October 20, 2010 4:07 pm

How the BBC agreed to swallow its medicine

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Slough station will have a small part to play in the history of the BBC.

It was here that Mark Thompson, the director-general, got off the train bound for his home town of Oxford on Monday night and returned to central London for all-night talks to thrash out a long-term deal for the BBC’s finances. Critics say that the BBC has acted in haste, reaching an accord that makes the BBC a fungible part of the national economy and its licence-fee income vulnerable to chopping and changing according to political whim. They say it will repent at leisure.

The broadcaster itself argues that it may have suffered a reduction of 16 per cent in its income, but it has six years of stability in which to plan for that austerity. Only time will tell which is right.

The story of a rapid deal – licence fee negotiations normally last for six months – began about two weeks ago. Jeremy Hunt, the culture secretary, who had come under pressure from the Treasury to find more contribution to savings, approached the BBC with the idea it could pay for the World Service, which currently has a budget of £273m and is paid for by a grant-in-aid by the Foreign Office.

Other elements that the government wanted off its books, such as fully funding the Welsh-language channel S4C, the BBC Monitoring service at Caversham and the potential costs of supporting a local television network, were added in too.

The BBC resisted, although not very hard, saying it couldn’t know for sure that it could afford to do that and both Mr Thompson and Sir Michael Lyons, chairman of the BBC Trust, decided they would rather take their chances when negotiations on the level of the licence fee to run from 2011-12 to 2016-17 began next spring.

But then, last Tuesday, the BBC said it could take on some extra spending commitments so long as there was a long-term licence fee settlement. This time it was Mr Hunt’s turn to resist and an impasse went into the weekend.

The catalyst for change happened on Sunday, when Iain Duncan-Smith, the work and pensions secretary, decided he wanted to offload the benefit offered to 4m households with an over-75-year-old in it. He said the BBC should pay it, at a cost starting at £556m and increasing each year as the population aged.

The immediate reaction of Sir Michael and other trustees was that this was unacceptable to them and an ugly fight would loom in which the government would have to pass primary legislation through parliament to force the BBC to become what they said was a part of the welfare system.

As the argument went back and forward between the culture secretary, the department of work and pensions and the Treasury on Monday, someone in Whitehall briefed a BBC journalist and the Daily Mail that if a fight was needed, the government was up for it.

However, on Monday evening, Don Foster, the Liberal Democrat spokesman on the media, made clear his, and his party’s view, that he would not sign up for the BBC becoming part of the welfare state.

It was at this point that the director-general was called back from his train journey home to Oxford, got off the train at Slough and returned to London. He went back to the Mr Hunt’s offices near Trafalgar Square and in all-night talks thrashed out the details of the deal.

The BBC reckoned it could cover the extra spending by making relatively small efficiency savings and not affect core services. And the deal was done by lunchtime.

The broadcaster will argue it has certainty and even its critics say it can pay for this if it knows exactly how much it has to cut each year. But all agree that it will still be painful.

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