Q51 Greg Clark: What I do not quite understand is that there is a statement in the Report, paragraph 17, page 3, which says " . . . the BBC is confident that the new buildings will be fully occupied" yet we have, as was pointed out in earlier questions, a situation in which about 4,000 people are going to be made redundant or the payroll will shrink by nearly 4,000 people and about 1,500 people will go to Manchester. In other words, there are going to be at least 5,000 fewer people required, yet the buildings are going to be full. How can this be?
Mr Thompson: We have identified a large amount of space in London which we expect to vacate over the period. In terms of initial reductions, we know of at least 750,000 square feet of accommodation of which, for example, Woodlands represents 330,000 square feet, which we will vacate over the coming year. So we will consolidate into the property we have talked about, television centre, media village, West One and indeed, since you mentioned it, Millbank.
Q52 Greg Clark: The problem is that you have built a very high spec specialist centre here and you are moving in office workers effectively to fill it up at great expense.
Mr Thompson: There is a nuance here which is worth exploring. We are saying that we believe that as far as possible there should be a significant mix of programme makers in the media centre. Across the W12 property as a whole, we have quite a lot of general office space as well and there is no reason at all why we cannot get a good fit for the different departments, the different parts of Worldwide, the programme-making departments and the other operations of the BBC, in the portfolio of different kinds of accommodation we have in West London. Despite the Manchester move and therefore the net increase in square footage in Manchester, we believe that the reductions in square footage that we can make across the London site mean that we will have a more efficient use of property and the numbers of square feet per employee will reduce over this period even after taking the value for money headcount reductions into account.
Q53 Greg Clark: Worldwide will be happy to pay the costs they will be charged and this will not disadvantage them commercially in any way. The prices are comparable to what they could get in any other part of London.
Mr Smith: To be honest, and I speak as the chief executive of Worldwide, there is a lot to be said for being relatively close to BBC programme makers. It is worth paying a premium to get that.
Q54 Greg Clark: May I ask a question about borrowing? The BBC's borrowing is limited to £200 million, as I understand it, and counts towards the PSBR. Mr Thompson, does Channel Four's borrowing, on the basis of your experience there, count towards the PSBR?
Mr Thompson: I cannot recall whether it counts towards the PSBR. What is certainly true is that Her Majesty's Treasury insisted relatively recently on imposing a £200 million borrowing ceiling on Channel Four as well.
Q55 Greg Clark: But Channel Four has a much lower turnover.
Mr Smith: Yes; much lower turnover.
Q56 Greg Clark: If we look into the future and expect, perhaps hope, that the BBC is a major global player, to have a borrowing limit that is the same size as the fourth UK channel, very much domestically oriented, seems a little out of sync. Perhaps you would agree.
Mr Peat: May I just provide a personal response on that? I agree with you Mr Clark; that was the limit which was set for the present charter. In the context of charter renewal, we have already had first discussions with the Treasury about that limit and about how we should take matters forward.
Q57 Greg Clark: What limit do you think would be desirable for the BBC's ambitions?
Mr Peat: We are not at a stage where I can give you an exact answer to that. It is very small in the context of the turnover of the company and certainly we should want to look at what sensible borrowing by the BBC would be, given its programme of capital expenditure and other activities over the period of the new charter. We have begun that process of looking at it, but we are not at a stage where I can give you an exact figure. Certainly we would wish to discuss with the Treasury during the period rolling up to the new charter what was appropriate and what would not be such a constraint as to risk damaging value for money for the BBC.
Q58 Greg Clark: Final question for Mr Thompson. Given your plans for the increased role in the BBC around the world, do you find, compared with other competitors, CNN comes to mind and some of the Murdoch channels, that the lack of access to the capital markets is a serious constraint or is it a minor matter?
Mr Thompson: The first thing is that the BBC has the enormous benefit and privilege of the licence fee and the BBC has shown over 80 years a considerable ability to reinvent itself, modernise itself and continue to serve audiences, both in the UK and around the world, despite being constrained in what it can achieve commercially. Some years ago the BBC entered into a strategic partnership with Discovery around the world, whereby the BBC was able to get significant revenues into its programme-making stream, launch the channel BBC America in the United States and indeed participate in channels around the world. The BBC's reputation, the attractiveness of the BBC brand and BBC content around the world means there is a great deal we can do through partnership rather than through access to the capital markets.
Mr Smith: One other comment would be that we have had the benefit of access to the capital markets, even though it has not counted against our borrowing ceiling of course, by issuing the bonds for these buildings.
Q59 Mr Bacon: Mr Thompson, you said earlier, and I wrote it down, that at each stage of the process this had saved the public money. In paragraph 19 it states that the land was purchased in 1985, which was 15 years ago. If you sat on this land for 15 years, 3.8 hectares of undeveloped land purchased in 1985, how can that be a process which saves the public money?
Mr Thompson: The BBC took the view in the 1980s, and you will appreciate that I was not directly involved in the decision-making, that it should begin to think hard about its property requirements around the UK, but particularly in terms of West London, and make sure that its property holdings were future proofed. Several BBC sites, a good example would be Queen Margaret Drive in Glasgow, land locked and very small, have acute issues in terms of modernising and developing our services to the public. The view was that the W12 series of buildings was a very important engine room of television and news production in the BBC during this period. They took the view that it was right to secure the site, it was the site of the 1908 Olympic Games, subsequently a dog track, as part of a long range plan to rationalise its buildings and that, over the last 20 years, has happened.
Q60 Mr Bacon: Are you saying that it was just as a land bank strategy to make sure your future needs were taken care of?
Mr Thompson: No.