Policy Paper on BBC Charter Renewal (September 2016)

Section One - Charter Dependent Change

In the context of Charter Renewal, the key change we seek is a transformation of the BBC's governance structure to reflect the higher levels of devolution across the UK, and in particular to Scotland, following the Smith Commission.

Strong support for the principle of a high quality public service broadcaster of the nature of the BBC, is also a core part of this policy, and, on this basis, the approach to Charter should be to future proof the BBC to ensure its continued quality and relevance in future decades. The policy presented in the following section is aimed at addressing a range of key issues, such as audience representation, which will contribute to this.

It should also be recognised that the new role, agreed in the MoUs for Scotland, Wales and Northern Ireland will strengthen the degree to which the process is representative and transparent, supporting better outcomes.

We agree that the cycle of the Charter should also be removed from that of elections to remove any suggestion that the renewal process is anything other than an objective assessment of the performance and requirements of the BBC and how it delivers for audiences. We welcome the commitment of the UK Government to delivering an 11 year charter as set out in its white paper.

Delivering for Audiences

The BBC in Scotland has not been able to provide output which has reached a high level of audience satisfaction. The Scottish public's opinion of the BBC's TV news coverage has barely improved since the country's independence referendum with the overall approval rating for BBC news in Scotland at 7.2 out of 10 at the end of 2015, down from 7.4 at the beginning of autumn and only slightly up on a low of 7.0 in the immediate aftermath of the 2014 referendum. Opinions of BBC news have been diverging north and south of the border since the first half of 2013, when Scotland ranked the corporation's coverage at 7.9, only slightly down from the country as a whole at 8 ( BBC Trust Report, 17 August 2016). It is essential therefore that this Charter Renewal process addresses this issue. The range of audience satisfaction ratings and reports by the BBC and Ofcom, in addition to the consultation work which has been undertaken by the Scottish Government all suggest that the main reason for the lower levels of audience satisfaction in Scotland than seen elsewhere in the UK are because audiences do not feel that the output of the BBC in Scotland fully represents their views and interests. Whilst there has been a slight improvement in the ratings for news and current affairs since 2008, this remains an issue here and is also seen across other genres and to an extent in radio output.

The core element of this policy proposal is to address this issue by bringing decision making on output in Scotland closer to viewers and listeners through a decentralisation of the control of the editorial and commissioning processes and budget to the BBC in Scotland, empowering them to make decisions which are more representative of the Scottish audience, whilst maintaining a relationship with the wider organisation and the ability to make decisions about what UK network content to broadcast.

Decentralised Structure: implications for editorial and commissioning control and regulation of the BBC.

A decentralised BBC would allow for a greater degree of autonomous decision making at an operational level, leaving it better able to reflect the nations and regions of the UK which it serves.

It is the policy of the Scottish Government that the governance structure of the BBC should be reformed to bring it into line with the constitutional changes which have occurred across the UK since the last Charter.

This policy recognises that there is an asymmetrical level of devolved power across the nations and regions of the UK, and provides the flexibility for a federalised structure of the BBC to be appropriate to each of these positions, with varying levels of decentralised control across individual administrative units within the corporate structure of the BBC as a whole.

This policy would also address the issues the BBC currently faces in terms of the level of engagement with viewers and the degree to which they feel represented by the output of the BBC, which is at less than 50% in Scotland and is also at a relatively low level in the northern half of England, Wales and Northern Ireland. A higher level of autonomy over commissioning and editorial decisions, as well as the running of the organisation in each unit of a decentralised structure, would allow for more representative decisions to be taken with a greater degree of input from members of any board or panel representative of that area.

A decentralised approach to the structures and responsibilities of the BBC would also provide BBC Scotland with the autonomy to consider how to most appropriately represent, empower and engage with Scotland's diverse communities and would enable BBC Scotland to potentially further decentralise services that best meet the needs of Scotland's geographic and demographic diversity whilst benefitting from the 'economy of scale' afforded by membership of the wider BBC 'family'.

This kind of decentralised approach would also allow for services to be configured in such a way that they provide better outcomes for local communities in Scotland. For example, decision making on the mix of BBC radio stations broadcast on FM, MW and DAB are made at a UK level, often creating anomalous situations which do not best serve local communities in Scotland or respond to audience needs. In Orkney and Shetland the DAB frequency carries Radio 1 Extra which has a limited audience, whilst Radio Scotland is not made available on the DAB platform despite much higher audience penetration in these areas.

This structure would also support the delivery of social, economic and cultural outcomes, with the opportunity to address, for example, the current inconsistencies in arts coverage amongst other areas. We believe that Scotland's creative output could be improved in a way that benefits audiences across Scotland and the wider UK. Scotland is home to world class talent, and we want to see access to and engagement with this talent, widened and deepened. We want to see increased collaboration between the BBC and Scotland's creative sector and we want to see Scotland's creativity nurtured, celebrated and reflected more meaningfully across Scotland, across the UK and, indeed, the world. We also recognise the role that Creative Scotland must play in this relationship and will be working with them and the BBC to enhance the effectiveness of support both for the creative industries through this model.

Accountability for Delivery

The UK Government's white paper sets out an intention to Create a strong unitary board for the BBC, enhancing its independence. The board will be fully responsible for the governance of the BBC and the delivery of its services. In contrast to the BBC Governors and the BBC Trust, this new governance structure will see the BBC responsible for appointing at least half of the board members.

A unitary board for the BBC with a Scottish member is consistent with our policy position however, more detailed discussion is required on the process for appointing this board member to ensure that there is a proportionate level of involvement for the Scottish Government in the appointment process, including potentially running the process.

We previously set out that a key part of our push for a decentralised approach is to bring the accountability structures for the BBC similarly into line with the new devolution positions of the UK and closer to audiences in the nations and regions. Consequently through this model we continue to press for a unitary board structure for Scotland , charged with holding BBC Scotland to account for the delivery of an agreed strategy, governing its output and investment of a budget agreed between the board and senior management of the BBC. This would build upon elements of this structure which already exist, by equipping expanded boards with a wider range of powers and greater degree of budget control in order to create semi-autonomous units within the overall structure of the BBC.

This Scottish board would also send members to a UK board, which would be responsible for the centrally provided services of the BBC, with appropriate skilled representation from all the nations and regions of the UK. The Scottish and UK boards would also be held to account by the Scottish parliament through the role set out in the Memorandum of Understanding and to be established in the Charter.

Each board would be composed of members of staff of the BBC in that region, independent members from the sector and representatives of the audience of the BBC. The board would send members to a UK board, with responsibility for setting the overall framework for the operation of the BBC corporately, such as on issues like pay and benefits, and UK network issues such as schedules.

In this structure the unitary board could have full responsibility for the running of the BBC within the region it represented, and control over more of the revenue raised by the BBC in that region than is presently the case. A percentage would support the valuable centrally provided services of the BBC, including some network content and the BBC world service etc. making up the balance of funds to that of the licence fee revenue raised. The contribution to the centre would be proportionate to the capacity in the industry and the benefits to that region and could change over time.

In Principle Economic Breakdown in Scotland and at UK Level

Income Streams	Expenditure Streams in Scotland	Expenditure Streams from Scotland on UK Services
License Fee	BBC Scotland Costs	Centrally procured services
Commercial Income	Local Commissioning	UK TV and Radio Content (produced in other areas of UK or in partnership)
Studio Income	Network Commissioning
Rights Income

Summary of BBC Scotland Income and Expenditure

In consultation with the BBC, and following the points raised by both the Public Audit Committee and in the report of the Education and Culture Committee, which requested Scottish specific information be presented by the BBC, there is a detailed breakdown of the current income and expenditure of the BBC with appropriate sources identified, in Annex A. This can be summarised as follows -

• Total Licence Fee income from Scotland in 2014/15 approx. £323 million.
• Total BBC spend attributed to Scotland for 2014/15 was £190.5 million - for both BBC Scotland spend for local content for Scottish audiences and for Scottish BBC Scotland spend for BBC network content.
• In 2014/15, attributable BBC Scotland spend in Scotland on network content was £83.2 million. (Commissioned by BBC1/ BBC2 Network).
• Total spend on all 'local' Scottish output by BBC Scotland for TV, radio, online, etc. is reported by the BBC as £108.2 million in 2014/15:.
  • BBC Scotland spent £73.9 million in 2014/15 on TV production in Scotland delivering 'Scottish' programming for the BBC Scotland opt-out slots; that is local content for BBC One, BBC Two and BBC ALBA.
  • Within the budget to deliver 'local' Scottish opt-out TV programming, BBC Scotland's expenditure on original production for Scotland was £35 million in 2014/15. This is the 'cash spend', otherwise known as the 'above the line expenditure' on commissioning original TV productions for the local market from both in-house and independent production teams ( i.e. for the writers, creative, talent, etc.).
  • The difference between the £35 million for 'above the line' commissioning of original TV content for Scotland and the overall local TV content budget for Scotland of £73.9 million is that the larger sum includes overheads for production (including studio costs, rights, outside broadcast, property, IT etc).
• BBC Scotland spent £34.3 million in 2014/15 on 'local' Scottish online, radio, end other content; that is, BBC Radio Scotland, BBC Radio Nan Gaidhael, BBC Online (including Red Button) and the Scottish Symphony Orchestra.

In the appearance of the BBC before the Education and Culture Committee in January 2016, it was outlined that, out of this breakdown for original 'local' TV content for Scottish audiences, £35 million of cash spend which is for 'above-the-line' commissioning (both for in-house and independent production) for writers, directors, artists and production team talent.

In 2014/15, BBC Scotland spend in Scotland on network TV content was £74.1 million. This is TV content commissioned by the BBC One and BBC Two networks which is defined as 'Scottish' and produced by BBC Scotland. Eligible 'Scottish' network spend is defined as first-run, UK-made Network-commissioned programmes, excluding News, content produced in Scotland which meets the Ofcom definition as what qualifies as 'Scottish'. It is important to note that this BBC Scotland network spending figures includes so called `lift and shift`, which means that some of this money is spent on productions either internally or by independent producers who have only a limited base in Scotland. The full implications of a more decentralised approach to this funding can be found in the next section.

Budgetary Control over Commissioning

The governance structure proposed in the UK Government's white paper provides a continued opportunity to make the case with both the BBC and with OFCOM (in the context of the service licence) to introduce further decentralisation.

A BBC Scotland board would also have oversight of the editorial and commissioning control, vested in the executive team, for the output across BBC Channels in the area it represented. As a consequence of this, BBC Scotland would have direct control over a level of funding which approximated to that of the revenue generated from the license fee in Scotland (c.£323m), less a proportionate contribution for centrally produced content and services, and which would fluctuate over time depending on what services were bought into Scotland. As outlined above, this is not dissimilar to the current position, except for the fact that budgets would be allocated to Scotland "up front" instead of qualifying spend being allocated to Scotland retrospectively, as is currently the case.

This decentralisation of existing budget, could represent a very significant economic boost to Scotland, as well as addressing current questions around the degree to which the BBC's output in Scotland represents the nation. Whilst in and of itself the decentralisation of the budget of the BBC in this manner may not require changes to the current Charter, it is recognised that changes to the governance of the BBC would provide an important context for this kind of change to budget structures.

Additional TV and Radio Channels or Platforms

A further product of the decentralisation of the structure, decision making and funding of the BBC is the opportunity to deliver benefits for audiences in Scotland through the provision, over the Charter period, of additional linear or digital channels across radio and TV for viewers and listeners in Scotland. Both an incentive for, and a product of, increased production in Scotland, would be the additional content, which would support additional TV and Radio channels, as well as providing more content produced in Scotland for UK TV and Radio networks. Lord Hall said to the Education and Culture Committee on 12 January 2016 that:

"At the moment I am reviewing how we commission across network television. One of the aims is to ensure that we are representing and portraying all parts of the UK, particularly Scotland. We are also looking at how we can help to sustain production in the nations. I want to ensure that in the next charter period we are not only telling Scottish stories to Scotland, but that we are taking Scottish stories, dramas and comedy to the whole UK and beyond. We are looking at ways within that of ensuring that we can tap into new talent-writers, directors and so on."

This has the potential to deliver significant potential benefits for viewers in addressing current issues around representation as well as declining viewing and listening figures for BBC services in Scotland which would be better able to provide a range of services across multiple channels, including news, sport, arts and culture.

Internal Market for Production

In this structure, programmes produced by each nation could be bought in an internal market by other nations and/or regions to supplement their schedule of programmes produced under their own commissioning budget, with the UK board setting the framework for this internal market which would operate on a cost of production basis.

The schedules for BBC One and Two, at a UK network level, would operate as they currently do, but with a greater degree of opt-out for each decentralised unit, with no costs incurred for programmes which are not shown in that area.

Production Quotas

The Scottish Government welcomes the recommendation in the UK Government White Paper which states: Ensure that the BBC serves all nations and regions in the UK through a clear focus on the BBC's obligations in the new operating licence regime, clear board-level responsibilities, and a continued commitment to the out-of-London production targets.

The Scottish Government understands that our efforts to secure a service licence, for Scotland will need to be taken forward with OFCOM as the new regulator for the BBC. Nonetheless, in the context of our wider policy ambitions, we continue to argue that a service license should be able to enable production quotas, established under the Network Supply Review ( NSR), and due to expire in 2016, to be handled differently. A more strategic approach could be taken by BBC Scotland, with a greater degree of responsibility up-front to make decisions about what should be produced in Scotland at a local and network level across both TV and Radio. This would empower BBC Scotland, in partnership with its board, independent producers and Government arts agencies in Scotland, to take a strategic approach to investment in content over a sustained period, building a more sustainable sector in Scotland rather than one underpinned by an outmoded quota based approach.

Under the existing quota system, it is a retrospective allocation of the costs of a qualifying production, which make up the final total for the value of productions under one of the NSR quotas. Whilst this approach has helped to establish production for network in Scotland, and, where commissioners have worked closely with Scottish producers, both in house and external to the BBC, it has worked relatively well, it does not enable a more strategic approach to commissioning from the nations in the longer term interests of those nations. Furthermore, due to the retrospective nature of the allocation of productions to the quota, it is not possible for BBC Scotland to make strategic decisions about how to use the budget, as it is never allocated "up-front" as a single budget.

Whilst this does not necessarily mean that a strategic approach is not taken to production in Scotland, it does mean that for UK network output, responsibility for production is largely in the hands of UK Commissioners, who are predominantly London based. The changes we propose would see more of the responsibility for the strategic decisions about what is commissioned from Scotland's share of UK Network output, made in Scotland and integrated with the wider strategic plan for the BBC Scotland. This would be agreed annually between the executive team and Scottish and UK Boards. This approach would also provide the opportunity for greater collaboration between local and UK network content where both were produced in Scotland, for example local programmes for Scotland which examined specific aspects of an issue raised by a programme made for UK network, or spin-off drama set in a more local context but using a format from a UK series.

Under a more decentralised approach, with responsibility for commissioning from this budget in Scotland, it would be possible for a more empowered and strategic approach to be taken, without the need for additional investment. This approach could be most usefully underpinned by ensuring that the Public Purposes, as set out in the Charter, include a requirement on the BBC to invest in and grow the creative industries of all the nations and regions of the UK.

A Service Licence, that covers the delivery of BBC services in Scotland, and which allocated an annual budget, including for network commissioning and required BBC Scotland's board to agree and implement a strategy for this budget, including the buying in of central BBC services, would provide a model of positive affirmation for the use of resources, in contrast to the more restrictive approach of the quota system, which could be removed over time. The BBC Scotland board would then be responsible for appropriate monitoring of the spend to ensure that the strategic aims of, for example, supporting and growing Scotland's creative industries, were met.

Expected Impact of Policy

We expect that the implementation of this policy to deliver a range of social, economic and cultural outcomes, not just for Scotland, but for the wider UK.

Scotland has taken the lead in pushing for a transformation of broadcasting which would not only benefit it as a devolved nation, but benefit the other nations and regions of the UK. Alongside Ministers from Wales and Northern Ireland, the Cabinet Secretary for Culture, Europe and External Affairs outlined the benefits of this approach in August 2015 and then again in February 2016.

Economic outcomes:

A recent report by the Producers Alliance for Cinema and TV ( PACT) finds that total investment in production in Scotland (both in-house and independent) has grown by over 9% per annum over the last six years (although it should be noted that it had previously fallen to less than 4% of the BBC's overall spend on original content and that the current quota was adopted voluntarily by the BBC to address this) and that Scotland now has a base of scale for producers to compete nationally and internationally across multiple genres.

However, there remains a number of small Scottish producers who are highly dependent on BBC local commissioners and who have limited ability to invest in the business development necessary to grow. Analysis of successful producers from across the UK identified a number of factors that are key if small producers are to grow effectively. A sustainable model requires:

• Multiple genres;
• A diverse client base to reduce dependency on public service broadcasters;
• High margin secondary revenues; plus,
• Depth and breadth of commissioning relationships.

The impacts of the Scottish Government's proposals will be both immediate and long term. At the heart of the ambition that we set out here is our commitment to high quality, well-resourced public service broadcasting which is underpinned by a sustainable production sector in Scotland which, in turn, is supported by a growing creative sector.

An immediate impact of this policy, should BBC Scotland gain full control of the monies raised in Scotland from the licence fee, i.e. full control of commissioning, could see, up to an additional £100 million of investment in Scotland's creative sector over the course of one year. It is estimated that for each £100 million of production spend in Scotland, around 1,500 FTE jobs will be supported and up to £60 million will be contributed to the Scottish economy.

In the longer term, over the period of a 10 year Charter, this would see up to £1 billion invested directly into Scotland's economy and up to £600 million of additional benefit, alongside the "softer", positive benefits engendered through the wider distribution and availability of good quality Scottish produced content both nationally and internationally, the ability to work across multiple genres and to develop strong local commission relationships for the production of network content. This potential economic benefit could also be further enhanced by the sale, internationally, of Scottish produced programmes, including through the BBC Worldwide model.

Socio-cultural outcomes

The social, cultural and democratic role that the BBC plays cannot be understated. We expect a BBC Scotland that holds the UK Government, the Scottish Government and other institutions to account, whilst ensuring the delivery of services that connect, inform, entertain and educate.

The BBC reaches into our homes and our lives through a range of mediums. It has the power and the credibility to empower audiences, to widen access and participation in a number of ways, and, in so doing, tackle, head on, the key social challenges of our times, particularly social inequalities. The Scottish Government looks to influential and powerful institutions, such as the BBC, to lead the way on promoting equality and ensuring that talents, skills, and stories of all our communities are reflected, valued and enjoyed by all.

The social, cultural, economic and democratic outcomes that we aspire to are, of course, interconnected. We want to see a BBC that is pivotal to the social inclusion and diversity agenda, which connects people and communities locally, nationally and globally, which empowers, which educates, which challenges and inspires.

Scotland is a country where our creative achievements are celebrated and enjoyed, along with those from other lands. The cultural benefits of our proposition relate to Scotland being better represented both to itself and to the rest of world and also Scotland better connecting, benefitting and enjoying the cultural offer from beyond its borders.

Scotland has a rich and diverse cultural offering which could widen and extend its reach not only across Scotland's communities, thus benefitting audiences, but also across the wider UK and beyond.

A BBC Scotland that is better connected and with a long-term strategic stake in the future health and vitality of Scotland's cultural offer could reap significant benefits. The Scottish Government is clear, it is our job to create the conditions which enable our creative sector to flourish and for as many people, groups and organisations as possible to benefit from and enjoy our culture and heritage because we recognise and value the impact that cultural engagement has on our quality of life. The media, particularly the BBC, is a key actor in this endeavour and, in Scotland, a key actor that could be empowered to do more.

We are aware that BBC Scotland is working with Creative Scotland on a memorandum of understanding between the bodies. We welcome this. A BBC Scotland that works more closely with Scotland's cultural sector and sees the benefits of a more strategic approach to nurturing, supporting and collaborating with Scotland's artists can only be of benefit. This is wider than our desire to see increased investment in Scotland's production sector and for more programmes to be made in Scotland, important and key as that is to our ask.

A stronger, better connected BBC Scotland could create significant opportunities to strategically and practically connect with Scotland's creative and cultural sector both for the benefit of the sector and for the benefit of audiences who could be enabled to experience and enjoy performances and artworks that they otherwise may not have been able to. Widening access and participation requires creative minds with a commitment to tackling social and cultural inequalities … imagine what could be achieved for Scotland and Scotland's communities if the responsibility and the resources rested here?

Equality and Diversity

Whilst equality and diversity issues should be addressed by the BBC on an on-going basis, a firmer commitment to these issues in the context of a new Charter would be a beneficial policy outcome from this process. Now, and in the future, the BBC must be sensitive to the fundamental question - is it able to reflect and serve the audiences it serves in all their diversity? These audiences are the licence fee payers . These audiences are those people whose individuality is characterised by their ethnicity, their sexual orientation, their faith, whether or not they are disabled, where they live and their socio-cultural backgrounds and experiences.

In August 2015, as part of her Alternative MacTaggart lecture, the First Minister set out her concerns about the representation of women in the media. These concerns are rooted in an evidence base which confirms that women enjoy significantly less favourable treatment in our media than their male counterparts.

According to a recent Channel 4 survey of all main channels in the UK, men are twice as likely to appear on television as women and as many as five sexist incidents an hour are broadcast during prime time. Sexism, primarily at women's expense, was most commonly found in comedy, but the worst area for gender balance overall was sport with just 2% of presenters, pundits or guests being women. Films were the next worst performers with just 26% of on screen roles filled by women during that time

Actor Idris Elba recently addressed Westminster MPs on and argued - that despite Britain being " the most successful, diverse, multicultural country on earth […] you wouldn't know it if you turned on the TV. Too many of our creative decision-makers share the same background. They decide which stories get told, and those stories decide how Britain is viewed. Even to ourselves. Especially to ourselves."

This is not acceptable. The BBC has a pivotal role to play in delivering meaningful social and cultural outcomes for the communities that pay their license fees across the UK and we expect the BBC to do more.

People, in all their diversity, have a right to be seen and to be heard on the television and the radio, and to be seen and heard in a way that doesn't diminish them. Taking diversity seriously is about treating audiences with respect and understanding that our media can not only reflect the changing times we live in, but be a key agent for change.

The Scottish Government believes that the BBC needs to work harder and smarter to achieving 50-50 when it comes to gender equality on our screens and airwaves. Women, in all their diversity, need to be seen and heard in a way that accurately and meaningfully reflects their lives, their knowledge and their experiences.

As well as wider issues with how well the BBC's output reflects Scotland, we expect the BBC's service to meaningfully represent modern Scotland's communities in all their diversity. In order to support this work, the Scottish Government will include the following objectives within its race and diversity action plan -

"Work to improve ethnic diversity in the media and how ethnic minority communities are represented via proactive negotiations on the BBC Charter Renewal'"

"We will support the BBC in delivering this action both through the process of BBC Charter and beyond."