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The BBC 'is on track' to exceed its three per cent annual savings target but could do more to encourage a 'culture of challenging cost'

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The BBC must "strengthen" its approach to targeting savings and do more to encourage a "culture of challenging cost" under the 2010 licence fee settlement, according to a report by the National Audit Office.

The study, which was commissioned on behalf of the BBC Trust, assessed the BBC's efficiency programme following the 2007 licence fee settlement, which saw the broadcaster needing to find savings of three per cent each year from 2008 to 2013.

The NAO also looked at lessons to be learned from this in light of further savings the broadcaster must make under the 2010 licence fee settlement.

Overall the report found that the BBC "is on track" to exceed its three per cent annual savings target.

"The BBC has delivered the required savings whilst broadly maintaining its overall level of performance," the report adds.

"Areas of the BBC that produce content for the public account for 82 per cent of the savings target and have monitored over 50 performance measures based on three of the BBC's established indicators of public value: Reach, Quality and Impact.

"Over the course of the programme to date, the proportion of performance measures that have fallen more than five per cent below 2007-08 levels has remained between seven and 11 per cent each quarter."

But the report advises that to manage the savings necessary under the 2010 licence fee settlement, "the BBC must build on the successful elements of its efficiency programme by strengthening its approach to targeting savings and creating a culture of challenging cost on a continuing basis".

Last month the BBC announced proposals which would see around 2,000 jobs cut as it attempts to make savings of around £670 million a year by 2016/17 in response to last year's agreement.

This week's report from the NAO recommends that in order to "embed a culture of continuously challenging cost" the BBC will need to offer incentives to staff.

"Creating such a culture is challenging, particularly at a time when cost reduction programmes are having a direct impact on staffing levels and morale," the report adds.

"The BBC has established a strong and visible leadership for its efficiency programme and by doing so has raised the profile of efficiency across the organisation. It also created strong incentives to deliver the savings required by the programme by establishing clear accountabilities through formal personal objectives.

"Whilst such incentives encourage delivery up to the programme targets they provide limited incentive to deliver further savings."

The NAO did however identify some areas where staff had been given effective incentives, such as allowing teams on BBC Audio & Music who had exceeded their savings targets to reinvest some of these into creative projects.

A BBC spokesperson said: "We are pleased the NAO has found that our efficiency programme is proving a clear success in the terms set for it by the Trust, and is on course to exceed its initial targets.

"We will implement the NAO's recommendations as part of our approach to making the challenging new savings set in Delivering Quality First."
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