Thompson tells staff: expect cuts

BBC director general Mark Thompson has written to staff warning that some of the BBC's future plans will need to be abandoned following the announcement of the licence fee settlement.

BBC director general Mark Thompson has written to staff warning that some of the BBC's future plans will need to be abandoned following the announcement of the licence fee settlement.

In an email sent this morning, Thompson said:

Dear All
So now we know. The Government has finally reached a decision about the future level of the licence fee.

Last year's White Paper about the BBC called for an improvement in existing services, for new digital services AND for the BBC to play a leading role in digital switchover. We argued that for the BBC to do all three, the licence fee needed to grow in real terms - in other words above the rate of inflation.

Instead the Government has opted for a licence fee which will grow less than inflation.

That makes it a disappointing settlement when you look at the challenges we face over the next few years. Many of our commercial rivals would be delighted if they were offered these numbers and this level of certainty. Nonetheless, it means some difficult choices for all of us - and for the BBC Trust.

The settlement will give us more than £20 billion over the next six years. But there will be a £2 billion gap between what we believed we need to deliver our plans for the future and the revenue we will actually get over the next six years. That's £2 billion over the whole period of course, not each year. And it doesn't mean £2 billion cuts from existing services or anything like. Our bid contained lots of ideas for new investments and new services - for instance, well over £1 billion for new investment in 'quality content'.

We will, though, also have to look hard at whether we can free more money through efficiencies or by moving it from what we do now to future services. We always have to look hard at efficiency - we had already planned a programme to take over once the present three-year VfM plan is over. But we've done a great deal on productivity and efficiencies already and I believe there's a real limit to how much further we can go without damaging the quality of our output.

So we also need to look at some bold decisions both about future plans - recognising that some plans will have to be abandoned or significantly scaled back - and about the current mix of spend. Some of the initial work will be for me and the executive board of the BBC, but I am asking all the different groups and divisions to get involved too. We're more likely to strike the right balance if creative leaders across the BBC are involved in the thinking about their area. Our proposals with then go to the BBC Trust who will make the final decisions about our priorities going forward.

Two more topics to update you on. First, Salford. Last Autumn - at a time when credible reports were suggesting a licence-fee settlement which would only last four years and at numbers well below today's figures - I warned that Salford might not prove affordable.

Since then, not only has the proposed settlement moved in the right direction, but the Salford proposition has itself improved financially. The project itself is now much better value-for-money and the analysis we've done has demonstrated that the 'do nothing' option of keeping the relevant divisions in West London - with the massive renovation and modernisation that would be required - is more expensive than realised a few years ago. Today the BBC Trust is confirming that Salford can go ahead subject to the successful conclusion of contractual negotiations. It's the right decision for the BBC and for our audiences. The departments we had planned to move there will do so in 2011.

Second, Targeted Help. There's one question you may hear reported about the settlement - which is whether or not the BBC is going to run the so-called 'targeted help' scheme which is intended to assist vulnerable groups in making the switch to digital television. On this point, the BBC Trust is still discussing the details of the proposed scheme and its financial implications with the Government. No final conclusion has been reached yet.

I want to end with a different point. Our plans for the future - and above all the many brilliant ideas that came out of Creative Future - were never fundamentally about getting extra money. Of course the more money you have, the more you can do, but Creative Future is really about transforming and unlocking the content investment we already make. Extending ideas and talent across platforms and through different windows in time. Even though we face pretty tight funding over the next few years, we still have a compelling and confident vision of our future built around our audiences.

A tough licence fee settlement doesn't make the thinking behind Creative Future impossible. It makes it vital.
All the best
Mark