THE BLOG
16/06/2015 07:53 BST | Updated 16/06/2016 06:59 BST

The Facts About Our Income and Expenditure

You might have read yesterday's story in the Daily Mail about how much of the licence fee goes on funding our programmes. I wanted to explain why the Mail's interpretation is misleading. The paper's central accusation is that the BBC's income is approximately £5.1bn and only £2.4bn of this goes on 'content'. The implication they leave is that much of the rest of the money is wasted.

You might have read yesterday's story in the Daily Mail about how much of the licence fee goes on funding our programmes. I wanted to explain why the Mail's interpretation is misleading.

The paper's central accusation is that the BBC's income is approximately £5.1bn and only £2.4bn of this goes on 'content'. The implication they leave is that much of the rest of the money is wasted.

The reality is the BBC has a record on efficiency which has been acknowledged by the National Audit Office and Parliament's Culture, Media and Sport select committee - and which ensures more money goes on programmes and services for licence fee payers.

We've got nothing to hide, so let me explain the figures (they're available in full in the financial statements of last year's annual accounts if you want to study them in detail).

Firstly, our income

Last year we received £3.7bn from the licence fee. As you would imagine this accounts for the majority of our income and what we spend on programmes.

However, not all of this benefits the BBC - last year around £285m went to pay for the Government's broadband roll-out programme (£150m), Local TV (£16m), BBC Monitoring (£7m), the Digital Switchover Help Scheme (£7m) and S4C (£105m, of which we spent £24m on content for S4C).

We also received around £240m from the Government for the BBC World Service. It's the last year we'll receive this though, as from April 2014 we have had to pay for these costs out of the licence fee.

Separately we have three commercial businesses (BBC Worldwide, BBC Global News and BBC Studios and Post Production). The Mail claims that we 'pumped money' into these businesses. This is nonsense. These all run as commercial entities, separate from the BBC - so they don't get any of your licence fee. They earn money when they sell things (programmes abroad, use of studios etc) and, just like any business, have costs (investing in TV productions and channels abroad as well as things like staff salaries, buildings etc). At the end of the day if they earn more than they spend they make a profit that can be reinvested in their business or can be returned to the BBC - so last year it meant an extra £174m to spend on programmes and services for UK licence fee payers. Last year collectively these businesses took in just over £1bn in revenue but around £900m was accounted for by operating costs and investments.

So when the Mail says our income was £5.1bn that includes over £500m of money we didn't get to spend on the BBC's UK Services and £900m of money that simply couldn't all be spent on content as it was used to keep these businesses running. No business - including the Mail - can operate without costs. To claim otherwise is misleading.

Our expenditure

Actually more than 90% of the money we control is spent on content, distribution and their related support costs - making TV, radio and online content and bringing it to you. That leaves just 9% of spend on the professional support needed to run the BBC. That figure has been independently verified.

You might wonder why this is so different from the figures in the Mail. For starters, when the paper says that we spend £2.4bn on programmes it excludes crucial things like the distribution costs of getting programmes to your homes, all the equipment in our newsrooms, edit suites, studio lighting, and research and development - without which you wouldn't have any programmes or new services. Our creative people also need desks and places to work, which is also in the infrastructure and support costs.

The article goes on to say that "most of the remaining cash was swallowed up by costs that included running its ostentatious buildings, middle managers and services such as human resources and marketing." Again, this simply ignores the kind of crucial programme costs listed above and the fact that by selling off unnecessary buildings and using more modern, efficient, ones, we're saving £75m a year in running costs.

So the figure quoted by the Mail is like calculating the cost of running a newspaper without including printing presses, newsprint, and a delivery network to get newspapers into shops and homes.

In fact, the amount we spent on making our programmes and services and bringing them to you last year was around £3billion.

Last year we published a report which showed how we're now saving £1.1billion a year by becoming more efficient - so more of our money goes into programmes and services. And don't take our word for it. Parliament's Culture, Media and Sport Committee said in a report earlier this year: "The BBC has highlighted to us that over the last 20 years, the licence fee has stayed almost flat in real terms, but the BBC had expanded its offering, suggesting greater value for money and organisational efficiency."

It added: "The BBC's achievement of cumulative savings of £1.1 billion since 2007 is commendable given the relatively small negative impact they have had on audiences" appreciation and on reach of its services."

Another £400 million a year is due to be saved by 2016/17 - taking the total to over £1.5 billion a year. We'll never stop looking for ways to do things even more efficiently, but we're proud of the work we've already done to save money to invest more in programmes. We publish full details of our income and expenditure in our accounts for everyone to view so these 2013/14 figures have been public since July 2014 and analysed by many people and no one has seen anything remarkable in them until now.

This post first appeared on the About the BBC Blog here.