Battling for a licence to audit Aunty

As will the House of Lords when parliament returns from the spring holiday.

Members of the upper house are likely to end up in something of a brawl, albeit a dignified one, over who is counting the BBC’s pennies.

The influential public accounts committee of the House of Commons and the Tory party want to see the National Audit Office, the scourge of government spending plans, parachuted in to the Beeb to audit the accounts and ensure the licence fee is being spent in the best possible way. The government and BBC governors, some of whom sit in the Lords, have raged against the proposal.

But why are they so sensitive? Why shouldn’t the nation’s spending watchdog have a look at the way the nation’s licence fee is being paid?

It’s worth recounting the saga so far. At the beginning of 2001, Lord Sharman, former managing partner at KPMG, published his report into the work of the NAO and included a demand that it be allowed to audit the BBC. After various debates, the issue came to a head last February when the Tory chairman of the public accounts committee, Edward Leigh, went to the Commons to try to have an amendment placed in the Communications Bill allowing full rights of access to the BBC’s accounts for the watchdog.

Leigh’s argument is simple: the licence fee is effectively a tax on watching TV, so the NAO, which audits all Whitehall departments and produces value for money reports on various government projects, should be looking at the BBC’s books.

The NAO’s remit has recently been extended to contractors working for the government, so there appears little to stop it auditing the broadcaster.

In addition, the NAO is already auditing the World Service, because it is funded by the Foreign Office. But Leigh’s efforts were defeated. NAO access was denied on the basis that it could challenge the independence of the BBC and, as a result, inhibit creativity.

The BBC currently has KPMG as its auditor, with PKF acting at a kind of review level for the annual report and accounts. PricewaterhouseCoopers is also contracted to provide a ‘fair trade’ audit to ensure the BBC is not acting uncompetitively.

After Easter, the battle will begin again in earnest with Baroness Buscombe leading efforts for NAO access, with BBC governor and 3i chairman Baroness Hogg defending the BBC. She will be backed by Gavyn Davies, chairman of the BBC’s board of governors, who has made public attacks on the idea of NAO oversight.

The stakes are high. The BBC’s income is around £3.38bn with £2.5bn raised from the licence fee alone. But the 2002 annual report showed that the broadcaster still ended the year with a deficit of around £15.9m – a long way from the £75.5m surplus of 2001.

One of the key fears of the governors and director-general Greg Dyke is that the NAO would take an entirely different approach to current auditors.

For example, KPMG may just say the accounting that produced the current deficit was correct. But the NAO could ask why the BBC hadn’t managed its budget to avoid a deficit.

Indeed, there are plenty of issues the NAO may address. For example, the BBC’s pledge to spend 85% of the licence fee on programmes. The NAO audits collection of the licence fee, but could ask whether it is high enough. Or should the licence fee be levied at all? The NAO could decide to be quite unpleasant to BBC governors and the government alike.

Then there’s the issue of the BBC’s expansion into digital, the launch of News 24 and its commercial activities. The list of difficult questions that could be posed as a result of the NAO gaining access is endless and potentially very difficult to answer.

Let’s not forget that if the NAO doesn’t like what you’re doing, it tends to make its conclusions very public. Reports from the watchdog make national news and there’s no reason why criticism of the BBC should be any different.

Ironically, BBC news might be compelled to run some of the conclusions as a story. At the moment, it seems likely the government will get its way in the Lords, though the argument is expected to be fierce. But it is unlikely the issue will go away.

Observers claim the NAO is already planning what it would do at the BBC. A spokesman says the watchdog is paying close attention to the debate.

There’s one thing not in doubt. NAO chief Sir John Bourn would see his empire expanded enormously if his officials were let loose on BBC accounts.

Related reading