24
Delivering breaking news: BBC News 24’s coverageof the London bombings in July. The channel
won the Royal Television Society’s award for News
Channel of the YearRemit
BBC News 24 aims to deliver news,
analysis and insight, supported by theBBC’s newsgathering operations acrossthe UK and around the world, all day,every day of the year. It sets out toprovide fast, comprehensive coverage of
events as they unfold – locally, nationallyand internationally – and specialist analysis
to put the news in context.
BBC News 24 has continued to makegood progress, reflecting changes made bymanagement to place the channel at thecentre of BBC News’ television operations.
We are encouraged by the continued
increase in audience reach. In 2005/2006,
average weekly 15-minute reach to viewers
aged 4+ in multichannel homes was 7.4%
or 3.1 million people (6.7%/2.5 million in
2004/2005)1. We are also encouraged by
the channel’s growing reputation among
opinion formers. News 24’s editorial
achievements have been recognised by theRoyal Television Society’s award of News
Channel of the Year – a first for News 24.
The channel responded well to the year’s
big breaking stories. Its coverage of theearthquake in Pakistan and Kashmir
included a commendable emphasis onreflecting the experience of families in
the UK affected by the disaster.
Our view remains that the distinctivenessof the channel must rest on an agenda thatis more analytical, more international andmore diverse than that of its competitors,
and which gives a higher priority tocompelling and serious journalism.
With this in mind, we were pleased tonote management’s commitment in theStatements of Programme Policy to feature
more international news coverage than
Sky News, and to feature more local andregional news by giving regional perspectives
to national stories. Performance against
these commitments will be measured byperiodic analyses of News 24’s output
by independent experts.
One issue coming to the fore in News 24
is how far the channel is justified in carrying
unconfirmed reports.The question iswhether the BBC’s traditional caution
in this area is entirely appropriate for acontinuous news channel where, in theearly stages of many breaking stories, it
may be a more accurate reflection ofreality to report uncertainty and competing
explanations of events rather than stickwith a single – usually official – versionof events unless and until it is definitively
proved wrong.
There is some evidence that audiences
approach continuous news differently fromthe way they view set-piece bulletins. Frombulletins they expect – particularly fromthe BBC – a steadfast adherence to thefacts and do not lightly forgive inaccuracy.
However, with continuous news, audiences
seem to be more willing to accept thatreporting an unfolding story, especially in its
early stages, is likely to involve some degreeof uncertainty.This debate has raised very
important issues and we will monitor
developments closely.The BBC’s reputation
for accuracy ought not to be put at risk –but, equally, audience expectations should
be fully taken into account.

Remit
BBC Parliament is the only UK channel
dedicated to the coverage of politics.
Debates from both Houses at Westminster,
the work of the devolved parliamentarychambers of the UK, and some SelectCommittee hearings are broadcast
uninterrupted.The channel also covers
the work of the European Parliament.
BBC Parliament has extended its valuable
work. For the first time the channel
covered the Scottish Parliament live andtwo further broadband streams wereadded for live coverage of the House ofLords, Commons debates in Westminster
Hall, and Select Committees.
For some years we have been pressing for
an improvement in the viewing experienceon Freeview where the quarter-screen
view is unsatisfactory. We are glad tonote management’s determination in theStatements of Programme Policy to improve
matters during the coming year.

For our report on bbc.co.uk/news see
page 45.
The number of individuals in multichannel homes
grew by 5 million to 42.5 million between
2004/2005 and 2005/2006

1

BBC Annual Report and Accounts 2005/2006

49

Governors’ review
of services – BBC World
Service & Global News
Overview
The BBC’s Global News division brings together BBC World
Service radio, BBC World television, the BBC’s internationalfacing online news services and BBC Monitoring.
This has been a year of great change in many parts of thedivision – change driven by the pressing need to respondrapidly and imaginatively to major shifts in technology,
audience and geopolitics.This has particularly affected theWorld Service, which has undertaken one of the biggest
transformations in its history.We are encouraged that,
despite these upheavals, audiences to the division’s news
services have reached record levels.
The Global News division has produced thoughtful andaccurate reporting and analysis of the major news storiesof the year and created extra impact by using its three
media to develop a single news theme in a coordinated way.
The Governors are advised independently by the BBC World
Service and Global News Consultative Group.Their reportis on page 62.

50

BBC Annual Report and Accounts 2005/2006

163
millionlisteners to BBC World Service in an
average week in 2005/2006

Hurricane Katrina
The best global news coverage: the aftermathof Hurricane Katrina – audiences worldwide turnto the BBC for coverage of stories like thisGlobal News division
Audiences for the BBC’s Global News
services are rising despite increasing global
competition. Record figures for reach havebeen recorded by the three services – BBCWorld Service radio, BBC World television,and the BBC’s international-facing online
news services. Independent surveys indicatethat the total tri-media weekly reach isabove 210 million, with some people using
more than one service.This is despite theloss of more than 4 million listeners as aresult of the closure of ten World Service
language services.
We are encouraged that the BBC’s
reputation for trust and objectivity remains
strong. According to independent surveys,
the BBC outperformed its international
competitors in terms of audience
perceptions of trust and objectivity inalmost all major markets.The exception
was Egypt where CNNI was ahead on
objectivity among opinion formers.
The division operates in an increasingly
challenging environment reflecting rapidchanges in audience expectations, intechnology, and in the global social andpolitical landscape.The division has
responded by developing a five-year
strategy.This includes a searching review
to ensure that its services are structured
to provide the optimum response toaudience need, especially in the area of
on-demand services, and an examinationof the portfolio of language services.
We look forward to considering thedivisional strategy later this year.

BBCUrdu.com
Providing a platform: the BBC Urdu-language
website received many emails following theearthquake in Kashmir, many from people who had
lived through the disaster£7.1million efficiency savings for the year
by implementing new working practices
and making savings in distribution andtransmission. Additional savings will befound from English programmes andbusiness support areas.
BBC World Service
BBC World Service’s weekly global
audience estimate, based on independent
surveys, reached 163 million – 10 million
more than the previous high in 2001.
There were strong rises in key African
markets including Nigeria, up 3.6 million
to 23.8 million;Tanzania, up 2.7 million to
12.9 million; and Kenya, up 1.5 million to
6 million. Audiences also grew significantly
in Indonesia, India and Sri Lanka, although
they fell back in Bangladesh and Pakistan,reflecting the continuing growth of
television there.The overall figure includes
the results of the first national survey in
Burma, which gave the BBC a weekly reachof 23.1% with 7.1 million listeners, andincreased survey coverage in Nepal, adding
2.6 million listeners this year.
Short-wave audiences still account for twoout of three BBC World Service listeners,
but audibility on FM is crucial in urban
areas where competition from local andnational stations is most intense. BBCWorld Service’s long-term strategy toinvest in this area is paying off: total FM
audiences grew by 12 million. BBC World
Service is now available in 150 capital cities
on FM, up from 144 in 2004.
BBC World Service announced proposals
for radical change during the year.These
include the launch of an Arabic language
television service in 2007.There were also
proposals to increase investment in ondemand new media services, FM radio
distribution, overseas news bureaux andmore effective marketing.These plans will
be funded partly from efficiency savings.
BBC World Service delivered its agreed
BBC Annual Report and Accounts 2005/2006

But these efficiency savings are not enoughto fund the strategic plan. BBC World
Service took the difficult decision to close
services in ten languages – Bulgarian,
Croatian, Czech, Greek, Hungarian, Kazakh,
Polish, Slovak, Slovene and Thai.The
reasoning included geopolitical change(which has weakened the justification forsome European language services), and therelatively low impact of the BBC services in
the Kazakh and Thai languages.
We supported these sweeping changes
as the appropriate response to the greatchallenges faced by the World Service andthey were approved by the Foreign andCommonwealth Office.The closure of
the language services has meant personal
disruption for many individuals. We sincerely
thank the staff of those services, past andpresent, for their contribution to creating
and maintaining the BBC’s formidable
international reputation.
In some areas, BBC World Service
broadcasters have faced severe difficulties.
Reporting from Iraq and Afghanistan remains
challenging. Central Asia has become
increasingly volatile. In Uzbekistan some BBC
operations were closed. Pakistan took BBC
Urdu off FM partner stations after the South
Asian earthquake, although a reduced
service has now been resumed. During
the disturbances in Nepal the authorities
stopped FM partner stations broadcasting
BBC programmes for a time.
BBC World Service publishes its own
annual review which is available online atbbc.co.uk/worldservice/us/annual_review.
51

Governors’ review
of services – BBC World
Service & Global News

Newshour
Delivering global news to international audiences:
George Alagiah hosts an hour-long weekday news
programme for BBC World.Target audiences
include the USA and Asia

BBC international-facing online news sites
Usage of the BBC’s international-facing
news sites has shown significant increases.
The sites attracted a record 499 million page
impressions a month in March 2006 compared
to 324 million page impressions in March
2005.This is a rise of 54% over the year.
The sites now attract 32.8 million uniqueusers each month, up from around 21
million unique monthly users a year ago.
Investment in interactive technology madeit possible to process much higher volumesof traffic during periods of intense interest,
such as the controversy over publication of
cartoons depicting the Prophet Muhammad.
Interactivity is now a key part of many
programmes. In many African countries,
where the use of mobile phones is growing
rapidly and texting is relatively cheap,
there is keen interest in taking part in longestablished output such as Network Africa
and Focus On Africa. New interactive
programmes and online sites, such as World
Have Your Say and Africa Have Your Say,
were launched this year.The programmes
are part of a new generation of interactive
programming, promoting a global
conversation between people of different
cultures, languages and backgrounds.
Dialogue with audiences is also giving
news teams an early warning of issues
that may turn into major news stories.

BBCUrdu.com received more than 4,000
emails following the Kashmir earthquake.
These included numerous eyewitness
accounts and videos of the quake.
The international-facing site also received a
sharp rise in the amount of user-generated
content. It organised a ‘laptop link-up’ from
Muzaffarabad – the city most devastatedby the earthquake – in which school
children from Bradford and other usersof the website put questions to those in
the affected area.
The Iraq referendum and elections
generated significant user content for
BBCArabic.com and other BBC
international-facing sites. The websites
had panels where people spoke about
their voting intentions, fears for security
and hopes for the future.
However, online access to the BBC’s news
services cannot be taken for granted. China
still blocks the BBC’s news websites, andIran began doing the same for the first timein January 2006, depriving many Iranians ofa trusted source of free and independent
information at a time of growinginternational tension.

The new daily bi-media programme in
Spanish, BBC Enlace, produced from theMiami bureau, shows how interactive
programming is deepening the relationshipwith both radio and online audiences.
By the end of the year over 30 FM partner
stations were taking the programme
whose topics – from teenage pregnancy
to urban insecurity – are proposed byonline users.
52

Kashmir earthquake
Responding to the big events: the BBC’s global
news resources are brought swiftly to bear when
big stories such as the Kashmir earthquake happen

BBC World
BBC World – the commercially fundedinternational English language news andinformation channel – continues to show
significant growth in audience reach andhousehold distribution, and is achieving
improvements in the quality of its
editorial output.
The total weekly audience of BBC World
now stands at a record 65 million, up by
6 million from last year.The channel isavailable 24 hours a day in 138.8 million
homes, up from 127.3 million last year
(an increase of 9%), while a further
140 million homes are able to see BBC
World on a part-time basis.This brings
total distribution to 278.8 million homes,
up from 270 million last year. Hotel room
distribution increased by more than 13%
to more than 1.2 million rooms.
We are encouraged by BBC World’s
progress towards its key objective ofgaining 24-hour distribution in North
America. Last November the channel
signed a major agreement with Discovery
to represent the channel in the US. It isearly days, but BBC World has alreadylaunched on the Cablevision network on
a 24-hour basis, providing the channel withaccess to 2 million subscribers in the New
York area. Discussions are continuing withother parties.
Recent US ratings show BBC World news
via PBS and BBC America to have a nightly
average of 927,000 people watching. BBCWorld’s audience to its evening bulletinsis larger than any individual CNN
programme, except Larry King.

BBC Annual Report and Accounts 2005/2006

BBC World distribution to homes
with 24-hour reception (millions)

2006
2005
2004
2003
2002

139
127
112
102
101

Source: BBC World Distribution Department, various
Data as at March year end

Have Your Say
Giving the audience a voice: initiatives suchas the World Have Your Say website enableaudiences around the world to take part indebates on global issues

BBC Monitoring
Listening to the world: at the Caversham HQof BBC Monitoring, mass media from around theglobe are sifted and analysed on behalf of a wide
range of customers

Audiences have continued to grow inEurope with a reach of 11.4% in the latest
independent survey. In East Asia BBC
World reach has grown by more than
30% in a year.

BBC Monitoring
BBC Monitoring supplies news, informationand comment gathered from the mass
media around the world. Operating aroundthe clock, it systematically monitors morethan 3,000 radio, television, press, internet
and news agency sources, translating up to
100 languages, to provide an authoritative
view of world events.

There has been a continued editorial focus
on impartial and authoritative news andanalysis, with more live news and businesscoverage.The BBC World debate at Davos
attracted a high-profile panel.
Financially, turnover has increased by
25.5% to £36million this year and theloss for the year (before interest, taxationand non-cash pension costs) has fallen
by 7.0% to £15million. The loss after
interest and taxation is £11million(£11million 2004/2005).

BBC Monitoring bureaux in many
countries give access to media which areotherwise not generally available. BBC
Monitoring’s ability to track news sourcesfrom some of the most difficult regionsof the world paid dividends during amomentous year in key areas including
Iraq, Iran and Afghanistan, and countries ofthe former Soviet Union such as Belarus,
Georgia, Ukraine and Uzbekistan. During
the year it provided key source materialon crucial global events for stakeholders
including the Cabinet Office, theMinistry of Defence, the Foreign andCommonwealth Office and the BBC.

funding increase amounts to an average of£23.8million per year between 2006/2007
and 2010/2011. However, it remains
necessary to reduce costs by £2million
per annum by March 2007.
Following publication of the review, BBC
Monitoring began a transformation of its
services.The details of structural changes,
new posts and teams were announced
in March 2006.The changes include theclosure of 69 posts, although many had
been left unfilled to minimise redundancies.

BBC Monitoring was the subject of areview by the Cabinet Office on behalf ofall stakeholders, of its role, oversight andfunding arrangements.The review, led by
Sir Quentin Thomas, concluded that BBC
Monitoring represented “excellent value
for money” and that it should be a “UK
objective” to give BBC Monitoring stability
and confidence, allowing it to focus on
further building an operation that meets its
stakeholders’ growing needs for so-called‘open source’ information.
The outcome is that the Cabinet Officehas now taken over from the Foreign andCommonwealth Office as BBC Monitoring’s
lead stakeholder. A five-year funding
agreement is now in place.
A ring-fenced grant replaces the current
subscription model of funding.The overall
BBC Annual Report and Accounts 2005/2006

53

Governors’ review
of services – Nations& Regions
Overview
BBC Nations & Regions seeks to provide high-quality
local, regional and network programmes and services thatare valued by audiences throughout the UK, connecting
them to their communities and contributing to theirsense of belonging.
This sense of connection between the BBC and its
audiences will be strengthened over the coming years
by increased commissioning and production across the
UK and through the move of significant parts of the
BBC production base out of London. By the end of thenext Charter period the BBC plans to spend more than
£1billion a year on programmes made outside London –an increase of more than a third.
Following BBC research that showed an increasing desire formore local television news, a pilot service on broadband anddigital satellite was launched in the West Midlands in 2005.
The results will be assessed towards the end of this year.
A Public Value Test will be undertaken before we or the
Trust decide whether or not to agree to a full UK launch.
The BBC’s long-term commitment to supporting the
UK’s minority languages has been recognised in the
Government’s White Paper. Significant enhancements toservices in all indigenous languages are expected in thenext Charter period, for example, through a new strategic
partnership with S4C and a new digital service in Gaelic.

54

BBC Annual Report and Accounts 2005/2006

6,460hours
of BBC television programmes made andbroadcast in the nations and regions in
2005/2006 (excluding repeats)

Remit
BBC English Regions aims to be themost trusted and creative community
broadcaster in England, serving a widely
diverse range of urban and ruralcommunities. It sets out to provide anaccessible yet authoritative service ofnews, current affairs, politics, arts andmusic, religion, sport and weather onregional television, local radio and online.
The BBC’s network of 40 local radio
stations in the English Regions has a large
and loyal listenership. For more than a thirdof listeners, BBC Local Radio is their only
contact with the BBC’s radio services.
Audience figures are broadly stable.
The average weekly reach of BBC Local
Radio was 19.5% or 7.8 million people
in 2005/2006 (19.9%/7.8 million people
in 2004/2005)1.
The output is strongly distinctive, mostobviously in its reliance on speech – itscommercial competitors offer largely
music-based output. For example, breakfast
output on BBC Local Radio is all speech
on weekdays.The quality of journalism isanother mark of distinctiveness. BBC Local
Radio prides itself on providing a trusted
service of local, UK and global news in its
bulletins, as well as putting local issues
under the microscope and holding toaccount those with power in thecommunities that each station serves.
The stations also work hard to foster asense of local community through suchthings as high-quality coverage of local
sport, providing wide-ranging information
about what is happening in the community,
a strong emphasis on enabling individuals
to get involved with helping others, and astress on involving listeners in contributing
to the output.There is also a good range of
output in specialist languages appropriate

BBC Radio Devon
Reflecting the community: Simon Furber and John
Coates broadcast live from the Navy Days festival
in Plymouth celebrating the county’s naval heritage

Where I Live
Providing emergency information for local
audiences: BBC Where I Live websites, becamea crucial information source after the London
bombings, helping people affected cope betterwith the crisisto the communities served by individual
stations – these include Mandarin, Cornish,
Guernsey French, Polish and the principal
Asian languages. During the General
Election, BBC Local Radio did good work,
mounting live broadcasts of public meetings
across England bringing local electors andcandidates together, as well as Question
Time sessions where listeners could phone
into their local BBC studio to question
their candidates.

information on travel disruption and soon, enabling Londoners to cope betterwith the crisis.

The BBC is committed to extending
its network of local radio stations to alimited number of underserved areas,and BBC management is carrying out
preparatory work for new stations inSomerset, Dorset and Cheshire.
English Regions’ television output is largely
concentrated on regional news and current
affairs and politics. In 2005/2006, audiences
fell a little. Average15-minute weekly reachfor the BBC’s early evening news was
20.4% or 9.5 million people (21%/9.75
million in 2004/2005) but remained wellahead of ITV in all English regions.The
weekly current affairs strands produced ineach English region and broadcast under
the umbrella title Inside Out have continued
to build a reputation for lively andaccessible journalism reflecting a wide rangeof subjects and places. Notable examples
included an examination of the finances of
the Baltic Centre for Contemporary Art
by BBC North East, and an investigation of
speed cameras by BBC South West. Inside
Out drew strong praise from the BBC’s
Regional Advisory Councils and the English
National Forum.
All three arms of BBC London journalism– television, radio and online – responded
well to the suicide bombings in the capitalin July, both in terms of powerful news
coverage and analysis and also in terms
of providing continuously updated
BBC Annual Report and Accounts 2005/2006

As we noted in last year’s Annual Report,
the BBC is committed to respondto audience demand for more local(as opposed to regional) television news
services. A nine-month pilot of a local
BBC television news service delivered via
digital satellite and broadband began in
December 2005 covering six areas of theWest Midlands: Staffordshire, Shropshire,
Coventry and Warwickshire, Hereford
and Worcester, Birmingham, and theBlack Country. In addition to news andinformation, each service offers content
made by local people with the help of
BBC or independent producers.
One aim of local television news is to solve
the perennial editorial problem of regional
news programmes – where the concernsof viewers in one part of a large and diverse
region are often very different from thoseof viewers in another. By concentrating on
smaller geographical areas, the local television
news services have the potential to deliver
the close focus of the BBC’s Local Radiostations (the pilots are being overseen by
BBC Local Radio editors).The results of thepilot will be assessed towards the end of
2006 and could pave the way for a further
60 local digital TV services across the UK.
There has been some opposition to theBBC’s local television proposals from private
sector media interests, although someregional newspaper groups have entered into
partnership arrangements with the BBC.We
are committed to applying a Public Value Test,
including a Market Impact Assessment carriedout by Ofcom, before we or the Trust decide
whether to approve a UK-wide launch.
The number of adults 15+ in the area covered by
BBC Local Radio rose by 0.5 million to 39.8 million
in 2005/2006

155

Governors’ review
of services – Nations& Regions

Colin and Cumberland
Supporting indigenous languages: BBC support for
Gaelic broadcasting includes Colin and Cumberland,
which gives an introduction to the Gaelic language
through television and online

Remit
BBC Scotland aims to produce a richand broad range of high-quality anddistinctive content on television, radio
and online for all age groups, properlyreflecting the diverse nature of Scotland
and celebrating all aspects of Scottish
culture and heritage for audiences in
Scotland and across the UK.
BBC Scotland’s news and current affairs
output has continued to perform well. On
radio, average weekly reach of Good
Morning Scotland was 11.4% or 0.48 million
people (10%/0.42 million in 2004/2005).
On television, average 15-minute weekly
reach to the early evening news Reporting
Scotland was 23.2% or 1.1 million people(24.4%/1.15 million in 2004/2005), down alittle on the year but comfortably ahead of
ITV. Notable journalism included a week ofthemed coverage across platforms on theissue of Scotland’s future energy needs.
River City is now a well-established partof the TV soap landscape in Scotland andreaches Scottish audiences who may beunderserved by other BBC television
output. It is appreciated for its freshness
and its unique Scottish voice.There is someevidence that a lighter texture could help
the programme to win larger audiences
and work will progress towards this goal
during 2006/2007. Some concern was
expressed in our meeting with the
Broadcasting Council for Scotland that thelong-running drama series Monarch of the
Glen had come to an end in 2005 without
any replacement network commission.
It was noted in the discussion that thesuccess of River City had helped to develop
a strong talent base both on and off air.
This strong talent base should place
BBC Scotland in a good position todevelop new network programmes.
56

BBC Scotland’s support for Gaelic
broadcasting has remained strong and therecent BBC White Paper recognised the
crucial role the BBC plays in safeguarding
Gaelic cultural heritage.There is a regularThursday evening slot on BBC Two, andRadio nan Gaidheal and the BBC Alba
website are well liked. Colin and Cumberland
gives an introduction to the Gaelic language
through television and online.The website
engages learners through interactive
games and provides an audio guide topronunciation. In April 2006 we approved
the start of planning for a new digital service
for Gaelic audiences.This is a joint projectwith Gaelic Media Services (GMS) andother Gaelic language partners and it will
include television, radio and online content.
BBC Scotland’s Island Blogging project,which originally provided an online platform
for islanders in North Argyll, has now been
expanded to cover all Scotland’s islands andis available in English and Gaelic.The entries,
many illustrated with photographs, open
a window into and out of often isolated
communities and attract appreciative
comments from an international audience.
Audience concern over network news
coverage of Scottish issues has been raisedwith us during our accountability work.
As we report elsewhere, BBC News isdeveloping a training module on reporting
the devolved UK.

Dr WhoBuilding production outside London: Dr Who,starring Billie Piper and David Tennant, is madein Cardiff.The BBC is committed to increasing
programme production outside the M25

Remit
BBC Cymru Wales aims to produce highquality, distinctive services which reflect
the unique culture and history of Walesand its social and political landscape. Its
key ambition is to foster an inclusive andparticipatory engagement with audiencesin Wales across the range of its services.
News continues to be the cornerstone of
BBC Cymru Wales.The 15-minute weekly
reach to the early evening television news
bulletin Wales Today averaged 22.2% or 0.6
million people in 2005/2006 (26%/0.71
million people in 2004/2005), down on theyear although very substantially ahead of ITV.
The reach of Radio Wales slipped alittle. Average weekly reach was 17.2%
or 0.42 million people in 2005/2006(18.4%/0.44 million in 2004/2005).
Radio Cymru’s weekly reach averaged
6.9% or 0.17 million people in 2005/2006(7.1%/0.17 million in 2004/2005).
BBC Cymru Wales has been notably
successful in supplying the network withmemorable programming across a range ofgenres. Drama has been particularly strong
and includes some of the highpoints of
BBC One, such as Dr Who and Life on Mars.
Tribe, for BBC Two, was a remarkable
documentary series in which the presenter,
Bruce Parry, lived with six of the mostisolated tribes in the world. Popular
programming for BBC Cymru Wales’ own
audience included Wales at War, presented
by John Humphrys, and the returning sitcom
High Hopes. Gwynfor:Yr Aelod Dros Gymru
was a well-regarded documentary on thelife of Plaid Cymru’s former President andfirst MP Gwynfor Evans, produced for S4C.
The BBC White Paper makes clear theBBC’s unique position in regard to the

BBC Annual Report and Accounts 2005/2006

Average audience for regional news bulletins across the UK 2005/2006 (millions)

BBC One lunchtime regional news
ITV1 lunchtime regional news

2005/
2006
3.0
1.1

2004/
2005
2.9
1.4

BBC One early evening regional news
ITV1 early evening regional news

5.3
3.6

5.4
3.9

BBC One late evening regional news
ITV1 late evening regional news

4.7
2.5

4.9
2.9

Source: BARB,TNS/Infosys, age 4+

Facing the Truth
Helping to bring people together: in Facing theTruth, presenter Fergal Keane and Archbishop
Desmond Tutu brought victims and perpetratorsof sectarian violence in Northern Ireland
face-to-face to seek reconciliation

provision of services to support minority
languages and we know the high value
placed by Welsh speakers on the BBC’scommitment to the Welsh language.
The BBC has a longstanding obligation to
supply 520 hours a year of licence-funded
programming free of charge to the
Welsh-language television channel S4C.
This includes much of S4C’s most significant
output, such as the channel’s popular soap
Pobol y Cwm, and its news services –including a Welsh language results
programme on the night of the General
Election. We are working towards a new
strategic partnership with S4C.
We have noted the concern expressed tous through the Broadcasting Council for
Wales at the lack of universal access to
BBC services and, in particular, the fact thatless than half the population can receive
Radio Wales or Radio Cymru on DAB.
A key objective of the BBC’s digital radio
strategy is that all its services in Walescan be received on DAB, and the BBC is
supporting the current attempt by Ofcom
to negotiate the release of further
spectrum for local multiplexes.

Remit
BBC Northern Ireland’s aim is to provide
something of value for everyone in thecommunity through a broad range ofprogrammes and services which informand stimulate debate, celebrate andsupport cultural and sporting life, andreflect local interests and experiences foraudiences within Northern Ireland andacross the rest of the UK.
Audiences to the early evening television
news bulletin Newsline are stable.The 15minute reach averaged 20% or 0.3 million
people in 2005/2006 (19.8%/0.3 million
people in 2004/2005). BBC Northern
Ireland has traditionally faced uniquely
strong competition not just locally but also
from across the border, and it is the one
area in the Nations & Regions where theBBC’s early evening news programme
does not win larger audiences than its
commercial competition. Newsline scoredsome notable scoops during the year,
including the completion of IRA weapons
decommissioning, and a series of Newsline
Specials, investigating stories in greater
depth, made impact on audiences.

a range of genres. Perhaps most notable
was the BBC Two series Facing the Truthin which victims and perpetrators ofNorthern Ireland’s sectarian conflict cameface-to-face. Returning network drama
included Messiah IV. Memorable output
for BBC Northern Ireland’s own audience
included From Belfast to Dachau, which
won an RTS award, exploring the storyof one of the first Allied soldiers toenter the concentration camp; extensive
programming marking the death of the
Belfast-born footballer George Best; andSupergoose, a remarkable wildlife series
tracing the migration of Brent geese.
We have noted the concern, expressed
to us through the Broadcasting Council
for Northern Ireland, over the continuing
problem with DAB and DTT availability inNorthern Ireland and the lack of carriage
on DAB for Radio Foyle. A key objectiveof the BBC’s digital radio strategy is that
all its services in Northern Ireland canbe received on DAB, and the BBC is
supporting the current attempt by Ofcom
to negotiate the release of further
spectrum for local multiplexes.

The reach of Radio Ulster and Radio Foylerose.The two stations’ combined average
weekly reach was a record 41% or
0.56 million people in 2005/2006(37%/0.5 million in 2004/2005).This marksa further year of impressive growth – reachin the last quarter of 2005 was 45% or
0.61 million. Radio Ulster remains by somemargin the most listened-to radio stationin Northern Ireland.The presenter Stephen
Nolan won his fourth Sony Gold sincejoining the station in 2004, and his second
RTS award for BBC Northern Ireland.
BBC Northern Ireland has produced
successful output for the network across
BBC Annual Report and Accounts 2005/2006

57

Governors’ review ofcommercial activities

Overview
This has been a year of further major change in the BBC’scommercial activities following the full scale review in
2004/2005 which recommended wide-ranging restructuring.
One key recommendation was that the BBC did notneed to own either BBC Resources or BBC Broadcast.
In August 2005 BBC Broadcast, which provided playout
and other services, was sold and now operates under thename Red Bee Media Limited. A sale of BBC Resources will
not take place before June 2007.
The commercial review recommended that BBC Worldwide
should be retained and work has progressed to simplify thecompany structure and improve its financial performance.
Profits from BBC Worldwide are re-invested for the
benefit of licence fee payers.
BBC Worldwide publishes its own annual review which isavailable online at www.bbcworldwide.com

58

BBC Annual Report and Accounts 2005/2006

BBC Worldwide profit before
interest and tax (£million)

2005/2006
2004/2005
2003/2004
2002/2003
2001/2002

BBC Worldwide cash flow
to the BBC (£million)

89.4
55.2
36.7
32.4
25.7

Source: BBC Worldwide. Profit before interest and tax
based on continuing operations. Excludes BBC Worldand beeb.com

2005/2006
2004/2005
2003/2004
2002/2003
2001/2002

185
145
141
123
106

Source: BBC Worldwide

The Office ringtones
Exploiting BBC assets to benefit licence fee payers:
BBC Worldwide deals, such as the one with
Orange turning The Office catchprases into
ringtones, produce investment funds for public
service broadcasting

BBC Worldwide
BBC Worldwide is the main commercial
subsidiary of the BBC. It exploits the BBC’scontent assets, brands and intellectual
property around the world, bringing value
to the BBC for the benefit of licence fee
payers.The BBC reinvests the earnings
from its commercial activities into public
service broadcasting.
Moves to improve Worldwide’s transparency
and governance include the publicationof a more open annual review and theintroduction of external non-executive
directors. An independent non-executive
Chairman, Etienne de Villiers, was appointed
in August 2005 and further non-executive
appointments will be announced indue course.
BBC Worldwide’s target of doubling profit
over two years from April 2004 was beatenwith profits of £89million – an increase of
144% over the two years and 62% year on
year.This was achieved by turning aroundloss-making businesses and pulling out of,or finding partners for businesses which nolonger fitted Worldwide’s new remit or
which lacked scale, combined with good
growth in other businesses and a cost
reduction programme.
In 2005/2006 sales were up 11% from£706million to £784million, and BBC
Worldwide returned £185million in cash
flow – profits and direct programme
investment – to the BBC (up 28% from£145million in 2004/2005).
The company expects further growthin 2006/2007, particularly in developing
markets and its Global Channels business,
as well as a number of new media
opportunities such as an advertiser-fundedinternational website, bbc.com and thepotential commercialisation of an interactive
media player, should these projects beapproved. It is aiming to achieve a profitof £100million in 2006/2007.
In January 2006, BBC Worldwide inpartnership with the Indian media company,
Mid Day Multimedia Limited, won thelicences to broadcast radio on FM in sevenmajor Indian cities.
In March 2006, BBC Worldwide was told
by JMC, its distributor in Japan, that it nolonger had the financial means to distributethe BBC Japan channel. As a result, it went
off the air at the end of April. However,
BBC Prime found a new market in Korea.
The Global Channels division achieved a
73% increase in profits, £6.9million up from£4million last year.
BBC Worldwide’s share of profits from its
video/DVD joint venture with Woolworths
plc – 2|entertain Limited, part of theHome Entertainment division – were£27.3million. Sales of its Little Britain DVDs
have reached 3 million units. BBC Books,
also part of the Home Entertainment
division, has achieved profits of £1million,a significant improvement on the £3.1million
loss of 2004/2005.
The Children’s division, which was losing£11million in 2003/2004, again improved
upon its 2004/2005 performance, reducing
its losses from £6.6million last year to£0.9million.This business is expected toreach profit in 2006/2007.
In June 2005, BBC Worldwide’s subsidiary,Broadcasting Data Services (BDS), was soldto BBC Broadcast which was subsequently
itself sold.
BBC Worldwide formed a partnershipwith Pearson Education for its academic,
consumer and English language teaching(ELT) businesses.The partnership will publish
BBC Annual Report and Accounts 2005/2006

BBC-branded educational products andservices under a new imprint, BBC Active.
BBC Worldwide is seeking partnerships for
its interactive learning business and for BBC
Books, and to sell Audiocall, which supportsfunctions such as telephone voting, donationand information lines.
BBC Worldwide has begun to exploit new
ways of bringing its content to audiences.
A good example is the deal with Orange
which enables mobile-phone users to
download clips from BBC shows including
The Office and Little Britain, and use theircatchphrases as ringtones.
BBC Resources
BBC Resources is a wholly-owned subsidiaryof the BBC. It supplies production facilities:
outside broadcasts; post production; studios;and costumes and wigs. Its customers
include the BBC, independent producers,
other broadcasters and corporate clients.
As expected, this was a challenging year forthe business, which performed well against
budget. In 2005/2006 BBC Resourcesdelivered revenues of £128million and
PBIT of £6million (£135million and£7million in 2004/2005); and a net cash
inflow of £8million (£13million 2004/2005).
BBC production highlights included Strictly
Come Dancing and Strictly Dance Fever, Planet
Earth, Life in the Undergrowth and Coast,
Glastonbury, the Royal Wedding, the General
Election and key sporting events such as
Wimbledon, Six Nations and the Open Golf.
Independent production highlights included
Friday Night with Jonathan Ross for Open
Mike, 8 out of 10 Cats for Endemol, theLive8 DVD Box Set for the Band Aid Trustand EMI, Come and Have a Go for 12 Yard,
Lenny Henry for Tiger Aspect, Formula One
for North One, horse racing for Sunset
and Vine and snooker for TWI.
59

Being accountable
and responsible

Overview
Increasing the accountability and transparency of the BBC
will be an important priority for the new BBC Trust which,under the terms of the new draft Charter, is required“actively to seek the views of, and engage with, licencefee payers” and to ensure that “the BBC observes highstandards of openness and transparency”.
As Governors we have already begun the move towards
this new relationship with licence fee payers. In 2005/2006
we held our first Annual General Meeting and carriedout a wide range of other accountability activities.The
Broadcasting Councils and the English National Forum
are important ways for licence fee payers to channel theirviews to us and we have continued to work closely withthem. Under the new Charter they will be replaced by
new bodies to be called Audience Councils.
In this section we report on the BBC’s responsibilities toprovide training both for BBC staff and for people working
in other parts of the industry, and to support diversity in
its workforce.This section also reports on BBC support
for charitable activity, and on the steps taken to reduce theBBC’s negative impact on the environment.

60

BBC Annual Report and Accounts 2005/2006

BBC advisory bodies
Broadcasting Councils and theEnglish National ForumThe BBC draws on a network of more than
500 licence fee payers around the UK –selected through an independent process –for advice on programmes and services.
Broadcasting Councils for Northern Ireland,
Scotland and Wales represent the interestsof people in the nations. In England, Regional
Advisory Councils advise the Governors
through the English National Forum (ENF)
and are informed in their turn by a networkof Local Advisory Councils.
Each Broadcasting Council, and the ENF,
is chaired by a BBC national Governor who
ensures that their members’ views are fed
into our discussions.There are also many
informal contacts throughout the year. In
the past year the Chairman and senior
members of the Governance Unit haveattended Council and ENF meetings tobrief them on how the new governancearrangements have been developing
and to hear their views in response.
Representatives of the Council and the
ENF also brief us face-to-face on theirassessment of BBC performance – theresults of the most recent meeting, in
April 2006, will be reflected in our work
going forward.
The Councils’ primary responsibility is
to advise us how well the BBC serves
the needs of audiences in the nations
and the English regions. As part of thisthey advise on key objectives for thenations and monitor the BBC’s delivery
against these objectives. All the Councils
hold a wide programme of outreachactivities in order to understand theconcerns of audiences in the nations
and regions. This informs their assessmentof how the BBC has performed. Overall
the Councils felt that significant progress
had been made against the 2005/2006

Average monthly licence fee spend
BBC One
BBC TwoTransmission and collection costs
Nations and English Regions television
BBC Radio 1, 2, 3, 4 and Five Live
Digital television channels
Local and Nations’ radio
bbc.co.uk
BBC jam
Digital radio stations
Interactive TV (BBCi)
Total
Governors’ accountability activity
Being open: BBC Governor, Ruth Deech, listens
to licence fee payers in Cardiff – one of a seriesof Governors’ public meetings around the UK

objectives. There were, however, someareas of concern.
Digital provision is a concern shared by
all Councils.The Broadcasting Council for
Northern Ireland noted that clarification
was required about the timetable for digital
switchover in Northern Ireland, particularly
with regard to digital developments in
the Republic of Ireland, It also noted thecontinuing problem with DAB availability
in Northern Ireland, and called for Radio
Foyle to be carried on the DAB platform
at the earliest opportunity.The Broadcasting
Council for Wales noted that there was alack of universal access to the BBC’s digital
services in Wales. A significant percentage oflisteners were unable to access either BBC
Radio Wales or BBC Radio Cymru on DAB.
In particular, the majority of Welsh speakers
were unable to receive Radio Cymru on
DAB.They expressed concern about theamount of promotion for the digital services
in Wales, given that such a large number
could not receive these services.The ENF
was concerned that there was a lack ofknowledge among licence fee payers about
digital switchover. It stressed that the BBC
had a key role in educating licence fee
payers about digital services, and must help
to demystify the process. A call for greater
information about digital services for lateadopters was made by all the Councils.
The Broadcasting Council for Scotland
expressed concerns about the failure,particularly in news and sports coverage,
to differentiate between issues that affected
the whole of the UK and those whichapplied elsewhere but did not affect
Scotland.The Broadcasting Council for
Wales expressed similar concerns about
issues which did not apply to post
devolution Wales.The Council also wanted
network news bulletins to include morestories reflecting Welsh experience. As wereport elsewhere, BBC News is planning a

2006 monthly cost
£
3.52
1.52
1.08
1.04
1.02
1.00
0.68
0.36
0.14
0.10
0.08
10.54

Note: Programme related costs such as marketing and overheads have been fully apportioned against channels/networks to show
the total cost of BBC output. Excludes exceptional restructuring costs.
Figures rounded to the nearest penny.

training module on reporting the devolved
UK.The Broadcasting Council for Northern
Ireland expressed its view that more
network-commissioned programming from
Northern Ireland – particularly drama –should be made in Northern Ireland.
The ENF noted that in BBC network drama
there was very little reflection of life in the
English regions.The Councils all wanted
closer links between network programmecommissioners and the nations and regions.
The Broadcasting Council for Northern
Ireland noted that a key concern raisedby audiences at public meetings was bad
language used in some programmes.The
Council felt that research into perceptionof inappropriate language, focusing on
regional variations in attitude, could be
helpful to the BBC and other broadcasters.
The Council also noted the importanceof providing programming in both Irish
language and Ulster-Scots and has soughtclarification of the new Charter requirementthat there should be “appropriate provision”
in this area.
The Broadcasting Council for Wales
welcomed the review of the scheduleof BBC 2W, particularly in light of theincreasing number of people watching
the service via Freeview who, therefore,
had no access to BBC Two Wales.The
Council also noted the importance of aclose strategic partnership between the
BBC and S4C, which would be crucial if
audiences in Wales were to receive thebest public service broadcasting.
The Broadcasting Council for Scotland
noted the low approval for politicalprogrammes and believed that in addition
to traditional political programmes
there was a need to develop innovative
programming which would appeal to awider audience.They welcomed BBC
BBC Annual Report and Accounts 2005/2006

Scotland initiatives such as Energy Week
as a way to engage audiences in current
affairs topics.The Council also noted
the need for BBC Scotland to develop
successful network programmes across all
genres now that a number of long-runningseries had ended.
The English National Forum paid particularattention to the local television pilot being
carried out in the West Midlands.They
noted that such services would be vitalin the future as the BBC tried to connect
with communities throughout the UK.
They noted, however, that such services
need adequate funding.
Under the new draft Royal Charter the
Broadcasting Councils and the English
National Forum will be replaced by new
bodies called Audience Councils – oneeach for England, Scotland, Wales andNorthern Ireland.
The views of the Broadcasting Councils
and the ENF are published in more detailin their Annual Reviews.These are available
on the BBC Governors’ website atwww.bbcgovernors.co.uk.
Central Religious Advisory Committee
The Central Religious Advisory Committee(CRAC) advises the BBC on religious policy
and programmes.
In preparation for the beginning of the
new Charter period and the replacementof the BBC’s Board of Governors by the
BBC Trust, the BBC’s Governance Unit has
been carrying out a thoroughgoing reviewof the BBC’s accountability arrangements.
This has involved consideration of the roleof the BBC’s existing system of advisory
bodies, such as CRAC.
CRAC has been active in working with
the Governance Unit on addressing this61

Being accountable
and responsible

issue throughout the year. At present CRAC
has the dual role of advising the Board ofGovernors on broad policy issues andadvising the BBC’s management on
programming. Under the new governancearrangements, which are based on theprinciple of much greater separation
between the Trust, as the BBC’s sovereign
body exercising both strategic andregulatory oversight, and the BBC’s
Executive, which is charged with operational
duties, this dual role is open to question.
The issue for the future, therefore, is how
and on what terms CRAC might continue
to fulfil a useful advisory role that is
consistent with this principle of separation.
Various options have been discussed andwork continues on this question which must
be resolved in good time for the beginningof the new Charter period.
Although CRAC’s principal focus thisyear has been on its future role it has
also undertaken work on matters relating
to its current remit. It was consulted onchanges to the religious output of theWorld Service, which involved a greater
emphasis on religious journalism rather
than worship.
BBC World Service and Global News
Consultative Group
The BBC Governors’ World Service andGlobal News Consultative Group provide
the Governors with an independent
external assessment of the range andquality of BBC World Service and BBC
World output.

BBC Complaints website
Being responsive: the BBC has overhauled its
complaints system to make it easier for licence fee
payers to complain if they are unhappy about any
aspect of BBC output

BBC Open Centre, Sheffield
Being accountable: BBC Chairman Michael Gradetakes questions from licence fee payers in Sheffield –the exchange was broadcast live on BBC Radio
Sheffield

In the context of the increasing competition
from new radio stations in many of thecountries reviewed, the Group wereencouraged by the findings.The World
Service has retained its image as a solidand reliable source of news and its
journalism is regarded as providing moredetail than other radio stations, includinginternational competitors. However, there
were indications that the proliferationof more lively local stations was changing
audience expectations of news programmes(notably in Pakistan and Africa) andthat some younger non-listeners perceive
the World Service presentation to lackdynamism and energy.The Group felt it
would be important to monitor the riskof the World Service being marginalisedby its listeners.

Learn English and Participate pages; andconsidering a fully functioning English/Urdu
dictionary to increase the usability andeducational value of the site.

In the light of polarising world events
our research provided an opportunity togauge how well the World Service wasperceived to have handled these difficult
issues. We were pleased to conclude that
the World Service had maintained its
reputation for impartiality and objectivity.
There were no accusations of bias oninternational issues from the respondents.
Some issues were raised, however, at anational or regional level. For example,
in Africa some respondents felt that the
BBC adopted a Western attitude to Africa
by regarding the continent as a “problem”.
The Group has asked World Service
management to take account of this issue
when producing output.

In 2005/2006 the Group commissioned
independent research from Ipsos MORI
to review World Service output in English
for Africa, Urdu, Romanian, Persian, andSpanish for America. Overall they weresatisfied that the World Service output
reviewed was of a good standard, withno significant concerns identified.

The online services were singled out
as offering an accessible version of theBBC brand with wide appeal. However,some further presentational areas for
improvement were identified.These
included improving the look of clutteredhome pages; making it easier to returnto the language service home page;giving clearer instructions for use for the62

BBC Annual Report and Accounts 2005/2006

Feedback from the respondents satisfied
the Group that their research – while
inevitably limited and impressionistic –nevertheless provided a useful indicationof a range of listener and potential
listener views across the language services.
World Service management have been
made aware of the key concerns of
the respondents.

Responding to complaints
The BBC has a Charter commitment toensure that the BBC handles comments
and complaints properly.The Governors’
Programme Complaints Committee(GPCC) is the subcommittee that monitors
this. It receives quarterly complaints
reports from management and considers
an annual review of complaints handling.
It also considers serious editorial
complaints on appeal.
New complaints system
The BBC launched a major new complaints
system in February 2005. Key features ofthe system include a published code ofpractice; a commitment to answer initial
complaints within ten working days; acomplaints website (bbc.co.uk/complaints)
which continues to be refined; a clear
three-stage process with the GPCC as the
final stage; and a Complaints Management
Board chaired by the Deputy DirectorGeneral to oversee complaints handlingwithin management and share learning at
a senior level.
The complaints system was analysedby the BBC’s internal audit team this year
to evaluate its robustness against internal
audit measures. No major areas of concern
were found. It found that sampled11.8
millionadults in homes with digital televisions
used BBCi 24/7 in March 200627%of the population watched at least
15 minutes of Springwatch (BBC Two,
May–June 2005)

Training
Building the next generation of media
professionals: the BBC offers highly-regarded
training to its own staff – and to many othersin the UK broadcasting industry

complaints were handled in accordancewith procedures; that there was goodawareness of the new system; that
there was an effective relationship with
Capita – the provider of frontline services;and that management information was
robust. A number of areas for further
improvement were identified, for example
better communication between someareas, and these are being addressed.
The GPCC noted management’s
achievement in implementing andimproving the new complaints system.
The GPCC noted the BBC’s greater
willingness to admit where it had madea mistake. Discussion will continue on
ensuring that apologies are appropriately
full and clear.
This year the BBC handled more than
150,000 complaints overall, comparedwith 137,000 the previous year. More than
50,000 of last year’s total was accounted
for by complaints about Jerry Springer –the Opera, which means that the underlying
total is up by around 80%.The GPCC
considered that the likely primary driverof the increase is the improved accessibility
in terms of complaining because of thewebsite. Some notable specific issues
this year included complaints during theGeneral Election; the new format forweather reporting; and the controversy
surrounding cartoons depicting theProphet Muhammad.
91% of Stage 1 complaints (ie to theprogramme or BBC Information) were
responded to within the target ten working
days of receipt. Special arrangements were
put in place to deal with complaints during
the General Election.
BBC Information
BBC Information continued to operate 24
hours a day, seven days a week, handlingcomplaints via telephone, letter and email.
It handles the vast majority of complaints at
Stage 1. Around two-thirds of complainants
score BBC Information at least 8 out of 10
in terms of overall satisfaction with theservice in an independent survey conductedby MORI.The GPCC noted that this wasa good figure in the context of complaints
handling. It welcomed management’s
proposal to measure public perceptions of
the BBC’s willingness to embrace complaints
during 2006/2007.
Editorial Complaints Unit
The role of the Editorial Complaints
Unit (ECU) is to take serious editorial
complaints from people who are notsatisfied with the Stage 1 response.
It considers these independently of
programme makers.The ECU considered
206 complaints (0.14% of all complaints):
40 were upheld (19.5%) in full or in part.
Upheld findings were published quarterly,
together with a note of the action taken
in each case. 53% of complaints were
responded to within four to seven weeks(48% 2004/2005).The target is to respondto 80% within this time frame.
A review of the ECU was undertaken
in response to the changed context
of the new complaints system, and new
structures and procedures will be
implemented during 2006/2007.The GPCC
noted that the new procedures should
help improve turnaround times.

As part of its wider objectives to deliver
greater transparency and accountability,
the GPCC reviewed its own procedures
during 2005/2006, and in March 2006
conducted a public consultation on
proposed changes on how it would
consider and handle appeals.The proposals
were: first, that all parties should normally
have the opportunity to comment onmaterial provided to the GPCC in making
its decision; second, that with some firstparty complaints (where complainants
are directly affected by issues for fairness
or privacy) the GPCC should have thediscretion to hold a hearing.The GPCC
will also publish details on its procedures,and it consulted on the drafting of these.
The GPCC is currently considering
responses to the consultation and plans to
implement new procedures later in 2006.
Ofcom
The industry regulator Ofcom can also
take complaints on most editorial matters.
The notable exception is impartiality andaccuracy – the BBC Governors are thesole regulators on these issues.The BBC
was found to be in breach of regulatorycodes in eight standards cases and ten
fairness and privacy cases.
For further information about editorial
compliance, see page 89.

Governors’ Programme Complaints
Committee
Part of the GPCC’s remit is to hearserious editorial complaints on appeal –ie from people who have been throughthe two management stages but remain
unsatisfied with the response. Fifty-fourcomplaints were escalated to appeal.
Of these, eight were upheld in fullor in part.
BBC Annual Report and Accounts 2005/2006

63

Being accountable
and responsible

BBC World Class
Bringing the world to the UK: as part of theAfrica Lives season the BBC World Class project
linked up more than 1,700 African and UK
schools. This school in Lagos was twinned with
one in Loughborough

Serious Amazon
Supporting new talent: the CBBC series Serious
Amazon sent a group of children – chosen ina nationwide competition – on a testing trip
to South America. Special efforts were made toinclude children from disadvantaged backgrounds

Training and development

BBC Talent
BBC Talent was launched in 2000 andcontinues to provide a pathway into
the BBC for new talent from acrossthe UK. New schemes in 2005/2006
included finding a new presenter for
BBC Radio Coventry & Warwickshire,finding new DJs and radio drama writersfor 1Xtra BBC, and a competition tochoose the eight children to take partin the CBBC series Serious Amazon –to encourage children who might nototherwise have applied. A team from
BBC Talent held workshops at 25 schools,
many in inner cities.

BBC College of Journalism
In 2005 we approved the setting up
of a BBC College of Journalism – ademonstration of our determinationthat BBC journalists should haveaccess to the best training in orderto ensure they can meet the highest
standards of independence,
impartiality and accuracy.
We are encouraged by the rapid
progress made since then.Vin Ray, adistinguished BBC journalist, has been
appointed Director and work has
begun to identify the key skills andknowledge that BBC journalists willneed in the future and how best they
can be delivered.
The College is not a set of buildings
on a campus.Training is delivered –face-to-face or through selfadministered online modules – close
to where BBC journalists do theirwork.The aim is to offer all staff
continuous learning at every levelof their careers.
In March 2006 a module Israel and
the Palestinians was launched using
the BBC’s Middle East editor Jeremy
Bowen and aimed at 4,000 staff.
Future modules will include legal
training, reporting the devolved UK,
and reporting faith and religion.
A website on journalism issues isbeing developed as the main entry
point for all the College activities
as well as a forum for discussion
and debate. The College will seek
to build strong relationships withkey external bodies such as
regulatory agencies, think tanks,
journalism training schools, andother news organisations.

64

During the year, management completeda major review of training and development
strategy. It found that the existing training
model was too complex and did notpromote a long-term collective strategic
approach or encourage innovation.
It recommended a new training anddevelopment strategy focusing on areas vitalto the BBC and the wider broadcasting
industry.This has now been implemented.
All training and development funding
is now controlled by a newly createdLearning Board which sets and monitors
spending priorities.The training itself ischannelled through four training boards.
These cover journalism (including the
BBC College of Journalism – see box);
leadership and personal effectiveness;
production (including engineering); andcreativity and audience insight. Eachtraining board is chaired by a memberof the Executive Board, who is also amember of the Learning Board.
Industry training
As well as training its own staff, the BBC
continues to play an important role as a
trainer to the wider broadcasting industry.
In 2005 the BBC provided more than
3,800 days of training for 176 organisations.
BBC Training & Development also offersa range of free online courses covering
aspects of television and radio production –including shooting, lighting, editing, writing,interviewing, and health and safety advice.
In addition, the BBC offers free andsubsidised training to freelance and contract
workers on a range of camera, sound,lighting and new media training. In 2005,
300 UK freelances benefited from BBC
training. The BBC also maintains strategic
relationships with Skillset (the sector skills
council for the audio-visual industries) andwith the Broadcasting Training and Skills
Regulator established by Ofcom.
BBC Annual Report and Accounts 2005/2006

AwardsIn 2005/2006 the BBC received morethan 250 programme-related awards
across television, radio and new media.
These included 24 Baftas (TV, Craft andChildren’s), 22 Sony Golds, 48 RTS awards(Programme, Educational, Journalism,
Sport, Crafts and Design), two Webbies
and one Prix Italia award.
Diversity
Management adopted a new diversity
strategy in 2005, following a review ofactivity in the preceding years. Among the
key principles of the new strategy is thatdiversity should be seen as a creative
opportunity for the BBC to engage thetotality of the UK audience. Diversity
should be seen as including ethnicity,disability, age, faith, sexuality, class, politicalaffiliation and regional differences. BBC
leaders across the organisation shouldbe held accountable for making diversity
happen in their part of the business anddiversity should be embedded into thekey processes of programme making,creativity, service delivery and creating
an inclusive workforce. A Diversity Board,chaired by the Director-General, hasbeen created to establish priorities andmonitor progress.

88,969

91.6%

job applications received by BBC
Recruitment in 2005/2006

of programming on BBC One was subtitledin 2005/2006

People’s War
Capturing community histories: the BBC’s People’s
War project enabled many people to record theirpersonal memories of the Second World War –building a valuable archive for future generations

BBC News coverage of the EU
During the year we asked
management to update us onprogress on implementing therecommendations of the 2005
Wilson report on the impartialityof BBC coverage of the EU.We
received management’s response
in February 2006.
We welcome the significant
progress made by management in
implementing change in this area.
New training initiatives haveincluded a compulsory EUinteractive online course taken bymore than 6,000 people. In addition,
the College of Journalism is planninga series of seminars and producing
two films to be distributed to all
programme teams in an effort to
get them to think more deeply
about their EU coverage.
We welcome the appointmentof Mark Mardell as the BBC’s first
Europe Editor. His work has added
significant depth and authority to
BBC coverage.
Regular monitoring of BBC coverageof the EU is now carried out bymanagement every six months,
assessing such things as accuracy,
fairness and use of language.The
results and recommendations are
considered by the Journalism Board,which is chaired by the Deputy
Director-General and brings
together the leaders of all the BBC’sjournalism – national, international,
regional and local.

The BBC has had workforce diversity
targets for a number of years.These targets
are due to be met by December 2007.
They include a target of 12.5% for ethnic
minority staff in the total workforce andof 7% for ethnic minority staff in senior
management grades. By March 2006,
the figures stood at 10.3% and 5.3%
respectively (10.1% and 4.9% March 2005).
There is also a target of 4% for disabled
staff in the total workforce. By March 2006,
this stood at 2.7% (no change from March
2005).The slow progress on diversity
targets in 2005/2006 partly reflects
a slowdown in external recruitment.
In October 2005 the BBC held aDisability Leaders seminar which brought
together representatives of 24 key
disability organisations and senior BBC
managers.The seminar considered issues
including portrayal, recruitment, and how
technology can improve access. A followup seminar is planned for 2006 to review
progress and maintain the dialogue withdisability groups.

Corporate social responsibility

we operate in, to maintain their faith in the
BBC.The BBC’s social impact will be mostevident through fulfilling our public service
duties and through environmental, ethical,
charitable and community commitments.”
Business in the Community, theorganisation that works to improve thepositive impact of business in society,publishes a CSR index each year. It
provides a benchmark of how companies
manage, measure and report their impact
on society. In 2006 the BBC’s score was
95% (90% in 2005) placing it joint 20th
in the top 100 UK companies for CSR(up from 32nd in 2004) and leader in the
media and entertainment sector.
The BBC published a CSR report (available
online at bbc.co.uk/info/csr) which gives
more detail on the wide range of activities
through which the BBC puts into effect its
CSR policies.
Some of these activities in 2005/2006 arerecorded below.

The BBC sets out to deliver public value
primarily through its programmes andservices, but it also extends its public value
through activities that reach out directly
into society through a commitment tocorporate social responsibility (CSR).

Charitable work: fundraisingthrough appeals
Broadcast appeals are an important public
service.They provide BBC audiences with
an opportunity to support charities, while
offering charities the opportunity to raisemoney and awareness of their work.

This is how the BBC defines its ambitionsin this area: “The BBC’s core mission isto enrich people’s lives with programmes
and services that inform, educate andentertain. In line with this, the BBC aims
to be a responsible corporate citizen,
acting in the public interest to strengthen
and enrich communities across the UK
and internationally. CSR means living ourvalues with integrity and ethical consistency
towards our own people, our audience,business suppliers and the communities

The BBC is advised by the Appeals
Advisory Committee (AAC), which ismade up of 12 specialist external advisers
who represent a broad range of interests
across the charitable field. The AAC
provides advice on the BBC’s appeals
policy and assists the BBC in overseeing
the major fundraising projects such as
Red Nose Day and BBC Children in
Need. It also advises on the allocation of
the Radio 4 weekly appeals and BBC One
Lifeline appeals. At the end of 2005,

BBC Annual Report and Accounts 2005/2006

65

Being accountable
and responsible

414,019
visitors to BBC Open Centres and busesin 2005/2006

Children in Need
Reaching out to the needy: Fearne Cotton with
Ruby, a patient at Richard House Children’s Hospicein East London, one of the many charities helped
by a grant from Children in Needfollowing the recommendation of areport commissioned by the Governors,
the reporting lines for the AAC weretransferred from the Board of Governors
to BBC management.
The year 2005/2006 featured a numberof major appeals. In November 2005,
Children in Need raised more than
£17million on the night, with the eventual
total expected to be double that. The
money goes to a wide range of projects
working with children in the UK. A Blue
Peter Treasure Trail Appeal for Childline,
also launched in November, has raised£413,033 so far.
In 2005, the BBC was a partner in two
appeals coordinated by the Disasters
Emergency Committee, an umbrellaorganisation representing the major
overseas aid agencies. The first, in August,raised £25million for a humanitarian
response to the food crisis in Niger andadjacent countries, and in October an
appeal for the earthquake in Asia raised£59million for relief efforts in northern
Pakistan and Indian Kashmir.

Charitable work: BBC World
Service Trust
The BBC World Service Trust is theBBC’s international development charity,
which aims to promote development
through innovative use of the media inthe developing world.Trust projects reachthe poorest communities, promoting
good health and providing educational
programmes through radio and televisionin local languages.The Trust also helps
local and national broadcasters to develop
by training journalists and production staff.
The Trust raises its funds not from theBBC but from governments, international
agencies, other partner organisations anddonations from individuals. In 2005/2006,£16.4million was raised.
The Trust works in partnership withnational and local broadcasters, othercharities and governments, and now has
more than 600 staff working on projects
in more than 50 countries worldwide.

Last year audiences also donated morethan £1.4million to individual charities
featured on weekly and monthly appeals.
Listeners donated more than £1,194,000
to charities featured on the weekly Radio
4 Appeal, including more than £661,000
to the annual Christmas appeal for
St Martin-in-the-Fields.

Community partnerships
The BBC operates a number ofcommunity partnerships, actively seeking
out opportunities to join with otherlocal organisations to improve conditionsin the communities in which they
operate. They include the Community
Channel, a free-to-air digital channel
wholly owned by the Media Trust, thecharity that provides media expertiseto other charities.

Viewers of BBC One’s monthly
Lifeline programme donated more than£240,000 to the charities featured over
the year. This included £95,061 for theStarlight Children’s Foundation, with
an appeal fronted by Stephen Fry,and £51,856 for the overseas charity
WaterAid.

Through a strategic joint partnership,
the Community Channel has accessto BBC social action programmes and,
where possible and appropriate, develops
connections with relevant themes andseasons in the BBC television schedules.
It also allows for the exchange of ideas
and skills across both organisations.

66

BBC Annual Report and Accounts 2005/2006

BBC buses and Open Centres
The BBC buses and Open Centres area way to connect the BBC more closely
to communities, to reach new audiences,
to develop media literacy and bridge thedigital divide, and to involve more people
in local BBC programming.
The first BBC bus began operating in2001 in Lancashire, in partnership with
Lancashire County Council. Its aim wasto take the BBC local radio station on
the road, to put listeners on air, and tooffer opportunities for media and IT
training. Its success led to other buses
being commissioned and there is a now
a fleet operating in England, Wales andNorthern Ireland. Each bus has half adozen computers and internet access,and is equipped as a mobile broadcastingstudio. Qualified tutors are on board toteach visitors.
The first BBC Open Centre was also
launched in 2001 – in Blackburn – tostrengthen and extend BBC Radio
Lancashire’s connection with its local
audience by offering opportunities tolearn about the media, acquire IT skills
and to become involved in community
broadcasting. There are now similarcentres across England and Wales. In
2005/2006 more than 360,000 people
visited the BBC buses and Open Centres
in England.
The BBC works with external educationaland not-for-profit organisations at eachof the locations. The BBC has aspirations
to extend the service of BBC buses andOpen Centres to other areas wherepartnerships allow and audience needis greatest.
The BBC and the environment
The BBC works to ensure it complies

77%
of music played on 1Xtra is new (pre-releaseor less than one month since release)

BBC Buses
Taking the BBC to the audience: BBC buses, like thisone on the road in Cumbria, help to connect the
BBC with hard-to-reach communities

Environmental awareness
Purchasing responsibly: the Radio Times is printed on
paper from sustainable forests, part of a BBC policy
to take environmental concerns into account in theway it buys raw materials

with environmental legislation and tries
to reduce its environmental impacts andto manage its business risks responsibly.
The Business in the Environment Index
2005 places the BBC joint 53rd overall(up from 61st in 2004), and third in
the media and entertainment sector(down from second in 2004).

an increasing proportion comes fromsustainable forests. The other 5% oftimber is used in other areas including
washroom consumables, furniture,sets and props. For these areas, bettersourcing arrangements and monitoring
systems are being developed together
with improvement targets.

In 2005 management reviewed 72
areas of the BBC supply chain for theirenvironmental and reputational impact.
As a result, six categories have been
identified as priorities for action andreview. These are: timber and timber
products; outsourcing of building facilities
management; taxis and hire cars; fleet(outside broadcast vehicles and company
vehicles); utilities; and outsourcing of thetransmission network.

The BBC works closely with its outsourced
partners to bring environmental
improvements.The partners can often
bring specialist expertise and systems
for managing environmental risk: they canoften fund improvements – for example
in energy-efficient equipment and power
plant; and have the purchasing power toinfluence supply chains in environmentallysound ways.

Since November 2005 electricity has
been bought from ‘Good Quality
Combined Heat and Power’ sources –these are highly energy efficient andexempt from the climate change levy.
The BBC now has a number of sites
covered by the EU Emissions Trading
Scheme, designed to reduce carbon
dioxide emissions. These sites areallocated CO2 emission certificates andif they emit more CO2 than allocatedthe BBC has to buy more certificatesin the open market – or, if less CO2 isemitted, it can sell the excess certificates.
In 2005 the Media Village at White City
produced 5,103 tonnes of CO2 less thanits allocation – although this reflects thefact that the site is not yet fully occupied.
The BBC is working to increase theamount of timber it buys from sustainably
managed forests. BBC Magazines accounts
for 95% of this in the form of pulp for
paper, and detailed information onsources is now gathered to ensure

BBC Annual Report and Accounts 2005/2006

67

Governors’ review
of services – Performanceagainst Statementsof Programme Policy
commitments 2005/2006

Overview
In line with the Communications Act 2003 the BBC isrequired to publish Statements of Programme Policy eachyear, setting out how the BBC will fulfil its public service
remit, and to report on performance against them in
the Annual Report.
In future, this assessment of performance will be enhanced
by Service Licences issued by the new BBC Trust. The
Service Licences will include conditions and performancemeasures, and be supported by annual Statements ofProgramme Policy. The Trust will assess delivery against
the Service Licences and hold management to account.
The BBC published its Statements of Programme Policy
covering 2006/2007 in May this year (available atbbc.co.uk/info/statements2006).

68

BBC Annual Report and Accounts 2005/2006

These tables summarise performance in 2005/2006 against Statements of Programme Policy. All commitments to hours of output specificto different genres are a minimum, unless otherwise stated.
BBC One:Commitment

ActualHours of current affairs programmes

90

159 hours

Increase hours of current affairs in peak, working towards 48.5 hours in 2006/2007–

44 hours in peak (up from
40 hours in 2004/2005)

Panorama specials in peak time4

4 specials

Start reducing the volume of peak-time repeats of programmes previously
seen on this channel below the existing ceiling of 10% of peak time<10%

8.9% of peak(down from 9.7% in
2004/2005)

Science, natural history and educational programmes will form part of thecommitment to hours of new factual programming

650

916 hours

Hours of religious programming on BBC One

80

92 hours

Hours of religious programming across BBC One and BBC Two112

139 hours

Hours of children’s programming

400

672 hours

Hours of sports programming

260

670 hours

Hours of arts and music

45

82 hours

BBC Two:Commitment

ActualHours of current affairs

240

259 hours

Hours of news

100

673 hours

Hours of arts and music programming

200

350 hours

Hours of factual programming

500

1,438 hours

Hours of religious programming (as part of joint commitment with BBC One)20

47 hours

Hours of new children’s programming

100

153 hours

Hours of sport

430

1,028 hours

BBC Three:

Commitment

ActualHours of new current affairs programmes

15

16 hours% of hours to be news, current affairs, education, music and arts

15%

28% of hours

Hours of new music and arts programming

50

52 hours

New talent initiatives

6

6 initiatives

Hours of new educational programmes

30

127 hours

Hours of new science, religion, ethics and business programmes

15

20 hours

Channel’s output with interactive support

20%

Target met using email,SMS and online messaging

Minimum qualifying hours commissioned from the independent sector

25%

33.1% ofqualifying hours% spend from independent sector on eligible programmes

25%

37% of programmebudgets% eligible budget produced from outside the M25

33%34.5% of spend

Output specially commissioned for BBC Three80%

82% of programmes

Programme hours of EU/EEA origin

90%

91% of hours

Spend of EU/EEA origin

90%

94% of spend

BBC Annual Report and Accounts 2005/2006

69

Governors’ review of services – Performanceagainst Statements of Programme Policy
commitments 2005/2006

BBC Four:Commitment

Actual% of output made in the EU/EEA

70%

95% of hours

Broadcast new documentaries from around the world

30

49 documentaries

Premieres of new international film titles

20

34 premieres

CBeebies:

Commitment

ActualHours of mixed genre programmes

4,500+

4,711 hours

Output of UK/EU origin

approx 90%

97% of hours% of channel investment on new UK programming

75%

77% of spend% of hours of UK programming that is new material, including output
commissioned from outside London

25%

27.3% of hours

The CBBC Channel:

Commitment

ActualHours of news

85

97 hours

Hours of drama

650

768 hours

Hours of live presentation

240

313 hours

Hours of factual and schools programming

1,000+

1,388 hours% of output made in the EU/EEA

approx 75%

88% of hours% of investment made in the EU/EEA

approx 75%

96% of spend% of programme budgets allocated to originations, including productionscommissioned outside London

approx 75%

95% of spend% of programme hours allocated to originations, including productionscommissioned outside London

approx 25%

33% of hours

BBC News 24:

Commitment

ActualNumber of editions of HARDtalk featuring long-form interviews withnewsmakers and cultural figures

200

206 editions

Hours of political debate through programmes such as Straight Talk

35

38.5 hours

Editions of Dateline London, offering an alternative viewpoint on events fromforeign correspondents based in London

50

50 editions

Minimum hours of sports news

100

115.8 hours

BBC Parliament:

Commitment

ActualHours of proceedings of the Scottish Parliament100

133 hours

Hours of proceedings of the Welsh Assembly

100

100 hours

Hours of programming from Brussels and Strasbourg (including repeats)100+

169 hours

Hours of coverage of Westminster’s Select Committees

400

427 hours

BBC Television services have a regulatory requirement to meet ‘Tier 2’ quotas agreed by the Board of Governors with Ofcom eachcalendar year for independent production, regional programme making, news and current affairs programmes, levels of original production,and regional programming.These quotas and compliance with them are listed in the Compliance section on page 91.

70

BBC Annual Report and Accounts 2005/2006

BBC Radio 1:

Commitment

ActualHours of news, sport and current affairs

310

339 hours% of schedule devoted to specialist music or speech-based programmes

40%

43.4% of schedule% of mainstream music programming that is ‘new’ (pre-release or less than
one month since release)45%

51% of music% of mainstream music programming from UK acts

40%

49% of music

Live events and festivals in the UK and abroad

approx 25

27 live events/festivals

New sessions and Live Lounge performances

250+

356 new sessions/performances

Commission new documentaries

40

43 new documentaries

Hours of opt-out programming from Scotland, Wales and Northern Ireland

approx 200

223 hours

BBC Radio 2:

Commitment

ActualSchedule split between speech and music

approx 33% speech

37.5% speech

Hours of news and current affairs, including hourly news bulletins

800

829 hours

Hours of specialist music programmes

1,100+

1,210 hours

Hours of musical theatre and film music

60+

70 hours

Hours of arts programming

100+

112 hours

Hours of religious output covering the broad range of faiths

170+

170 hours

BBC Radio 3:

Commitment

Actual% of music live or specially recorded music

50%

53.2% of music

Live output consisting of live or specially recorded performances

500

595 hours

Commission new musical works

30+

36 new musical works

Commission new documentaries on arts and cultural topics

30

39 new documentaries

Budget spent outside the M2540%

45.4% of spend

BBC Radio 4:

Commitment

ActualHours of news and current affairs

2,500

3,021 hours

Hours of original drama and readings

760

770 hours

Hours of original comedy

300

321 hours% of new Afternoon Plays that will be first or second commissions
from writers new to radio

35%

43% of Afternoon Plays

Hours of documentaries

200

232 hours

Hours of religious programming

200

214 hours

BBC Radio Five Live:

Commitment

ActualHours of regional, national and international news coverage

6,000/approx 70%

6,549 hours/
74.8% of output

Hours of documentaries, plus specially commissioned debates on major news
and sports events

approx 50

56 hours

BBC Annual Report and Accounts 2005/2006

71

Governors’ review of services – Performanceagainst Statements of Programme Policy
commitments 2005/2006

1Xtra:

Commitment

Actual% of music played that is ‘new’ (pre-release, or less than one month since release)70%

77% of music% of output dedicated to news, documentaries and social action programming

approx 10%

11.3% of output

Approximate % of overall output consisting of speech

approx 20%

23.8% of hours

Number of live music events

50

55 live events% of music played from the UK

40%

46% of music

BBC 6 Music:

Commitment

ActualHours of archive concert performances

400+

530 hours

Number of new sessions recorded through the year275+

380 sessions% of music that is concert tracks and sessions from the BBC’s music archives

15%

15.7% of music

At least half of the music played will be at least four years old

50%

52% of music played

Hours of rebroadcast and newly commissioned documentaries and essays

550+

612 hours

Number of social action campaigns, with supporting online resource material

3

3 campaigns

BBC 7:

Commitment

ActualHours of books and drama

2,800

3,833 hours

Hours of comedy

2,800

3,437 hours

Hours of readings for children

40

40 hours

Hours of original comedy

10

22 hours

Hours of original drama

10

14 hours

Hours of children’s programming

1,400+

1,457 hours

BBC Asian Network:

Commitment

ActualContent will be approximately 50% speech and 50% music

approx 50% speech

50.5% speech% of music playlist from UK acts

40%

40% of music playlist

Hours broadcast per day in languages other than English

3–5 hours

5.2 hours

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BBC Annual Report and Accounts 2005/2006

bbc.co.uk:

Commitment

ActualIncrease BBC reach of the GB adult internet population

50%+

54% of GB adult internet
population (Q1 2006)

Number of users of the BBC WebWise site and number of links tosupport centres nationwide by March 2006

Total of 1 million users
across the year
1,000 centres

560,000 users in Q1
2006

Extend Skillswise with major literacy campaign, aiming to attract target users
a month between October and March 2006

200,000

250,000 users a month

Further enhance Ouch!, the disabled community site, with the aim of ensuring
target visitors a month

20,00040,000 visitors
per month

BBCi:

Commitment

ActualGrow reach of BBCi 24/7–

33% of adults in homes
with digital television(Q1 2006)

Changed methodology: now
actual rather than ‘claimed’
usage

Changed methodology – seepage 44

Reduce access times

6 seconds

8 seconds in homes withdigital satellite television(Q1 2006)
See page 44 for further
information

Maintain cost per user reached of BBCi 24/7

8p in homes with digitalsatellite

4p in homes with digital
television (Q1 2006)
Changed methodology –see page 44

BBC jam:Commitment

ActualPrepare for the launch of the first materials in January 2006

Launch in January 2006

Launched in January
2006 with four subjects:
English, Geography,
French and BusinessStudies

BBC Annual Report and Accounts 2005/2006

73

Governors’ review of services – Performanceagainst Statements of Programme Policy
commitments 2005/2006

BBC Nations & Regions:

Commitment

ActualHours of speech and debate across our radio stations

approx 260,000

272,089

Hours of news, politics and current affairs across our television services

5,000+

6,499

English Regions:

Commitment

ActualHours of daily local and regional television news

3,350

3,735 hours

Hours of local and regional non-news programming, including current affairs

250

271.4 hours

Hours of local radio output

230,000

236,379 hours

BBC Scotland:Commitment

ActualMaintain reach of Reporting Scotland

48%

48%

Maintain share of viewing to Reporting Scotland

30%

29%

Over 500 hours of television news and current affairs

500+

516 hours– including at least 100 hours of current affairs and political coverage100

153 hours

Hours of radio news and current affairs

2,200

2,225 hours

Hours of music and arts coverage on radio and television, in addition to
weekly specialist music strands on radio

270

432 hours

Hours of network programmes provided

200

282 hours

Spend on Gaelic television and online£2.1million£2.2million

Hours of schools output across television and radio

17

25 hours

Proportion of network children’s output provided by BBC Scotland

18%

18.5%

74

BBC Annual Report and Accounts 2005/2006

BBC Cymru Wales:

Commitment

ActualHours of news and current affairs on English language television including
Wales Today

500+

509 hours

Hours of news and current affairs on BBC Radio Wales

1,500+

1,552 hours

Hours of news and current affairs on BBC Radio Cymru

1,000

1,045 hours

Hours of news for S4C

180+

223 hours

Hours of coverage of the National Assembly’s proceedings for broadcast on S4C

500+

528 hours

Hours of output on BBC Radio Cymru, excluding news and current affairs

7,000+

7,074 hours

Hours on BBC Radio Wales, excluding news and current affairs

5,500

5,704 hours

Hours on television in English and Welsh

500

565 hours

Programmes made by the National Orchestra of Wales80+

93 programmes

Public concerts by the National Orchestra of Wales

50+

73 concerts

Hours of network programmes provided

125+

159 hours

Hours of Welsh language television delivered to S4C

520

531 hours– of which hours of original drama

90+

96 hours

BBC Northern Ireland:Commitment

ActualHours of news and current affairs on BBC Radio Ulster

1,550+

1,736 hours

Hours of news and current affairs on BBC Radio Foyle

380+

380 hours

Hours of news and current affairs on television

325

386 hours

Increase hours of factual programming for BBC One, with more single
documentaries covering a range of issues and subjects of interest to local audiences

100

104 hours

Hours of local television

640

635 hours

Hours of local radio

8,400+

8,809 hours

Increase the number of arts documentaries on television from 2004/2005 levels

2

2 arts documentaries

Hours of BBC Northern Ireland schools provision on radio and television

16

16 hours

BBC Annual Report and Accounts 2005/2006

75

Compliance

1 Fair trading
The Board of Governors has clear
Governors’ Fair Trading Compliance Committee (FTCC)
responsibilities under the BBC’s Charter
During the year the FTCC consisted of the following Governors
to ensure that the BBC behaves responsibly of the BBC: Anthony Salz (Chairman), Baroness Deech,
Professor Merfyn Jones and Professor Fabian Monds.
and follows all applicable regulation and
The key responsibilities of the FTCC during the year were to:codes of practice.
keep under review the BBC’s Fair Trading Commitment
keep under review the BBC’s Fair Trading Guidelines■ through the Governance Unit, appoint independent auditors
to test the extent to which the BBC has established, and applied,a system of internal controls which provide reasonable assurance
that it has complied with its Fair Trading Commitment■ consider reports from the independent auditors or otherindependent experts as appropriate, the Head of Fair Trading, theHead of Business Assurance and senior executives on mattersrelating to compliance with the BBC’s Fair Trading Commitment■ consider significant external challenges to the BBC’s compliancewith its Fair Trading Commitment■ consider the Governors’ and independent auditors’ annual reportand independent auditors’ opinion on fair trading■ consider the Governors’ annual report and independent auditors’
review in respect of the World Service Trading Protocols and the
BBC News/BBC World trading relationship■ report to the Board of Governors on the work of the Committee■■

The Governors must satisfy themselves thatthe BBC:■ complies with all legal obligations■ has an appropriate management structure■ maintains adequate controls to protect

its assets■ adheres to its own guidelines and codesof practiceOn the following pages the Board ofGovernors and, where appropriate, theindependent auditors report formallyon the BBC’s policies, procedures andcompliance as follows:
1 Fair trading
76
2 Financial statements
79
3 Risk and control processes
80
4 Other corporate governanceresponsibilities
84
5 Freedom of information
86
6 Donations and acknowledgements86
7 Governors’ remuneration report86
8 Programmes, channels and promotions 89
9 Cost of compliance91

During the year the FTCC implemented a number of reforms toincrease separation between the Governors and BBC management,
reflecting issues raised in the Government’s Green Paper on Charter
Review.These are discussed further under fair trading complaints.
Governors’ statement on fair trading
Commercial activities and fair trading
The BBC’s core purpose is to provide public service broadcasting
funded by the licence fee. Licence fee payers’ investments, built
up over many years, have produced a critical mass of talent andproduction capability for the BBC, together with an unparalleledarchive of past programming.These assets have a secondary value,
over and above their use on public service channels and outlets.
The BBC has a responsibility to ensure that this value is properly
developed commercially, and used to the benefit of licence fee payers.
In pursuing commercial activities, the BBC is, like otherorganisations, fully subject to both domestic and European
competition law. In addition to ensuring compliance with
European and UK competition law and European law on stateaid, and in recognition of its special position as a publicly fundedorganisation, the BBC voluntarily embraces other requirements
within its framework of fair trading.
Fair trading compliance procedures
The BBC’s fair trading obligations are embodied in its Fair Trading
Commitment, compliance with which is scrutinised throughout
the year by a standing committee of the Board of Governors,
the FTCC.This is underpinned by the Fair Trading Guidelines,
which provide a detailed operational framework that builds on
the principles of the Fair Trading Commitment. Although the
Fair Trading Guidelines include guidance on competition law,complaints which relate primarily to issues of competition law
or state aid may also be made directly to the relevant competition
authority.The Governors themselves are not a competition
authority and therefore have no standing to consider appeals
in relation to alleged breaches of competition law.

76

BBC Annual Report and Accounts 2005/2006

The Committee is advised by independent auditors commissioned
and managed by the Governance Unit. In addition, the Committee
consults the BBC’s Head of Fair Trading and Head of Business
Assurance, if necessary without the mediation of BBC management.
All trading subsidiaries and commercial operations report throughthe Head of Fair Trading to the Committee on their activities, andthe Committee requires staff with commercial responsibilities to be
trained in the BBC’s fair trading policies.
The management of the BBC’s fair trading arrangements isregularly tested by the British Standards Institute and thesearrangements have been accredited with the ISO 9001:2000
quality standard. The most recent assessment, conducted in
February 2006, confirmed that the procedures are continuing
to operate effectively.
By their nature, fair trading judgements are complex, reflecting
the constantly developing environment in which the media
industry operates.Through the FTCC, the BBC’s Governors
bring informed scrutiny and balanced judgements to bear on theimportant issues of policy that arise from the BBC’s engagement
in commercial ventures.
Following its 2003 response to the Richard Lambert Review of
BBC News 24 against the terms of its approval, the Governors
annually consider the relationship between BBC News and
BBC World.This includes a review by external auditors that themarginal cost principle is appropriately applied in dealings between
BBC News and BBC World.The Governors are satisfied that themarginal cost principle has been applied appropriately.
Annual Fair Trading Audit
The independent Fair Trading Auditors, commissioned by theGovernance Unit on behalf of the FTCC, conduct an annual Fair
Trading Audit to determine whether the BBC has established andapplied a system of internal controls which provide reasonableassurance that it has complied with the Fair Trading Commitment.
In conducting their audit, the auditors undertake a number ofactivities, including the following:■ meeting with fair trading representatives and other individuals
with significant fair trading roles in each division■ evaluating the fair trading system of internal controls that eachdivision has implemented■ reviewing and testing a sample of commercial activities enteredinto during the course of the year
■ testing the adequacy of processes to record and track fair trading
issues through to resolution/completion■ assessing and testing the adequacy of fair trading training
programmes within each division■ reporting their findings and conclusions to the FTCC
The auditors’ opinion based on their audit for the year ended
31 March 2006 is set out below.
Fair trading complaints
In May 2005 the Governors commissioned Spectrum Strategy
Consultants to provide independent advice on reform of thecomplaints and appeals process. In December 2005 the Governors
published their conclusions on a revised framework.
Amongst other recommendations the Governors proposed that
there should be a clear separation between the handling ofcomplaints and appeals. Under this revised framework the Headof Fair Trading is responsible for handling all fair trading complaints
made against the BBC.The Governors, through the FTCC, areresponsible for handling appeals.
Public guidance on the complaints and appeals process can befound at www.bbcgovernors.co.uk/docs/fairtrading.html.
The BBC dealt with external challenges in relation to ten
issues during the year. One of these issues is currently underconsideration by Ofcom. A further matter remains underconsideration by the European Commission. There was nobreach of the Fair Trading Commitment found in relation
to the remaining complaints, although one external party was
found to have been incorrectly advised by a BBC division in
one complaint. During the year the FTCC published quarterly
bulletins of the BBC’s response to any alleged breaches of
the Fair Trading Commitment. Details of all complaints areavailable from the Head of Fair Trading at BBC, Media Centre,
201 Wood Lane, London W12 7TQ, or online atbbc.co.uk/info/policies/fairtrading_complaints.
Events of the year
The Government’s White Paper on Charter Review and draft
Charter and Agreement were published on 14 March 2006.
Governors’ opinion
The Governors consider that the policies contained in the BBC’s
Fair Trading Commitment are consistent with the requirements of
the Royal Charter and the accompanying Agreement.Through the
FTCC, they have gained reasonable assurance that the systemof controls and procedures designed to ensure that these policies
are applied throughout the BBC has been operating effectively
throughout the year.
Independent Fair Trading Auditors’ report to the Governorsof the British Broadcasting Corporation (‘BBC’) for the year
ended 31 March 2006
We have examined, in our role as the BBC’s Fair Trading Auditors,
the system of internal controls established within the BBC toprovide the Governors with reasonable assurance that the BBC
has complied with its published Fair Trading Commitment for theyear ended 31 March 2006.
Our instructions for this examination, which included the scopeof work to be undertaken, were agreed with the Governors’
Fair Trading Compliance Committee. These instructions include
agreement that our examination should be conducted in accordancewith relevant Auditing Standards, agreement on the limit of ourliability in respect of this work, and agreement that our duty of carein respect of this work is solely to the BBC. We are satisfied thatthe agreed scope of our examination was sufficient to enable us
to express the opinion set out below.
Respective responsibilities of Governors, management and auditors
The Governors are responsible for ensuring that the BBC meets
all the requirements of competition law and trades fairly.They
have established the Fair Trading Commitment and determined
the objectives of the system of internal controls designed toensure compliance with this Commitment and to monitor theoutcomes of those controls.They are also responsible forpreparing the Governors’ Statement of Fair Trading Compliance,
as included in the BBC’s Annual Report and Accounts, which
includes a statement on fair trading.

BBC Annual Report and Accounts 2005/2006

77

Compliance

The BBC’s management is charged by the Governors with
operating a system of internal controls designed to ensurecompliance with the fair trading Commitment, including identifying
and assessing risks that could threaten fair trading and designingand implementing responses to such risks.
As the BBC’s Fair Trading Auditor, it is our responsibility to form an
independent view, based on our examination, as to the extent towhich the BBC has established, and applied, a system of internal
controls which provide reasonable assurance that it has compliedwith its Fair Trading Commitment during the year. We havereviewed specific decisions reached by the BBC on fair trading
issues only in so far as this is necessary to form an opinion on thesystem of internal controls. Our examination was not designed toexpress an opinion on the quality of the specific decisions taken by
the BBC with regards to fair trading. We have also reviewed
whether the Governors’ statement on fair trading reflects our
findings of the BBC’s compliance with its system of internal
controls, and we report if it does not.
This opinion has been prepared for and only for the BBC inaccordance with our instructions which were agreed with the
Director of Governance on behalf of the Governors’ Fair Trading
Compliance Committee. We do not, in giving this opinion, accept
or assume responsibility for any other purpose or to any otherperson to whom this report is shown or in to whose hands it may
come save where expressly agreed by our prior consent in writing.
Basis of audit opinion
We have carried out a programme of procedures and tests
designed to provide us with the assurance that we were seeking.
Our work consisted of enquiry and assessment to enable us toform a view as to whether an appropriate system of internal
controls was in place. We also reviewed the processing of asample of material transactions to provide us with reasonableassurance that the system of internal controls had been applied.
As with any system of control, however effective, it is notpracticable to ensure that no errors or irregularities have occurred
without being detected. Our audit work was therefore designed togive the Governors reasonable assurance, but not certainty, as tothe adequacy of the system of internal controls which were in place
and were being applied to deliver compliance with the Fair Trading
Commitment during the year. Further, because fair trading issues
require judgements which ultimately might be tested in a courtof law, competition authority or elsewhere, there is always a riskof challenge even where the system of internal controls has been
followed and decisions have been taken with the greatest care.
OpinionIn our opinion the BBC has established and has applied a system
of internal controls which provide reasonable assurance that it
has complied with its Fair Trading Commitment for the year ended
31 March 2006.

Governors’ report on BBC World Service Trading Protocols
BBC World Service is responsible for commissioning andscheduling its own programmes and for making programmes for
its language services, but purchases English language programme
making and technical and support services from other divisions of
the BBC (the Supplier Divisions). BBC World Service also receives
services from and supplies services to the BBC’s commercial
subsidiaries (the Subsidiaries).
It was agreed by a Joint Foreign and Commonwealth Office(FCO)/BBC World Service Working Group that the BBC would
draw up guidelines to govern the trading relationship between
BBC World Service and other parts of the BBC, in order toensure that BBC World Service maintains its distinctive voice andto preserve the clear separation between Grant-in-Aid and licence
fee income.These Trading Protocols were approved by theGovernors’ Fair Trading Compliance Committee (FTCC) in 1997.
Each of the Supplier Divisions then drew up detailed agreementswith BBC World Service, specifying:■ the services to be provided■ criteria to ensure the quality of the services■ the cost of the services
The FTCC is responsible for monitoring and reviewing compliancewith the Trading Protocols.The FTCC receives reports frommanagement on the effectiveness of the systems and proceduresin place to ensure compliance with the Trading Protocols.
KPMG LLP (the external auditors) have received a summaryof the value of transactions and the related cash flows which havetaken place during the year between BBC World Service and theSupplier Divisions and Subsidiaries. KPMG LLP have reported to
the Governors that, in their opinion, the information contained in
the summary of transactions for the year ended 31 March 2006
has been accurately extracted from the books and records of
BBC World Service and the Supplier Divisions and Subsidiaries,
and has been properly prepared on the basis of cost allocation
and apportionment methods set out in the agreements between
BBC World Service and Supplier Divisions and Subsidiaries and,on this basis, there has been no material cross-subsidy between
Grant-in-Aid and licence fee funds or between Grant-in-Aid andthe BBC’s commercial subsidiaries.
Governors’ statement on BBC World Service Trading Protocols
Following reports to the FTCC by the Head of Fair Trading andby internal and external auditors, the Governors are satisfied that:■ the Trading Protocols reflect the requirements of the FCO/BBCWorld Service Working Group■ agreements are in place which are consistent with the Trading
Protocols■ there has been no material cross-subsidy between Grant-in-Aid
and licence fee funds or between Grant-in-Aid and the BBC’scommercial subsidiaries

PricewaterhouseCoopers LLP
Chartered Accountants
London9 June 2006

78

BBC Annual Report and Accounts 2005/2006

2 Financial statements
Statement of Board of Governors’ and Executive Board’s
responsibilities for the preparation of the financial statements
The Governors and Executive Board are required by the BBC’s
Charter to prepare financial statements for each financial year
which give a true and fair view of the state of affairs of the BBC
and of the income and expenditure for that period.They haveelected to prepare the financial statements in accordance with
UK Accounting Standards. In preparing those financial statements,
the Governors and Executive Board have undertaken to:■ select suitable accounting policies and then apply them consistently■ make judgements and estimates that are reasonable and prudent■ state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed andexplained in the financial statements■ prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the BBC will continue in businessIn addition, the Governors and Executive Board have voluntarily
decided to comply with the accounting and disclosure provisionsof the Companies Act 1985 and, where applicable, of the Financial
Services Authority Listing Rules.
The Governors and Executive Board are responsible for keeping
proper accounting records that disclose with reasonable accuracy
at any time the financial position of the BBC and enable them toensure that its financial statements comply with the Companies
Act 1985 as if that Act had applied to these financial statements.
They have general responsibility for taking such steps as arereasonably open to them to safeguard the assets of the company
and to prevent and detect fraud and other irregularities.
The Governors and Executive Board are responsible forthe maintenance and integrity of the corporate and financial
information included on the BBC’s website. Legislation in the
UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Statement of disclosure of information
The Governors and the Executive Board members who held officeat the date of approval of this Annual Report and Accounts confirm
that, so far as they are each aware, there is no relevant audit
information of which the BBC’s auditors are unaware; and each
Governor and Executive Board member has taken all the steps thatthey ought to have taken as a Governor or Executive Board member
to make themselves aware of any relevant audit information andto establish that the BBC’s auditors are aware of that information.
This statement was approved by the Executive Board on
6 June 2006 and by the Board of Governors on 14 June 2006
and signed on their behalf by:

Mark Thompson Director-General

Michael Grade Chairman

Independent Auditor’s report to the Governors of the British
Broadcasting Corporation (BBC)We have audited the group and UK Public Service Broadcasting
financial statements (the ‘financial statements’) of the BBC for
the year ended 31 March 2006, which comprise the Group Income
and Expenditure Account, the Group and UK Public Service
Broadcasting Balance Sheets, the Group Cash Flow Statement, theGroup Statement of Total Recognised Gains and Losses and therelated notes (pages 95 to 139).These financial statements havebeen prepared under the accounting policies set out therein.
In addition to our audit of the financial statements, the Governors
have engaged us to audit the information in the Governors’
Remuneration Report that is described as having been audited,which the Governors have prepared as if the BBC were a listedcompany and which is thus compliant with part 3 of Schedule 7A
to the Companies Act 1985.
This report is made solely to the BBC’s Governors, as a body,in accordance with the Royal Charter for the continuance of the
BBC which came into force on 1 May 1996 (‘the Charter’) andin accordance with the terms of our engagement. Our audit
work has been undertaken so that we might state to the BBC’s
Governors those matters we are required to state to them in anauditor’s report and for no other purpose.To the fullest extent
permitted by law, we do not accept or assume responsibility toanyone other than the BBC and the BBC’s Governors as a body, for
our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Governors and Executive Board
and Auditors
The Governors and Executive Board are responsible for preparing
the Annual Report, the Governors’ Remuneration Report and thefinancial statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) as set out in the Statement ofGovernors’ and Executive Board’s Responsibilities. Our responsibility,in accordance with the terms of our appointment, is to audit thefinancial statements and the part of the Governors’ Remuneration
Report to be audited in accordance with relevant legal andregulatory requirements and International Standards on Auditing(UK and Ireland) and the Charter.
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements andthe part of the Governors’ Remuneration Report to be audited havebeen properly prepared in accordance with the Companies Act 1985
as if that Act had been applied to these financial statements.We also
report to you if, in our opinion, the BBC has not kept properaccounting records, if we have not received all the information andexplanations we require for our audit, or if information specified bylaw regarding Governors’ and Executive Board remuneration andother transactions is not disclosed.
In addition to our audit of the financial statements, the Governors
have engaged us to review their Corporate Governance Statement
as if the BBC were required to comply with the Listing Rules of the
Financial Services Authority in relation to these matters. We review
whether the Corporate Governance Statement on pages 80 to 84
reflects the BBC’s compliance with the nine provisions of the 2003
Financial Reporting Council Combined Code specified for our
review by the Listing Rules of the Financial Services Authority, andwe report if it does not.We are not required to consider whether

BBC Annual Report and Accounts 2005/2006

79Compliance

the Governors’ statements on internal control cover all risks andcontrols, or form an opinion on the effectiveness of the BBC’s
corporate governance procedures or its risk and control procedures.
We read other information contained in the Annual Report,
and consider whether it is consistent with the audited financial
statements.This information includes the Chairman’s statementon pages 2 to 3, the Director-General’s report on pages 4 to 5,
the Governors’ review of services on pages 24 to 59, the Financial
review on pages 92 to 94, the Corporate Governance Statement
and the unaudited part of the Governors’ Remuneration Report.
We consider the implications for our report if we become awareof any apparent misstatements or material inconsistencies with thefinancial statements. Our responsibilities do not extend to any
other information.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, ofevidence relevant to the amounts and disclosures in the financial
statements and the part of the Governors’ Remuneration Report
to be audited. It also includes an assessment of the significant
estimates and judgements made by the Governors and Executive
Board in the preparation of the financial statements, and ofwhether the accounting policies are appropriate to the Group’sand UK Public Service Broadcasting’s circumstances, consistently
applied and adequately disclosed.

3 Risk and control processes
BBC corporate governance framework
The Board of Governors are appointed as trustees for the public
interest to ensure that the BBC is properly accountable to Parliamentand licence fee payers. Part of this role requires the Board ofGovernors to satisfy themselves that the BBC is applying the highest
standards of corporate governance.To this end the BBC voluntarily
complies with the 2003 FRC Code to the extent it is applicable.
The BBC has complied throughout the year ended 31 March 2006
with the 2003 FRC Code, except as noted below.
Overall, the requirements of the 2003 FRC Code apply to the
BBC with three exceptions. First, those requirements relating to
the appointment of non-executive directors are inapplicable as
the Governors are appointed by the Queen in Council and theirremuneration is set by the Secretary of State for Culture, Mediaand Sport. Second, those requirements relating to shareholders
can only be applied to the licence fee paying public, rather thanshareholders through the stewardship of the Board of Governors.
Third, the BBC has not complied with section 2.4 of the Smith
Guidelines within the 2003 FRC Code which states that the
Chairman should not be a member of the Remuneration
Committee (on the basis that a chairman is not independent). All
BBC Governors are independent of management and therefore
the Governors determine that the Chairman is independent forthe purposes of setting the remuneration of the Executive Board.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonableassurance that the financial statements and the part of theGovernors’ Remuneration Report to be audited are free frommaterial misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluatedthe overall adequacy of the presentation of information in thefinancial statements and the part of the Governors’
Remuneration Report to be audited.

The BBC does not have a standing nominations committee.
However, a nominations committee was established in 2004 to
assist in the appointment of a new Director-General. As noted
above, the Governors are appointed by the Queen in Council.

OpinionIn our opinion:■ the financial statements give a true and fair view, in accordancewith United Kingdom Generally Accepted Accounting Practice,of the state of the Group’s and UK Public Service Broadcasting’s
affairs as at 31 March 2006 and of the Group’s surplus for theyear then ended; and■ the financial statements and the part of the Governors’
Remuneration Report which we have been engaged to audit
have been properly prepared in accordance with the provisionsof the Charter and the Companies Act 1985 as if that Act had
applied to these financial statements.

Board structure
The Governors are the members of the Corporation and act astrustees for the public interest, while the Executive Board takes
responsibility for day-to-day operations. More information on how
the BBC is run can be found on pages 6 to 9. Details of the Boardof Governors and the Executive Board members are summarisedon pages 10 to 13. A register of interests for both the Boardof Governors and Executive Board is maintained.The Board ofGovernors’ register is available online at www.bbcgovernors.co.uk.
The Executive Board’s register may be inspected by written
application to the Director, BBC People, MC2 B4 Media Centre,
201 Wood Lane, London W12 7TQ.

KPMG LLP
Chartered Accountants
Registered Auditor, London

In 2004/2005, the Board of Governors undertook a formal
evaluation of its effectiveness, conducted by independent specialists
in corporate governance. During 2005/2006, the Board asked theGovernance Unit to review progress in key aspects of the Board’s
activities, including its committees, relationships, accountability,
information flows and decision-making processes. An action plan
was agreed by the Board in June 2005 and a progress reportpresented to the meeting of the Board in May 2006. Given thesignificant changes involved in the forthcoming transition from theBoard of Governors to the BBC Trust, the Board determined that

14 June 2006

80

The BBC follows the seven principles of public life set out in the
Nolan Committee reports on Standards in Public Life.
How the BBC has applied the remuneration principles is detailed
within the remuneration report on pages 86 to 89.

BBC Annual Report and Accounts 2005/2006

it was not good value for money to undertake an externallyfacilitated Board evaluation this year.

Executive Board attendance
The attendance record of individual Executive Board members is
detailed below.

The Board meets monthly (except August), usually over two days,
and the minutes of the meetings have been made available since
the June 2005 meeting online at www.bbcgovernors.co.uk.
The Board of Governors refer some matters to subcommittees.
The main responsibilities of these subcommittees are explained
elsewhere in this Annual Report and Accounts:■ Governors’ Fair Trading Compliance Committee (page 76)■ Governors’ Audit Committee (page 83)■ Governors’ Finance and General Purposes Committee (page 84)■ Governors’ Remuneration Committee (page 86)■ Governors’ Programme Complaints Committee (page 89)■ Governors’ Property Committee (disbanded May 2005) (page 84)
The terms of reference of these committees are available atwww.bbcgovernors.co.uk.
The attendance record of individual Governors at full Board andsubcommittee meetings is detailed below:
Programme Fair Trading
Board of Complaints Compliance
Audit Remuneration
Property
Governors Committee Committee Committee
Committee Committee

Number ofmeetings in the year

11

Michael Grade
11/11
Anthony Salz
10/11
Deborah Bull
11/11
8/8
Sir Andrew Burns1
Baroness Deech
9/11
Dermot Gleeson
11/11
Professor Merfyn Jones 11/11
Professor Fabian Monds 11/11
Jeremy Peat
11/11
Angela Sarkis
8/11
Ranjit Sondhi
11/11
Richard Tait
11/11

11

4

6

4/4
9/11
4/4
11/11
11/11

4/4
6/6
5/6

Finance andGeneralPurposesCommittee

6

1

11

6/6
6/6
6/6

1/1

11/11
9/11

1/1

11/11

4/4
4/4
6/6

9/11

7/11
11/11

1

Appointed 1 July 2005

As well as formal Board meetings and subcommittee meetings,
Governors have been involved in a range of activities across theyear, including performance monitoring meetings, work with BBC
advisory bodies, hosting public meetings, and attendance before
Parliamentary committees.
BBC Governance Unit
The BBC’s Governance Unit is a specialised unit providing discrete
professional advice to support the work of the Board of Governors.
The Governance Unit is separate from the management of the
Executive Board in terms of both reporting lines and management.
The unit is structured around the key areas which support theGovernors’ roles on performance, compliance and value for money
work, and accountability. More information on the Governance
Unit and its activities can be found on page 8.

Number of meetings
attended within the period
Number ofmeetings for the period

11Mark Thompson
Mark Byford
Jenny Abramsky
Jana Bennett
Stephen Dando
Tim Davie (started April 2005)
Ashley Highfield
Zarin PatelJohn Smith
Caroline Thomson

11
10
10
8
11
10
10
10
9
10

Accountability and internal control
The Board of Governors is ultimately responsible for the properuse of public money, while the Executive Board is responsible formaintaining an adequate system of internal control and for reviewing
its effectiveness.The respective responsibilities of the Board ofGovernors and Executive Board and the external auditors are setout on page 79. In addition to the reviews of internal controls carriedout by the BBC’s Internal Audit function, the BBC Governors appoint
external specialists and advisers to undertake further work toprovide assurance over the operation of internal controls as required.
The system of controls is designed to manage rather thaneliminate the risk of failure to achieve business objectives andcan provide only reasonable, and not absolute, assurance againstmaterial misstatement or loss.
The Board of Governors and Executive Board have reviewed theprocess for identifying, evaluating and managing significant risks
faced by the BBC.The process has been subject to ongoing
consideration by the Executive Board and developed in line with
their recommendations during the year. A process for managing
significant risks to the BBC has been in place for the year ended
31 March 2006 and up to the date of approval of this BBC Annual
Report and Accounts and accords with the Turnbull guidance.
Financial reporting and going concern
A review of the financial position of the BBC is included on pages
92 to 94.The going concern basis has been adopted in the
preparation of the financial statements as the Board of Governors
and the Executive Board believe that the BBC has adequate
resources to continue its operations for the foreseeable future.
Control environment
The key aspects of the control environment operating throughout
the year are described below.
■ Risk identification and management
The BBC’s framework for the management of risk is subject tocontinuous development as management assesses risks in relation
to the delivery of the BBC’s objectives.

The Director of each division has a clear responsibility for theidentification and management of risks facing their business. Eachdivision identifies and assesses the key business risks which may havean impact on the accomplishment of its strategic objectives.The risks
identified, and the actions planned in response, are documented ina risk register in each division and are reviewed by divisional boards.
BBC Annual Report and Accounts 2005/2006

81Compliance

The overall management of risk within the BBC is considered tobe most effectively managed through the engagement of the entire
Executive Board. For that reason, risk management is not delegatedto a subcommittee. The Executive Board receives assessmentsof the management of each of the top BBC risks: this includes
the controls and further actions required to manage those risks
effectively. The overall assessments are augmented by periodic
reports on certain top risks as required by the Executive Direction
Group.The BBC’s wide-ranging and ambitious change programme,for example, presents a significant opportunity and risk for the BBC.
The change risks are monitored in accordance with the BBC’s
over-arching risk management strategy and are reviewed by the
Executive Direction Group on a quarterly basis.

Continuity Unit, providing guidance and advice for business as
usual, projects, new investments and initiatives. Working withnominated representatives from each division, this unit coordinates
the corporate BCM arrangements and systems within the BBC
and with external agencies, as well as a comprehensive rehearsal
and exercise programme. Responsibility for the activation andcoordination of the BBC’s corporate emergency response
arrangements rests with this unit.

The Board of Governors also has some oversight of the managementof risk through the work of its subcommittees.The process for
managing risks is reported to the Audit Committee during the year.
The Finance and General Purposes Committee receives a report on
key risks from the Director-General at each meeting.

■Internal Audit
The BBC has an Internal Audit department which is a core partof the Business Assurance function. Internal Audit’s authority, andits independence, is assured from its joint independent reporting
relationship to the Audit Committee, the Fair Trading andCompliance Committee, and the Director-General.The scopeof Internal Audit includes the examination and evaluation of theadequacy and effectiveness of the BBC’s systems of internal
control.The work programme of Internal Audit extends
throughout all activities of the BBC and includes the exerciseof the BBC’s right of audit over external parties including
independent production companies.

■

Internal Audit undertakes regular testing of control systems andcore business processes under a plan agreed annually with the
Audit Committee.The audit plan is based on a continuing
assessment of key risks, monitoring compliance of key systems
and processes, and considering value for money to the licence fee
payer.The results of testing are reported at each meeting of the
Audit Committee, which scrutinises the operation of the BBC’sinternal controls over these risks throughout the year.
Divisional controls
The divisions’ management have responsibility for ensuring thatexisting controls and procedures are followed. Key controls overmajor business risks include maintaining and regularly updating risk
registers, monthly management reporting, exercise of budgetarycontrols, performance review and exception reporting. Reviews byInternal Audit monitor the operation of divisional and subsidiary
controls, to ensure that they are consistently applied and, as aminimum, meet the BBC-wide control policy.

■

Business and broadcast continuity
Business Continuity Management (BCM) in the BBC aims toprotect the BBC’s people, systems and infrastructure; to identify
and mitigate, to an acceptable level, risks to the BBC’s programmes
and services; and to manage any disruption to minimise the effects.

■

The Business Continuity framework and arrangements makeprovision for a consistent system of BCM across the BBC, withclear executive sponsorship, and each divisional Director owning
responsibility for BCM in their specific division.The BBC’s BCM
policy and organisation is developed by a small central Business82

In the last year, the BBC’s corporate emergency response
arrangements were activated successfully on four occasions: industrial
action in May, the two London bomb emergencies in July, and theevacuation of Birmingham on 9 July.
Controls over outsourced functions
Outsourcing of BBC business services has increased over the
past year.The outsourcing of key services presents a significant
change to the BBC’s risk profile and risk is not necessarily
outsourced with these services. It is therefore important thatthe BBC has appropriate processes in place to manage theserisks and to ensure continuity of ongoing business operations.
During the year, Internal Audit has begun a structured programmeof assurance work in relation to the BBC’s most significant
outsourced contracts.
The majority of the BBC’s finance transaction processing is
outsourced to a service company, Media Accounting Services
Limited (Medas), a wholly-owned subsidiary of EDS which is
independent of the BBC.The work programme of BBC Internal
Audit includes reviews of activity in Medas.The collection of thelicence fee is outsourced to Capita Business Services Limited.The
BBC monitors the provisions that Capita Business Services Limited
has put in place to ensure the collection of the licence fee in theevent of business interruption. Safeguards are in place to ensure
the integrity of the BBC’s transaction processing and collection
data and to provide alternative methods in the event of a failureof the core processes.
Financial reporting and business performance
Individual divisions are responsible for ensuring compliance with
the BBC’s financial reporting systems and policies.The BBC has
a comprehensive system for reporting financial results and businessperformance. During the year each division prepares monthly
reports and accounts.These results are reviewed locally and are
scrutinised by Group Financial Control.The consolidated resultsof the BBC are reviewed at the Executive Board’s Executive Direction
Group and Board of Governors’ meetings each month.

■

Each financial year the divisions prepare detailed budgets for thefollowing financial year and update long-term plans.The annual
budget of each division is reviewed by the Director-General and
the Group Finance Director.The overall BBC budget is submitted
by the Director-General and the Executive Board to the Boardof Governors for approval.The performance of each division is
subject to monthly monitoring, and at the end of every year eachdivision is subject to a rigorous performance review verifying how
effectively it met its objectives.
Future FinanceIn the last financial year the Director-General and the Executive
Direction Group have engaged in a comprehensive programmeof change with the ambition of creating a BBC that is Creative,
Digital, Simple and Open. As part of this programme, the BBC’s■

BBC Annual Report and Accounts 2005/2006

Finance division has a substantial savings target. Future Finance,a programme of work established to meet this target, will help
simplify and standardise business processes.
Fraud awareness
The BBC takes very seriously its responsibilities to minimise therisk of fraud and the consequential loss to the licence fee payer.
The BBC has a clear fraud policy which clarifies responsibilities for
ensuring that the appropriate controls are in place to minimise therisk of fraudulent activity and to ensure that all suspected incidents
of fraud are thoroughly investigated.The policy is managed by theAnti-Fraud Group which reports to the Audit Committee andto the Executive Board.

■

As in previous years, a series of anti-fraud workshops have been
undertaken across the BBC to identify key fraud risks and topromote fraud awareness.The programme of workshops is acontinuing core element in the BBC’s anti-fraud strategy.
■ Whistle-blowing
The BBC has a ‘whistle-blowing’ or ‘protected disclosure’ policy.The
policy facilitates the anonymous communication to the BBC of any
incident in which there is a suspicion that there has been a breachof the BBC’s codes.The process is administered by an independent
external company to ensure anonymity. Each reported incident
is notified to the Head of Business Assurance, who ensures thatevery incident is investigated, a response communicated and action
taken as appropriate.

Governors’ Audit Committee
During the year the Audit Committee consisted of the following
Governors: Jeremy Peat (Chairman), Baroness Deech, Dermot
Gleeson and Sir Andrew Burns (from July 2005).
The Audit Committee complies with the recommendations of
the Smith Report with at least one member having significant,recent and relevant financial experience. Jeremy Peat is themember with that experience. The Committee augments thebroad range of skills of its four members with regular financial
training and advice from financial professionals within the
Governance Unit (see page 8) and from external advisers,
ensuring that the Committee is kept abreast of recent andrelevant financial developments.
The Audit Committee has written terms of reference. Its principalrole is to review:■ the effectiveness of the systems of internal control, including
consideration of the reports from both management and internal
auditors on significant risks to the organisation and the controls
exercised over those risks■ the BBC’s financial statements, including accounting policies,
compliance with legal and regulatory requirements, and thefindings of the external and internal auditors■ the BBC’s relationship with the external auditors, including their
engagement, the scope of and approach to their work, their fees,
their effectiveness and their independence, including theobservance of the policy relating to the engagement of theexternal auditors in non-audit work
■ the activities and plan of work and the effectiveness of Internal Audit■ the programme of Value for Money reviews commissionedby the Audit Committee from the National Audit Office (NAO)
and other external agencies with the objective of ensuring value
to the licence fee payer

The Audit Committee met six times during the year.The meetings
are usually attended by the Director-General, the Group FinanceDirector, the Head of Business Assurance (also Head of Internal
Audit) and representatives from the external auditors. The
Committee meets regularly with the external auditors without
any member of management present.The Chairman of the Audit
Committee meets routinely with the Head of Business Assurance,alone or with the external auditors, but without management.
The Audit Committee is advised by the Governance Unit andhas access to independent professional advice as required.
In addition to the review of the reports of the internal auditors
relating to the operation of the controls over risks to the organisation,
the Committee has reviewed reports from external agencies, including
the NAO, on Value for Money studies in specific areas.The PwC
review on BBC People: Human Resources Operations was laid,
together with the BBC response, before Parliament in April 2006.
The NAO reviews on The BBC’s Definition of Overheads and
BBC Outsourcing, together with the response, will be laid before
Parliament with the BBC’s Annual Report and Accounts in July 2006.
In considering legal and regulatory requirements, the Audit
Committee has reviewed developments, including receiving
presentations from management and the Governance Unit, on theimpact of proposed changes in accounting and reporting standards.
The Chairman of the Audit Committee reports to the full Boardof Governors after each meeting of the Committee.
Independence of external auditors
The BBC complies with the guidance governing the conductof external audit set out in the 2003 FRC Code.The external
auditors appointed by the BBC are KPMG LLP as auditors of
the financial statements, and PricewaterhouseCoopers LLP as thefair trading auditors (see pages 76 to 78).The Audit Committee,
FTCC, PricewaterhouseCoopers LLP and KPMG LLP themselves
all have safeguards in place to avoid the possibility of the auditors’
objectivity and independence being compromised.
The Audit Committee regularly reviews the independence of its
external auditors.The Audit Committee holds discussions with theexternal auditors without management being present.The Audit
Committee reviews the level of non-audit fees paid to KPMG LLP.
Any significant consulting work is put out to competitive tender.
Recruitment from KPMG LLP into any senior management
position in the BBC requires the prior approval of the Audit
Committee.The BBC’s policies in relation to services procured
from the external auditors are:■ non-audit services, above a £50,000 threshold, proposed to becommissioned from the external auditors must be notified to,
and approved by, the Audit Committee■ above an established de minimis level the planned work mustbe submitted to competitive tender and, in the event that theexternal auditors are to be awarded the contract, the priorapproval of the Audit Committee must be obtained■ the external auditors are specifically excluded from being
considered for certain types of work where the effect could
be perceived to prejudice their ability to express an independentand objective opinion
Governors’ Finance and General Purposes Committee (FGPC)The Finance and General Purposes Committee was establishedby the Board in April 2005.The Committee consists of the

BBC Annual Report and Accounts 2005/2006

83Compliancefollowing Governors: Dermot Gleeson (as Chairman), Michael
Grade, Jeremy Peat and Anthony Salz. Its purpose is to consider
and review significant financial, strategic, investment and propertyrelated issues and make recommendations to the Board.
The key responsibilities of the Committee are to:■ scrutinise and make recommendations to the Board on theannual budget■ review investment cases prior to them being considered by thefull Board■ review progress against major projects and strategies, including
property■ scrutinise proposals from BBC management where priorconsideration may assist the deliberation of the Board
Governors’ Property Committee
The Governors’ Property Committee was disbanded in May 2005
and its responsibilities assumed by the new FGPC.The FGPC hascontinued to scrutinise the progress of the Broadcasting House
project throughout the year. The Audit Committee remains theauthority by which the Corporation determines satisfactorycompliance with internal and external controls, including forproperty projects. At its meeting in May, the Property Committee
consisted of the following Governors: Dermot Gleeson (Chairman)
and Michael Grade, with two vacancies.
Governance arrangements for commercial subsidiaries
During the year under review, in preparation for the new Royal
Charter, the Governors agreed new governance structures for
the BBC’s commercial subsidiaries.
BBC Commercial Holdings Limited, a wholly-owned subsidiaryof the BBC, now coordinates and manages the activity andfinancing needs of BBC Resources Limited and BBC World
Limited. An independent non-executive Chairman was appointed
to the board of BBC Commercial Holdings Limited during
the year. The BBC’s public service aims are enshrined in thecompany’s Memorandum of Association, and many of its powers,
including the power to appoint directors, are exercisable subject
to prior approval of the Board of Governors.
The Board of Commercial Holdings Limited Audit Committee(CHAC) has a responsibility to consider all Audit Committee
papers relating to the commercial subsidiaries.The CHAC
members are independent of the operational management of
the commercial businesses. Matters of significance will also betaken and discussed by the Governors’ Audit Committee, referralof which is determined by the Chair of CHAC and overseen by
the Head of Business Assurance.The objective of the CHAC isto ensure that the BBC commercial subsidiaries meet the highest
standards of corporate governance, particularly with respect tointernal control and risk management, and operate within theframework of the Governors’ Audit Committee.The Chair of
CHAC reports to the Governors’ Audit Committee on theactivities of the CHAC.
BBC Worldwide Limited is the main commercial subsidiaryof the BBC. Its activities are described on page 59. During theyear, an independent non-executive Chairman was appointed.The
Chairman leads the board of directors, ensuring that each director
is able to make an effective contribution. In addition, three senior
executives from the BBC’s Public Service were appointed as nonexecutive directors.These non-executive directors ensure that the84

views of the BBC, the ultimate parent of BBC Worldwide Limited,
are taken into account in the decision-making of the board.
Events of the year
Post 31 March 2005, the BBC learned that certain events staged on
BBC premises had not complied with requirements of the Licensing
Act 2003 (effective November 2005) in regard to performances infront of public audiences.The BBC took immediate steps to ensurecompliance with the Act.

4 Other corporate governance responsibilities
Human resources and internal communication
The BBC’s human resources division, BBC People, continues todrive the human resources agenda across the organisation. As partof a programme of efficiencies, BBC People is in the process of
introducing a new business model and has significantly reduced
headcount through the outsourcing of a number of services anda programme of voluntary redundancies.
Regular meetings are held by management with the recognised
unions: BECTU (Broadcasting Entertainment Cinematograph and
Theatre Union), NUJ (National Union of Journalists) and AMICUS.
Internal communication plays a key role in the BBC’s transformationplans.The annual staff survey, conducted by MORI in November
2005, showed that the BBC has further work to do to communicate
a clear vision and plan, facilitate better collaboration and teamwork
across divisions and to get the best out of employees.
During the year the internal communications function has beenrevamped and a pan BBC communications strategy is being
developed. An internal survey in May 2006 showed a significant
increase in support for the way the BBC is responding to change,
understanding of individual contribution to change, and being wellinformed about the BBC’s vision for the future.
Occupational risk management
Context of BBC policy on health and safety
The BBC’s occupational risk management framework incorporates
three policies; health and safety, environment, management
and security.
Overall goal of policy on health and safety
Our overall goal is to provide and maintain a safe and healthy
environment for our employees, the people we work with andthose who visit us.The ways in which this is achieved include:
effective identification of risk; setting and review of health andsafety targets; measurement and continual improvement of healthand safety performance; compliance with legislation, and effective
cooperation with competent third parties.
Significant risks and action to control them
Our employees face a very broad range of potential hazards.
As well as those connected with familiar aspects of a UK-based
environment, including stress, manual handling and driving, there
are events (which are attended by tens of thousands of membersof the public) and major procurement initiatives (which introduce
the problem of ensuring that risks overseen by third parties aremanaged effectively).
A new set of procedures and arrangements to help deal with the
problem of stress has been developed and agreed with our trades
unions.Training for managers has been implemented as part of

BBC Annual Report and Accounts 2005/2006

by July 2006, to update corporate standards and guidelines forthe effective management of driving risks and to demonstrate
implementation by April 2008

the leadership training programme and training for individual
members of staff has been designed which will complement thatgiven to managers.

■

Occupational Risk Management and the Live Events team havebuilt on, and improved, the existing guidance for those organising
live events.They have, for example, given clearer advice about
establishing the roles of different parties at an event, developing
clear lines of responsibility, ensuring that contractors are selected
and managed effectively, and the need to monitor the
implementation of safety arrangements.

Action to achieve goals and targets
The Corporate Occupational Risk Management programme
has been developing the safety management system to meetthe requirements of the BSI occupational health and safetyassessment series specification 18001 (OHSAS 18001). Model risk
assessments have been developed to assist programme makers inestablishing risk control on productions, and the BBC is creating a
new accident reporting system which will allow all staff to record
accidents online and enable more effective investigation of root
causes of accidents. Safety responsibilities have been described forall staff and a wide range of performance measures have been
identified. Arrangements for monitoring major procurements were
integral to the procurement process and those for other major
suppliers have been reviewed and revised. A list of pre-vetted
suppliers of high-risk production services has been prepared andpublished. Further improvements to controlling occupational risk inthe procurement of goods and other services are being developed.

However, many in the BBC face more unusual challenges. In the
UK there were riots in Birmingham and Belfast, and serious
disorder at the G8 Summit.There were the bombings in London
on 7 July, and the oil depot explosion and fire at Buncefield.
Overseas, our News and Current Affairs teams covered theconflicts in Iraq and Afghanistan, Darfur, Chechnya, and Israel andthe Occupied Territories; they also covered disasters such as the
Asian earthquake and Hurricane Katrina, as well as other difficult
stories such as the avian flu outbreaks.
For the Planet Earth series, the Natural History Unit filmed in
the world’s most challenging environments, some of which werealso politically unstable. Many months of preparation went into
identifying the hazards that the team would face and how these
could be overcome through training, equipment and contingency
planning, so that the team could capture safely the breathtaking
images that have delighted our audiences.
Our well-established guidelines have been revised to coverhigh-risk programme making activities wherever they takeplace and now include undercover investigations and covert
filming; armed sieges; riots; chemical, biological or radiologicalincidents; natural disasters, and outbreaks of serious diseases
or pandemics. Safety equipment supplied to staff has included
everything from Wellington boots to lightweight body armour.
Teams can be supplied with emergency satellite telephones andtracking devices.
Health and safety targets and objectives
In September 2005 the Management Committee for Occupational
Risk Compliance (MCORC) expanded on the BBC’s previous
health and safety targets and objectives and agreed that by 2010
the BBC would aim to reduce (from the position measured in theyear 2000):■ the number of working days lost per 100,000 from work-related
injury and ill health by 30%■ the incidence rate of reportable accidents by 60%■ the incidence rate of cases of work-related ill health by 20%
The MCORC agreed the following strategic objectives to help
achieve these targets:■ by November 2007, to have demonstrated implementation of
an integrated system to manage health, safety and security risks
across the BBC■ by April 2007, to establish measuring and monitoringarrangements with assigned responsibilities, for all major third
parties undertaking BBC business to ensure compliance withlegal and BBC requirements■ by July 2006, to update corporate standards and guidelines
for the effective management of manual handling risks andto demonstrate implementation by April 2008

Performance and progress against targets
The number of injuries reportable to the Health and Safety
Executive (HSE) has been reduced from 62 in the year
2000/2001 to 37 in 2005/2006 (38 in 2004/2005).The incident
rate fell in the same period from 277 per 100,000 full-time staff
to 159 per 100,000 (140 in 2004/2005).
■ The incidence rate of suspected cases of work-related ill healthhas been reduced from 23 per thousand in 2000/2001 to 16.9
in 2005/2006, a reduction of over 25% (16.3 in 2004/2005).
The main reasons for suspected work-related ill health havebeen attributed to stress, upper limb disorders and othermusculoskeletal problems.
■ There were 113,607 reported absence days through all causes,
equivalent to a rate of 2.23% of full-time staff.The cost of thislost time is estimated at about £13.8million (based on averagesalary costs).
■ There were no fatalities during 2005/2006 (two in 2004/2005).
■

Enforcement
The BBC is in regular contact with enforcing authorities
nationally and locally on health, safety and environmental issues.
No enforcement action has been taken. The Executive Board
receives a monthly report which includes a summary of contact
with the enforcing authorities, reportable accidents and othersignificant safety issues.
Arrangements for consulting with employees
The BBC has carried out an initiative to revitalise health andsafety consultation, with the emphasis on local consultation withstaff.The initiative has resulted in a clearer accreditation process
for representatives and better information sharing.The National
Joint Council for Health and Safety includes senior managers andsafety representatives: it provides a forum for the discussion ofstrategic issues and helps speed the development of national
health and safety initiatives. Where there are no accredited safety
representatives, arrangements have been put in place to consult
staff through the regular system of team briefings.
The BBC is represented on national forums which seek toimprove safety standards in broadcasting and in other areas ofindustry and through which best practice is both identified and

BBC Annual Report and Accounts 2005/2006

85

Compliancepromulgated. We continue to be a member of the Broadcasting
Joint Advisory Committee and Broadcast Industry Safety Group.
Because of the major redevelopment of our building stock,
including White City, Pacific Quay and Broadcasting House,
we have been an active member of the Construction ClientsFederation.The BBC has also been asked to be a member of a
new HSE-sponsored working group to develop guidance on therevised Construction, Design and Management regulations.
Nature and effectiveness of training programme
The BBC recorded training given to over 11,000 people on safetyissues, and many people receive specialist training in addition tothis. More staff are undertaking special training in preparation forwork in high-risk environments. In 2004/2005 the BBC had a fleetof 1,600 vehicles and there were 1,187 insurance claims related
to these (an incident rate of 74%), costing a total of £840,000.
In 2005/2006 the incident rate was 66%, with the cost of incidents
being £667,000. An initiative to reduce the value of insurance
claims is partially met by a driver training programme. This istargeted at parts of the business where driving is an operational
requirement. The BBC expects that there should be a direct
relationship between the number of injury accidents and thevalue of claims, although market research suggests that it will
be October 2006 before a direct benefit is measurable.
Audit activity
Audits of specific occupational risk topic areas are conducted throughthe BBC’s Internal Audit department. During the last year a wide
range of pan-BBC topics were subjected to review, including theManagement of Asbestos, Live Events Arrangements, Child
Protection, and Environmental Risk. As a result of the latter, a twoyear programme to develop and implement a new, Corporationwide Environmental Management System meeting the requirementsof ISO 14001 is now under consideration. Other audit activity has
resulted in improvement to the BBC’s procurement process toensure that only competent contractors are selected to work withand for the BBC. A new three-year rolling programme of audit
activity has been endorsed by MCORC. Specific audit activity in the
coming year will include a gap analysis against OHSAS 18001, testingunderstanding of key safety responsibilities, and examining systems forthe prevention of falls from height.

5 Freedom of information
The BBC became subject to the Freedom of Information Act(FOIA) on 1 January 2005. In the first year of operation the
Information Policy and Compliance (IPC) department received 971
requests for information (RFIs). Of these, the BBC believed 415(43%) were out of scope of the Act. (The Act only applies to the
BBC for information held for purposes other than journalism, art
and literature, the so-called content derogation.) All information
was withheld in 120 (22%) of requests, including those where the
BBC did not believe the Act applied; 932 RFIs (96%) were responded
to within the 20 working days statutory time frame, or extended
legitimately under the Act. In January to March 2006 the BBC
received 226 RFIs, of which 88 (39%) were out of scope.
There were 69 requests for internal reviews of BBC FOI decisions
in 2005; six were received in the first three months of 2006.The
BBC was notified of 28 cases being referred to the Information
Commissioner’s Office (ICO) during 2005; 19 cases were notified
during the first three months of 2006 (this increase was due toa backlog of cases inside the ICO and does not reflect an increasein complaints). One case has been referred to the Information
86

Tribunal for a decision on a jurisdictional issue surrounding thecontent derogation.
The BBC also provides a FOI publication scheme on its website,
as required by the Act.The site had 643,309 hits during 2005 and
217,693 hits in January–March 2006.
Data protection
IPC received 49 initial inquiries for personal information in 2005.
Of these, 39 translated into formal Subject Access Requests(SARs) under the Data Protection Act. All but four were delivered
within the 40-day statutory timetable.This compares with 32
inquiries, translating into 26 SARs in the previous year.There havebeen 16 inquiries, translating into 11 formal SARs, in the first threemonths of 2006.There have been no referrals to the ICO on dataprotection issues during the two years that the IPC has been in
existence (April 2004 to March 2006).

6 Donations and acknowledgements
Political and charitable donations
The BBC does not make political donations.
UK Public Service Broadcasting does not make cash donations
to charities but provides services in kind. During 2005/2006
services with a cash equivalent value of £228,000 (2005 £509,000)
were provided to charities. In addition to broadcast appeals
detailed on pages 65 to 66, BBC commercial businesses donated£6,000 to charities during the year (2005 £61,000).
Financial grants
The BBC acknowledges financial grants from the European
Commission for various technical research projects.

7 Governors’ remuneration report
This report sets out the BBC’s remuneration policy and details the
remuneration received by the Board of Governors and membersof the Executive Board.The BBC is exempt from the requirementsof the Directors’ Remuneration Report Regulations 2002 andthose of the Financial Services Authority, but this report has been
prepared as if those requirements apply wherever the disclosure
provisions are relevant and applicable.The sections on pensions
and remuneration received by the Governors and Executive Board
members are audited.
Governors’ Remuneration Committee: constitution and operation
The Remuneration Committee is a subcommittee of the Boardof Governors and is accountable to them for the determinationand maintenance of overall remuneration policy for the Executive
Board.The Remuneration Committee considers the performanceof the individual members of the Executive Board andrecommends their base pay and annual bonus awards to thefull Board of Governors.
The Remuneration Committee is chaired by Anthony Salz,
and the other members are Deborah Bull and Michael Grade.
The meetings are attended as appropriate by Mark Thompson,the Director-General, and Jeremy Nordberg, the Acting Director,
BBC People, to advise on matters relating to other membersof the Executive Board and the overall performance of the BBC.
Neither is present when matters concerning their own remuneration
are considered.The Remuneration Committee has access to internal
expertise through Roger Fairhead, the BBC’s Head of Reward,
who also attends the meetings.

BBC Annual Report and Accounts 2005/2006

Complying with the 2003 FRC Combined Code on Corporate
Governance, the Remuneration Committee takes specialist advice
from external professional advisers on remuneration matters,
particularly market practice. During the year, the Remuneration
Committee received advice from the Hay Group on comparative
market data in the determination of pay and benefits for the
Executive Board.
Governors: remuneration policy
The members of the Board of Governors receive a fee determinedby the Secretary of State for Culture, Media and Sport.They are
additionally reimbursed for expenses incurred on BBC business, andany tax arising on those expenses is settled directly by the BBC.
The fees and expenses are reported in the table on page 88.
Executive Board: remuneration policy
The Remuneration Committee recommends to the Board ofGovernors the remuneration policy for Executive Board members.
This policy seeks to balance the BBC’s status as a public corporation
with the fact that it operates in a competitive, commercial environment.
All areas of spend, including executive remuneration, must deliver
value to the licence fee payer and recognise legitimate public
interest concerns about the pay of public sector employees.This
must be balanced with the need, in an increasingly competitiveenvironment, to offer remuneration that attracts, motivates andretains the key talent required to lead the BBC and to deliver
outstanding public service broadcasting. In doing so the
remuneration policy seeks to:■ remunerate individuals fairly for individual responsibility
and contribution■ determine base pay, benchmarked against the median base payof relevant comparator organisations, whilst recognising thata moderate premium is necessary to compensate for the limited
bonus opportunity and absence of share-based awards comparedto the BBC’s private sector competitors■ provide a limited element of performance-related pay, reduced
from a maximum of 30% to a maximum of 10% of base pay for
the Executive Board in 2005/2006, linked to the achievementof key objectives and overall contribution to BBC performance■ take into account remuneration policy within the rest of the BBC
and consider the relationship between the remuneration of
Executive Board members and that of other employees
Separate arrangements apply for John Smith, Chief Executive Officer,
BBC Worldwide, and Chief Operating Officer, BBC, whose prime
responsibility is for the BBC’s commercial business. In this capacity,
he participates in the annual bonus and long-term incentive plansof BBC Worldwide which are established by the Board of BBC
Commercial Holdings and driven by profit and return on sales
targets and outperformance of major international media sectorbusinesses over one and three-year performance periods.These
plans are not funded by the licence fee but by the commercial
revenue of BBC Worldwide.The cost to the BBC Public Service
Broadcasting Group is restricted to a proportion of John Smith’sbase pay, reflecting his public service responsibilities for Property,
Procurement, and Information and Archives. For 2005/2006 thecosts were assessed to be 25% of base pay. He has no bonus
entitlement in respect of his public service responsibilities.
Elements of remuneration
The main elements of remuneration are base pay, annual bonus
and pension.

Base pay
Base pay is reviewed with effect from 1 August each year, taking
into account the external market, individual responsibilities andperformance, and internal comparators.The Remuneration
Committee receives specialist advice from external professional
advisers, the Hay Group, on remuneration matters, particularlymarket practice. In 2004, the Hay Group identified that BBC
executive base pay had fallen significantly below market medianlevels. A policy was agreed to bring pay into line with the externalmarket in two stages: the first of those stages was made with effectfrom 1 August 2004 and was reflected in last year’s report; thesecond was made the following year and is shown in this report.
Annual bonus
For 2005/2006, the maximum annual bonus potential has been
reduced from 30% to 10% of base pay for the Executive Board,
thereby seeking to achieve a better balance between public service
values and market competitive rewards.
Bonus awards are based on the delivery of divisional targets andobjectives agreed by the Remuneration Committee and theindividual’s overall leadership support of the Governors’ objectives.
For 2005/2006, the achievement of divisional value for money
targets accounts for up to 50% of the bonus, with divisionaltransformational measures accounting for the other 50%. An
assessment of the individual’s overall contribution to, andchampionship of, the Governors’ objectives then results in theretention or a reduction of the bonus awarded.
As summarised above, the annual bonus plan for John Smithis based on the profit of BBC Worldwide.Ten per cent of basepay is paid for achieving the profit target, rising to 50% of basepay if BBC Worldwide exceeds its profit target by 10% or more.
Long-term incentive plan (LTIP)
As summarised above, John Smith participates in the BBC Worldwide
long-term incentive plan, which is self-funded entirely by thecommercial revenues of BBC Worldwide. No other Executive
Board members are entitled to participate in this LTIP, whichis available to senior executives of BBC Worldwide only. Any
payment from the LTIP is dependent upon BBC Worldwide’s profit
growth and return on sales compared to a minimum of 15 listed
media sector businesses over a three-year performance period.
If part of any annual bonus is forgone, the amount is matchedby BBC Worldwide and the total amount is put at risk by being
invested in the LTIP (the ‘matched invested bonus’). At the endof the performance period, the following payments are due
dependent upon performance:■ if BBC Worldwide’s performance equals the median of comparable
companies, 10% of annual salary at the rate on the last day of theperformance period plus half of any matched invested bonus ispayable■ if BBC Worldwide’s performance meets or exceeds the upper
quartile of comparable companies, 20% of annual salary at therate on the last day of the performance period plus 100% of any
matched invested bonus is payable■ if BBC Worldwide’s performance falls below the lower
quartile of comparable companies, no payment will be made(neither the salary-related amount, the bonus forgone nor
any matched amount)■ where BBC Worldwide’s performance is between lower quartileand median, or median and upper quartile, a pro rata amountis payable

BBC Annual Report and Accounts 2005/2006

87Compliance■in the event of leaving voluntarily before the end of the vesting
period, the participant is entitled to repayment of the bonus
amount forgone, but no matching award

Pensions
Members of the Executive Board are eligible to participate in the
BBC Pension Scheme.This generally provides for pension benefits
on a defined benefit basis with an accrual rate of 1/60th of the
final pensionable salary per year of service, subject to a maximum
pensionable salary (£105,600 per annum for 2005/2006) for those
who joined the Pension Scheme after 31 May 1989. Only base pay
is pensionable.The Pension Scheme provides for early retirement
on medical grounds and life assurance of four times base pay toa prescribed limit.
For those joining after 31 May 1989, where their base pay exceeds
the maximum pensionable salary a variety of arrangements were
put in place, including funded and unfunded arrangements outside
the BBC Pension Scheme. For the Executive Board, all of thesearrangements were funded through a Funded Unapproved
Retirement Benefits Scheme (FURBS).
With the new pensions regime effective from April 2006, the BBC
continues to apply a maximum pensionable salary based on theprevious Inland Revenue limit.The FURBS arrangements have been
replaced by a cash pensions supplement. Additionally, members
who reach or exceed the new Lifetime Allowance (LTA) may opt
out of the Pension Scheme and instead receive a cash pensions
supplement replacing BBC contributions to the Pension Scheme.
These arrangements are cost-neutral to the BBC.
Details of defined benefit entitlements and contributions todefined contribution schemes for the Chairman and Executive
Board members during the year are shown below.
Definedcontribution
schemesDefined benefit schemes
Annual values

Governor/Executive
Board member(age at 31 March 2006)

ChairmanMichael Grade (63)
Executive Board
Jenny Abramsky (59)Jana Bennett (50)Mark Byford (47)
Stephen Dando (44)
Tim Davie (38)1, 2
Ashley Highfield (40)
Zarin Patel (45)John Smith (48)Mark Thompson (48)2
Caroline Thomson (51)

Accruedpensionat
31 March
2006£000paTransfer values3

Increase inTransfer Transfer
transfer
Increase value of value of value lessin accrued accrued members’
accrued pension pension
contribpension
at
atutionsover 31 March 31 March
over
year
2006
2005
year
£000pa
£000
£000
£000

3

2

50

22

23

177
7
156
8
2
10
13
153
3
54

28
2
22
2
2
2
2
28
2
3

3,849
92
2,117
76
12
74
126
2,195
38
1,014

3,026
59
1,655
55
–
54
98
1,619
15
836

804
27
440
15
6
14
22
550
17
171

BBC
contributions
2006
£000

2005
£000

–

–

–
–
65 46
–
–
71 56
–
–
53 43
64
–
–
–
151 11148 30

Tim Davie was appointed an Executive Board member and joined the Pension
Scheme on 11 April 2005
As at the year end, Mark Thompson and Tim Davie had less than two years’service and so would not be entitled to a deferred pension if they had left
the Pension Scheme on this date. However, for comparison with the other
Executive Board members, their accrued benefits have been calculated andvalued assuming that they will complete the two years’ service requirement
3
The transfer value of accrued pension benefits represents the estimated costto the Pension Scheme of providing the pension benefits accrued to date.
The value is affected by many factors, including age, pensionable salary,1

pensionable service and investment market conditions at the date of calculation(in accordance with Actuarial Guidance Note GN11). It is not a sum paidor due to the individual and therefore cannot be meaningfully added
to remuneration.The effect of the investment market conditions on the transfer
value varies according to the member’s age: for older members the calculationreflects the yields on index-linked gilts, whilst for younger members the dividend
yield on the FTSE All-Share Index is the more significant determinantBenefits
In addition to base pay, annual bonus and pension, the other main
contractual benefits are a car and fuel allowance, private healthinsurance, and life assurance. It has been the policy for some years
that, with the exception of the Director of Nations & Regions, newappointees to the Executive Board are not eligible for provisionof a chauffeur-driven car.The Director-General’s contract provides
for a chauffeur-driven car, but no entitlement to a personal car
allowance and fuel allowance.
Employment contracts
It is the policy of the Governors that the employment contractsof Executive Board members should not include a notice periodof more than one year. Each employment contract expires on the
60th birthday of the Executive Board member, which is currently
their normal retirement age, but is subject to earlier termination
for cause or if notice is given under the contract.
As at 31 March 2006, the unexpired term and notice period ofeach Executive Board member was a maximum of 12 months.
There is no entitlement to any additional remuneration in theevent of early termination other than in the case of termination
for reason of redundancy.
Outside interests
With the prior agreement of the Board of Governors and where there
is no potential for conflict of interest, members of the Executive Board
may hold external directorships. In principle, no more than two external
directorships may be held at the same time, of which only one should
be in a commercial organisation. Any remuneration which arises fromdirectorships is paid to the BBC. During the year John Smith served asa non-executive director of Severn Trent plc. For information on how
to obtain the Executive Board’s register of interests, see page 80.
Remuneration received
The remuneration of the Governors and Executive Board
members during the year is shown below:

Governors

Deborah Bull
Sir Andrew Burns (appointed 1 July 2005)
Baroness Deech
Dermot Gleeson
Michael Grade
Professor Merfyn Jones
Professor Fabian Monds
Jeremy Peat
Anthony Salz
Angela Sarkis
Ranjit Sondhi
Richard Tait

2

88

Fee/
base pay£000

Annual Expenses/
bonus benefits
£000
£000

Total
2006
£000

Total
2005
£000

16
21
16
16
83
28
28
28
28
16
28
16

–
–
–
–
–
–
–
–
–
–
–
–

7
15
7
10
27
14
1
6
7
9
4
3

23
36
23
26
110
42
29
34
35
25
32
19

20
–
25
28
96*
36
31
10
24*
22
32
15*

324

–

110

434

339

324

–

110

434

403

Governors who retired during 2004/2005
Total

BBC Annual Report and Accounts 2005/2006

64

Executive Board

Jenny Abramsky
Jana Bennett
Mark Byford
Stephen Dando1
Tim Davie (appointed 11 April 2005)
Ashley Highfield
Zarin PatelJohn Smith2
Mark Thompson3
Caroline ThomsonFee/base pay£000

Annual Expenses/
bonus benefits
£000
£000

Total
2006
£000

Total
2005
£000

295
321
403
290
253
281
297
331
609
276

15
17
40
–
19
15
13
87
–
26

12
15
13
2
15
15
14
26
10
15

322
353
456
292
287
311
324
444
619
317

304
334
457
313
–
320
72*
387
459*
290

3,356

232

137

3,725

2,936

Payments under long-term incentive plans–

47

Members who resigned or left the
Executive Board during 2004/2005
Total

766
3,356

232

137

Payments to former directors

3,725

3,749

–

443

Appointed part-way through 2004/2005
Stephen Dando resigned on 23 April 2006
2
John Smith’s base pay, bonus and benefits are included at their full rate,
although the cost to the BBC Public Service is restricted to 25% of base pay
for 2005/2006. In addition to his annual bonus, an equal amount has beenforgone and has been invested in the Long Term Incentive Plan for BBC
Worldwide, which may vest in March 2008
3
Mark Thompson has waived his right to be considered for an annual bonus
award for 2005/2006*

1

There were no payments in respect of termination or compensation
for loss of office paid to or receivable by Governors or Executive
Board members during the year.

8 Programmes, channels and promotions
Governors’ Programme Complaints Committee
During the year the Governors’ Programme Complaints
Committee (GPCC) consisted exclusively of Governors:
Richard Tait (Chair), Deborah Bull, Merfyn Jones, Fabian Monds
and Angela Sarkis.
The GPCC is responsible for fulfilling the Charter requirementthat the Board of Governors ensures that complaints areproperly handled by the BBC. The GPCC undertakes a rangeof responsibilities in fulfilling this requirement. These involve:■ ensuring that complaints are handled by the BBC promptly, areinvestigated rigorously and impartially, and that the process is
informed by good practice■ undertaking an annual review of the BBC’s complaints handlingprocesses and performance; as a result of issues raised in theannual reviews, undertaking a periodic review of the complaints
handling strategy, and making recommendations to the Boardof Governors concerning any changes it deems necessary arisingfrom these reviews■ reviewing the quarterly complaints report submitted to theBoard of Governors by the Complaints Management Board,chaired by the Deputy Director-General■ reviewing the quarterly Complaints Bulletin published by the
Editorial Complaints Unit (ECU)■ raising broader editorial issues arising from its considerationof appeals with, as appropriate, the Director-General or
the Deputy Director-General through the Complaints
Management Board■ considering certain appeals against the decisions of the
ECU in relation to complaints about programmes transmitted,
or material carried by services for which the BBC has
editorial responsibility■

considering certain appeals against the decisions of a Directorof a BBC division in dealing with an editorial complaint where thatcomplaint falls outside the remit of the ECU and is accompaniedby evidence to suggest a serious breach of editorial standards

In taking appeals, the GPCC is advised by an independent Editorial
Adviser who informs the GPCC about the range of editorial issues
relating to complaints and the concerns and/or considerations
raised by complainants.
The GPCC’s decisions on appeals are communicated to the appellant
and to the Complaints Management Board.The GPCC also publishes
a quarterly bulletin of its findings. For further information oncomplaints handling during 2005/2006, see page 62.
Upholding editorial standards
The Governors ensure that the BBC maintains high editorial
standards, monitoring its compliance with the BBC Editorial Guidelines
and with the Code of Impartiality and Accuracy included in them.
In April 2005 the Governors approved the revised guidelines,
which came into effect at the end of July 2005.
Undertaking an annual review of editorial issues in April 2006, theGovernors were satisfied that in 2005/2006 overall the BBC met
the standards expected of it.They recognised the BBC’s continued
success in bringing challenging and risk-taking programmes to air,including Pinochet in Suburbia, The Secretary Who Stole Millions,
Soldiers’ Wives, Naked City and Whistleblower.
The Board noted that particular editorial challenges during theyear included:■ Coverage of the London bombings in July 2005: Not only did
this break new journalistic ground in terms of images sent inby mobile phones, it also raised important questions of privacy,
accuracy and verification. Further guidance was issued on the useof the world ‘terrorist’.The Board endorsed the guidance, which
does not ban use of the word ‘terrorist’ but prefers its use to be
attributed.The Board also noted the Ofcom resolved findingon images of a seriously injured victim.
■ The publication of the cartoons depicting the Prophet
Muhammad in various European newspapers: see the Governors’
review of BBC News on page 47.
■ The General Election of May 2005:The Board noted thatconsiderable guidance and support was provided across the
BBC for the campaign.The Board noted that the complaint fromthe Conservative Party about a claim on The World at One that
Michael Howard had avoided an interview on Today was partiallyupheld by the Editorial Complaints Unit.
■ The global music event Live8: The BBC was careful to work
hard to maintain impartiality. The Governors noted that Ofcom
upheld complaints about bad language. Since then, further
editorial policy guidance has been published on live output
to help minimise risks.
The Board noted some Ofcom content standards rulings onRadio 1, for example offensive language in the introduction
to Most Punk. It noted that while Radio 1 is a challenging
contemporary network, it must ensure that it complies with
Ofcom and BBC guidelines.
The Board noted that the Governors’ Programme Complaints
Committee had upheld eight complaints in full or part.

BBC Annual Report and Accounts 2005/2006

89Compliance

The Board received management’s conclusions following its
investigation into product placement following claims in The Sunday
Times.The report concluded that no products had been placed
in programmes in return for cash or other benefits. However,there were instances when branded goods were afforded undue
prominence. Appropriate training and guidance was being issued.
The Board also noted that the increase in the number of
independent commissions envisaged in the Window of Creative
Competition will pose new editorial challenges in ensuring thatindependent productions receive the same level of advice andsupport as in-house productions. The Board noted that plans
are in place to address this.
It also noted the increasing challenges posed by interactivity,
including for example publication of BBC staff ’s personal blogs.
Guidelines on blogging have been put in place to mitigate
editorial risks.
Reviewing the overall editorial decision-making process, the Governors
noted that while there were some individual errors, they weresatisfied that overall there was a clear allocation of complianceresponsibilities, leading ultimately to the Director-General as
Editor-in-Chief, and that advice from the Editorial Policy Unit wasgiven sufficient weight in compliance matters.
In 2005/2006, the Board also maintained its oversight of
impartiality across the BBC’s output. It received regular reportson the monthly tracking survey which has been in operation
since February 2004. It commissioned an independent review ofcoverage of the Israeli/Palestinian conflict, which was published in
May 2006. For further information see review of objectives on
pages 18 to 19 and review of BBC News on pages 46 to 49.
Department for Culture, Media and Sport (DCMS) approvals
All new BBC public services launched since 1 January 1997 require
the approval of the Secretary of State for Culture, Media andSport.The key terms of approval are contained in the Statementof Programme Policy for each of these services.The BBC’s
performance against measurable commitments in these Statementsof Programme Policy is shown in the tables on pages 68 to 75.

Publication of plans: in June 2005 the BBC published the broad
commissioning plan for 2007, and in November 2005 thedetailed plan of learning outcomes to be covered in 2007
(slightly ahead of the schedule required by the conditions).
This followed consultation with the Government’s education
technology agency, Becta, over which learning outcomes were
amenable to Information and Communications Technology (ICT).
■ External content spend: the BBC has given a commitment to spend
50% of content funds externally over the period to September
2008.To date, 22 of the 50 commissions in production or completed
have gone directly to external companies from the preferredsuppliers’ list that was compiled in accordance with EU regulations
for new media content. In addition, areas of external work havebeen commissioned by in-house production teams. External spend
has not reached 50% to date, but the Board has been assured
that this balance will change over the course of the full approval
period to meet the requirement.
■ Narrowband delivery: the BBC has given a commitment that 70%of the service’s overall content will be available via narrowband.
The service is fundamentally for broadband delivery, but the
BBC has developed a package known as ‘jam player’ which allows
narrowband users to download content to their computers,
thereby simulating the broadband experience.This has so far
been made available for English for 5–7 year olds, but it isplanned to extend it over time to all appropriate commissions.
■ UK diversity: the service must support and reflect the diversity of theUK. BBC jam has been developed to meet the curricular needsof all four nations of the UK and was introduced with a Welsh
language option and with content made in different parts of the UK.
■ Virtual learning environments: the BBC has given a commitment
to work with providers of other learning environments and makeits content available to their systems. Discussions have been heldwith Becta about necessary licensing arrangements to facilitate this.
■ Promotion of BBC jam in other BBC services must make prominent
reference to the Government’s Curriculum Online and to alternative
sources of supply.The BBC has included such a reference and, whereappropriate, a weblink, in promoting the service on its broadcast
channels and online.
■ The BBC must work with the Government’s Curriculum Online
Content Advisory Board (CAB) in developing the service.To thisend, the BBC has held quarterly meetings with CAB andadditional subcommittee meetings.
■

There were no new service approvals in 2005/2006.
In accordance with the incorporation agreement of BBC
Broadcast, approval was sought, and subsequently given by the
DCMS, to the sale of BBC Broadcast Limited (22 July 2005).
BBC jam (previously known as the Digital Curriculum)
In approving the digital curriculum service in January 2003,
the Secretary of State for Culture, Media and Sport set the BBC
a number of conditions, including meeting the undertakings givenby the BBC itself. Each year the BBC will report on its compliancewith those conditions that are relevant to activity during the year.
After just over two years of development, the first elementsof BBC jam went live on 27 January 2006. Four commissions wereintroduced initially and others are being added periodically up to
September 2008, building up to an eventual total of over 100
commissions. (A subject for a particular age group, for example
English 5–7, may consist of more than one commission.)
During the year the BBC took the following specific steps tocomply with conditions of approval or undertakings:
90

The BBC has also regularly met industry representatives andindividual companies and plans to continue these meetings.
Governors receive monthly reports on BBC jam’s compliance against
its conditions at their Board meetings, supplemented by six-monthly
progress reports by the Director of Factual & Learning at Boardof Governors meetings.
A complaint, concerning alleged non-compliance with a condition
set by the European Commission when it approved the service,
has been under consideration by the Commission since July 2005.
The UK Government and the BBC have made a number ofsubmissions to the Commission on this matter which is ongoing.
UK programme quotas
Under the Communications Act 2003, the BBC has a duty to ensurethat not less than 25% of the amount of time allocated to thebroadcasting of qualifying television programmes is allocated to thebroadcasting of a range and diversity of independent productions.
Ofcom is required to report the extent to which the BBC has

BBC Annual Report and Accounts 2005/2006

performed that duty. In addition, the BBC is required to meeta number of other programme production obligations, the so-called‘Tier 2’ quotas, for which Ofcom is required to monitor compliance.
Ofcom is expected formally to report the BBC’s performancefor the calendar year 2005 against these quotas in its 2006
Communications Market Review. However, the BBC fully expects
to exceed all of the quotas and its self-assessment figures areprovided here.
Independent production quota1
Hours of qualifying programmes across all channels
Hours of qualifying programmes on BBC One
Hours of qualifying programmes on BBC Two
Regional programme making2
Spend on qualifying programmes
Hours of qualifying programmesNews and current affairs programmes3
Hours of news on BBC One
Hours of news on BBC One in peak time
Hours of current affairs on BBC One and BBC Two
Hours of current affairs on BBC One
and BBC Two in peak time
Levels of original production4
BBC OneBBC One in peak time
BBC Two
BBC Two in peak time
BBC Three
BBC Three in peak time
BBC Four
BBC Four in peak time
CBeebies
The CBBC Channel
BBC News 24
BBC Parliament
Regional programming5
Hours of regional programming
Hours of programmes made in the relevant area
Hours of BBC One news
Hours of BBC One news in peak time
Hours of non-news programming in peak time
All non-news programmes adjacent to peak time

Quota

Achievement

25%
25%
25%

31%
28%
39%

30%
25%

34%
33%

1,380
275
365

1,467
293
433

105

110

70%
90%
70%
80%
80%
70%
70% approx
50%
80% approx
70%
90%
90%

82%
99%
82%
97%
81%
71%
73%
61%
79%
85%
95%
99%

6,580
95%
3,920
2,010
1,030
355

7,048
99%
4,656
2,217
1,084
365

1

The BBC is subject to a 25% independent production quota across all channels
and from 1 January 2005 on BBC One and BBC Two individually
The BBC quotas for regional production agreed with Ofcom are based on theexisting ‘Hatch’ definition
3
These quotas and performance figures are for network programming only.The
news quota specifically excludes overnight transmissions of BBC News 24
4
Original productions include all BBC commissioned programmes including repeats.
For BBC Three and BBC Four they exclude repeats of programmes first shownon another channel
5
These figures represent regional programmes across BBC One and BBC Two
2

EU programme quotas in the calendar year 2005
European Community legislation requires Member States to ensurethat broadcasters reserve for European works a majority proportionof their television transmission time, excluding the time devoted
to news, sports events, games, adverts, teletext services andteleshopping.The legislation also requires broadcasters to reserve atleast 10% of their transmission time for European works (excluding
works of the kind described above) made by independent producers.
Ofcom is expected to formally report the BBC’s performancefor the calendar year 2005 in its 2006 Communications Market
Review. However, the BBC’s self-assessment is that it has exceeded
the EU quotas. Of the relevant BBC One and BBC Two output,
80% was of European origin (79% in 2004) and 21% was madeby European independent producers (21% in 2004). Of therelevant output of all BBC channels (including BBC Three, BBC

Four, CBeebies,The CBBC Channel and BBC News 24), 87% wasof European origin and 24% was made by European independent
producers (86% and 27% respectively in 2004).
European channel broadcasting regulation
The BBC broadcasts two television channels in Europe, BBC Primeand BBC World. Both channels were originally operated by
European Channel Broadcasting Limited, but on 1 December 2002
the Secretary of State approved the transfer of the business andassets of the BBC World channel to a new company, BBC World
Limited, which became a wholly-owned subsidiary of BBC
Commercial Holdings Limited. BBC Prime continues to be
operated by European Channel Broadcasting Limited, a whollyowned subsidiary of BBC Worldwide Limited. Both these channels
and BBC Food (a BBC Worldwide Limited channel) are now
licensed by Ofcom as television licensable content services. BBCWorld and BBC Prime complied with the principles on which theSecretary of State’s approval was originally granted and all threechannels complied with the licence requirements.
On-air promotions: OFT undertaking
Following the 1992 report of the Monopolies and Mergers
Commission (on the publicising in the course of broadcasting ofgoods supplied by the broadcaster), the BBC gave an undertaking
to the Office of Fair Trading (OFT) about trailing BBC magazines,
including a commitment not to exceed seven minutes as anaggregate across a seven-day period on its television services.
Although the legal obligation applies only to BBC magazines, theGovernors’ Fair Trading Commitment commits to applying thespirit of the undertaking to all on-air trails of commercial products.
Following the Commercial Review, trails of magazines on radio,
television and bbc.co.uk ceased in December 2004.
From 1 April 2005 to 31 March 2006 the total promotion time
for all commercial products (including BBC Worldwide andindependent products) was 1 hour, 34 minutes and 30 secondsof transmission, which averages 1 minute and 49 seconds in aseven-day period (2004/2005: 1 hour, 23 minutes and 40 seconds,
averaging 1 minute and 37 seconds per seven-day period).
Trails for non-BBC products have also been tracked. In the same
12-month period there were 21 minutes of promotion for
products not produced by BBC Worldwide but associated with
our programmes.This averages 24.2 seconds per seven-day periodon the BBC’s television services (2004/2005: 11 minutes and 20
seconds of promotion, averaging 13 seconds per seven-day period).

9 Cost of compliance
As a result of operating in the UK broadcasting market place, andby virtue of being a public body, the BBC incurs substantial costs inensuring that it complies with all relevant regulation. In 2005/2006,
these costs of compliance are estimated to be £16.4million(2004/2005: £17million). Included in this figure is a £3.5million
subscription fee paid to Ofcom (2004/2005: £4.7million). It also
includes the cost of transmission licences, the fair trading audit, staff
employed to monitor compliance and report against commitments
including Ofcom requirements, DCMS consents and fair trading.
However, these costs are not complete since they do not include
any allocation of costs for staff (including relevant staff in the
Governance Unit) who do not work solely on compliance, but
who may provide information necessary to monitor or reportagainst the commitments.The cost of the Governance Unit isseparately disclosed on page 8.

BBC Annual Report and Accounts 2005/2006

91

Financial review

Financial performance
In 2000 the BBC set out its financial strategy for the period to the endof the current Charter in December 2006.The strategy set the course
for a significant increase in spending on public service broadcasting, tobe achieved through efficiency savings, increases in the licence fee, andutilising existing cash and borrowing facilities whilst aiming to return toa broadly zero debt position at the end of the Charter.
Result for the year
As the BBC does not have shareholders it does not aim to makea profit. Group income has increased by £170million to £4,005million
driven by a 4.5% increase to the licence fee, and the income andexpenditure returned to a surplus of £4million (following deficits
in recent years) in line with the financial strategy.

Long-term financial commitments for the current Charter period
To ensure Income and Expenditure is balanced
This year income and expenditure for UK Public Service
Broadcasting, before exceptional restructuring costs, wasbroadly in balance.
Commercial businesses contributed a surplus of £207million (before
interest, taxation and non-cash pension costs), up from £91million
in 2004/2005, including a profit of £109million on the disposalof BBC Broadcast.The proceeds from the sale of BBC Broadcast
also helped move the BBC from net debt of £135million last year
to net funds of £50million at 31 March 2006.

Funding sources
Licence fee
The licence fee continues to be the BBC’s most important funding
source. Licence fee revenue for the year was £3,101million,
which was an increase of £160million (5.5%) on 2004/2005. For
this period the licence fee, which is set by the Government, wasincreased by 4.5% (RPI plus 1.5% above inflation increase) plus the
BBC contributed an additional 1.0% from efforts to reduce evasion.
Ongoing reductions in evasion together with tight control ofcollection costs continue to play a key part in increasing licence feerevenues. Evasion was driven down from 5.0% last year to 4.7%
despite already operating in a low-evasion environment. Collection
costs increased by £1million (in line with the contract with Capita)
and remain at 4.9% of licence fee income. At just 9.6%, thecombined cost of evasion and collection has fallen to its lowest
level since 1991/1992 when the BBC took direct responsibility
for licence fee collection from the Home Office. At the endof the year the BBC announced PayPoint plc had been selected
as a new contractor to supply over-the-counter services for TV
Licensing for a six-year period from April 2007 and it is expectedthat this will further reduce the cost of collection.
The Government has confirmed that the licence fee will remain inplace throughout the next Charter period to the end of 2016 andits level will be set as part of the current Charter review process.
Commercial businesses
In addition to the licence fee, the BBC funds its public service
broadcasting activities through cash contributions from its
commercial businesses.
92

As part of the Commercial Review in 2004 the BBC identified
that, although BBC Broadcast provides important services to theBBC, it was not essential that it be owned by the BBC. As a resulton 31 July 2005 BBC Broadcast was sold for proceeds of£166million and a profit of £109million for the BBC.
BBC Worldwide is a significant element of the commercial businesses
and over the last few years has been transforming its operations
to focus on seven core business areas. BBC Worldwide’s targetof doubling profit over two years from April 2004 was beatenwith a profit (before interest, tax and non-cash pension costs)of £89million – an increase of 144% over the two years and 62%
year-on-year. BBC Worldwide returned £185million in cashflow –profits and direct programme investment – to the BBC (up 28%
from £145million in 2004/2005).This was achieved by turning
around loss-making businesses and pulling out of, or finding
partners for, businesses which no longer fitted or lacked sufficientscale for BBC Worldwide’s new remit, combined with good growthin other businesses and a cost reduction programme.
Due to the timing of main sporting events, this year was a quieter
year for BBC Resources which delivered revenues of £128million
and a surplus (before interest, taxation and non-cash pension
costs) of £6million (£135million and £7million in 2004/2005).
Ownership options for BBC Resources remain under review and
the BBC has committed not to sell the company before June 2007.
BBC World continues to show significant growth in audience reachand household distribution and has made significant progress
towards its key objective of gaining 24-hour distribution in North
America this year.Turnover has increased by 25.5% to £36million
this year and the loss for the year (before interest, taxation andnon-cash pension costs) fell by 7.0% to £15million.The loss after
interest and taxation is £11million (2004/2005 £11million).

Public service broadcasting expenditure
Spending on programmes
Total spending on programmes at £2,494million increased by£28million this year. Spend on analogue services has fallen by£24million to £1,778million. Additional spend on coverage of the2005 General Election was offset by a relatively quiet year for
sport. Expenditure on digital services continues to grow, increasingby £53million this year. 2005/2006 saw increased investment infirst-run children’s drama on The CBBC Channel and the launchof BBC jam (the digital curriculum). Spend outside of London
overall increased moderately by 2.1% to £865million, but spend
on television outside London increased by 6.1%. In particular,
BBC Cymru Wales has made a particularly strong contribution
to the BBC’s drama output this year. A number of new landmark
programmes (Bleak House, Doctor Who and Life on Mars) has
driven a 4.1% increase in the analogue cost per hour of drama.
This is consistent with the strategy to increase overall investment
in original UK drama and is a reversal of the longer term trend
which has seen the cost of drama decreasing since 2002/2003.
This year overheads excluding exceptional restructuring costs
increased by £30million, which is due to the impact on the prioryear of significant one-off refunds for National Insurance andproperty rates. Excluding one-offs, overheads have fallen by£3million in 2005/2006.
Further information on individual channel spend is included in
Note 2b, with Broadcasting facts and figures on pages 140 to 150.

BBC Annual Report and Accounts 2005/2006

Efficiency
In 2004/2005 the BBC embarked on an ambitious value-for-money(VFM) programme in order to maximise efficiency and boost
investment in programmes.This identified a challenging three-yeartarget to achieve £355million of cash-releasing efficiencies per
year by the end of 2007/2008 on top of those already requiredby the existing Charter.The BBC has achieved its first year targets,achieving £99million of ongoing cash savings and a further£7million from programme mix changes. One significant area ofsavings has been a strong performance in reducing headcount with
1,132 posts closed, exceeding the target for the year. Next year’s
targets are substantial with over 2,000 staff leaving the BBC in
2006/2007. A structured transformation programme is in place todrive change and significant progress has been made in the year
including shifting towards a digital production environment using
integrated, lower cost digital production tools and techniques;finance process re-engineering; and the outsourcing of the humanresources function. One-off implementation costs in the originalplan were forecast to be £197million over the three-year programme.
During the year this forecast rose by £44million to £241million,
the increase resulting mainly from increased pension augmentation
costs of post closures.

Long-term financial commitments for the current Charter period
To meet the cumulative seven year self help targets of £3.3billion
set for this charter period
The BBC is on track to meet them, and indeed exceed themthrough the additional VFM savings.

Property
Phase 1 of the redevelopment of Broadcasting House, the newhome for News, World Service and Radio in central London,
delivered during the year and reoccupation of the refurbished listed
original Broadcasting House is ongoing, although late. Work has
begun on phase 2 which will include demolition of the old extensions
to Broadcasting House and construction of a new building.
Significant progress has been made in the year on the developmentof the BBC’s new Scottish headquarters and broadcasting centre
at Pacific Quay in Glasgow.The existing BBC property in Glasgow
is being marketed.
During the year the BBC completed the sale and leaseback of two
regional properties realising a profit of £2million (2005 £19million),and also disposed of three other surplus properties, realising a
combined profit of £5million.
Further rationalisation of the BBC portfolio is anticipated in
London. Full and final decisions must await further considerationof the out of London strategy.The BBC is currently working withlandowners in the Wood Lane opportunity area to progress anoutline planning application for a major mixed use redevelopmentin the area.

Pensions
The BBC remains committed to keeping a good quality defined
benefit pension scheme for its employees whilst ensuring that
it is affordable.The majority of employees belong to the BBC
Pension Scheme.

2005 Actuarial valuation
During the year the triennial formal actuarial valuation of the BBC
Pension Scheme, as at 1 April 2005, was completed by independentactuaries.This revealed a surplus of £13million (in comparison tototal fund assets of £6,406million).The interim valuation as at thesame date, and based on the previous full valuation in 2002, had
shown a net actuarial surplus of £274million. One of the main
reasons for this deterioration in the actuarial position is an increasein longevity; people are living longer and therefore drawing pensions
for longer than in the past, which increases the cost of the benefits
to be provided significantly. Also, over the longer term, investment
returns are expected to be lower than they have been historicallyand the costs of pensions in payment are likely to continue to rise,creating a potential ‘gap’ between income and expenditure thatneeds to be addressed.
As a result, the pension scheme trustees are proposing to makesome changes to the pension arrangements in order to protect
the benefits of existing members and maintain competitive pensions
for new staff in an environment of increasing costs and investment
uncertainty. In particular it is proposed that the contributions
payable by the BBC and pension scheme members are increased
to 17.3% and 7.5% respectively by 1 April 2007, and also thata career average scheme is introduced for new staff. A periodof consultation around the proposed changes has begun and anychanges will be confirmed in August 2006.The next full actuarial
valuation will be brought forward and will be undertaken as at
1 April 2007.
2006 Financial statements
Accounting standards require a market-based valuation to beundertaken at the year end and on this basis the main scheme
is showing a net surplus of £170million as at 31 March 2006.This
is an improvement of £592million on the valuation at 31 March
2005 of a £422million deficit, mainly due to a better performanceof the scheme’s assets in comparison to the returns expected(although some of this has reversed since the year end), butsomewhat offset by changes in the assumptions underlying thescheme liabilities (such as the increase in longevity referred to above).
Despite this positive valuation, which has benefited from somerecent improvements in the investment returns, it is more
appropriate to review the funding of pension arrangements on
the basis of the actuarial valuation as the volatility in the valuationof the scheme’s assets and liabilities that FRS 17 introduced (seeNote 8b iv) does not reflect the underlying long-term financial
position of the scheme.

Treasury management
The BBC’s main treasury management risks are ensuring that the
BBC has sufficient liquid funds to meet its obligations as they falldue and that it is compliant with any borrowing limits (in particular
those set out in the Charter, by DCMS and any external loan
covenants). Note 23 gives more details of the BBC’s treasury
operations and policies.

Cash and debt
Group net debt reduced from £135million in 2005 to net fundsof £50million at 31 March 2006, driven by the cash received on
the sale of BBC Broadcast.
DCMS apply a different definition of net debt for UK Public Service
Broadcasting which includes licence saving stamp deposits and direct

BBC Annual Report and Accounts 2005/2006

93Financial review

debit instalments. At the year end BBC Public Service Broadcasting
had net funds of £18million (2005 borrowings of £89million)in accordance with the DCMS definition of borrowings,
and remained within the borrowing ceiling of £200million
throughout the year.
Long-term financial commitments for the current Charter period
To return to ‘broadly zero’ debt by the end of the CharterAt the year end UK Public Service Broadcasting had net fundsof £18million.

During the year the commercial businesses continued to reduce
their levels of net debt to £39million (2005 £122million).This was
as a result of the increased profitability of the commercial businesses
and debt leaving the Group on the sale of BBC Broadcast.
Further information on maturity of borrowings and available
facilities is included in Note 23.

■

The UK Accounting Standards Board has a strategy for converging
UK accounting standards with IFRS which involves, over time, issuing
new UK standards that are based on IFRS to replace existing UK
accounting standards. A number of UK accounting standards havealready been converged with IFRS, for example FRS 21, 23, 25
and 26 which the BBC has implemented during the current year.
The other standards that have been converged have not been
applicable to the financial statements of the BBC to date.

However, the BBC has continued to review the impact that adoptionof IFRS would have on the Group accounts and has presented
a summary of the impact adopting IFRS will have on the financial
statements. As at 31 March 2006 the BBC calculated that if it had
adopted IFRS its net assets would be reduced by £145million to£1,052million.
£m

Net assets as reported under UK accounting standards
Lease reclassification
Goodwill non-amortisation
Employee benefits
Deferred tax
Other1,197.0(132.8)3.1(15.3)(1.0)
1.2

Net assets as they would be reported under IFRS

1,052.2

Changes in accounting policies
During the year the BBC has implemented a number of new UK
accounting standards (FRS 21, 23, 25, 26, and 28). In particular the
BBC has voluntarily implemented new standards relating to financial
instruments. One of the main effects of this has been to recognisecertain assets and liabilities, largely relating to contracts priced inforeign currencies and interest rate swaps, in the balance sheet for
the first time. At the year end a net liability of £0.5million exists,
which represents an unfavourable movement in exchange rates
and interest rates.

Some of the IFRS accounting changes, principally the reclassificationof certain operating leases as finance leases, would have an effecton the calculation of Public Service Broadcasting borrowings as
defined by the DCMS borrowing ceiling.The Public Service Borrowing
limit of £200million is set within the BBC Charter and is based on
UK accounting standards not IFRS. Borrowings under IFRS would
have been £676million, compared with net funds of £18million under
UK accounting standards. As accounting standards converge to
IFRS, the Charter definition of borrowings would have to change.

International Financial Reporting Standards

For the year ended 31 March 2006 the BBC calculated that if it
had adopted IFRS the surplus for the year would be reducedby £43million to a deficit of £39million.

For a number of years the BBC has voluntarily prepared its
financial statements in accordance with the accounting anddisclosure requirements of the Companies Act 1985, applicable
UK accounting standards and the Financial Services Authority
Listing Rules to ensure that its financial statements are preparedon a basis consistent with that of UK public limited companies.
Recent changes in European and UK legislation now require
UK listed companies to adopt International Financial ReportingStandards (IFRS) in their group financial statements for years
beginning on or after 1 January 2005. For the BBC the first
relevant year would have been the year ended 31 March 2006
(in addition, for consistency, the comparatives for the year ended
31 March 2005 would have been restated).
The BBC follows the highest standards in financial reporting, but it
has decided not to adopt IFRS in its annual accounts for 2005/2006
for the following reasons:■

The BBC is a public body and from this year must report financial
information to Her Majesty’s Treasury (HMT) for inclusion in the
Whole of Government Accounts (a consolidation of financial
information covering the whole public sector) using consistentaccounting standards, which are not presently based on IFRS
because the approach of HMT in the Whole of Government
Accounts is to follow UK accounting standards.The BBC haschosen to continue presenting its accounts under UK accounting
standards until full convergence as we do not consider it value
for money to produce two sets of financial statements.

94£m

Surplus as reported under UK accounting standards
Lease reclassification
Goodwill non-amortisation
Other

3.6
(46.6)
3.1
1.0

Deficit as it would be reported under IFRS

(38.9)A more detailed reconciliation between the BBC’s results andfinancial position under UK accounting standards and what would
have been reported if IFRS had been adopted, along with further
details of the adjustments, including the IFRS accounting policies
and significant assumptions made in implementing those policies(such as the date of transition to the IFRS accounting policies)
are available on the BBC’s website at bbc.co.uk.

Zarin PatelGroup Finance Director
14 June 2006

BBC Annual Report and Accounts 2005/2006

Financial statements
Consolidated statement of income and expenditure
for the year ended 31 March

Note

2006
£m

2005
£m

13b ii

4,234.5(229.5)

3,997.1(161.8)Group income

1

4,005.0

3,835.3

Operating expenditure excluding exceptional restructuring costs
Exceptional restructuring costs

4c(4,094.1)(119.1)(4,022.2)(50.7)

Total operating expenditure2(4,213.2)(4,072.9)(208.2)31.2(237.6)
19.7

3
5
6

(177.0)125.2
16.0(217.9)28.2(43.1)

7a
7b
8c ii

(35.8)
13.5(12.0)
65.7(232.8)5.2(11.3)
65.4

Surplus/(deficit) before taxation and minority interest

1

31.4

(173.5)

Taxation
Minority interest

9(27.7)(0.1)(15.2)
0.5

Surplus/(deficit) for the financial year

18

3.6

(188.2)

Income (including share of joint ventures)
Less: share of joint ventures

Group operating deficit
Share of operating surplus of associates and joint ventures
Operating deficit: Group and share of associates and joint ventures
Profit on sale and termination of operations
Profit/(loss) on disposal of fixed assets
Deficit before interest and taxation
Interest receivable and similar items
Interest payable and similar items
Other net finance income (from defined benefit pension scheme)

All results arise from continuing operations.
There is no difference between the results as disclosed above and the results on an historical cost basis.

BBC Annual Report and Accounts 2005/2006

95

Financial statements
Balance sheetsat 31 March

Fixed assets
Intangible fixed assets
Tangible fixed assets
Investment in programmes for future sale
Other investments

Note

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006£m

UK Public
Service
Broadcasting
2005
£m

10
11
12
13

19.3
697.2
106.5
46.3

20.3
721.6
97.3
40.6

–
493.0
–
283.9

–
488.1
–
285.4

869.3

879.8

776.9

773.5

Current assets
Stocks

14

462.4

458.8

447.6

439.5

Long-term debtors
Current debtors

15
15

45.9
727.1

106.1
674.8

26.9
582.8

84.3
547.4

Total debtors
Short-term investments
Cash at bank and in hand

21
21

773.0
–
160.2

780.9
41.9
38.3

609.7
–
104.6

631.7
22.6
7.6

1,395.6

1,319.9

1,161.9

1,101.4(919.8)(918.3)(729.5)(775.2)

475.8

401.6

432.4

326.2

1,345.1

1,281.4

1,209.3

1,099.7(116.8)(196.2)(187.6)(139.6)(33.3)(164.5)(34.7)(94.9)

1,032.1

954.2

1,011.5

970.1

170.2
(5.3)

–
(426.8)––––

1,197.0

527.4

1,011.5

970.1

Creditors – amounts falling due
within one year

16b

Net current assets
Total assets less current liabilities
Creditors – amounts falling due after
more than one year
Provisions for liabilities

16c
17

Net assets excluding pension asset/(liability)
Pension asset
Pension liability

8c i
8c i

Net assets
Represented byOperating reserve excluding pension reserve
Pension reserve

18
18

257.5
164.9

188.7
(426.8)

237.0
–

204.3
–

Total operating reserve
Capital reserve
Revaluation reserve

18
18
18

422.4
771.3
3.2

(238.1)
761.8
4.0

237.0
771.3
3.2

204.3
761.8
4.0

1,196.9
0.1

527.7
(0.3)

1,011.5–

970.1–

1,197.0

527.4

1,011.5

970.1

Minority interest

The financial statements were approved by the Governors and Executive Board on 14 June 2006 and signedon their behalf by:
Michael Grade
Mark Thompson
Zarin Patel

96

Chairman
Director-General
Group Finance Director

BBC Annual Report and Accounts 2005/2006

Financial statements
Consolidated statement of total recognised gains and losses
for the year ended 31 March

Group surplus/(deficit) for the financial year
Exchange differences on retranslation of overseas subsidiaries
Unrealised gain on disposal of business
Actuarial gain on defined benefit pension schemes
The adjustment to reserveson adoption of FRS 26 relates
to the fair value of derivatives
existing at 1 April 2005 whichhave not been recognised in
the comparatives, as permitted
by the standard.

Total recognised gains and losses relating to the year
Adjustment on adopting FRS 26

Note

2006
£m

2005
£m

8c iii

3.6
1.9
–
661.1

(188.2)
(0.5)
22.8
80.9

18

666.6
2.6

(85.0)–

669.2(85.0)

UK Public
Service
Broadcasting2005£mTotal gains and losses since last annual report

Reconciliations of movement in reserves
for the year ended 31 March

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006£mSurplus/(deficit) for the financial year
Other recognised gains and losses relating to the year (net)

3.6
663.0

(188.2)
103.2

41.4
–

(16.5)–

Increase/(decrease) in reserves during the year
Adjustment on adopting FRS 26

666.6
2.6

(85.0)–

41.4–(16.5)–

Increase/(decrease) in reserves since last annual report
Opening reserves

669.2
527.7

(85.0)
612.7

41.4
970.1

(16.5)
986.6

1,196.9527.7

1,011.5

970.1

Closing reserves

BBC Annual Report and Accounts 2005/2006

97Financial statements
Consolidated cash flow statement
for the year ended 31 March

Reconciliation of Group operating deficit to net cash flow from operating activities
2006
£m

2005
£m

Group operating deficit
Depreciation and amortisation
Difference between pension charge and cash contribution
Loss on disposal of tangible fixed assets
Increase in stocks
Increase in debtors
Increase in creditors
Increase in provisions
Cash outflow on termination of operations(208.2)
197.3
135.1
2.4
(6.8)
(28.7)
47.5
77.5–(237.6)
198.6
136.8
8.8
(38.2)(43.8)
24.4
32.9
(1.7)

Net cash inflow from operating activities

216.1

80.2

2006
£m

2005
£m

216.1

80.2

19.8

13.6

Return on investments and servicing of financeInterest received
Interest paid
Interest paid on finance leases

13.5
(9.2)
(0.5)

5.2
(11.3)–Net cash inflow/(outflow) from return on investments and servicing of finance

3.8

(6.1)

Taxation
Taxation paid

(12.0)(2.0)

Capital expenditure and financial investments
Purchase of tangible fixed assets
Investment in programmes for future sale
Investment in intangible fixed assets
Repayment of loan to associate undertaking
Proceeds from the sale of tangible fixed assets(130.7)(73.6)
(0.4)
0.4
20.2

(487.7)(75.5)
(0.5)
0.3
382.6

Net cash outflow from capital expenditure and financial investments(184.1)(180.8)Acquisitions and disposals
Purchase of a subsidiary
Purchase of interest in associates and joint ventures
Proceeds from sale of operations
Proceeds from disposal of interests in associates

(0.8)
(4.1)
166.1
–

–
(7.1)
144.1
21.0

Net cash inflow from acquisitions and disposals

161.2

158.0

Net cash inflow before use of liquid resources and financing

204.8

62.9

Cash flow statement
Note

Net cash inflow from operating activities
Dividends received from joint ventures and associates

13aManagement of liquid resources
Sale/(purchase) of other liquid resources

20

41.9

(29.3)Net cash inflow/(outflow) from management of liquid resources

20

41.9

(29.3)

57.0(135.0)
(9.4)
(0.5)

20.0
(50.0)(3.2)(0.1)

Financing
Increase in loans
Repayment of loans
Capital repayment of finance leases
Repayment of loan notes98

Net cash outflow from financing

20(87.9)(33.3)

Increase in cash in the year

20

158.8

0.3

BBC Annual Report and Accounts 2005/2006

Financial statements
Statement of accounting policies

This section explains the BBC’s main accounting policies, whichhave been applied consistently throughout the year and in thepreceding year except where stated. A footnote in italics follows
some policies to explain technical aspects of the accounting
treatment in plain English.
The financial statements have been prepared in accordance withthe provisions of the BBC’s Charter and Agreement. Although
not mandatory, the BBC has in previous years chosen to follow
the accounting and disclosure provisions of the Companies Act
1985, applicable UK accounting standards and the Financial
Services Authority Listing Rules to ensure that its financial
statements were prepared on a basis consistent with thoseof UK public limited companies.
Following changes in company law, if it had continued to report as
if it were a public limited company, the BBC would have prepared
its Group financial statements in accordance with EU-adopted
International Financial Reporting Standards (IFRS) from 1 April 2005.
However, as discussed in the Financial review (see pages 92 to 94),
reporting under IFRS would be inconsistent with Government
reporting. Instead the current financial statements have been
prepared under UK GAAP as in previous years.
In line with other companies, the BBC files with Companies House
audited financial statements for all its subsidiary companies.
Basis of accounting
The financial statements are presented in accordance withUK GAAP under the historical cost accounting convention as
modified by the revaluation of certain plant, machinery, furnitureand fittings.
Adoption of new accounting standards
The BBC has adopted the following applicable UK accounting
standards for the first time in these Group accounts.
■

■

■

■

FRS 21 (IAS 10) Events after the balance sheet date.This has had
no impact on the statement of income and expenditure or thebalance sheet.
FRS 23 (IAS 21) The effects of changes in foreign exchange rates.
The principal effect of this change is that transactions are now
recorded at the prevailing exchange rate and not the forward
contract rate if a related foreign currency contract has been enteredinto.The gain or loss when the forward contract is discharged
flows directly to the statement of income and expenditure.
FRS 25 (IAS 32) Financial Instruments: Disclosure and Presentation and
FRS 26 (IAS 39) Financial Instruments: Measurement.The principal
effect of these standards has been to recognise derivative financial
instruments. As permitted under these standards the 2005
comparatives have not been restated and continue to bepresented under previously applicable accounting standards.
FRS 28 Corresponding amounts.This has had no impact on thestatement of income and expenditure or the balance sheet.

Basis of consolidation
The Group comprises:■

UK Public Service Broadcasting (the deemed parent company)
and those subsidiaries incorporated to act solely on its behalf,

notably Centre House Productions Limited, BBC Property
Limited, BBC Property Investment Limited and BBC Free
to View Limited (UK Public Service Broadcasting Group)■ BBC World Service (and its subsidiaries)■ Commercial subsidiary companies comprising BBC Commercial
Holdings Limited and its various subsidiaries (notably BBC
World Group and BBC Ventures Group – which includes
BBC Worldwide)
Unless otherwise stated, the acquisition method of accounting has
been adopted. Under this method, the results of subsidiaries acquiredor disposed of in the year are included in the consolidated statementof income and expenditure from the date of acquisition or up to thedate of disposal.
An associate is an undertaking in which the Group has a long-term
interest, usually between 20% and 50% of the equity voting rights,
and over which it exercises significant influence. A joint venture is anundertaking in which the Group has a long-term interest and overwhich it exercises joint control.The Group’s share of profits lesslosses of associates and joint ventures is included in the consolidated
statement of income and expenditure and its interest in their net
assets is included in the consolidated balance sheet except where
the BBC has no obligation to make good its share of theircumulative operating losses.
A separate statement of income and expenditure reflecting theresults of UK Public Service Broadcasting has not been presented,
as permitted by Section 230 of the Companies Act 1985 as if itwere a company.
These accounts of the Group include the results of UK Public Service
Broadcasting, BBC World Service and all other businesses controlled
by the BBC (subsidiaries) together with the BBC’s share of theresults of businesses over which the BBC has influence but notcontrol (associates) and those which the BBC jointly controls(joint ventures).
Investments in Group undertakings
Other than the BBC World Service, investments are recorded on
the balance sheet of UK Public Service Broadcasting at cost lessprovision for any impairment in value.
The funding of UK Public Service Broadcasting and of BBC World
Service is legally separate and cross-subsidisation is not permissible.
Accordingly, for the purposes of preparing UK Public Service
Broadcasting’s balance sheet, UK Public Service Broadcasting is
considered to have an investment in BBC World Service equal
to the net assets of BBC World Service.
IncomeIncome, which excludes value added tax, trade discounts andsales between Group companies, is comprised of the following
key classes of revenue, which are recognised as follows:
Television licences
Income derived from television licences is recognised when
receivable from the Department for Culture, Media and Sport.
This represents the value of licences issued in the year.The amountwhich can be paid in cash to the BBC for any year cannot exceed
the total amount voted by Parliament for that year. Any excess
between the value of licences issued and the amount voted isrecognised in the following year.

■

BBC Annual Report and Accounts 2005/2006

99

Financial statements
Statement of accounting policies■ Grant-in-Aid from the Foreign and Commonwealth Office
BBC World Service Grant-in-Aid is recognised when receivablefrom the Foreign and Commonwealth Office. It is intended to meet
estimated expenditure in the year but unexpended receipts forthe year, within predetermined limits, are not liable to surrender.

■ Provision of equipment, facilities and services
With the exception of long-term contracts, income is recognised
when the equipment, facilities and services are provided to customers.

For long-term contracts, the amount of profit attributable to thestage of completion is recognised when the outcome of thecontract can be foreseen with reasonable certainty.Turnover forsuch contracts is stated at the cost appropriate to their stage ofcompletion plus attributable profits, less amounts recognised in prioryears. Provision is made for any future losses as they are foreseen.
■ Provision of programme making facilities and services
Recognised on provision of service.

■ Distribution and advertising income
Recognised on provision of service.

■ Licence fees from international television programme sales
Recognised at the start of the licence period unless the programme
rights have not been delivered by that date, in which case, revenue
is recognised on delivery of the rights.

Sale of promotional merchandise and income from publishing
Recognised at the time of delivery or on provision of service. Sales
are stated after deduction of the sales value of actual and estimatedreturned goods.
■

The distinction between the various income sources is important.The BBC
is careful not to cross-subsidise commercial, UK Public Service Broadcastingor BBC World Service activities. More information on these BBC fair trading
requirements and policies can be found on pages 76 to 78 of this report.
Foreign currency translation
Transactions in foreign currencies are translated into sterlingat the rates of exchange ruling at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies
are translated into sterling at the rates of exchange ruling at
31 March. Surpluses and deficits arising from the translation ofassets and liabilities at these rates of exchange, together withexchange differences arising from trading, are included in thestatement of income and expenditure.
The profit and loss accounts and cash flows of overseas subsidiaries
are translated into sterling at average rates for the year. Exchange
differences arising on consolidation from the retranslation of the
opening net assets of overseas subsidiaries and any related longterm foreign currency borrowings together with the differences
arising when the profit and loss accounts are retranslated at therates ruling at the year end, are taken to the statement of total
recognised gains and losses.
As these financial statements are prepared in sterling, the BBC’s
foreign currency transactions and balances must be translated, atappropriate exchange rates, into sterling. This policy states how thoseretranslations are included in the financial statements and is consistent
with the methods used by many companies.
100

Pension costs
The BBC operates both defined benefit and defined contribution
schemes for the benefit of employees.
The amounts charged as expenditure for the defined contribution
schemes represent the contributions payable by the BBC for theaccounting periods in respect of these schemes.
The defined benefit schemes, of which the majority of staff are
members, provide benefits based on final pensionable pay.The assetsof the BBC’s main scheme are held separately from those of
the Group.
Pension scheme assets are measured using market values. Pension
scheme liabilities are measured using a projected unit methodand discounted at the current rate of return on a high quality
corporate bond of equivalent term and currency to the liability.
The pension scheme surplus (to the extent that it is recoverable)or deficit is recognised in full.The movement in the scheme surplus/
deficit is split between operating charges, finance items and, in thestatement of total recognised gains and losses, actuarial gains
and losses.
Amounts are charged to expenditure so as to spread the costof pensions over employees’ working lives with the BBC.
The BBC pension scheme is a Group wide scheme and UK PublicService Broadcasting and its subsidiary undertakings are unable
to identify their shares of the underlying assets and liabilities of thescheme on a reasonable and consistent basis.Therefore as requiredby FRS 17, Retirement benefits, UK Public Service Broadcastingaccounts for the scheme as if it were a defined contribution scheme.
As a result the expenditure charged under FRS 17 for UK PublicService Broadcasting represents the contributions payable in the year.
On retirement, members of the BBC’s main pension scheme are paid theirpensions from a fund which is kept separate from the Group.The BBC
makes cash contributions to that fund in advance of members’ retirement.
Research and development
Research and development expenditure is written off as incurred.
Intangible fixed assets
Goodwill
Purchased goodwill (representing the excess of the fair value ofthe purchase consideration plus any related costs of acquisition
over the fair value attributable to the separable net assets acquired)arising on acquisition of a subsidiary or business, is capitalised andamortised on a straight line basis over its useful economic life
(usually 20 years), subject to reviews for impairment. On thesubsequent disposal or termination of a business, the surplus ordeficit is calculated after charging the unamortised amount of any
related goodwill. As is permitted by FRS 10 Goodwill and intangible
assets goodwill arising in periods up to 1 April 1998 remains offset
against the operating reserve. On disposal, goodwill previously
written off against reserves is transferred to the statement ofincome and expenditure for the year.
Goodwill arises when the BBC pays more for a business than the sumof the business’ net assets acquired, representing the fact that the Group
places more value on the business entity as a whole (usually due to
expected synergies or earning potential of that business). As such, this

BBC Annual Report and Accounts 2005/2006

premium is treated as being an asset in its own right and held on theGroup’s balance sheet, with a presumed economic life of 20 years.
As with any other asset, the profit or loss on sale or disposal(in this case sale/disposal of the business) is calculated after writing
off the unamortised amount still held on the Group’s balance sheet.
Other intangibles
Other intangibles are capitalised and amortised on a straight line
basis over their useful economic life (usually 2–4 years) subject toreview for impairment.
Tangible fixed assets
Expenditure on fixed assets is capitalised together with incremental
internal direct labour costs incurred on capital projects.Tangible fixed
assets are stated in the balance sheet at cost less accumulated
depreciation and any provision for impairment.
UK Public Service Broadcasting’s plant and machinery is statedat the estimated current replacement cost of the assets, as at
31 March 1993, adjusted for remaining service potential, or cost
if acquired later, less accumulated depreciation.
BBC World Service’s plant and machinery and furniture and fittings
are stated at the estimated current replacement cost of the assets,
as at 1 April 1996, as adjusted for remaining service potential, or
cost if acquired later, less accumulated depreciation.
There is no material difference between the net book value ofthese tangible fixed assets and their value as determined on an
historical cost basis.
Depreciation is calculated so as to write off the cost or valuation,less estimated residual value, of fixed assets on a straight line basis
over their expected useful lives. Depreciation commences fromthe date an asset is brought into service.
The BBC’s useful lives for depreciation purposes for the principal
categories of assets are:Land and buildings
Freehold land
Freehold and long-leasehold buildings
Short-leasehold land and buildings– not depreciated– 50 years– unexpired lease term

Plant and machinery
Computer equipment– three to five years
Electrical and mechanical infrastructure – ten to 25 years
Other– three to ten years
Furniture and fittingsof investment in programmes for future sale is charged tothe statement of income and expenditure over the estimatedaverage marketable life of the programme genre which is
generally between two and ten years.The cost and accumulated
amortisation of investment in programmes for future sale are
reduced by programmes which are fully written off.
The cost of programmes for sale is charged to the statement ofincome and expenditure to match the expected timing of income
from future sales.
Impairment of fixed assets
The Group reviews the carrying amounts of its fixed assets when
there is an indication that those assets may have suffered an
impairment loss.
If the recoverable amount of an asset (or cash generating unit)
is estimated to be less than its carrying amount, the resulting
impairment loss is recognised in the statement of income andexpenditure immediately.
Originated programme stocks and work in progress
Originated programme stocks and work in progress, including
those commissioned from independent producers, are statedat the lower of cost and net realisable value. With the exceptionof the costs of prepaid repeats of independent programmes, thefull stock value is written off on first transmission.
Cost includes all direct costs, production overheads and a
proportion of other attributable overheads.
Programme development costs are expensed to the statementof income and expenditure until such time as there is a strong
indication that the development work will result in a commissioned
programme when any further costs are capitalised as work in progress.
Net realisable value is based upon arm’s length contract prices
negotiated between the channel controllers and programme makers.
Acquired programmes and film stocks
The costs of acquired programmes and film stocks are written
off on first transmission except to the extent that further
showings are likely in the foreseeable future, when they are
written off according to their expected transmission profile.
Assets and liabilities relating to acquired programmes arerecognised at the point of payment or commencement of thelicence period, whichever is earlier. Agreements for the futurepurchase of programmes whose licence period has notcommenced and where there has been no payment by thebalance sheet date are disclosed as purchase commitments.

– three to ten years

The BBC has revalued its assets once, when the internal market was
introduced, but has chosen not to revalue them on an ongoing basis.
This reflects the fact that they are used within the BBC rather thanbeing held for resale or their investment potential. Assets are therefore
included at the amount they cost when purchased or constructed(in either case less subsequent depreciation).
Investment in programmes for future sale
Investment in programmes for future sale is stated at cost,
after writing off the costs of programmes that are consideredirrecoverable, less accumulated amortisation. Amortisation

Other stocks
Raw materials and other physical stocks are stated at the lowerof cost and net realisable value.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation arising from past
events and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions that are payable
over a number of years are discounted to net present value atthe balance sheet date using a discount rate appropriate to theparticular provision concerned.

BBC Annual Report and Accounts 2005/2006

101

Financial statements
Statement of accounting policies

Deferred tax
Deferred tax is computed under the liability method. Full provision,
without discounting, is made in respect of timing differences between
certain items in the financial statements and their treatment for
taxation purposes at the balance sheet date except as otherwise
required by FRS 19 Deferred tax. Deferred tax assets are recognised
to the extent that it is regarded as more likely than not that they will
be recovered.

on demand. Liquid resources are current asset investments
which are readily convertible into known amounts of cash at,
or close to, their carrying values: they comprise money market
deposits and liquidity funds with a notice period in excess of
one working day.

Deferred tax is corporation tax which is not payable at a specific time
but which is expected to become payable in the future.

Financial instruments
The Group does not enter into speculative derivative contracts.
However some derivative financial instruments are used with aview to managing the BBC’s exposure to fluctuations in foreign
currency exchange rates and interest rates.

Operating leases
Operating lease rentals are written off on a straight line basis over
the term of the lease.

Derivative financial instruments are initially recognised at costand are subsequently remeasured at fair value with movements
recorded in the statement of income and expenditure.

An operating lease is a lease in which the lessee has not taken on therisks and rewards of owning and operating the asset. The lessee – theBBC – has not acquired an asset but is hiring it, so the hire charge isincluded in the BBC’s costs.

A limited number of derivative financial instruments are used
to hedge the Group’s exposure to fluctuations in interest rates.
The fair value of interest swaps is the estimated amount that theGroup would receive or pay to terminate the swap at the balance
sheet date, taking into account current interest rates and thecurrent creditworthiness of swap counterparties.

The BBC receives operating lease income which is also accounted
for on a straight line basis over the term of the lease.
Finance leases
Assets acquired under finance leases are included within fixed
assets at the total of the lease payments due over the life of thelease discounted at the rate of interest inherent in the lease.
The same amount is included in creditors. Rental payments areapportioned between the finance element, which is charged in thestatement of income and expenditure and the capital element,
which reduces the lease creditor.
A finance lease is a lease that transfers substantially all the risks andrewards of owning and operating an asset to the lessee. Effectively thelessee owns the asset and has financed it by borrowing, so the asset
and borrowing are included separately in the balance sheet.
Reserves
Each year an amount equivalent to the costs expended by theHome and World Services on capital assets over and above
depreciation, adjusted for disposals, is transferred to capital reserve
so that, at the balance sheet date, the amount of the capital reserve
is equivalent to the historical cost net book value of Home andWorld Services’ fixed assets.
The revaluation reserve reflects the difference between the net bookvalue of fixed assets of UK Public Service Broadcasting and BBC
World Service at historic cost compared with their revalued amount.
The operating reserve is the accumulated surplus of the income
and expenditure account to date.
The pension reserve represents the net surplus or liability of theGroup’s defined benefit pension schemes.
The BBC is careful not to mix UK Public Service Broadcasting and
BBC World Service reserves. Hence BBC World Service reserves areshown separately in the notes to the financial statements.

Some hedging contracts are undertaken in order to limit theGroup’s exposure to foreign exchange fluctuations.The fair valueof foreign currency forward contract rates is determined by using
forward exchange market rates at the balance sheet date.
The Group does not apply hedge accounting but instead allows
the movement on the fair values of the hedging contracts to flow
to the statement of income and expenditure as it arises.
The Group’s loans are stated at amortised cost using the effective
interest rate.
Disclosure of the Group’s loans and other financial assets andliabilities is provided within Note 23 to the financial statements.
The BBC’s derivative financial instruments comprise forward exchange
contracts and interest rate swaps.
Forward exchange contracts provide certainty of future expenses andincome in a foreign currency by fixing the exchange rate rather than
waiting for the prevailing exchange rate at the time of the transaction
or payment. The BBC also enters into interest rate swaps to effectively
swap a floating rate loan into a fixed rate loan, again to provide morecertainty of interest payments.
Depending on how exchange rates and interest rates move between
the time the Group enters into the transaction and the year end, thesederivatives can either be profitable (‘in the money’) or loss-making intheir own right. However, the rationale in entering into these derivatives
is not to profit from currency markets or interest rate fluctuations,but to provide stability to the BBC’s cashflows. The movements relating
to these derivatives (ie where they are either in profit or loss-making),
are taken to the Group’s statement of income and expenditure forthe year.

Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cashin hand and deposits repayable on demand, less overdrafts payable
102

BBC Annual Report and Accounts 2005/2006

Financial statements
Notes to the financial statements

Note 1 provides analysis of
the different business areas
within the BBC.

1 Analysis of income, surplus/(deficit) and net assets
1a Analysis of income, surplus/(deficit) and net assets by activity
UK Public
Service
Broadcasting
Group
£m

BBC
World
Service£m

Commercial
Businesses
£m

Total
£m

2006
Total income
Less: Intra-Group income

3,242.1(117.3)

260.5
(0.3)

976.6
(127.1)

4,479.2(244.7)

Total external income
Less: Share of joint ventures

3,124.8
–

260.2
–

849.5
(229.5)

4,234.5(229.5)

1b,d,g,h3,124.8

260.2

620.0

4,005.01e,h(105.7)

(1.9)

206.9

99.3

Note

UK Public Service
Broadcasting Group (referred
to as ‘Home Services’ within
the BBC Charter) comprises
the UK Public Service
Broadcasting operations andthose subsidiary companies
incorporated to act solely
on behalf of those public
service operations.
BBC World Service
comprises broadcasting andmedia monitoring activities.
Commercial Businesses
comprise businesses which
generate external income
from exploitation of theBBC’s programmes, otherassets and skill base.

Group income
Surplus/(deficit) before interest, taxationand non-cash pension costs
Defined benefit pension scheme– additional operating costs*†– other net finance income*Net interest receivable(135.1)65.7
1.5

Surplus before taxation and minority interest
Net assets (excluding pension asset)

31.4
1f,h

730.5

158.6

143.0

Net pension asset*†

1,032.1
164.9

Net assets

1,197.0

2005
Total income
Less: Intra-Group income

3,084.8(120.1)

247.7
(0.5)

1,090.3(305.1)

4,422.8(425.7)

Total external income
Less: Share of joint ventures

2,964.7
(0.9)

247.2
–

785.2
(160.9)3,997.1(161.8)

1b,d,g,h2,963.8

247.2

624.3

3,835.3

1e,h(194.5)7.1

91.4(96.0)

Group income(Deficit)/surplus before interest, taxationand non-cash pension costs
Defined benefit pension scheme– additional operating costs*†– other net finance income*Net interest payable(136.8)65.4(6.1)

Deficit before taxation and minority interest
Net assets (excluding pension liability)(173.5)
1f,h

689.2

160.1

104.9

954.2

Pension liability*†(426.8)

Net assets

527.4*In accordance with FRS 17 these items are not split between business classes because they are managed centrally across theGroup and it is not possible to allocate them on a reasonable and consistent basis†The actual employer cash contribution to the defined benefit pension scheme is included in the surplus/(deficit) before interest,
taxation and non-cash pension costs of each entity.The additional operating cost is the cost to the Group over and above thesecash contributions

BBC Annual Report and Accounts 2005/2006

103

Financial statements
Notes to the financial statements

The income from licences
represents the value of all
licences issued in the year.

Other income includes
the provision of content
and services to overseas
broadcasters, concert ticket
sales and exploitation of
the programme archive.

1b UK Public Service Broadcasting Group income
2006
£m

2005
£m

Colour
Monochrome
Concessionary
Over 75s
Quarterly payment scheme premium

2,622.3
1.8
0.9
459.2
16.4

2,489.2
2.0
0.9
432.3
15.9

Total licence fee income
Other income

3,100.6
24.2

2,940.3
23.5

Total external income

3,124.8

2,963.8

Licence fee income

During the year 3.3 million (2005 3.2 million) colour licences were issued under the quarterly payment
scheme at a premium of £5 each (2005 £5).
Households in which one or more persons over the age of 75 reside, as their primary residence, are entitledto a free licence.The BBC is reimbursed for these free licences by the relevant Government departments.

Licences in force are thosewhich are still valid as at
31 March each year.

Licence fees are set by the
Department for Culture,
Media and Sport.

Licences in force

2006
Numberm

2005
NumbermColour
Monochrome
Over 75s
Concessionary

20.8
0.1
3.9
0.2

20.6
0.1
3.8
0.2

25.0

24.7

2006
£

2005
£

126.5042.00
5.00

121.0040.50
5.00

Licence fees

Colour
Monochrome
Concessionary

From 1 April 2006 the colour and monochrome licence fees were increased to £131.50 and £44
respectively.The concessionary licence remained at £5.
1c Geographical analysis of UK Public Service Broadcasting GroupUK Public Service Broadcasting Group income and deficit arise in the UK.The net assets used by these
operations are located in the UK.
1d BBC World Service income
Other income is generated
from the sale of programmes,
co-production deals,
publishing activities and theprovision of media
monitoring services.

2006
£m

2005
£m

Grant-in-Aid
Subscriptions
Other income

239.1
15.8
5.3

225.1
16.7
5.4

Total external income

260.2

247.2

2006
£m

2005
£m

Broadcasting
BBC Monitoring

0.7
(2.6)

7.7
(0.6)

Total (deficit)/surplus before interest and taxation

(1.9)

7.1

1e BBC World Service (deficit)/surplus before interest and taxation by activity

104

BBC Annual Report and Accounts 2005/2006

1f Geographical analysis of BBC World Service
BBC World Service income, operating expenditure and (deficit)/surplus arises primarily in the UK.
Location of BBC World Service net assets:

2006
£m

2005
£m

UK
Overseas

65.8
92.8

66.2
93.9

Net assets

158.6

160.1

2006
£m

2005
£m

Children’s, new media and home entertainment
Television sales
Magazines
Entertainment and news television channels
Provision of playout and channel management services
Provision of programme making facilities and services
Provision of technology services
Less intra-Group income

133.5
193.5
152.1
112.1
31.5
124.4
–
(127.1)

161.0
158.2
163.5
90.8
108.9
135.1
111.9
(305.1)

Total external income

620.0

624.3

1g Analysis of Commercial Businesses’ income by activity

1h Geographical analysis of Commercial Businesses
This table shows where thecustomers of Commercial
Businesses are based.

UnitedKingdom£mAmericas£mRest ofthe world
£m

Total
£m

2006
External income by destination

302.4

147.6

170.0

620.0

Surplus before interest and taxation

167.5

7.6

31.8

206.9

Net assets

106.8

35.9

0.3

143.0

2005
External income by destination

358.9

115.6

149.8

624.3

Surplus before interest and taxation

69.7

4.1

17.6

91.4

Net assets

75.9

28.5

0.5

104.9

All commercial income originates in the UK as this is where rights for exploitation and the skills and servicesof the Commercial Businesses are developed.

BBC Annual Report and Accounts 2005/2006

105

Financial statements
Notes to the financial statements

2 Operating expenditure
2a Analysis of operating expenditure by activity

Note

UK Public Service Broadcasting GroupBBC World Service*
Commercial Businesses
Non-cash pension scheme operating costs**

2b
2c
2d

Total
2006
£m

Total
2005
£m

3,236.7
262.1
579.3
135.1

3,107.7
240.1
588.3
136.8

4,213.2

4,072.9*BBC World Service expenditure of £262.1million (2005 £240.1million) excludes £0.3million (2005 £0.5million) of expenditureon the provision of services to other BBC Group companies**In accordance with FRS 17 the non-cash operating costs are not split between the business activities as it is not possible to do
this on a reasonable and consistent basis

2b UK Public Service Broadcasting Group expenditure
Note

Analogue services
BBC One
BBC Two
National and regional television
National, regional and local radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five Live

Digital services
The CBBC Channel, CBeebies
BBC Three
BBC News 24
BBC Parliament
BBC FourInteractive television (BBCi)
1Xtra
BBC Radio Five Live Sports Extra
6 Music
BBC 7
BBC Asian Network
bbc.co.uk
BBC jam (formerly known as Digital Curriculum)Transmitted programme spend

(i)
(i)
(ii)

(i)

(iii)

(iv)

(v)
(vi)

2006
£m

2005
£m

840.4
374.1
228.6
141.3
17.7
24.1
31.1
71.4
48.9

872.9
374.5
213.5
142.2
17.8
23.8
32.0
71.3
53.8

1,777.6

1,801.8

63.2
92.9
23.1
1.9
46.9
18.2
5.7
1.6
4.4
5.0
7.6
72.3
35.5

49.7
92.9
22.9
2.2
41.1
17.1
5.7
1.6
4.5
4.8
5.4
69.2
8.3

378.3

325.4

2,155.9

2,127.2

table continues

106

BBC Annual Report and Accounts 2005/2006

2b UK Public Service Broadcasting Group expenditure continued
2006
£m

2005
£m

89.5
60.4
19.0
40.3
23.7
12.1
93.3

89.5
57.2
17.9
49.6
24.5
16.0
84.2

338.3

338.9

2,494.2
311.5

2,466.1
281.6

2,805.7

2,747.789%90%(viii)

153.4
166.9

152.0
157.3

(ix), 4c
(x)

320.3
106.7
4.0

309.3
50.7
–

3,236.7

3,107.7

Note

Programme related spend
Newsgathering
Collecting society
Orchestras and performing groupsMarketing, press and publicity
On-air trailsMarket research and consumer services
Libraries, helplines, development and one-off events

Total programme spend
Overheads excluding restructuring(vii)

Total output spend
Percentage of output spend on programmes
Licence fee collection costs
Transmission costs
Exceptional restructuring costs
Digital UK costs
Total UK PSB expenditure(i) Spend on BBC One and BBC Radio Five Live was higher in 2005 due to coverage of the Olympics and Euro 2004.
(ii) National and regional television spend increased in 2006 to support the BBC’s policy of investment in local television
initiatives and local politics programming.
(iii) Spend on the children’s channels has increased due to proportionally more quality content, particularly drama, being
premiered on The CBBC Channel and CBeebies, rather than BBC One or BBC Two.
(iv) Spend on BBC Four reflects the continuation of the channel’s investment programme in original output, including drama
and comedy.
(v) Increased costs were incurred by BBC Asian Network on new refurbished facilities and the first phase of a new strategy
which will see a strengthening schedule with increased investment in journalism.
(vi) BBC jam, formerly known as the Digital Curriculum, launched in January 2006 with content available in four subject areas.
The service will continue to expand over the next two and a half years, with content covering a range of subjects acrossthe curriculum and Key Stages being made available at regular intervals.
(vii) Overheads are the costs associated with the provision of physical infrastructure and support services across the BBC, which
include the cost of accommodation, technology, finance and human resources.The proportion of these costs which are
directly attributable to programme making are included within total programme spend, whilst the costs of services provided
across the BBC as a whole are shown as overhead spend. In 2000 the BBC adopted a target to increase the proportion
it spends on programmes, in relation to its total output spend. Output spend excludes licence fee collection costs,
transmission costs, exceptional restructuring costs and Digital UK costs.The BBC targeted to increase the proportion of spend
on programming to 85% which was achieved in 2003, and in 2006 the proportion of output spend incurred on programmingwas 89%. Overheads in 2006 are higher than 2005, as a result of one-off rebates in National Insurance and property rates
in 2005.
(viii) Of the transmission costs, £77.2million relates to analogue services (2005 £76.7million) and £89.7million to digital services(2005 £80.6million).
(ix) Restructuring costs include those costs relating to the change programme occurring within the BBC which will deliver£355million savings annually from 2008/2009.
(x) Digital UK costs represent the BBC share of the running costs and marketing expense for Digital UK, the company that will
drive switchover in the UK, in line with Government strategy.

BBC Annual Report and Accounts 2005/2006

107Financial statements
Notes to the financial statements

BBC World Service
expenditure excludes
expenditure on intra-Group
activities.

2c BBC World Service expenditure
2006
£m

2005
£m

Radio
Monitoring
Transmission and distribution costs
Internet activity

178.4
26.5
42.8
14.4

159.1
25.2
42.3
13.5

Total

262.1

240.1

BBC World Service expenditure includes £12.4million of exceptional restructuring costs (see Note 4c).
The expenditure shown forCommercial Businesses
relates only to external
income and excludes
expenditure relating to sales
within the BBC.

2d Commercial Businesses’ expenditure

Cost of sales
Distribution costs
Administrative and other costs
Amortisation of programme investment
Total

Note

2006
£m

2005
£m

12

325.8
149.5
21.7
82.3

323.5
136.9
48.9
79.0

579.3

588.3

3 Operating deficit
The operating deficit before interest and taxation is stated after charging/(crediting) the following items:

Payments under operating leases– land and buildings– plant and machinery– other
Research and development
Programme development
Depreciation– owned assets– leased assets
Loss on disposal of tangible fixed assets*
Amortisation of investment in programmes for future sale
Amortisation of intangible fixed assets
Net exchange differences
Fair value losses on embedded derivatives
Fair value gains on forward foreign currency contracts
Auditors’ remuneration (KPMG LLP)
– financial audit – UK Public Service Broadcasting– other– further assurance services– tax advisory services– other non-audit services
Fair trading auditors’ remuneration (PricewaterhouseCoopers LLP)

2006
£m

2005
£m

60.8
4.3
12.5
16.2
31.7

59.5
13.2
10.2
18.8
29.2

107.1
6.5
2.4
82.3
1.4
(0.5)
5.1
(4.3)

113.9
1.7
8.8
79.0
4.0
(2.8)
–
–

0.7
0.5
0.3
0.3
0.4
0.4

0.6
0.5
0.4
0.4
0.3
0.4

*Loss on disposal of tangible fixed assets represents adjustments to depreciation on disposals in the ordinary course of business.
Significant disposals are disclosed separately in Note 6

108

BBC Annual Report and Accounts 2005/2006

4 Employees and remuneration
4a Persons employed
The average number of persons employed in the year was:Average for the year
2006
Number

2005
NumberUK Public Service Broadcasting
BBC World Service
Commercial Businesses

18,8602,367
4,150

19,6472,347
5,270Group total

25,37727,264

Within the averages above, 2,981 (2005 3,414) part-time employees have been included at their full-time
equivalent of 1,717 (2005 1,593).
In addition to the above, the Group employed an average full-time equivalent of 823 (2005 785) persons
on a casual basis and the BBC Orchestra and BBC Singers, employed on programme contracts, totalled 382(2005 378) full-time equivalents.
On 31 July 2005 the equivalent of 1,056 full-time employees transferred to Red Bee Media Limited as partof the sale of BBC Broadcast Limited.This transfer is reflected in the average for 2006.
4b Staff costs
Note

Salaries and wages
Social security costs
Pension costs– main scheme (defined benefit)– other schemes
Redundancy costs

8c ii
8c ii
4c

Comprising:
UK Public Service Broadcasting
BBC World Service
Commercial Businesses
Main pension scheme additional operating cost (defined benefit)*

2006
£m

2005
£m

988.4
88.4

1,038.6
95.1

184.9
1.1
129.5

176.8
1.6
61.5

1,392.3

1,373.6

986.9
100.6
169.7
135.1

909.9
84.3
242.6
136.8

1,392.3

1,373.6*The actual employer cash contributions to the defined benefit pension scheme are borne by each business.The additional
operating cost is the cost to the Group over and above these contributions. It is not possible to allocate this to each businesson a reasonable and consistent basis

4c Restructuring costs
Note

Exceptional redundancy costs:– UK Public Service Broadcasting– BBC World Service

2b

Non-exceptional redundancy costs:– BBC World Service– Commercial Businesses

4b

2006
£m

2005
£m

106.7
12.4

50.7
–

119.1

50.7

3.9
6.5

3.0
7.8

10.4

10.8

129.5

61.5

Exceptional redundancy costs relate to the change programme occurring within UK Public Service
Broadcasting and the strategic review of BBC World Service.
BBC Annual Report and Accounts 2005/2006

109

Financial statements
Notes to the financial statements

4d Remuneration of the Board of Governors and Executive Board
The emoluments of the Governors and of the Executive Board members are disclosed on page 88
in the Governors’ remuneration report.
5 Profit on sale and termination of operations
Note

Profit on sale of BBC Broadcast Limited
Profit on sale of BBC Technology Holdings Limited
Profit on disposal of learning business
Loss on termination of operations
Profit on disposal of children’s book businessProfit on sale and termination of operations

19
19

2006
£m

2005
£m

108.8
15.2
1.7
(0.5)
–

–
32.4
–
(4.6)
0.4

125.2

28.2

On 31 July 2005, the Group sold BBC Broadcast Limited, a wholly owned subsidiary, for £166.0million
consideration to Creative Broadcast Services Limited, a company owned by Macquarie Capital AllianceGroup and Macquarie Bank Limited (see Note 19). BBC Broadcast Limited provided playout and channel
management services.
On 30 September 2004 the Group sold BBC Technology Holdings Limited to Siemens Business Services
Limited. A profit of £32.4million was recorded in 2005 after providing £21.1million for the estimated pension
liability in respect of the expected number of BBC Pension Scheme members transferring to Siemens Business
Services Limited. During the year, after confirmation of the actual staff transferred from the BBC to the
Siemens pension scheme the value of the pension liability was confirmed as £5.9million, resulting in a further
profit of £15.2million.
In October 2005 BBC Worldwide entered into an agreement with Pearsons Education to form a partnershipnamed BBC Active. In return for the transfer of the assets of its learning division to the partnership, BBC
Worldwide acquired a 15% share in the new partnership together with cash of £6.6million (see Note 19).
The Group is accounting for its investment as an associate undertaking.
In August 2005, BBC Worldwide announced its intention to terminate its teacher learning business, which
maintained a learning website. During the year ended 31 March 2006 termination costs totalling £0.5million
were charged to the profit and loss account, of which £0.3million was in respect of the write off of assets
held at 31 March 2005.The balance of £0.2million comprised the cash costs of exiting the business.
During the prior year BBC Worldwide Limited terminated its multimedia publishing business whichdeveloped and marketed gaming titles for Playstation, Xbox and Gameboy platforms.This resulted intermination costs of £2.7million of which £1.4million comprised the cash costs of exiting the business and£1.3million comprised the write-down of stocks held at 31 March 2004.
In July 2004 the Group decided to terminate the operations of BBC Vecta Limited.This resulted in a loss ontermination of business of £1.9million of which £0.3million comprised cash termination costs.
6 Profit/(loss) on disposal of fixed assets
2006
£m

2005
£m

Disposal of music publishing rights
Regional properties
Other properties
White City site

9.3
1.5
5.2
–

–
19.4
–
(62.5)

Profit/(loss) on disposal of fixed assets

16.0(43.1)In May 2005 BBC Worldwide completed the sale of its current catalogue of music publishing rights held
within Investment in programmes for future sale. Consideration of £10.3million was received, with a profitof £9.3million. A cash advance against the deal was received in March 2005.

110

BBC Annual Report and Accounts 2005/2006

In 2005 the BBC entered into a sale and leaseback of regional properties; 20 regional properties were
disposed in 2005 realising a profit of £19.4million. In 2006, two further regional properties were disposedin this way realising a profit of £1.5million. In 2006 the BBC also disposed of Melbourne House, theHippodrome and Motspur Park properties realising a combined profit of £5.2million.
In the prior year the BBC changed the terms on which it occupies the White City site.This involved anumber of discrete legal steps, including: purchase of the freehold of the White City site from the BBC’s joint
venture with Land Securities Trillium (LST); cancellation of the existing lease on the White City site and theWhite City Development Partnership capital; and the sale and leaseback of the White City site with a new
third party investment vehicle.
The BBC considers that the substance of these discrete steps is that they formed part of a single property
related transaction.This gave rise to a net charge to the income and expenditure account in the year of£62.5million, comprising a £1.5million loss on disposal of the White City site, £8.5million accelerated
amortisation of goodwill in the property partnerships and £52.5million from the accelerated amortisationof balances previously shown in long-term prepayments.There was no cash effect from this accelerated
amortisation.The BBC expects that the charge recorded in 2005 will be more than compensated in futureyears through reduced rental payments.
7 Interest
7a Interest receivable and similar items
2006
£m

2005
£m

13.5

5.2

2006
£m

2005
£m

Fair value losses on interest rate swaps
Interest payable on bank and other loans
Finance charges payable in respect of finance leases

(2.3)
(9.2)
(0.5)

–
(11.3)–

Interest payable and similar items(12.0)(11.3)

Interest receivable
7b Interest payable and similar items

8 Pensions
8a Group pension schemes
The Group operates several pension schemes.The BBC Pension Scheme (the BBC’s most significant
scheme) and a small unfunded scheme (which is closed to new members) are contributory defined
benefit schemes. Additionally the Group Personal Pension Scheme and other small schemes are defined
contribution schemes. Note 8b describes the BBC Pension Scheme and Note 8c explains all the amounts
included in the financial statements.
8b BBC Pension Scheme
The BBC Pension Scheme is the main pension scheme of the Group and covers the majority of employees.
This scheme provides salary related benefits on a defined benefit basis funded from assets held in separate
trustee-administered funds.
The pension scheme trustees manage the scheme in the short, medium and long-term. They makefunding decisions based on valuations which take a longer term view of the assets required to fundthe scheme’s liabilities.
Valuations of the scheme are performed by Watson Wyatt, consulting actuaries. Formal valuations areundertaken every three years, and interim updates of the latest formal valuation are carried out for eachfinancial year end.The most recent formal valuation was carried out as at 1 April 2005 and, consistent withchanges in the valuation methodology used by other pension schemes, the actuarial valuation of the assets
has changed and has been carried out using a market-based method.The previous formal valuation (April 2002)
and its interim updates, including March 2005, were carried out on the basis of an assessed value method(see Note 8b iv).

BBC Annual Report and Accounts 2005/2006

111

Financial statements
Notes to the financial statements

The maturity of a scheme
provides an indication of the
cash requirements of thescheme and the likely
attitude of the trustees torisk within their investment
policy.The more mature ascheme, the more likely thattrustees will favour low risk
investments.

8b i Scheme membership analysis and maturity profile

Contributors
Pensioners
Dependants
Deferred pensioners

2006
Number

2005
Number

2004
Number

19,864
16,803
3,676
16,89021,093
16,567
3,622
16,241

21,426
16,302
3,555
14,8648b ii Funding the scheme
The scheme has shown an actuarial surplus for many years which has allowed both the BBC and the scheme
members to pay contributions at reduced rates.
As a result of the 2005 market-based valuation by Watson Wyatt, it has been agreed between the Group andthe trustees that employer contributions will increase to 7.5% on 1 April 2006 (with employee contributions
rising to 6% in summer 2006) and then rise to 17.3% on 1 April 2007 with employee contributions rising to
7.5% on the same date.This is part of the ongoing consultation process with BBC staff on the proposed changes
to the pension scheme. Ordinarily the next formal actuarial vaulation would be performed on 1 April 2008,
however, given the current consultation, the next formal valuation has been brought forward to 1 April 2007.
The position will be reviewed again once the results of the 1 April 2007 valuation are known.
Projections
2008
%

2007
%

2006
%

2005
%

2004
%

2003
%

17.3
7.5

7.5
5.5/6.0

6.0
5.5

5.5
5.0

5.0
4.5

4.5
4.5

Underlying cost of scheme to BBC
as % of pensionable salaries*
17.3

19.3/18.8

19.3

19.0

19.5

20.4

Employer
Employee*Excludes the cost effectively paid for by the employee

8b iii Scheme cash flows (day-to-day liquidity)
In 2006 cash outflows from the pension scheme exceed its cash inflows, however, this includes an outgoingof £29.8million due to transfers out relating to the sale of BBC Technology.
2006
£m

2005
£m

2004
£m

Contributions (employer and employee)
Investment income

112
189

99
187

90
167

Cash inflows
Payments of pensions and transfers out
Expenses

301
(275)
(29)

286
(239)
(22)

257
(220)
(20)

(3)

25

17

Net cash inflow

112

BBC Annual Report and Accounts 2005/2006

This note considers
whether the scheme’s
assets are sufficient tocover the scheme’s liabilities.

8b iv Ability to meet long-term commitments and scheme financial position
The most recent formal valuation (as at 1 April 2005) shows a surplus of £13.0million (with assets sufficient
to cover just over 100% of the benefits due to members).

The FRS 17 valuation
takes assets at their market
value and discounts theaccrued liabilities byreference to the discountrate of an AA rated
corporate bond.

FRS 17 valuation

An actuarial valuation assumes
the scheme will continue forthe foreseeable future.

2006
£m

2005
£m

2004
£m

2003
£m

2002
£m

7,846
(7,676)

6,342(6,764)5,880(6,312)

4,903(5,973)

6,219(5,254)

170

(422)

(432)

(1,070)965

Percentage by which scheme assets cover liabilities 102%

94%

93%

82%

118%

2005
Final
£m

2005
Interim£m

2004
Interim£m

2003
Interim
£m

2002
Final
£m

6,406
(6,393)

6,038(5,764)

5,668(5,525)

5,496(5,229)5,392(4,951)

13

274

143

267

441

100%

105%

103%

105%

109%

Scheme assets (Note 8b v)
Scheme liabilities (Note 8b vi)
Surplus/(deficit)

Actuarial valuation*

Scheme assets (Note 8b v)
Scheme liabilities (Note 8b vi)
Surplus
Percentage by which scheme assets cover liabilities*For the years 2002 to 2005 interim, the actuarial valuation of assets was carried out on an assessed value method which values
assets by projecting the income that will be generated by the assets, and discounts both assets and liabilities by reference to a
prudent long-term average discount rate which is consistent with the scheme’s asset portfolio

The 2005 final actuarial valuation has been carried out using a market-based method which takes assets
at their market value on the assessment date and discounts the liabilities by reference to a discount rateconsistent with market conditions at that time and the scheme’s asset portfolio.
A deferred tax asset or liability will not arise for the Group because most of the Group’s public service
activity is not subject to taxation.

BBC Annual Report and Accounts 2005/2006

113

Financial statements
Notes to the financial statements

Where FRS 17 values arehigher than actuarial values
in 2004 and 2005 it means
the market was anticipating
greater future investment
returns than were being
assumed in funding thescheme’s liabilities.

8b v Scheme assets
The allocation of assets by the scheme trustees is governed by a need to manage risk against the desire
for high returns and any liquidity needs. A high percentage of assets are held in equities which the trustees
expect will produce higher returns in the long term.The target allocation, based on market values, forequities is 60%, bonds and gilts 30% and property 10%.

Type of asset

2006
Equities
Bonds and gilts
PropertyCashLong-term rateof return expected
at 31 March(used formarket value)

£m

%

7.7%
4.4%
6.1%
3.9%

5,687
1,116
890
153

73
14
11
2

Total assets
2005
Equities
Bonds and gilts
Property
Cash

Total assets

Actuarial value*
Final

Actuarial value*Interim

£m

%

£m

%

4,320
1,063
737
286

67
17
12
4

4,294
909
668
167

71
15
11
3

7,846
7.7%
4.7%
6.2%
3.7%

Total assets
2004
Equities
Bonds and gilts
PropertyCash

FRS 17 value

4,333
1,050
737
222

68
17
12
3

6,342
7.9%
4.8%
6.3%
3.9%

4,118
1,048
597
117
5,880

6,406
70
18
10
2

6,038
4,109
902
556
101

72
16
10
2

5,668

*As per 8b iv, for the 2004 and 2005 actuarial valuations the scheme assets were valued on an assessed value basis, but for the2005 final a market-based method was used for the actuarial valuation and therefore the scheme assets would be valued at
the same amount for both FRS 17 and actuarial purposes from 2006 onwards.

The last formal valuation was undertaken in 2005.The 2005 and 2004 figures are from an interim update of
the 2002 formal valuation.

114

BBC Annual Report and Accounts 2005/2006

8b vi Scheme liabilities
The calculation of the scheme liabilities requires a number of assumptions, both demographic and financial, tobe made.The key financial assumptions made by the actuaries were:2006
Key financial assumptions

The discount rate for
the FRS 17 value is taken
as the rate for an AA rated
corporate bond.

The discount rate used in theactuarial valuation of liabilities
is that of the expected returnon assets held by the scheme
and is considered to be a
prudent long-term average.

%

2005
Interm%2004
Interim
%

4.7
2.7
2.7
5.5
22.0 years
24.5 years

4.7
2.7
2.7
5.6
22.0 years
24.5 years

4.7
2.5/2.7
2.7
5.45/6.7
23.5 years
25.7 years

4.5
2.5
2.5
6.25
22.0 years
24.5 years

4.5
2.5
2.5
6.25
22.0 years
24.5 years

2005
Final
£m

2005
Interim£m

2004
Interim
£m

6,393

6,764
5,764

6,312
5,525

FRS 17 valuation
Rate of increase in salaries
4.9
Rate of increase in pension payments
2.9
Inflation assumption
2.9
Discount rate for FRS 17 valuation
5.0
Longevity assumption post-retirement (age 60) – Males
23.5 years
Longevity assumption post-retirement (age 60) – Females 25.7 years
Actuarial valuation
Rate of increase in salaries
Rate of increase in pension payments*
Inflation assumption
Discount rate for actuarial valuation**
Longevity assumption post-retirement (age 60) – Males
Longevity assumption post-retirement (age 60) – Females
2006
Scheme liabilities at present value

A higher discount rate meansa lower value for the liabilities.

2005
Final
%

£m

FRS 17 valuation
Actuarial valuation

7,676*This increase in new benefit pension payments has been held at 2.5% as in previous years, however, old benefits have been
increased in line with the inflation assumption. New Benefits members’ pension increase with RPI up to a limit of 5% (for Old
Benefits the limit is 10%).This assumption is adopted on the basis that in some years RPI may increase above 5% and New
Benefit pension increases will be capped, so on average the increases for New Benefits will be lower than actual RPI**For the 2005 valuation a dual discount has been adopted since the assets backing the post-retirement benefits have a different
split between equities, bonds, property, and cash to those backing the pension liabilities in payment, with the investment
assumptions for post-retirement funding being more risk averse and therefore leading to a lower discount rate

8c Pension charges and balances within financial statements
8c i Movement in pension liability during year

The defined contribution
schemes do not give rise tobalance sheet pension assets/
liabilities as there is no ongoing
liability to the employer fromthese schemes once thecontributions due for theyear have been settled.

BBC
PensionScheme2006£mUnfundedscheme
2006
£m

Total
2006
£m

BBC
PensionScheme2005£mUnfunded
Scheme
2005
£m

Total
2005
£m

Net pension liability at start of year (421.8)
Contributions (from employer)*
49.8
Operating charge for year
(184.9)Net finance income/(cost)
66.0
Net gain recognised in STRGL
661.1

(5.0)
0.2
(0.2)
(0.3)
–

(426.8)50.0(185.1)65.7
661.1(431.6)40.0(176.8)
65.7
80.9

(4.7)
0.2
(0.2)
(0.3)
–

(436.3)40.2(177.0)65.4
80.9

Closing net pension asset/(liability) 170.2

(5.3)

164.9

(421.8)(5.0)(426.8)* The contribution shown for the unfunded scheme represents the pensions paid to members during the year. The assumptions
for pension scheme liabilities of the unfunded scheme are the same as the main scheme. As the scheme is unfunded there areno assets and hence no expected return on assets

BBC Annual Report and Accounts 2005/2006

115

Financial statements
Notes to the financial statements

8c ii Pension charges in statement of income and expenditure
The current service cost is
the underlying cost to the
BBC of pension rights earned
by employees during the year.

Defined benefit scheme
BBC Pension
Unfunded
Schemescheme£m£m

Definedcontribution
schemes£m

All schemes£m

The past service cost arises
from members of thescheme becoming entitled to
improved defined retirement
benefits, resulting in a charge
for years of service before theaward of the improvement.

2006
Current service cost
Past service cost
Gain on settlements and curtailments*(194.1)
(9.8)
19.0

(0.2)
–
–

(0.9)
–
–

(195.2)(9.8)
19.0

Operating cost(184.9)

(0.2)

(0.9)

(186.0)The finance return comprises
estimates based on predictionsof future performance andeconomic conditions.

Expected return on pension scheme assets
Interest on pension scheme liabilities

431.8(365.8)

–
(0.3)

–
–

431.8
(366.1)

66.0

(0.3)

–

65.7

Net cost in statement of income and expenditure(118.9)

(0.5)

(0.9)

(120.3)2005
Current service cost
Past service cost
Gain on settlements and curtailments(192.3)
(7.5)
23.0

(0.2)
–
–

(1.4)
–
–

(193.9)(7.5)
23.0

Operating cost(176.8)

(0.2)

(1.4)

(178.4)

Expected return on pension scheme assets
Interest on pension scheme liabilities

412.7(347.0)

–
(0.3)

n/a
n/a

412.7
(347.3)

65.7

(0.3)

–

65.4

(111.1)

(0.5)

(1.4)

(113.0)Net finance income/(cost)

Net finance income/(cost)
Net cost in statement of income and expenditure*There was a curtailment gain of £19.0million during the year in respect of the transfer for BBC Broadcast Limited employees,
395 of whom have elected to transfer their past service benefits to the Red Bee Media Pension Plan. In addition, there wasa further curtailment gain of £3.0million during the year in respect of approximately 180 members who left the Schemeon 31 March 2006 as part of the HR outsourcing exercise. Also there was a settlement loss during the year of around£3.0million in respect of the bulk transfer payment of £29.8million for the BBC Technology Limited employees to Siemens
on 16 November 2005

8c iii Pension costs in statement of total recognised gains and losses (STRGL)
These gains and losses arise
from actual performance
being different from thatpredicted – for example
changes in economic
conditions or thedemographic profile of
BBC employees.

Actual return less expected return on pension scheme assets
Experience gains/(losses) arising on scheme liabilities
Changes in assumptions underlying present value of scheme liabilities
Net gain recognised in STRGL

2006
£m

2005
£m

1,249.2
208.6(796.7)

198.7
(1.4)
(116.4)

661.1

80.9

Only defined benefit schemes give rise to gains and losses in the STRGL.
The actual return on scheme assets is significantly higher than the previous year due to very strong market
performance in 2006, particularly in the run up to the year end. However, some of these gains have been
lost since the year end as the markets have fallen sharply since 31 March 2006.
The gains on scheme assets are offset in part by an actuarial loss due to changes in assumptions relating
to the calculation of the scheme’s liabilities.The key changes are that longevity rates have been increased
as pensioners and dependants are living longer (and therefore drawing pensions for longer) thanpreviously assumed and that the discount rate (taken to be that of an AA rated corporate bond) has
fallen from 5.5% to 5.0%.

116

BBC Annual Report and Accounts 2005/2006

8c iv History of experience gains and losses
This note is designed to show
trends over several years.

2006

2005

2004

2003

2002

1,249.2
15.9%

198.7
3.1%

778.4
13.2%

(1,607.9)
32.8%(532.0)
8.6%

Experience gains and (losses) on scheme liabilities:
Amount (£million)
208.6
Percentage of present value of scheme liabilities 2.7%

(1.4)
0.0%

0.1
0.0%

(12.4)
0.2%

26.6
0.5%

Total gain/(loss) recognised in STRGL:
Amount (£million)
661.1
Percentage of present value of scheme liabilities 8.6%

80.9
1.2%

778.5
12.3%

(2,013.4)
33.7%(725.4)
13.8%

Amount by which the expected returnon scheme assets is (higher)/lower than
the actual return:
Amount (£million)
Percentage of scheme assets

8d UK Public Service Broadcasting pension charge
UK Public Service Broadcasting, in accordance with the group scheme provision within FRS 17, accounts forthe scheme as if it were a defined contribution scheme.This is because it is not possible to identify its shareof the underlying assets and liabilities of the scheme on a reasonable and consistent basis.The expenditure
for UK Public Service Broadcasting of £38.2million therefore represents the contributions payable in the year.
These contributions are set based on the funding needs identified from the valuation and benefit from theactuarial surplus (see Note 8b iv).They are therefore lower than the underlying cost.
9 Taxation
9a Analysis of charges for the year
The charge for the year, based on the rate of corporation tax of 30% (2005 30%) comprised:
2006
£m

2005
£m

Current tax
UK corporation tax
Deduct: double tax relief

17.6
(3.2)

7.1
(2.7)

Adjustments in respect of prior years

14.4
0.3

4.4
(8.3)

Foreign tax
Share of associates and joint ventures tax

14.7
8.2
8.9

(3.9)
3.8
5.5

31.8

5.4

(0.4)
(3.7)

5.3
4.5

(4.1)

9.8

27.7

15.2

Note

Total current tax

9b

Deferred tax
Origination and reversal of timing differences
Adjustments in respect of previous years
Total deferred tax

9dTotal charge for the year

BBC Annual Report and Accounts 2005/2006

117

Financial statements
Notes to the financial statements

9b Factors affecting the tax charge
The Group is only liable to taxation on those activities carried out with a view to making a profit and onrent, royalties and interest receivable.The BBC does not therefore receive relief for all its expenditure, andthe tax assessed for the year consequently differs from the standard rate of corporation tax in the UK.The
differences are explained below:
Note

Surplus/(deficit) before tax
Surplus/(deficit) before tax multiplied by standard rate of corporation tax
in the UK of 30% (2005 30%)
Effects of
Public Services taxable external income
Non-taxable deficit in Public Services
FRS 17 element of net Group pension charge
Commercial activities
Non-taxable income
Disallowed expenditure
UK taxation on intra-group overseas dividends
Capital allowances in excess of depreciation
Tax differential re overseas earnings
Other
Adjustments in respect of previous periods
Current tax charge for the year

9a

2006
£m

2005
£m

31.4

(173.5)9.4(52.0)

(2.1)
38.4
20.8

1.7
59.4
21.5

(38.4)
2.1
–
(3.8)
1.6
3.5
0.3

(17.2)
3.1
1.6
(3.5)
(0.7)
(0.2)
(8.3)

31.8

5.4

9c Factors that may affect future tax charges
The Group anticipates that the future tax charge will not alter materially since all licence fee income is freeof tax.
9d Deferred tax analysis
2006
£m

2005
£m

10.0
(0.4)
(4.1)
(2.4)

(1.9)
0.2
9.8
1.9

3.1

10.0

Accelerated capital allowances
Other timing differences

13.1
(3.6)

15.4
(0.1)

Deferred tax provision

9.5

15.3

US timing differences

(6.4)

(5.3)

Deferred tax asset

(6.4)

(5.3)

Deferred tax provision at year end

3.1

10.0

Movement on deferred tax provision/(asset) in the year

Provision/(asset) at start of year
Exchange adjustment
Deferred tax (credit)/charge
Disposal of subsidiary
Deferred tax provision at end of year

Note

9a

Analysis of deferred tax provision/(asset) at end of year

118

BBC Annual Report and Accounts 2005/2006

10 Intangible fixed assets

Goodwill is the difference
between the value paid for abusiness and the fair value of
its net assets. It represents
the premium the purchaser
is prepared to pay for thebusiness.

Goodwill£m

Otherintangibles
£m

Total
£m

Cost
At 1 April 2005
Additions

22.8
0.1

0.4
0.3

23.2
0.4

At 31 March 2006

22.9

0.7

23.6

Amortisation
At 1 April 2005
Charge for the year

2.5
1.3

0.4
0.1

2.9
1.4

At 31 March 2006

3.8

0.5

4.3

Net book value
At 31 March 2006

19.1

0.2

19.3

At 31 March 2005

20.3

–

20.3

The addition to goodwill in the year relates to the final adjustment to the contingent purchase consideration
for Origin Publishing Limited. On acquisition of 100% of the share capital of Origin Publishing Limited on
20 February 2004 by BBC Worldwide, contingent consideration of up to £5.1million was payable, basedon the performance of the acquired business in the period to 30 September 2005.The full £5.1million was
settled in the year ended 31 March 2006 of which £0.8million was paid in cash and the balance of £4.3million
settled by way of the issue of loan notes. Of the £5.1million settled, £5.0million had been accrued and recognised
as additional goodwill in the year ended 31 March 2005.
Other intangibles comprise of a customer list of names and brand names. Additions to other intangible assets
comprise the purchase of customer listings during the year and these are amortised on a straight line basis
over 2–4 years subject to reviews for impairment.
11 Tangible fixed assets
11a Group
Land andbuildings£mPlant andmachinery£m

Furniture andfittings£m

Assets underconstruction
£m

Total
£m

Cost or valuation
At 1 April 2005
Additions
Brought into service
Disposals
Disposal of subsidiary

431.5
6.1
3.5
(14.8)
–

950.2
56.1
52.0
(26.7)(75.7)

146.5
15.7
5.8
(8.0)
(4.8)

87.2
65.6
(61.3)(1.4)(1.7)

1,615.4
143.5–(50.9)(82.2)At 31 March 2006

426.3

955.9

155.2

88.4

1,625.8

Depreciation
At 1 April 2005
Charge for the year
Elimination in respect of disposals
Disposal of subsidiary

225.2
14.6
(4.7)
–

597.4
85.1
(23.4)(43.8)

71.2
13.9
(5.7)
(1.2)

–
–
–
–

893.8
113.6
(33.8)(45.0)At 31 March 2006

235.1

615.3

78.2

–

928.6

Net book value
At 31 March 2006

191.2

340.6

77.0

88.4

697.2

At 31 March 2005

206.3

352.8

75.3

87.2

721.6

BBC Annual Report and Accounts 2005/2006

119Financial statements
Notes to the financial statements

11b UK Public Service Broadcasting
Land andbuildings£mPlant andmachinery£m

Furniture andfittings£m

Assets underconstruction
£m

Total
£m

Cost or valuation
At 1 April 2005
Additions
Brought into service
Disposals

362.1
6.0
1.6
(14.7)

510.0
38.9
34.7
(14.6)

120.9
11.1
3.0
(6.8)

63.7
37.4
(39.3)(0.4)

1,056.7
93.4–(36.5)At 31 March 2006

355.0

569.0

128.2

61.4

1,113.6

Depreciation
At 1 April 2005
Charge for the year
Elimination in respect of disposals

185.9
11.5
(4.4)

327.8
52.0
(13.7)

54.9
11.2
(4.6)

–
–
–

568.6
74.7
(22.7)At 31 March 2006

193.0

366.1

61.5

–

620.6

Net book value
At 31 March 2006

162.0

202.9

66.7

61.4

493.0

At 31 March 2005

176.2

182.2

66.0

63.7

488.1

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006£m

UK Public
Service
Broadcasting
2005£mUndepreciated land
Freehold buildings

18.3
105.2

21.7
121.4

18.0
95.5

21.6
110.1

Total freeholds
Long leaseholds
Short leaseholds

123.5
45.5
22.2

143.1
52.0
11.2

113.5
26.3
22.2

131.7
33.3
11.2

191.2

206.3

162.0

176.2

UK Public
Service
Broadcasting2005£m

11c Land and building at net book value comprise:

11d Finance leases
Assets held under finance leases, capitalised and included in tangible fixed assets:

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006
£m

Cost
Accumulated depreciation

15.6
(6.5)

–
–

14.2
(5.9)

–
–

Net book value

9.1

–

8.3

–

The finance leases relate to IT equipment that was originally leased to the BBC under operating leases.
As at 1 April 2005 the contract was varied to allow the assets to be used by the BBC for substantially their
entire economic lives. As a result these assets have been capitalised and included in tangible fixed assets.

120

BBC Annual Report and Accounts 2005/2006

12 Investment in programmes for future sale
Group
£m

Cost
At 1 April 2005
Exchange adjustment
Additions
DisposalsElimination in respect of programmes fully amortised

228.7
1.9
93.5
(4.1)
(73.0)At 31 March 2006

247.0

Amortisation
At 1 April 2005
Exchange adjustment
Charge for the year
DisposalsElimination in respect of programmes fully amortised

131.4
1.1
82.3
(1.3)
(73.0)At 31 March 2006

140.5

Net book value
At 31 March 2006

106.5

At 31 March 2005

97.3

Investment by BBC Worldwide in programmes for future sale relates to programmes provided by the BBC andexternal producers.The additions figure above includes £89.0million direct investment in BBC programmes(2005 £74.6million).
Included in the net book value is £3.6million (2005 £2.5million) relating to investments held under a licence agreement.
During the year there were disposals of music publishing rights with a carrying value of £1.0million (see Note 6)
and as part of the sale of BBC Worldwide Limited’s learning business there was a disposal with a carrying valueof £1.8million (see Note 19).
13 Other investments (including BBC World Service net assets)
13a Movements in the year for the GroupInterests injoint ventures
Note 13b£m

Interests inassociates
Note 13c
£m

Total
Group
£m

Cost
At 1 April 2005
Exchange adjustment
Additions
Disposals

10.7
–
1.5
–

0.8
0.1
–
(0.4)

11.5
0.1
1.5
(0.4)

At 31 March 2006

12.2

0.5

12.7

Share of post acquisition reserves
At 1 April 2005
Exchange adjustment
Share of profits/(losses) after taxation
Dividends received
Adjustment to reflect effective obligations

1.7
(0.2)
30.0
(19.4)
(5.8)

0.5
–
(9.3)
(0.4)
9.8

2.2
(0.2)
20.7
(19.8)
4.0

At 31 March 2006

6.3

0.6

6.9

Goodwill
At 1 April 2005
Additions
Amortisation

26.9
1.5
(1.7)

–
–
–

26.9
1.5
(1.7)

At 31 March 2006

26.7

–

26.7

Net book value
At 31 March 2006

45.2

1.1

46.3

At 31 March 2005

39.3

1.3

40.6

BBC Annual Report and Accounts 2005/2006

121

Financial statements
Notes to the financial statements

Joint ventures are businesses
the BBC jointly controls withother parties.

13b Interests in joint ventures
13b i Significant joint ventures and their activities
The Group has a 50% equity interest in the following joint ventures which are all incorporated in Great Britain
and registered in England and Wales, unless otherwise stated:
Name of entity

Activity

Partner

UK Channel Management Limited
UK Gold Holdings Limited
UKTV New Ventures Limited
UKTV Interactive Limited
JV Programmes LLC1
BBC Haymarket Exhibitions Limited

Channels
Channels
Channels
Channels
Channels
Publishing

Worldwide Media Limited2

Magazines

2|entertain Limited3
DTV Services Limited4

Video/DVD
Marketing

Insight Property Partnership

Property

Daunus Limited5

Property

Flextech
Flextech
Flextech
Flextech
Discovery
Haymarket Exhibitions
LimitedBennett, Coleman
and Company Limited
Woolworths
Crown Castle UK Limited,
British Sky Broadcasting
LimitedLand Securities Trillium(Media Services) Limited
Land Securities Trillium(BH) Limited,
Morgan Stanley Delta LLC,
Structured FinanceManagement Limited

Accounting date

31 December 2005
31 December 2005
31 December 2005
31 December 2005
31 December 2005
31 December 2005
31 July 2005
28 January 2006
31 August 2005

31 March 2006
30 November 2005

Incorporated in the USA
Incorporated in India
3
60% equity interest
4
20% equity interest
5100% holding of ‘A’ class shares, representing 10% of the total issued shares of Daunus Limited.The rest of the shares in Daunus
Limited are held by the other partners.The BBC holds its investment in Daunus Limited through a subsidiary, BBC Property
Development Limited.
1
2

For a number of years the BBC, through its subsidiary BBC Worldwide, has had major partnership deals with
Flextech, the content division of Telewest Communications plc, for the production and marketing of subscription
channels in the UK and with Discovery Communications Inc. for new channels around the world and providing
new co-production funding for programmes.The joint ventures operated by these alliances are included in the list
above.The BBC has no obligation to make good its share of their cumulative operating losses.
The BBC is part of a joint venture, DTV Services Limited, to provide marketing services for digital channels
on a terrestrial platform in the UK.The BBC’s subsidiary BBC Free to View Limited (see Note 13e) holds theBBC’s digital terrestrial multiplex licence and its equity interest in the joint venture to ensure the costs of thisjoint venture are managed separately from licence fee-funded activities. On 11 October 2005 the Group
sold a 13% stake in DTV Services Limited reducing its equity interest to 20%.
The joint venture with Land Securities Trillium (LST), the Insight Property Partnership, provides a range ofproperty and development services to the BBC. Related joint ventures and associate companies have been
set up to develop particular BBC properties. In May 2005 the BBC and LST agreed to restructure thispartnership.The Insight Property Partnership’s contract to provide facilities management and property
services to the BBC will expire on 30 June 2006.
In December 2004, BBC Worldwide completed the acquisition of a 50% equity interest in Worldwide
Media Limited, a magazine publishing joint venture based in India for total cash consideration of £5.5million.
Goodwill of £2.9million arose on the transaction. Contingent consideration paid to the joint venture of up to
245million rupees (£3.0million) may be payable, based on the financial performance of the acquired businessin the period to 31 July 2006. Based on the applicable financial targets and the expected short-term financial
performance of the business during this period, the full contingent consideration has been recognised in thecalculation of goodwill during the year ended 31 March 2006.This additional investment payable to the joint
venture has been recorded as an addition to the Group’s share of joint venture net assets (£1.5million) andas additional goodwill £1.5million.

122

BBC Annual Report and Accounts 2005/2006

The following disclosures represent the Group’s equity shares of the assets and liabilities of its joint ventures
based on the results for the latest accounting periods as shown above. Where the latest accounting period
for the joint venture is more than three months prior to the Group’s accounting reference date of 31 March
the latest interim financial information has been used.
13b ii Group share of joint ventures results and net assets
2|entertain
Limited£m

UK Gold
Holdings
Limited*£m

UK Channel
Management
Limited*£m

Other joint
ventures£m

Total
joint ventures
2006
£m

2006
Turnover

115.2

40.8

36.3

37.2

229.5

Profit/(loss) before tax
Taxation

28.2
(8.5)

7.8
(3.8)

11.7
(3.5)

(1.7)
(0.2)

46.0
(16.0)

Profit/(loss) after tax

19.7

4.0

8.2

(1.9)

30.0

Fixed assets
Goodwill
Current assets
Liabilities less than one year
Liabilities more than one year
Adjustment to reflect effective obligations

5.2
22.6
59.3
(53.5)
–
–

–
–
16.4
(8.9)
(22.7)
15.2

–
–
34.5
(13.4)(25.1)
4.0

7.9
4.1
29.5
(6.4)
(41.5)
18.0

13.1
26.7
139.7
(82.2)(89.3)
37.2

Net book value

33.6

–

–

11.6

45.2

2005
Turnover

64.0

36.8

31.6

29.4

161.8

Profit/(loss) before tax
Taxation

16.7
(5.1)

11.0
(2.8)

9.0
(2.7)

(3.1)
(0.1)

33.6
(10.7)

Profit/(loss) after tax

11.6

8.2

6.3

(3.2)

22.9

Fixed assets
Goodwill
Current assets
Liabilities less than one year
Liabilities more than one year
Adjustment to reflect effective obligations

3.8
24.1
68.2
(65.0)
–
–

–
–
15.6
(6.6)
(28.1)
19.1

–
–
21.1
(2.9)
(30.4)
12.2

7.4
2.8
25.5
(5.1)
(37.8)
15.4

11.2
26.9
130.4
(79.6)(96.3)
46.7

Net book value

31.1

–

–

8.2

39.3

Group share of:*The figures are based on unaudited financial statements

Under the terms of the agreements with Flextech and Discovery, the Group has no obligation to fund losses
incurred by the entities nor to make good their net liabilities. As a result, the Group does not share in losses/net
liabilities of the relevant entities and accordingly no share of these is included in the financial statements for theyear ended 31 March 2006 (2005 £nil).The share of net liabilities not recognised comprises the £37.2million
shown in the table as ‘adjustment to reflect effective obligations’.The Group is entitled to its share of any profits
or net assets only once the ventures’ cumulative profits exceed cumulative losses since incorporation.

BBC Annual Report and Accounts 2005/2006

123Financial statements
Notes to the financial statements

Associates are businesses
over which the BBC exerts
significant influence but does
not have overall control.

13c Interests in associates
13c i Significant associates and their activities
The Group holds (directly and indirectly) significant interests in the associates listed below which, except
where otherwise stated, are incorporated in Great Britain and registered in England and Wales. A full list of
associates is available on request from The Secretary, BBC, Room MC3C3, Media Centre, 201 Wood Lane,
London W12 7TQ.

Parliamentary Broadcasting Unit Limited
Broadcasters Audience Research Board Limited (BARB)The Commonwealth Broadcasting Association
Radio Joint Audience Research Limited (RAJAR)
Frontline Limited
UKTV Pty Limited (incorporated in Australia)
People and Arts (Latin America) LLC (incorporated in the USA)**
Animal Planet LLC (incorporated in the USA)****The Animal Planet Europe Partnership**Animal Planet Japan KK (incorporated in Japan)**Jasper Broadcasting Inc (incorporated in Canada)
Jasper Junior Broadcasting Inc (incorporated in Canada)
3sixtymedia Limited
White City Development Partnership

Holdingof issued
ordinaryshares%Activity

33
*
*
50
23
20
50
25
50
33
20
20
10
***

Content provider
Audience research
Broadcasting forum
Audience research
Publishing
Channels
Channels
Channels
Channels
Channels
Channels
Channels
Production
Property* Broadcasters Audience Research Board Limited and The Commonwealth Broadcasting Association are companies limited
by guarantee, of which the BBC is a joint member with other broadcasters** Discovery associate*** 50% partnership share**** Animal Planet LLC (Discovery Associate). On 3 April 2006 the Group sold its shareholding

124

BBC Annual Report and Accounts 2005/2006

13c ii Group share of associates’ turnover and net assets
The following additional disclosures are based on the results of the Discovery associates for the year ended
31 December 2005 and the remaining associates’ disclosures are based on the results at the date of theirindividual financial statements.These additional disclosures represent the Group’s equity share of assets andliabilities of those entities.
Group interests in associates

2006
£m

2005
£m

Share of turnover

49.6

42.9

52.0
28.2
(22.5)(160.9)
104.3

38.8
24.5
(19.3)(123.9)
81.2

1.1

1.3

Share of fixed assets
Share of current assets
Share of liabilities due within one year
Share of liabilities due after more than one year
Adjustment to reflect effective obligation
Net interests in associates

The results include the Group share of the operating profit/(loss) of UKTV Pty Limited of £0.5million(2005 £0.5million), Frontline Limited of £0.5million (2005 £0.7million), Children’s Character Books Limited£(0.2)million (2005 £(0.1)million) and BBC World (India) Private Limited of £nil (2005 £0.1million).
The Group’s share of the remaining associates, including Jasper Broadcasting Inc. and Jasper Junior Broadcasting Inc.,
operated in partnership with Alliance Atlantis, was £nil (2005 £nil).
Under the terms of the agreements with Discovery and Alliance Atlantis, the Group has no obligation tofund losses incurred by the entities nor to make good their net liabilities. As a result, the Group does notshare in losses or net liabilities of the relevant entities and accordingly no share of these are included in thefinancial statements for the year ended 31 March 2006 (2005 £nil).The Group is entitled to its share of any
profits or net assets once the ventures’ cumulative profits exceed cumulative losses since incorporation, withthe exception of JV Network LLC. JV Network LLC was formed for the purpose of providing debt funding
from Discovery to the other Discovery joint ventures and BBC Worldwide is not entitled to any profits
arising within this entity.
13d Movements in the year for UK Public Service Broadcasting
Interest in
BBC World
Service net
assets£m

Interests in
subsidiaries
£m

Total
£m

At 1 April 2005
Deficit for year

160.1
(1.5)

125.3
–

285.4
(1.5)

At 31 March 2006

158.6

125.3

283.9

BBC Annual Report and Accounts 2005/2006

125

Financial statements
Notes to the financial statements

Subsidiary undertakings arebusinesses the BBC controls.

13e Subsidiary undertakings
The principal subsidiary undertakings of the BBC at 31 March 2006 are listed below. All are wholly owned
and incorporated in Great Britain and registered in England and Wales. A full list of subsidiaries is available on
request from The Secretary, BBC, Room MC3C3, Media Centre, 201 Wood Lane, London W12 7TQ.
Name of entity

Activity

BBC Commercial Holdings Limited
BBC Worldwide Limited***

BBC World Limited
BBC Ventures Limited
BBC Resources Limited

**
**
**

BBC Free To View Limited*

BBC Property Limited
BBC Property Development Limited
BBC Property Investment Limited
Centre House Productions Limited
Switchco Limited1 (Digital UK)

*
*
*
*
*

Holding company
Publishing, channels andprogramme distribution
Channels
Holding company
Programme making facilities
and services
Holding company
for digital licence
Property
Property
Property
Production financing
Digital switchover*Directly owned**Indirectly owned
The BBC controls 56% of the voting rights of Switchco Limited and therefore it is a subsidiary. Its results have been
consolidated into the Group accounts. Switchco Limited is a company limited by guarantee of which the BBC is a joint
member with other broadcasters

1

14 Stocks

Raw materials
Work in progress– originated programmes– other
Finished programmes– acquired programmes and films– originated programmes
Other
Total

126

BBC Annual Report and Accounts 2005/2006

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006£m

UK Public
Service
Broadcasting
2005
£m

1.7

2.9

0.2

0.7

287.9
1.9

281.0
2.4

287.8
0.1

280.7
0.1

98.5
61.0
11.4

88.1
69.9
14.5

98.5
61.0
–

88.1
69.9
–

462.4

458.8

447.6

439.5

15 Debtors
Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006
£m

114.9

119.5

17.1

12.9

318.2
–
34.9
36.0
28.8
190.8

285.8
–
10.2
35.5
102.3
121.5

318.2
27.2
14.5
33.9
6.6
165.3

285.8
28.0
5.8
32.6
78.6
103.7

723.6

674.8

582.8

547.4

3.5

–

–

–

Total current debtors

727.1

674.8

582.8

547.4

Receivable after more than one year
Other debtors
Prepayments

2.7
40.0

6.1
100.0

–
26.9

–
84.3

42.7

106.1

26.9

84.3

3.2

–

–

–

Total long-term debtors

45.9

106.1

26.9

84.3

Total

773.0

780.9

609.7

631.7

Note

Receivable within one year
Trade debtors
Department for Culture, Media and Sport– licence fee debtors
Amounts owed by subsidiaries
Amounts owed by associates and joint ventures
VAT recoverable
Other debtors
Prepayments

Financial assets

23e

Financial assets

23e

UK Public
Service
Broadcasting
2005£mOther debtors in 2005 included £56.6million in relation to the sale of the White City site, see Note 6
for details.
16 Creditors
16a Prompt payment policy
It is the BBC’s policy to comply with the Better Payment Practice Code in relation to the payment of
suppliers, provided that the supplier is complying with the relevant terms and conditions of their contracts.
The BBC monitors compliance against the terms of this code. Payments for programme acquisitions are
made in accordance with contractual terms.The Group’s number of creditor days outstanding in respectof other trade creditors at 31 March 2006 was 35 days (2005 35 days).
Residual creditors and associated costs have been excluded for the purpose of this calculation, as they relate
to payments to artists and contributors other than trade creditors.

BBC Annual Report and Accounts 2005/2006

127

Financial statements
Notes to the financial statements

16b Amounts falling due within one year

Bank overdrafts and other loans
Bank overdrafts
Unsecured loan notes

Note

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006
£m

21
23b

–
5.3

36.9
1.5

–
–

31.2
–

5.3

38.4

–

31.2

74.9
31.3
64.4
25.6
169.8

60.1
26.5
59.0
21.5
167.0

74.7
31.0
41.4
–
119.6

58.9
26.3
36.0
–
107.2

366.0

334.1

266.7

228.4

–
–
11.5
28.7
4.8
14.7

–
8.5
5.8
28.6
–
59.9

37.2
–
4.7
26.8
4.7
11.4

51.7
–
2.3
26.6
–
59.9

59.7

102.8

84.8

140.5

393.5
92.1

342.6
100.4

285.9
92.1

274.7
100.4

485.6

443.0

378.0

375.1

3.2

–

–

–

919.8

918.3

729.5

775.2

Trade creditors
Programme creditors
Programme acquisitions
Salaries and wages
Residual copyright payments
Other trade creditors

Other creditors
Amounts owed to subsidiaries
Amounts owed to associates and joint ventures
Corporation tax
Other taxation and social security
Obligations under finance leases
Other

23b

Accruals and deferred income
Accruals and deferred income
Licence savings stamps deposits and direct debit instalments

Financial liabilities

23e

Total

UK Public
Service
Broadcasting
2005£mOther creditors in 2005 included £59.9million in relation to the sale of the White City site, see Note 6.
16c Amounts falling due after more than one year

Bank and other loans

Note

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006
£m

23b

72.0

150.0

–

–

3.6

7.1

3.6

7.1

28.5
–
8.7

27.1
–
3.4

3.8
25.9
–

–
27.6
–

37.2

30.5

29.7

27.6

4.0

–

–

–

116.8

187.6

33.3

34.7

Trade creditors
Programme acquisitions
Other creditors
Obligations under finance leases
Amounts owed to subsidiaries
Other

Financial liabilities

23b

23e

Total

128

BBC Annual Report and Accounts 2005/2006

UK Public
Service
Broadcasting2005£m17 Provisions for liabilities
At 1 April
2005£mProvisions
disposed£m

Utilisedduringthe year£m

Releasedduringthe year£m

Charge forthe year£m

At
31 March
2006£m

Licence fee
Restructuring
Litigation and insurance
Property
PensionDeferred tax
Other

17.2
47.4
13.8
11.8
21.1
15.3
13.0

–
(0.5)
(0.1)
–
–
(2.6)
–

(17.2)(41.8)
(1.8)
(0.7)
(5.9)
(7.0)
(8.0)

–
(3.4)
(1.8)
(0.9)
(15.2)
–
(5.0)

19.5
127.7
6.5
3.0
–
3.8
8.0

19.5
129.4
16.6
13.2
–
9.5
8.0

Total

139.6

(3.2)

(82.4)(26.3)

168.5

196.2

Group

Licence fee provisions are made for the expected level of refunds (money repayable on the unexpired
portion of a licence where the licence is no longer required) and revocations (where no money is received
in relation to a licence sold).
The restructuring provision includes a net charge for the year of £119.1million of exceptional redundancy
costs relating to the change programme occurring within the BBC and non-exceptional redundancy costsof £5.2million. In addition, non-exceptional redundancy costs of £5.2million are included in other creditors
as there was no uncertainty over the amount or timing of these payments.
Property provisions relate to the cost of returning leasehold properties to their original condition at the endof the lease, and include BBC World Service’s liability of £3.4million (2005 £3.3million) to restore BushHouse to its original condition.
Pension provisions comprised an amount of £21.1million which crystallised on the sale of BBC Technology
Holdings Limited.The final valuation of the pension liability was £5.9million and this liability has beentransferred to creditors.The remaining £15.2million was released during the year (see Note 5).
Other provisions consist of a number of balances arising across the BBC in the normal course of business.
Provisions disposed of during the year relate entirely to the sale of BBC Broadcast Limited.

At 1 April
2005£mProvisionacquired thisyear£mUtilisedduringthe year£m

Releasedduringthe year£m

Charge forthe year£m

At
31 March
2006£m

Licence fee
Restructuring
Litigation and insurance
Property
PensionDeferred tax
Other

17.2
45.6
12.0
7.8
–
–
12.3

–
–
–
–
21.1
–
–

(17.2)(36.2)
(0.8)
(0.5)
(5.9)
–
(8.0)

–
(2.9)
(2.0)
(0.3)
(15.2)
–
(4.3)

19.5
109.6
2.1
2.8
–
3.5
4.3

19.5
116.1
11.3
9.8
–
3.5
4.3

Total

94.9

21.1

(68.6)(24.7)

141.8

164.5

UK Public Service Broadcasting

BBC Annual Report and Accounts 2005/2006

129

Financial statements
Notes to the financial statements

18 Reserves
Operatingreserveexcludingpension reserve£m

Pensionreserve£m

Total
operatingreserve£m

Capitalreserve£m

Revaluation
reserve
£m

Total
£m

At 1 April 2005
Adjustment on adopting FRS 26
Exchange difference
Surplus for financial year
Actuarial gain on defined benefit
pension schemes
Revaluation reserve transfer
Pension reserve transfer
Capital reserve transfer

188.7
2.6
1.9
3.6

(426.8)–––(238.1)
2.6
1.9
3.6

761.8
–
–
–

4.0
–
–
–

527.7
2.6
1.9
3.6

–
0.8
69.4
(9.5)

661.1
–
(69.4)
–

661.1
0.8
–
(9.5)

–
–
–
9.5

–
(0.8)
–
–

661.1
–
–
–

At 31 March 2006

257.5

164.9

422.4

771.3

3.2

1,196.9

Represented by:General Group reserves
BBC World Service reserves

256.0
1.5

164.9
–

420.9
1.5

617.4
153.9

–
3.2

1,038.3
158.6

257.5

164.9

422.4

771.3

3.2

1,196.9

Operatingreserve£m

Capitalreserve£m

Revaluation
reserve
£m

Total
£m

At 1 April 2005
Surplus for financial year
Revaluation reserve transfer
Capital reserve transfer

204.3
41.4
0.8
(9.5)

761.8
–
–
9.5

4.0
–
(0.8)
–

970.1
41.4
–
–

At 31 March 2006

237.0

771.3

3.2

1,011.5

Represented by:
UK Public Service Broadcasting reserves
BBC World Service reserves

235.5
1.5

617.4
153.9

–
3.2

852.9
158.6

237.0

771.3

3.2

1,011.5

Group

UK Public Service
Broadcasting and BBC World
Service are funded fromdifferent sources. As such,the reserves relating to
BBC World Service are
maintained separately fromthe rest of the Group andare restricted for use solely
on BBC World Service
activities.

UK Public Service Broadcasting

Under the accounting standard FRS 10 Goodwill and intangible assets any newly arising goodwill must be
capitalised and amortised over its useful life. As is permitted by the standard, goodwill arising in periods prior
to 1999 of £6.8million (2005 £6.8million) remains offset against the operating reserve.
The Group has adopted FRS 26 Financial Instruments: Measurement this year and has also taken the
exemption in the standard to not restate comparatives.This therefore requires an adjustment to reserves
for balances existing at 1 April 2005 not previously recognised.The fair value gains and losses on the Group’s
financial instruments between this date and the year end (for stand alone derivatives such as forward
exchange contracts and interest rate swaps, and derivatives embedded within contracts) have been taken to
the current year’s statement of income and expenditure.
The cumulative translation differences at 31 March 2006 were £1.9million. In accordance with FRS 23, any
differences relating to prior years have not been separated out and remain within the operating reserve.

130

BBC Annual Report and Accounts 2005/2006

19 Sale of businesses
Learning
business
2006
£m

BBC
Broadcast
Limited
2006
£m

Total
2006
£m

1.8
2.8
1.7

–
48.9
108.8

1.8
51.7
110.5

6.3

157.7

164.0

Of which:
Cash consideration received
Less transaction costs

6.6
(0.3)

166.0
(8.3)

172.6
(8.6)

Net proceeds from sale of businesses

6.3

157.7

164.0

2006
£m

2005
£m

Increase in cash in year
Net cash (inflow)/outflow from management of liquid resources
Net cash outflow from decrease in loans and finance leases

158.8(41.9)
87.9

0.3
29.3
33.3

Change in net debt resulting from cash flows
Non-cash increase in finance leases
Non-cash increase in unsecured loan notes

204.8(15.6)
(4.3)

62.9
–
–

Change in net debt
Net debt at the beginning of the year

184.9
(135.3)62.9(198.2)

Net funds/(debt) at the end of the year

49.6

(135.3)

Investment in programmes for future sale
Net assets disposed
Profit on disposal

20 Reconciliation of net cash flow to movement in net funds/(debt)

21 Analysis of changes in net (debt)/funds
Liquid resources are current
asset investments that arereadily disposable without
disrupting the BBC, and areeither readily convertible into
known amounts of cash at,
or close to, their carrying
amount, or are traded in an
active market. In relation to
the BBC, liquid resources aresterling amounts on deposit.

At 1 April
2005£mCash flows£m

Non-cashchanges£m

At 31 March2006£m(36.9)
38.3

36.9
121.9

–
–

–
160.2

1.4

158.8

–

160.2

Liquid resources
Short-term investments

41.9(41.9)––

Gross funds

43.3

116.9

–

160.2

Debt
Loans from third parties
Unsecured loan notes
Finance leases(150.0)(1.5)(27.1)

78.0
(0.5)
9.4

–
(4.3)
(15.6)(72.0)(5.3)(33.3)Net (debt)/funds(135.3)204.8(19.9)

49.6

Public Service (including World Service)
Commercial Businesses
Centre House Productions Limited

11.6(121.7)(25.2)

113.8
87.8
3.2

(15.2)
(4.7)
–

110.2
(38.6)(22.0)Net (debt)/funds(135.3)204.8(19.9)

49.6

Net cash
Bank overdrafts
Cash at bank and in hand

Made up of:

The debt and repayments on finance leases held by Centre House Productions Limited are offset directly bycash held on matching deposits, and the income from them, such that there is no long-term cash flow effect.

BBC Annual Report and Accounts 2005/2006

131

Financial statements
Notes to the financial statements

22 Reconciliation of net funds/(debt) to the Department for Culture, Media and Sport (DCMS)
borrowing ceilings

Public Services in this context
represent the UK PublicService Broadcasting Groupand BBC World Service.

Net funds/(debt)
Licence savings stamps deposits anddirect debit instalments*

Note

PublicServices
2006£mPublicServices
2005£mCommercial
Businesses
2006£mCommercial
Businesses
2005
£m

21

110.2

11.6

(38.6)(121.7)16b(92.1)(100.4)

–

–

18.1

(88.8)(38.6)(121.7)(200.0)(200.0)(350.0)(350.0)Funds/(borrowings) as defined by DCMS
borrowing ceiling
Borrowing ceiling* The BBC must be able to repay the licence savings stamps deposits and direct debit instalments on demand and they are
therefore included in the Public Service Borrowings.

The Public Service borrowing limit of £200million is set within the BBC Charter. As at 31 March 2006 and
31 March 2005, and throughout the financial year, the BBC was in compliance with this borrowing ceiling.
When the DCMS granted a £350million borrowing limit for BBC Commercial Holdings Limited in July 2002,
three financial covenants were defined which are required to be met as at 31 March each year. As at
31 March 2006 and 31 March 2005 BBC Commercial Holdings Group was in compliance with each of thesecovenants. Compliance with the borrowing ceiling is detailed in the table above.
23 Financial instruments
The Group has adopted FRS 25 (IAS 32) Financial Instruments: Disclosure and Presentation and FRS 26(IAS 39) Financial Instruments: Measurement for the first time in this financial year.
Accounting and disclosures for the current year are in accordance with FRS 25 and FRS 26, and as permitted
under both standards the comparatives have not been restated and continue to be presented underpreviously applicable accounting standards (FRS 4 and FRS 13).
Had FRS 25 and FRS 26 been applied in the prior year the effect would have been to restate the 2005
balance sheet for derivatives existing at 31 March 2005, and the prior year statement of income andexpenditure for the movement in the fair value of derivatives between 1 April 2004 and 31 March 2005.
23a Financial risk management
The Group’s financial risk management operations are carried out by a Group Treasury function, withinparameters defined formally within the policies and procedures manual agreed by the Executive Board.
Group Treasury’s activity is routinely reported and is subject to review by internal and external auditors.
Group Treasury uses financial instruments to raise finance and to manage financial risk arising from the BBC’s
operations in accordance with its objectives which are:■ to ensure the business of the BBC, both Public Services and Commercial, is fully funded in the mostefficient manner and remains compliant with borrowing limits■ to protect the value of the BBC’s assets, liabilities and cash flows from the effects of adverse interest rates
and foreign exchange fluctuations■ to maximise the return on surplus funds, whilst ensuring sufficient cash is retained to meet foreseeableliquidity requirements

A forward currency contract
is a contract to buy or sellforeign currency in exchange
for sterling at a specific rate
on a specific date. Companies
typically enter into forward
contracts to lock into aparticular exchange rate,
thereby eliminating currency
risk that may be associatedwith a future purchase or sale.

132

The Group’s financial instruments, other than those used for treasury risk management purposes, comprise
cash and liquid resources, borrowings and various items such as trade debtors and creditors that arise
directly from its operations.The Group finances its operations from these financial instruments.The Group
does not undertake speculative treasury transactions.
Currency risk
The Group is principally a domestic organisation with the majority of transactions, assets and liabilities being
in the UK and sterling based. However, the Group undertakes some transactions in currencies other thansterling. Due to movements in exchange rates over time, the amount the Group expects to receive or pay
when it enters into a transaction may differ from the amount that it actually receives or pays when it settles
the transaction.The Group enters into forward currency contracts to manage this currency risk.These allow
the Group to settle transactions at known exchange rates, thereby eliminating much of this uncertainty.
BBC Annual Report and Accounts 2005/2006

The Group has one significant overseas operation, BBC Worldwide America, which operates in the USA andwhose revenues and expenses are denominated exclusively in US dollars.
An interest rate swap is
a contract between two
parties to change the basisof their interest rate payment
or receipts either from fixed
to floating rates or vice versa.
Companies typically enter
into these arrangements
to reduce the exposure tointerest rate risk by fixing afloating interest rate thereby
giving certainty to the levelof future interest payments.
Alternatively, a company may
believe that interest rates may
fall and wish to convert a fixed
rate loan to a floating rate.

Interest rate risk
The Group’s main exposure to interest rate fluctuations arises on external borrowings. Since March 2003
the Group has been borrowing at floating rates of interest and then used interest rate swaps to generate
the desired interest profile and to manage the Group’s exposure to interest rate fluctuations.
Market price risk of financial assets
The Group invests surplus cash in money market funds and money market deposits, therefore it is not
subject to market price risk.
Credit risk
Due to the unique way in which the BBC is funded via the licence fee, the BBC does not believe that it is
exposed to major concentrations of credit risk.
Liquidity risk
The BBC is subject to limits on its borrowings imposed under the Charter and by the DCMS.The BBC’s
Group Treasury manages the Group’s borrowings in order to comply with these limits together with theterms of the individual debt instruments.The BBC holds its surplus liquidity in readily convertible financial
instruments with highly rated financial institutions.
23b Fair values of financial instruments
Carrying
value
2006
£m

Fair
value
2006
£m

427.7
4.9
3.5

427.7
4.9
3.5

3.2

3.2

Cash at bank and in hand

160.2

160.2

Amounts payable falling due within one year
Loans
Trade creditors
Programme acquisitions
Obligations under finance leases
Derivative financial instruments(5.3)(252.8)(36.6)
(4.8)
(3.2)

(5.3)
(252.8)(36.6)(4.8)(3.2)

Amounts payable falling due after more than one year
Loans
Programme acquisitions
Obligations under finance leases
Derivative financial instruments(72.0)(3.6)(28.5)(4.0)(72.0)(3.6)(28.5)(4.0)

Provisions for liabilities and charges

(3.4)

(3.4)

Amounts receivable within one year
Trade debtors
Other debtors
Derivative financial instruments
Amounts receivable after more than one year
Derivative financial instruments

As at 31 March 2006 there are no significant differences between fair value and carrying value of anyof the Group’s financial instruments. The fair value of forward currency contracts, interest rate swaps,
and embedded derivatives are based on market prices and exchange rates at the balance sheet date.
The remaining financial instruments are carried at cost or amortised cost in accordance with FRS 26 whichapproximates to fair value.

BBC Annual Report and Accounts 2005/2006

133

Financial statements
Notes to the financial statements

At 31 March 2005 there were no significant differences in value between the book and fair value of theGroup’s financial instruments except for derivatives which were not recognised on the balance sheet inaccordance with applicable standards at that time.
The fair value of these derivatives was an unrealised loss of £7.8million on forward exchange hedging contracts
and an unrealised gain of £3.3million for interest rate swaps.These, along with £7.1million of unrealised
gains on embedded derivatives at 31 March 2006 result in an adjustment to reserves on adoption of
FRS 26 of £2.6million.
23c Financial assets
After taking account of the various interest rate swaps and forward foreign currency contracts entered intoby the Group, the maturity profile of the Group’s financial assets at 31 March 2006 was:Within1 year
£m

1-2
years
£m

2-3
years
£m

3-4
years
£m

4-5
years
£m

Greaterthan 5
years
£m

Total
2006
£m

4.5

160.2

–

–

–

–

–

160.2

–
–

427.7
4.9

–
–

–
–

–
–

–
–

–
–

427.7
4.9

0.8

3.5

2.6

0.3

0.3

–

–

6.7

596.3

2.6

0.3

0.3

–

–

599.5

Effective
interest rate%

2006
Cash at bank and in hand
Trade and licencefee debtors
Other debtors
Derivative financial
instruments

The Group’s financial assets are subject to floating rate interest. Included within derivatives are forward
foreign currency contracts (which are not subject to interest) and interest rate swaps (which have the effectof converting the variable rate loans to fixed rate loans for the whole term of the loans).
As at 31 March 2005 the Group’s financial assets, excluding short-term debtors, amounted to £80.2million,
all of which were subject to floating rate interest.
23d Financial liabilities
The Group arranges its borrowings to meet forecast cash flows such that it has access to sufficient funds
to meet its commitments. Short-term flexibility is achieved by overdraft facilities.The maturity profile of theGroup’s financial liabilities at 31 March 2006 was:2006
Trade creditors
Programme acquisitions
Obligations underfinance lease
Derivative financial
instruments
Loans
Provisions

Effective
interest rate%

Within1 year
£m

1-2
years
£m

2-3
years
£m

3-4
years
£m

4-5
years
£m

Greaterthan 5
years
£m

Total
2006
£m

–
–

252.8
36.6

–
3.6

–
–

–
–

–
–

–
–

252.8
40.2

4.7

4.8

3.3

1.1

–

–

24.1

33.3

0.1
4.9
3.5

3.2
5.3
–

1.7
72.0
–

0.6
–
3.4

0.7
–
–

0.9
–
–

0.1
–
–

7.2
77.3
3.4

302.7

80.6

5.1

0.7

0.9

24.2

414.2

The above includes contractual liabilities, including those held within provisions.

134

BBC Annual Report and Accounts 2005/2006

The Group’s financial liabilities are subject to fixed rate interest, except for the interest rate swaps included
within derivatives which fix the interest rate of the Group’s commercial loans. All interest rates are unchanged
for the term of the liabilities, except for a £350million multicurrency revolving credit facility agreement whereinterest is payable at LIBOR plus 0.375%, rising to LIBOR plus 0.45% once the facility is more than 50%
utilised. Included within the loan balance above is £47million against this facility (see Note 23f).
Defeasance deposits areamounts deposited withbanks by Centre House
Productions Limited whichearn the exact amountof interest needed to cover
the capital repayment andinterest element of eachof the finance leases.The
defeasance deposits are ‘ringfenced’ and therefore cannot
be used for any transactions
apart from the agreed capitaland interest payments.

As permitted under FRS 25
and FRS 26 the comparatives
have not been restated andcontinue to be presented
under previously applicableaccounting standards (FRS 4
and FRS 13).

The finance leases include £24.1million (2005 £27.1million) relating to Centre House Productions Limited.
Centre House Productions Limited enters into finance leases as a means of financing drama productions
which result in lower production costs for the BBC.These finance leases are matched by defeasance deposits
which may only be used to settle the finance lease liabilities and therefore do not represent separate assets
and liabilities. Consequently they are netted off the finance lease creditor to show the net unmatchedliability at the year end. These defeasance deposits, £250.4million at 31 March 2006 (2005 £263.0million),
are structured such that the principal on deposit and the interest earned will be sufficient to cover the rental
obligations on the finance leases until the end of the lease. Accordingly it is not included as borrowing for the
purposes of compliance with the BBC’s borrowing limits.
The maturity profile of the Group’s financial liabilities at 31 March 2005 was:

2005
Within one year
Between one and two years
Between two and five years
Greater than five years

Overdraft
£m

Bank
loans
£m

Unsecured
loan
notes
£m

Financeleases£m

Creditors£mProvisions
£m

Total
2005
£m

36.9
–
–
–

–
–
150.0
–

1.5
–
–
–

–
–
–
27.1

–
7.5
1.3
1.7

2.7
2.5
6.8
12.4

41.1
10.0
158.1
41.2

36.9

150.0

1.5

27.1

10.5

24.4

250.4

After taking account of the various interest rate swaps and forward foreign currency contracts entered intoby the Group, the interest rate profile (ie maturity or re-pricing date) of the Group’s interest-bearing financial
liabilities at 31 March 2005 was:Fixed rate liabilities

Total
£m

Financialliabilities on
which nointerest is paid£m

Floating ratefinancialliabilities£m

Amount£m

Weighted
averageinterest rate%

Weighted
average period
until maturity
Years

4.6

3

2005
Sterling

250.4

34.2

–

216.2

Total

250.4

34.2

–

216.2

BBC Annual Report and Accounts 2005/2006

135

Financial statements
Notes to the financial statements

23e Derivative financial instruments

Greater than one year
Forward foreign currency contracts
Interest rate swaps
Embedded derivatives

Less than one year
Forward foreign currency contracts
Interest rate swaps
Embedded derivatives

Assets2006£mLiabilities
2006
£m

1.3
1.2
0.7

(3.4)
(0.2)
(0.4)

3.2

(4.0)

1.6
–
1.9

(3.0)
–
(0.2)

3.5

(3.2)

At 31 March 2006 the Group had entered into a net commitment to purchase foreign currencies amounting
to £90.0million (2005 £95.0million) that mature in the period through to 2012 in order to fix the sterling
cost of commitments through this period (mainly Euros and US dollars). After taking into account the effectsof these forward foreign exchange contracts, the Group had no significant currency exposures.
Sterling fixed rate borrowings are achieved by entering into interest rate swap transactions; all outstanding
swaps mature in March 2008.
In total, £246.0million of swaps were entered into to cover all facilities, which is £174.0million (2005 £58.0million)
more than the current level of borrowings of £72.0million (2005 £188.0million).
In accordance with FRS 26, the Group has reviewed contracts for embedded derivatives that are required
to be separately accounted for if they do not meet certain requirements set out in the standard. Any such
embedded derivatives have been recognised at fair value.
23f Borrowing facilities
As at 31 March 2006 the UK Public Service Broadcasting had available a £100million loan facility which isavailable as either a revolving LIBOR-based loan or an overdraft to May 2006 with an option to extend thefacility to May 2007.The loan facility bears interest at a margin of 0.2% and the overdraft facility bears
interest at bank base rates plus 1%.
Money market lines areshort-term borrowings.

In addition to this loan facility UK Public Service Broadcasting has access to uncommitted money market
lines, from individual banks, totalling £24million (2005 £24million) with interest payable at a margin of
between 0.125% and 0.5% over LIBOR.
BBC Commercial Holdings Limited’s liabilities comprise a £350million multicurrency revolving credit facility
agreement repayable in full in March 2008. At 31 March 2006 £47.0million (2005 £125.0million) was drawn
down by way of advances. Interest is payable at LIBOR plus 0.375%, rising to LIBOR plus 0.45% once thefacility is more than 50% utilised. Of the total amount £100million is available in the form of letters of credit
to be issued in favour of the European Investment Bank to support their lending under the facilities detailed
immediately below. As at 31 March 2006 a further £25.0million (2005 £41million) was utilised by way ofletters of credit issued to support the borrowing under these facilities.
The European Investment Bank has made a loan facility available to BBC Commercial Holdings Limited, for
an amount of £25.0million.This loan is repayable in one single instalment by June 2007. £25.0million was
drawn under this facility at 31 March 2006 (2005 £25.0million).The interest rate applicable on the facility
is determined with reference to the European Investment Bank’s own funding cost and carries no margin
above this funding rate.The lending under the facility is supported by a letter of credit issued by thecommercial banks under the £350million revolving credit facility referred to above.
In addition BBC Commercial Holdings Limited had a facility of £20.0million which was available as an
overdraft at 1% over the Bank’s base rate, or a money market line, with a margin of 0.3%.The facility is due
for review in January 2007.

136

BBC Annual Report and Accounts 2005/2006

24 Commitments
24a Contracts placed for future expenditure

Fixed asset additions
Programme acquisitions and sports rights
Independent programmes

Group
2006
£m

Group
2005
£m

UK Public
Service
Broadcasting
2006£m

UK Public
Service
Broadcasting
2005
£m

79.9
918.3
96.3

27.7
987.7
85.3

67.5
861.9
85.7

21.5
945.1
76.2

1,094.5

1,100.7

1,015.1

1,042.8

Fixed asset additions includes a commitment of £43.3million for the design, build and installation of the fulltechnology solution for BBC Scotland’s new broadcasting headquarters at Pacific Quay. Of this amount£29.6million is expected to be paid within one year.

An operating lease is a lease
where the lessee has nottaken on the risks andrewards of owning andoperating the asset.The
lessee (the BBC) is hiring
rather than buying an asset.

24b Operating leases
Operating lease commitments payable in the following year, analysed according to the period in which thelease expires:Group
Within one year
In two to five years
After five years

UK Public Service BroadcastingWithin one year
In two to five years
After five years

Land andbuildings
2006£mLand andbuildings
2005
£m

Other
2006
£m

Other
2005
£m

2.7
8.3
41.4

2.9
6.3
35.9

1.4
8.5
3.2

3.3
5.9
2.6

52.4

45.1

13.1

11.8

2.1
6.1
40.9

1.8
3.8
35.7

0.5
2.6
1.0

1.7
2.8
0.8

49.1

41.3

4.1

5.3

24c Other financial commitments
In the ordinary course of business the BBC enters into a large number of contracts with artists and writers
and with providers of other services including licence fee collection and channel distribution.

BBC Annual Report and Accounts 2005/2006

137

Financial statements
Notes to the financial statements

25 Contingent assets and liabilities
At 31 March 2006 the Group had unprovided contingent liabilities estimated to be £6.3million (2005 £5.4million)
in respect of guarantees and indemnities. Of this, £1.6million relates to UK Public Service Broadcasting.
The remainder relates to BBC Worldwide’s joint venture, Worldwide Media Limited. BBC Worldwide Limited
has guaranteed bank loans in respect of this joint venture which were 366million rupees (£4.7million) on
31 March 2006.This debt may rise to 400million rupees (£5.2million) over the next two years.
In January 2006 the BBC received a reminder of a claim originally made in 2000 by the contractor engaged
to build and install gas turbines at TVC for an additional £3.1million. Given the length of time that has elapsed
since the original claim and the sporadic pursuit by the contractor of this claim, the BBC considers thelikelihood of the claim succeeding as remote and therefore has not provided for this claim in the accounts.
The Group also has a number of contingent liabilities arising from litigation.The BBC makes specific provision(see Note 17) for its best estimate of any damages and costs which may be awarded.
26 Post balance sheet events
On 3 May 2006 BBC Worldwide completed the disposal of 61% of its interest in Origin Publishing Limited to a
management buyout team. BBC Worldwide retains a 39% interest which will be accounted for as an associate.
On 30 April 2004, BBC Worldwide exercised a put option to require Discovery to purchase the Group’s
entire 25% shareholding in Animal Planet LLC.The net book value of the Group’s investment in this associate
at 31 March 2006 is £nil (2005 £nil). On 3 April 2006 consideration of $80million (£45.8million) was received
by BBC Worldwide in respect of its 25% holding in Animal Planet LLC.
27 Related party transactions
The related party transactions of the Group have been presented in accordance with FRS 8 Related party
disclosures. Under the provisions of FRS 8 the BBC has not disclosed transactions between Group entities
where more than 90% of those entities’ voting rights are controlled within the Group. UK Public Service
Broadcasting does not underwrite any of the activities or liabilities of the subsidiaries.
In all transactions, the terms of trade were negotiated on an arm’s length basis.
27a Transactions with joint ventures and associated undertakings
Included in the statement of income and expenditure is income from UKTV of £45.8million (2005 £51.8million)
relating to the sale of programmes and dividends. Also included is income of £27.9million (2005 £30.5million)
relating to the sale of programmes to JV Programmes LLC. Net income from 2|entertain Limited of£23.5million (2005 £15.6million) was received for licensing of programmes, other commissions and dividends.
There is also £5.9million (2005 £6.3million) of income from various other joint ventures and associates
relating to the sale of programmes. Included in the statement of income and expenditure is income of£0.8million (2005 £0.8million) from BBC Haymarket Exhibitions Limited relating to management fees anddividends. In addition, Frontline Limited charged £2.0million (2005 £3.1million) for the distribution of BBC
Worldwide Limited’s magazines and paid a dividend of £0.4million (2005 £0.6million). Also included is acharge for £0.3million (2005 £0.4million) from Parliamentary Broadcast Unit Limited, for the purchase ofbroadcast licences.
The BBC, Crown Castle UK Limited and British Sky Broadcasting Limited are partners in DTV Services
Limited. In the year the BBC paid DTV Services Limited £1.3million (2005 £0.9million) for marketing services.
The BBC and Land Securities Trillium Limited are partners in the Insight Property Partnership and the WhiteCity Development Partnership.The partnerships charged the BBC £104.8million for property services during
the year (2005 £153.2million).
In July 2003, the BBC granted a head lease on Broadcasting House to Daunus Limited (a company in which
the BBC holds a 10% interest (see Note 13b) and Morgan Stanley Gamma Investments. During the year
the BBC has paid rent of £11.5million to Daunus Limited and received £1.0million (2005 £14.9million)
for reimbursement of Broadcasting House development costs.
Amounts owed by/to joint ventures and associated undertakings at the year end are disclosed within
Notes 15 and 16. In all transactions the terms of trade were negotiated on an arm’s length basis.

138

BBC Annual Report and Accounts 2005/2006

Related parties include
Governors, the Executive
Board and other senior
managers, their immediatefamilies and external entities
controlled by themTransactions between the
BBC and these relatedparties are explained inthis note.

27b Other transactions
In the normal course of business the BBC transacts with other parties which are related to it by virtue of its
senior employees being married or closely related to employees of the BBC or individuals who own or are
employed at other media, production and broadcasting companies.
The BBC has set procedures for dealing with situations to avoid any conflict of interest. Where transactions
have arisen between connected parties, the BBC Governor or employee is not a party to the approval process.
Baroness Deech, Governor, has a daughter who is a journalist in BBC News. Her remuneration is basedon the BBC’s standard terms and conditions applicable to other staff employed in this capacity.
Professor Merfyn Jones, Governor, has a son who is a researcher in BBC News. His remuneration is basedon the BBC’s standard terms and conditions applicable to other staff employed in this capacity.
Ranjit Sondhi, Governor, is married to Anita Bhalla, who has been employed by the BBC since 1987 invarious production and broadcasting roles. Her current role is Head of Political Community Affairs for the
English Regions. Her remuneration is based on the BBC’s standard terms and conditions applicable to otherstaff employed in this capacity. His daughter is an actress and works occasionally on BBC Radio and Television
programmes. Her fees are based on the BBC’s standard artists and contributor terms and conditions.
Deborah Bull, Governor, is sole Director of Deborah Bull Limited. Subsequent to her appointment, Deborah
received, through Deborah Bull Limited, payments totalling £2,853 (2005 £8,650) for contributions to various
BBC programmes. No amounts were outstanding at the year end (2005 £nil).
The wife of Richard Tait, Governor, is a BBC Radio 4 commissioning editor. Her remuneration is based on the
BBC’s standard terms and conditions applicable to other staff employed in this capacity.
Michael Grade, Chairman, is non-executive Chairman of Pinewood Shepperton and non-executive Chairmanof Hemscott plc. In the year ended 31 March 2006 the BBC paid £2,494,051 (2005 £2,148,763) toPinewood Shepperton for the use of studios and related facilities. At the year end £16,105 was outstanding(2005 £5,554).
Menna Richards is controller of BBC Wales. Her sister has a controlling interest in Torpedo Limited. BBC Wales
made payments on contracts to the value of £323,895 with Torpedo Limited for the provision of independentradio and television programmes in the year.These amounts had been paid in full by 31 March 2006. Also,
BBC Wales entered into artists’ contracts worth £56,267 with her husband Patrick Hannan.These amounts
had been paid in full by 31 March 2006.

BBC Annual Report and Accounts 2005/2006

139

Broadcasting facts and figures

1 Average 15-minute weekly reach: BBC and competitors
2 Average audience share: BBC and competitors
3 Subtitling output on BBC Television
4 Audio description on BBC Television
5 Signing on BBC Television
6 BBC Network Television hours of output by genre
7 BBC Television hours of output by origin
8 BBC Network Television hours of repeats
9 BBC Network Radio hours of output by genre
10 BBC Network Radio hours of output by origin
11 Average weekly bbc.co.uk page impressions
12 Average weekly reach of BBC New Media (millions of users)
13 Weekly audio visual (AV) requests from bbc.co.uk
14 Comparative cost per hour of viewing/listening
15 Cost per hour of BBC-originated programmes by service
16 Cost per hour of BBC-originated programmes by genre
17 BBC News 24 costs
18 BBC distribution costs
19 BBC spend outside London
20 Creative spend outside the BBC
21 TV programming produced by independent producers as a percentage
of eligible hours
22 Top ten external producers for BBC Television by spend
23 Radio programming produced by independent producers as a percentage
of eligible hours
24 Top five external producers for BBC Radio by spend
25 New Media content produced outside the BBC as a percentage of eligible spend

140

BBC Annual Report and Accounts 2005/2006

Table 1: Average 15-minute weekly reach: BBC and competitors
The table shows the percentage of people who watch or listen to television or radio for at least 15 minutes in an average week.
All homes

All multichannel homes

Analogueterrestrial homes

2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005(55.4m1)(42.5m1)(37.5m1)(13.2m1)(17.9m1)(55.8m1)
%
%
%
%
%
%

Total BBC Television and Radio reach2

92.7

92.9

–

–

–

–

BBC Television
BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

85.3
79.7
59.1
11.8
4.5
4.2
6.4
5.4
0.2

86.6
81.9
61.4
9.4
3.0
3.5
5.8
4.2
0.2

83.6
77.1
52.9
16.1
6.1
6.0
8.8
7.4
0.2

84.5
78.7
53.3
14.8
4.8
5.6
9.0
6.7
0.3

89.7
86.7
74.7
–
–
–
–
–
–

90.2
87.2
75.3
–
–
–
–
–
–

Other channels (total)3
All ITV
ITV1
ITV2
ITV34
ITV45
CITV6
All Channel 4
Channel 4
E47
More 47,8
five
All Sky channels
Sky OneSky News
Discovery7
Nickelodeon7
Nick Jr.
UK Gold7
UKTV

58.6
75.9
73.0
16.9
8.6
4.85
0.16
65.5
62.3
13.6
7.08
43.4
31.7
14.2
4.1
5.2
3.9
2.9
11.2
22.5

52.0
77.5
76.0
13.9
3.3
–
–
64.6
62.6
8.4
–
43.9
30.7
14.8
4.0
5.1
4.4
2.6
11.0
20.4

81.2
74.4
70.5
23.0
11.7
6.35
0.26
62.2
57.9
18.4
9.18
43.0
45.1
19.6
6.0
7.0
5.7
4.1
15.8
31.5

81.4
75.1
72.7
21.4
5.0
–
–
59.7
55.8
13.0
–
42.9
48.4
22.8
6.3
8.0
7.0
4.1
17.2
32.0

–
–
79.6
–
–
–
–
–
72.6
–
–
43.1
–
–
–
–
–
–
–
–

–
–
81.3
–
–
–
–
–
71.4
–
–
44.5
–
–
–
–
–
–
–
–

BBC Radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Radio Five Live Sports Extra
1Xtra
BBC 6 MusicBBC 7
BBC Asian Network
BBC Local Radio (including Nations)
BBC World Service9

66.5
20.6
26.5
4.1
19.2
12.0
1.0
0.7
0.6
1.2
0.9
20.5
2.6

66.6
20.4
27.2
4.2
19.3
12.7
0.8
0.6
0.5
0.9
1.0
20.8
2.6

All commercial radio
Virgin AM/FMClassic FM
talkSPORT
All local commercial radio

62.2
5.1
12.1
4.4
50.6

63.8
5.1
12.6
4.6
52.5

Source:Television: BARB TNS/Infosys, age 4+; Radio: RAJAR, age 15+, bothaverage for the year
1
People aged 4+ as at March, source: BARB
2
Combined weekly reach to BBC Television and Radio, age 4+,
source: BARB/RAJAR
3
Excludes BBC One, BBC Two, ITV1, Channel 4 and five

ITV3 launched in November 2004
ITV4 data covers the period November 2005 to March 2006
6
CITV data covers the period March 2006
7
Includes the first transmission and +1 hour time-shifted channels
8More 4 data covers the period October 2005 to March 2006
9
UK only
4
5

BBC Annual Report and Accounts 2005/2006

141

Broadcasting facts and figures

Table 2: Average audience share: BBC and competitors
The table shows the percentage of hours of viewing or listening in an average week.
All homes

All multichannel homes

Analogueterrestrial homes

2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005(55.4m1)(42.5m1)(37.5m1)(13.2m1)(17.9m1)(55.8m1)
%
%
%
%
%
%

Total BBC Television and Radio share2

42.7

43.1

–

–

–

–

BBC Television
BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

34.9
22.9
9.4
0.6
0.2
0.4
0.9
0.4
0.0

36.2
24.4
9.6
0.5
0.2
0.3
0.8
0.4
0.0

29.8
19.2
7.0
0.9
0.3
0.6
1.3
0.6
0.0

29.7
19.7
6.7
0.8
0.3
0.5
1.3
0.6
0.0

48.0
32.5
15.5
–
–
–
–
–
–

47.9
32.9
15.0
–
–
–
–
–
–

Other channels (total)3
All ITV
ITV1
ITV2
ITV34
ITV45
CITV6
All Channel 4
Channel 4
E47
More 47,8
five
All Sky channels
Sky OneSky News
Discovery7
Nickelodeon7
Nick Jr.
UK Gold7
UKTV

30.5
23.6
21.1
1.5
0.9
0.35
1.66
11.4
9.8
1.4
0.48
6.3
6.3
1.4
0.4
0.5
0.4
0.4
1.1
2.9

27.3
23.9
22.3
1.2
0.3
–
–
10.6
9.8
0.8
–
6.5
6.5
1.5
0.4
0.4
0.4
0.3
1.2
2.6

42.4
21.6
18.2
2.0
1.2
0.45
2.06
10.2
8.1
1.8
0.68
5.2
9.2
1.9
0.6
0.7
0.5
0.5
1.6
4.0

42.5
20.9
18.5
1.8
0.5
–
–
8.8
7.6
1.0
–
5.2
10.2
2.2
0.6
0.7
0.6
0.5
1.8
4.0

–
–
28.7
–
–
–
–
–
14.2
–
–
8.8
–
–
–
–
–
–
–
–

–
–
29.2
–
–
–
–
–
13.8
–
–
8.8
–
–
–
–
–
–
–
–

BBC Radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Radio Five Live Sports Extra
1Xtra
BBC 6 MusicBBC 7
BBC Asian Network
BBC Local Radio (including Nations)
BBC World Service9

54.9
9.3
15.9
1.2
11.7
4.4
0.1
0.2
0.2
0.3
0.3
10.9
0.6

54.0
8.5
16.3
1.2
11.3
4.6
0.1
0.1
0.1
0.2
0.3
10.9
0.6

All commercial radio
Virgin AM/FMClassic FM
talkSPORT
All local commercial radio

43.1
1.6
4.2
1.8
32.8

44.1
1.5
4.2
1.7
34.3

Source:Television: BARB TNS/Infosys, age 4+; Radio: RAJAR, age 15+, bothaverage for the year
1
People aged 4+ as at March, source: BARB
2
Combined share of viewing/listening to BBC Television and Radio age 4+,
source: BARB/RAJAR
3
Excludes BBC One, BBC Two, ITV1, Channel 4 and five142

ITV3 launched in November 2004
ITV4 data covers the period November 2005 to March 2006
6
CITV data covers the period March 2006
7
Includes the first transmission and +1 hour time-shifted channels
8More 4 data covers the period October 2005 to March 2006
9
UK only
4
5

BBC Annual Report and Accounts 2005/2006

Table 3: Subtitling output on BBC Television
Subtitled hours

BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24

Actual for year

Target for year

2005/2006

2004/2005

2005/2006%

2004/2005%

2005/2006%

2004/2005%

13,144
9,516
2,542
2,534
3,286
3,866
6,149

12,643
9,355
2,293
2,162
2,912
3,768
5,382

91.6
91.7
78.3
77.0
75.7
82.3
70.4

87.4
88.5
69.0
65.4
65.8
78.6
60.4

90.0
90.0
70.0
70.0
70.0
70.0
70.0

85.0
85.0
60.0
60.0
60.0
60.0
60.0

Note: BBC Parliament is not subject to Ofcom subtitling targets on the basis of audience size

Table 4: Audio description on BBC Television
Audio
described hours

BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies

Actual for year

Target for year

2005/2006

2004/2005

2005/2006%

2004/2005%

2005/2006%

2004/2005
%

719
628
615
332
552
431

599
540
452
251
271
384

8.2
7.4
18.9
10.1
12.7
9.2

6.7
6.1
13.6
7.6
6.1
8.0

6.9
6.9
6.9
6.9
6.9
6.9

6.0
6.0
6.0
6.0
6.0
6.0

Note:Targets have been set for 10% of programming output to be audio described by 2008/2009
Note: BBC News 24 is not subject to audio description targets due to the narrative nature of the output
Note: BBC Parliament is not subject to Ofcom audio description targets on the basis of audience size

Table 5: Signing on BBC Television
Signinterpreted hours

BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24

Actual for year

Target for year

2005/2006

2004/2005

2005/2006%

2004/2005%

2005/2006%

2004/2005
%

308
312
117
129
172
176
336

269
269
104
112
146
200
276

3.5
3.7
3.6
3.9
4.0
3.8
3.8

3.0
3.0
3.1
3.4
3.3
4.2
3.1

3.4
3.4
3.4
3.4
3.4
3.4
3.4

3.0
3.0
3.0
3.0
3.0
3.0
3.0

Note:Targets have been set for 5% of programming output to be signed by 2008/2009
Note: BBC Parliament is not subject to Ofcom signing targets on the basis of audience size

BBC Annual Report and Accounts 2005/2006

143

Broadcasting facts and figures

Table 6: BBC Network Television hours of output by genre
The table shows the number of hours of each genre broadcast on each channel. It includes orginations, acquired programmes and repeats.
BBC OneFactual and learning
Education (formal)1
News and weather
Current affairs
Entertainment
SportChildren’s
Drama
Film
Music and arts
Religion
Continuity
Total network hours (excluding opt-outs)
Included in total network hours are acquired
programmes of
Included in total network hours are parliamentary
programmes of

BBC Two

Education (formal)
News and weather
Children’sContinuity

Total network hours
Included in total network hours are acquired
programmes of
Included in total network hours are parliamentary
programmes of

2004/2005

2005/2006

2004/2005

2005/2006

2004/2005

2005/2006

2004/2005

1,880
–
2,508
159
433
670
672
1,036
654
82
92

1,748
–
2,446
160
559
787
675
880
839
53
86

1,438
1,579
673
259
810
1,028
1,168
166
735
350
47

1,343
1,567
620
267
781
946
1,353
173
964
297
33

1,419
–
114
62
903
36
–
258
200
145
1

1,321
2
143
87
882
4
–
368
191
145
10

1,100
–
8
234
234
–
–
295
199
1,136
16

997
1
92
2452
187
–
–
190
258
1,261
26

259

234

322

320

119

118

82

80

8,445

8,467

8,575

8,664

3,257

3,271

3,304

3,254

1,476

1,471

1,597

1,919

287

299

522

542

64

51

131

145

–

–

–

–

CBeebies

BBC News 24

BBC Parliament

2005/2006

2004/2005

2005/2006

2004/2005

2005/2006

2004/2005

2005/2006

2004/2005

583
–
3,458

562
–
3,468

88
–
4,107

77
–
4,110

–
8,468
–

–
8,468
–

–
8,760
–

–
8,760
–

313

320

516

530

292

292

–

–

4,354

4,350

4,711

4,717

8,760

8,760

8,760

8,760

646

762

866

700

178

178

135

327

–

–

–

–

–

–

8,760

8,760

Education (formal) includes Education for children, Open University and BBC Learning Zone
Hours restated from 2004/2005 due to reclassification

1
2

144

BBC Four

2005/2006

The CBBC Channel

1

BBC Three

BBC Annual Report and Accounts 2005/2006

Table 7: BBC Television hours of output by origin
The table shows where programmes were made and broadcast.
Hours of programmes made in:England(excluding London)

London

Northern Ireland

Scotland

Wales

Total

2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005

First Transmission: Originated programmes Network BBC One and BBC Two
Factual and learning
852
859
678
688
4
36
23
16
7
1
Education (formal)1
News and weather
3,176 3,062–––
Current affairs
339
343
62
55
2
Entertainment
575
630
135
112
10
Sport
1,437 1,496–––
Children’s
278
332
8
22
–
Drama
281
255
174
157
9
Film
–
2
–
–
–
Music and arts
190
157
14
5
–
Religion
13
7
103
101
1

2
1
–
1
1
–
–
9
–
–
1

67
4
–
2
6
–
48
21
–
34
3

71
7
–
2
6
–
47
23
–
32
3

37
1
–
–
–
–
–
25
–
15
1

23
2
–
–
2
–
–
9
–
10
1

1,638
58
3,176
405
726
1,437
334
510
–
253
121

1,643
40
3,062
401
751
1,496
401
453
2
204
113

Subtotal

8,658

8,566

7,177

7,166

1,190

1,147

27

15

185

191

79

47

First Transmission: Originated programmes Digital channels
Factual and learning
235
149
80
60
Education (formal)1
–
11
–
–
–
–
News and weather
11,191 11,8222
Current affairs
148
1572
4
12
Entertainment
109
140
21
30
Sport
36
2
–
–
Children’s
575
766
64
23
Drama
12
2
1
23
Film
1
–
–
–
Music and arts
177
214
29
18
Religion
–
3
1
5

–
–
–
2
–
–
–
–
–
–
–

1
–
–
5
–
–
–
1
–
–
–

23
–
162
–
–
–
34
–
–
44
–

14
1
112
–
5
–
33
–
–
68
–

11
–
159
–
–
–
5
12
–
23
1

5
349
229
–
–
12
109 11,512 12,0432
–
154
1742
–
130
175
–
36
2
5
678
827
10
25
36
–
1
–
23
273
323
–
2
8

Subtotal

171

2

7

263

233

211

152 13,160 13,829

First Transmission: Originated programmes Nations and Regions
Factual and learning
1
3
14
21
Education (formal)1––––
News and weather
303
297 3,640 3,365
Current affairs
9
9
90
96
Entertainment
–
–
–
2
Sport
–
–
29
38
Children’s
–
–
–
–
Drama
–
–
–
–
Film
–
–
–
–
Music and arts
1–
6
2
Religion
–
–
–
–

103
2
350
36
50
93
–
–
–
1
–

70
2
336
36
70
108
–
5
–
6
–

85
12
452
64
23
141
19
53
–
42
–

64
9
438
66
17
154
15
53
–
31
–

89
7
470
39
15
190
–
7
–
24
–

88
4
461
40
17
215
–
6
–
33
–

292
21
5,215
238
88
453
19
60
–
74
–

246
15
4,897
247
106
515
15
64
–
72
–

Subtotal

12,484 13,266

200

314

309

3,779

3,524

635

633

891

847

841

864

6,460

6,177

Acquired programmes

1,148

1,188

11

5

–

4

–

–

4

11

1,163

1,208

Total first transmissions*21,123 21,929

5,180

4,847

664

659

1,339

1,271

1,135

1,074 29,441 29,780

Repeats
Network
Nations and Regions

20,287 19,689
–
–

2,974
2

3,118
2

24
221

33
146

737
237

859
199

333
281

184 24,355 23,883
278
741
625

Continuity
Open University
BBC Learning Zone

1,907
352
565

1,897
360
515

32
–
–

31
–
–

170
–
–

255
–
–

182
–
–

188
–
–

163
–
–

169
–
–

Total hours of broadcasting

44,234 44,390

8,188

7,998

1,079

1,093

2,495

2,517

1,912

2,454
352
565

2,540
360
515

1,705 57,908 57,703*Of which independents
Network
Nations and Regions

1,880
13

1,716
–

401
60

342
57

18
97

12
84

98
164

112
148

54
129

26
124

2,451
463

2,208
413

*Of which parliamentary
programming

3,751

4,317

111

–

28

–

251

112

255

109

4,396

4,538

Education (formal) includes Education for children, Open University and BBC Learning Zone
2
News and current affairs hours on BBC Four restated from 2004/2005 due to reclassification
1

BBC Annual Report and Accounts 2005/2006

145

Broadcasting facts and figures

Table 8: BBC Network Television hours of repeats
The table shows the number of hours of repeats shown on BBC One and BBC Two.
BBC One2005/2006

BBC Two

2004/2005

2005/2006

2004/2005

Hours of programmes in peak
Repeats in peak
Of which narrative repeats
Of which digital transfers% repeats in peak time

1,643
146
4
12
8.9%

1,643
159
2
5
9.7%

1,643
450
47
70
27.4%

1,643
533
38
99
32.5%

Total hours of network programmes
Repeats
Of which narrative repeats
Of which digital transfers% repeats in all hours

8,445
2,602
337
176
30.8%

8,467
2,683
457
175
32.0%

8,575
4,567
187
453
53.3%

8,664
4,771
175
379
54.0%

Repeats include transfers from BBC’s digital channels (but not digital premieres)
Table 9: BBC Network Radio hours of output by genre
The table shows the number of hours of each genre broadcast on each radio station.
BBC Radio 1

BBC Radio 2

BBC Radio 3

BBC Radio 4

BBC Radio Five Live2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005

Music
News and weather
Sport
FactualCurrent affairs
Drama
Arts
Entertainment
Religion
Schools
Children’sPresentation

8,219
304
35
89
–
–
115
73
–
–
–
148

83371
307
30
63
–
–
841
441
–
–
–
148

7,328
476
–
21
353
12
112
69
192
–
–
197

7,375
455
–
10
340
13
105
78
187
–
–
197

8,073
75
–
–
–
89
309
–
59
–
99
56

8,068
80
–
–
–
93
315
–
67
–
86
51

–
2,374
655
1,305
1,194
1,081
430
509
298
209
26
54

–
2,380
502
1,283
1,210
1,074
448
486
289
208
26
54

–
6,549
2,009
–
56
–
–
–
–
–
–
146

–
6,423
2,138
–
53
–
–
–
–
–
–
146

Total hours

8,9832

9,0132

8,760

8,760

8,760

8,760

8,135

7,960

8,760

8,760

BBC Five LiveSports Extra

1Xtra

BBC 6 MusicBBC 7

BBC Asian Network Total network radio

2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005

Music
News and weather
Sport
FactualCurrent affairs
Drama
Arts
Entertainment
Religion
Schools
Children’sPresentation

–
–
1,209
–
–
–
–
–
–
–
–
–

–
–
1,001
–
–
–
–
–
–
–
–
–

7,718
306
80
–
510
–
–
–
–
–
–
146

7,726
306
77
–
505
–
–
–
–
–
–
146

8,238
325
–
–
–
–
–
–
–
–
–
197

8,203
326
–
5
–
–
–
–
–
–
–
226

–
–
–
–
–
3,495
–
3,158
–
–
1,457
650

–
–
–
–
–
3,184
–
3,466
–
–
1,460
6501

2,844
1,240
390
6
1,690
120
–
–
572
–
–
234

2,746 42,420 42,455
1,246 11,649 11,523
390 4,378 4,138
6 1,421 1,367
1,704 3,803 3,812
122 4,797 4,486
–
966
952
– 3,809 4,074
643 1,121 1,186
–
209
208
– 1,582 1,572
235 1,828 1,853

Total hours

1,209

1,001

8,760

8,760

8,760

8,760

8,760

8,760

7,096

7,092 77,983 77,626

Hours restated from 2004/2005 due to reclassification
BBC Radio 1 operates nations’ opt-outs

1
2

146

BBC Annual Report and Accounts 2005/2006

Table 10: BBC Network Radio hours of output by origin
The table shows where in the UK programmes were made and broadcast.
Programmes produced in:England(excluding London)

London

Northern Ireland

Scotland

Wales

Total

2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005 2005/2006 2004/2005

BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Five Live Sports Extra
1Xtra
BBC 6 MusicBBC 7
BBC Asian Network

8,763
5,529
6,496
6,339
8,505
1,209
8,758
8,500
8,737
780

8,755
5,561
6,572
6,080
8,529
1,001
8,758
8,500
8,730
780

2
3,150
1,064
1,553
252
–
2
260
10
6,316

3
3,115
1,050
1,602
228
–
2
260
3
6,312

72
13
78
41
3
–
–
–
13
–

81
2
70
47
3
–
–
–
17
–

73
64
361
133
–
–
–
–
–
–

91
80
327
161
–
–
–
–
10
–

73
4
761
69
–
–
–
–
–
–

83
2
741
70
–
–
–
–
–
–

8,983
8,760
8,760
8,135
8,760
1,209
8,760
8,760
8,760
7,096

9,013
8,760
8,760
7,960
8,760
1,001
8,760
8,760
8,760
7,092

Total network radio hours
Nations and regions hours

63,616 63,266 12,609 12,575
8,760 8,760 227,619 222,772

220
8,809

220
631
669
907
896 77,983 77,626
8,740 11,961 11,617 15,375 15,367 272,524 267,256

Total radio hours

72,376 72,026 240,228 235,347

9,029

8,960 12,592 12,286 16,282 16,263 350,507 344,882

Table 11: Average weekly bbc.co.uk page impressions
The table shows page impressions viewed in an average week and includes pages accessed from the UK and abroad.
2005/2006 2004/2005
Millions
Millions

UK and international page impressions1

News and sport
Education2
Other bbc.co.uk

268.1
27.5
343.2

187.0
15.5
228.1

Total bbc.co.uk

638.8

430.6

BBC World Service, accessed via bbc.co.uk sites
BBC World Service, accessed via key partners3

29.0
3.1

19.2
1.2

Total BBC World Service

32.1

20.4

Source: BBC server logs, BBC World Service
1
Includes page impressions from international-facing site (average weekly figure for 2005/2006 was 55.4 million), funded by Grant-in-Aid, also includes page
impressions for the Global News Division home pages from December 2005 (weekly average was 35.2 million)
2
Education comprises all schools and lifeskills sites (excluding BBC jam)3
Key partner websites host BBC World Service text and audio

Table 12: Average weekly reach of BBC New Media (millions of users)
2005/2006 2004/2005
Millions
Millions

Unique users (server log based)1

bbc.co.uk unique users (UK only)
bbc.co.uk unique users (UK + international)

12.3
24.3

2005/2006 2004/2005
Millions
Millions

Claimed usage (survey based)

bbc.co.uk2
BBCi (interactive television – 24/7)3

13.7
10.74

BBCi (interactive television – enhanced TV programmes)6
Source: BBC server logs, based on cookie data
Source: BMRB Access, Monthly Omnibus Survey, GB adults age 15+
3
Digital satellite performance only of BBCi 24/7 ‘always on’ digital text
services available on Digital Satellite, Freeview and Digital Cable
Source:TNS News Media Tracker GB 16+
4
Cross platform (Digital Satellite, Freeview and Digital Cable) measure only
2

10.6
n/a5

2005/2006 2004/2005
Millions
Millions

Average monthly reach

1

8.7
17.3

3.2

3.5

available from October 2005
Comparable data not available. New methodology from October 2005
6
Digital satellite performance only of BBCi interactive TV programmes(eg Olympics, Little Britain).The number and size of services available eachmonth fluctuates and therefore so does the number of viewers interacting
Source: BARB, viewers aged 4+ in digital satellite homes5

BBC Annual Report and Accounts 2005/2006

147

Broadcasting facts and figures

Table 13: Weekly audio visual (AV) requests from bbc.co.uk
The table shows the number of hours of streaming and downloads of BBC programming per week.

UK and International AV consumption hours in million
Radio – live streams
Audio on-demand downloads
Other broadband and narrowband video and audio streams
Total AV from bbc.co.uk

2005/2006
millions

2004/2005
millions

2.3
1.3
1.0
4.6

1.4
0.9
0.6
2.9

2005/2006
pence

2004/2005
pence

5.4
50.6
81.8

5.0
44.0
81.5

Source: BBC server logs

Table 14: Comparative cost per hour of viewing/listening
The table shows the cost per hour to a viewer/listener of watching/listening.

BBC1
Sky multichannels2
Video/DVD hire3

Source: BARB, RAJAR, BBC Strategy estimates
1
Based on the cost of the licence fee to a household (£126.50 per year in 2005/2006), total hours of viewing/listening to BBC output and average 2.32 people
in household
2
Based on the cost of basic multichannels (family package), total hours of viewing to Sky channels and average 2.73 people in household
3
Based on the average cost per video/DVD hire(£2.94)

Table 15: Cost per hour of BBC-originated programmes by service
2005/2006£000

2004/2005£000

Television channels
BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

162.9
99.3
146.4
73.6
75.3
59.1
5.0
0.5

174.4
97.7
157.5
62.6
42.2
63.3
5.3
0.5

Radio stations
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Five Live Sports Extra
1Xtra
BBC 6 MusicBBC 7
BBC Asian Network

3.3
4.0
4.1
11.5
6.6
1.3
0.7
0.5
3.7
1.1

3.1
3.9
4.3
11.4
7.3
1.6
0.7
0.5
3.8
0.8

Nations and Regions
Television (BBC One/BBC Two/BBC Three/BBC Four)Radio (Local radio/Nations radio)

31.7
0.6

31.2
0.6

148

BBC Annual Report and Accounts 2005/2006

Table 16: Cost per hour of BBC-originated programmes by genre
2005/2006£000

2004/2005£000

Analogue television programmes
Factual and learning
Education (formal)1
News and weather
Current affairs
Entertainment
SportChildren’s
Drama
Film
Music and arts
Religion

108.5
107.1
43.3
130.6
199.3
158.4
80.2
526.3
–
133.6
105.3

110.6
93.0
42.8
116.8
196.1
199.8
93.3
505.4
280.3
151.0
108.3

Digital television programmes
Factual and learning
Education (formal)1
News and weather
Current affairs
Entertainment
SportChildren’s
Drama
Film
Music and arts
Religion

143.1
116.0
4.1
117.5
226.3
27.6
72.7
500.3
104.3
65.4
124.1

132.8
–
4.0
123.6
190.8
73.9
44.3
582.8
–
74.6
102.1

Education (formal) includes education for children, Open University and BBC
Learning Zone

Table 19: BBC spend outside London
The table shows the cost of BBC programmes made in the nations
and regions.
2005/2006£m

2004/2005
£m

286
45
106
68

2661
41
1121
571

505

476

128
13
26
23

129
16
27
23

190

195

Other programme costs incurred outside London
Other costs, including transmission

48
122

51
125

Total spend in the nations and regions

865

8471

300

2831

47

49

Television
England
Northern Ireland
Scotland
Wales

Radio
England – local radio
Northern Ireland
Scotland
Wales

Included within television originations
is network spend of
Included within radio originations
is network spend of1

TV figures restated on transmission rather than delivery basis, consistent with
Ofcom reporting

1

Table 17: BBC News 24 costs
Note 2b (page 107) sets out the cost of BBC services and channels. Table 20: Creative spend outside the BBC
2005/2006
Certain categories of expenditure, including newsgathering, are not£mallocated to individual services and channels. Had part of thisIndependent programme productions transmitted 353
expenditure been allocated to BBC News 24, its costs would have
External programme facilities and resources
241
been as follows:
Acquired programmes transmitted
80
Artists, contributors and copyright276
2005/2006 2004/2005£m£m
Performing groups
29
Total production costs
Newsgathering1
Central costs

23.1
19.1
6.6

23.0
18.4
6.7

Included in newsgathering allocation is £3.3million of regional spend(2004/2005 £3.2million)
Note: 1,049 hours of BBC News 24 programming were shown on BBC One
and 268 hours on BBC Two (2004/2005: 928 hours on BBC One and 225
hours on BBC Two)1979

2005/2006£m

2004/2005£m

Analogue
Digital

76
89

77
80

Total distribution costs

165

157

328
245
84
2831
28
968

Figure restated from 2004/2005

1

Table 21:TV programming produced by independent producers
as a percentage of eligible hours

TargetActualTable 18: BBC distribution costs

2004/2005
£m

2005

2004

%

%

25
31

25
30

There is a statutory requirement for 25% of eligible hours of TV programming
to be produced by independent producers. It is Ofcom’s responsibility to report
BBC’s performance against this requirement: the 31% in 2005 is the BBC’s self
assessment figure (see Compliance, page 91).

BBC Annual Report and Accounts 2005/2006

149

Broadcasting facts and figures

Table 22:Top ten external producers for BBC Television by spend
1 Hat Trick Productions
2 Kudos Film and Television
3 Talkback Thames
4 Tiger Aspect Productions
5 Endemol
6 Lion Television
7 Wall to Wall
8 Zenith Entertainment
9 Open Mike Productions
10 Mentorn

Table 24:Top five external producers for BBC Radio by spend
1 Unique2 Somethin’ Else
3 Smooth Operations
4 Pier Productions
5 Classic Arts Productions
The BBC spent £16.0million on external programme production in the financial
year 2005/2006 (£15.3million in 2004/2005).

Table 25: New Media content produced outside the BBC as apercentage of eligible spend

The BBC spent £335million on external programme production in the financial
year 2005/2006 (£311million in 2004/2005).

Table 23: Radio programming produced by independent producers
as a percentage of eligible hours

TargetActual2005/2006

2004/2005

%

%

10.0
14.2

10.0
13.4

TargetActual2005/2006

2004/2005

%

%

–
17.2

n/a
–

The BBC has made a voluntary commitment to 25% (by value) of eligible online
content being sourced from outside the BBC from 2006/2007. BBC New Media
had an external spend of £8.3milion in 2005/2006.

The BBC has made a voluntary commitment to 10% of eligible hours of radio
programming being produced by independent producers. Data based on
financial year.

General notes– new Ofcom genres will be introduced in the BBC’s next Annual Report and Accounts (2006/2007)
Terms
Peak time(television)

18:00–22:30 BBC One and BBC Two

RepeatA re-broadcast of a programme previously shown on the same or another BBC television channel

Narrative repeat Re-broadcast of a programme within seven days of first transmission
Digital transfers Re-broadcast of a programme on BBC One or BBC Two previously shown on one of the BBC’s digital channels(eg BBC Three or BBC Four)
Digital premiere A programme commissioned for BBC One or BBC Two but first shown (premiered) on one of the BBC’s digital
television channels (eg Spooks)
Originations

Programmes produced for transmission on the BBC

Acquisitions

Programmes originally produced for transmission by a different broadcaster, either in the UK or overseas

Weekly reach(radio)The percentage of adults in the UK aged 15+ who tune to a radio station within at least one 15-minute period
in an average week (as measured by RAJAR)

Weekly reach(television)

The percentage of individuals in the UK aged 4+ who watch at least 15 consecutive minutes of televisionin an average week (as measured by BARB)

Share (radio)

The percentage of total hours of listening in an average week

Share(television)

The percentage of the total viewing audience150

BBC Annual Report and Accounts 2005/2006

Getting in touch with the BBC

BBC Information
If you have a question or comment
about BBC programmes or services,
you can contact BBC Information.
Write to:
BBC Information
PO Box 1922
Glasgow G2 3WT
Telephone: 08700 100 222*
(24 hours a day, seven days a week)
Textphone: 08700 100 212
Fax: 0141 307 5770
Website: bbc.co.uk/info
For information about how toreceive the BBC’s digital services
Telephone: 08700 10 10 10*
Website: bbc.co.uk/digital
For general television and radio
reception advice
Write to:
BBC Reception Advice
PO Box 1922
Glasgow G2 3WT
Telephone: 08700 100 123*
Textphone: 08700 100 212
Website: bbc.co.uk/reception
To share your views on our
television programmes
Write to:Points of View
BBC Birmingham
Birmingham B1 1RF
Telephone: 0870 908 3199
(operational when programmeis on air)
Email: pov@bbc.co.uk
Website: bbc.co.uk/pov
To share your views on ourradio programmes
Write to:FeedbackBBC
PO Box 2100
London W1A 1QTTelephone: 08700 100 400*
(24 hours a day, seven days a week)
Fax: 020 7436 2800
Email: feedback@bbc.co.uk
Website: bbc.co.uk/radio4/feedback
Programme and editorial complaints
If you think a BBC programme or
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Write to:
BBC Complaints
PO Box 1922
Glasgow G2 3WT
Telephone: 08700 100 222
Textphone: 08700 100 212
Website: bbc.co.uk/complaints
Or you can contact the Officeof Communications (Ofcom), an
independent regulatory body, one ofwhose responsibilities is to consider
complaints about standards, fairness
and privacy in broadcasting.

Write to:Ofcom Contact Centre
Riverside House
2A Southwark Bridge Road
London SE1 9HA
Telephone: 020 7981 3040
Fax: 020 7981 3334
Email: contact@ofcom.org.uk
Website: www.ofcom.org.uk
BBC Broadcasting and Advisory
Councils
The National Broadcasting Councils
in Scotland, Wales and Northern
Ireland and the English Regional andLocal Advisory Councils assist BBC
Governors in their overview of theBBC. Under the existing Charter,
you can write to them with yourviews through:The Secretary
BBC Broadcasting Council for
Scotland
Room 3152
BBC Broadcasting House
Queen Margaret Drive
Glasgow G12 8DG
The Secretary
BBC Broadcasting Council for Wales
BBC Broadcasting House
Llandaff
Cardiff CF5 2YQ
The Secretary
BBC Broadcasting Council for
Northern Ireland
BBC Broadcasting House
Ormeau Avenue
Belfast BT2 8HQ
The Secretary
BBC English Regions
BBC Birmingham
The Mailbox
Birmingham B1 1RF
The Central Religious Advisory
Committee (CRAC) advises the BBC
on religious broadcasting policy andprogrammes.You can write to CRAC
with your views through:Head of Performance
BBC Governance Unit
Room 211
35 Marylebone High Street
London W1U 4AA
Free tickets
For free tickets to BBC radio andtelevision shows
Write to:
BBC Studio Services
PO Box 3000
BBC Television Centre
London W12 7RJ
Telephone: 020 8576 1227
Textphone: 020 8225 8090
Fax: 020 8576 8802
Email: tv.ticket.unit@bbc.co.uk
or radio.ticket.unit@bbc.co.uk
Website: bbc.co.uk/tickets

Visiting the BBC
The BBC runs tours of BBC Television
Centre in London.
For more information and to book
Telephone: 0870 603 0304*
Textphone: 0870 903 0304
Email: bbctours@bbc.co.uk
Website: bbc.co.uk/tours
BBC Scotland, BBC Wales, BBC
Northern Ireland and English regional
centres and local radio stations will
arrange tours for media students,
professional organisations and othergroups. Please contact your local
centre for details.
BBC products
You can buy DVDs, videos, books,
toys and other merchandise for some
BBC programmes. For copyrightreasons, getting tapes of other BBC
programmes is not generally possible.
For products and sales information
Telephone: 0870 600 7080*
You can also buy BBC products from
BBC Shops located around thecountry.
Write to:
BBC ShopPO Box 308
Sittingbourne
Kent ME9 8LW
Telephone: 08700 777 001*
(8.30am–6pm Monday–Friday)
Website: www.bbcshop.com
Contributing to programmes
The BBC has a Diversity Databaseof potential contributors to help BBC
programme makers find new faces
and voices, and to better reflect thefull diversity of UK society. We areparticularly interested in hearing frompeople with disabilities, ethnic
minorities and older people. Contact
us if you are interested in joining as
a potential contributor.
Write to:Diversity Database Project
Administrator
BBC
MC2 C5 Media Centre
Media Village
201 Wood Lane
London W12 7TQ
Telephone: 020 8008 4287
Fax: 020 8008 4282
Email: diversity.database@bbc.co.uk
Website: bbc.co.uk/info/policies

To find out about job vacancies
at the BBC
Write to:
BBC Recruitment
PO Box 48305
London W12 6YE
Telephone: 0870 333 1330*(9.30am–5.30pm Monday–Friday)
Email: recruitment@bbc.co.uk
Website: bbc.co.uk/jobs
For queries about your TV LicenceFor general enquiries or direct debit
payments
Telephone: 0870 240 3294
Fax: 0870 240 1187
Email: tvlcsc@capita.co.uk
Website: www.tvlicensing.co.uk
This BBC Annual Report and Accounts
is available in public libraries
throughout the UK and on the
BBC Governors’ website atbbcgovernors.co.uk. It is alsoavailable in Welsh, in an audio
version, in Braille and as a summary
leaflet. Annual Reviews for BBC
Scotland, BBC Wales, BBC Northern
Ireland, BBC English Regions and the
BBC World Service are also published.
The BBC also publishes the BBC
Statements of Programme Policy whichsets out the BBC’s commitments
and plans for the year ahead.
This is available on the BBC’s website
at bbc.co.uk/info/statements2006. It
is also available in Welsh, in an audio
version, and in Braille.
*Calls to this number may
be monitored or recorded
for training purposes

To find out about getting work
experience at the BBC
Write to:
BBC Work Experience
MC2 C6 Media Centre
Media Village
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London W12 7TQ
Email: work.experience@bbc.co.uk
Website:bbc.co.uk/jobs/workexperience

BBC Annual Report and Accounts 2005/2006

151

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