Oral evidence: BBC Licence Fee, HC 1037
Oral evidence, 27 March 2017.
Witnesses
Anne Bulford, Pipa Doubtfire, Vic Gysin, and Nicholas Prettejohn.
Chair
Good afternoon, everybody. Welcome to the Public Accounts Committee on Monday 27 March 2017. We are here today to discuss the collection of the BBC licence fee. I should stress that we are not here to discuss whether the licence fee is the right approach to fund the BBC; that is for other parts of Parliament to discuss. The BBC licence fee obviously touches every household in the country, as it is the main component of the BBC’s funding. It is crucial that it is collected for that reason, but it must also be collected in a way that is effective and maintains public support for the BBC. Since 2011, fewer evaders have been caught. We want to ask why and to push Capita, which has the contract now to collect the fee, on how that work is going—especially given some of the press coverage, Mr Gysin. The BBC also has some major work planned on upgrading its IT system, which links into the work being done to tackle people’s changing viewing habits, including the so-called iPlayer loophole. We want to probe how that is going. We are going to start off with fee evasion and enforcement activity, but before we do that, I want to welcome our witnesses: Nicholas Prettejohn, the chair of the value for money committee at the BBC Trust; Anne Bulford, the deputy director-general of the BBC and a previous witness at this Committee; Vic Gysin, the group operations and performance director at Capita Business Services Ltd, which has the contract for the collection of the licence fee; and Pipa Doubtfire, who heads up revenue management at the BBC Licence Fee Unit. Our hashtag today is #bbclicence. I will hand straight over to Chris Evans to kick off.
Chris Evans
I begin by declaring an interest: my wife, Julia Ockenden, wrote a report for the Trust in 2009 on the licence fee. She left the BBC in December 2013. I want to begin by addressing Anne Bulford and Nicholas Prettejohn. Are you concerned at the current level of TV licence fee evasion? Paragraph 8 of the Report says: “The BBC’s estimated evasion rate—the percentage of premises that should have a TV licence but do not—is between 6.2% and 7.2%. It has not moved towards the level targeted by the BBC and Capita.” Are you concerned by that?
Anne Bulford
Yes, I think we are concerned. The target that was set in 2011, of around 4%, was at a time when the BARB data used to calculate the level of evasion was running at a higher level. So when we set that target, we believed that the evasion rate running at that time was around 5%. The evasion rate running now—which, as you say, is explained in the Report—is estimated to be between 6% and 7%. There are a number of reasons for that. Certainly at least 1%, or maybe a bit more, is to do with the change in the basis of the calculation and makes no difference to the underlying number of evasions. Clearly it is a challenging operating environment. More evaders are familiar with how to avoid paying the licence fee. There are various campaigns online to help people with that. There is also some pressure on household income, and the way in which the sales visits and enforcement—
Chair
I don’t think we are asking about the way that is done at the moment, but you are concerned about it.
Anne Bulford
Yes.
Chris Evans
I want to touch on those issues later on. There are some other things that I want to touch on. Obviously, the BARB figures were a major factor in the renegotiation of the contract.
Chair
Do you want to explain BARB, Mr Evans, for anyone who is watching and many not be aware?
Chris Evans
It is the organisation that calculates how many households have TV licences. Obviously, they underestimated that figure, which led to a renegotiation of the contract with Capita. Can you explain to the Committee how you discovered that BARB had underestimated the number of TV sets in this country and how you ended up negotiating the contract with Capita?
Anne Bulford
BARB is the industry standard arrangement for measuring TV viewing. It is based on households and surveys. As part of that, there is a survey of 50,000 households, which is used to estimate TV penetration—the number of households that have a set. That drives through, therefore, into how many licences are required. The BARB data, which is used by everybody, including commercial television companies for the purposes of advertising, was showing a very steep decline in TV penetration. We at the BBC questioned that decline and asked BARB to recheck their data. That happened, and then they revised their approach to households. The impact of that was that the way in which the targets were set with Capita under the contract, as is explained in the NAO Report, had the unforeseen consequence of over-incentivising Capita to cut costs, rather than pursue income. We were concerned about that, and consequently we renegotiated the contract in a way that we believe represents value for money for the licence fee payer, in that we expect the net overall income coming through from the contract to be no worse, and probably higher, under the new arrangements.
Chris Evans
And if that mistake hadn’t been found, do you have an estimate of how much it would have cost the licence fee payer?
Anne Bulford
Sorry?
Chris Evans
If you hadn’t discovered that error in BARB’s calculations, do you have an estimate of how much that would have cost the licence fee payer?
Anne Bulford
We are happy with the renegotiation of the contract. Capita is incentivised now to maximise income.
Chris Evans
But do you know how much that would have cost?
Anne Bulford
The risk is that they would not have pursued that income—it could have been £15 million to £20 million a year—versus altering the contract, so Capita are absolutely incentivised to continue to invest in the customer service contact centre and field force, and therefore to maximise return.
Chair
Okay. It could have cost £15 million to £20 million.
Anne Bulford
Yes.
Chris Evans
What is your confidence in BARB going forward, given that you, rather than BARB, discovered that mistake? Have there been any conversations with BARB at any level, given that this could have seriously cost the licence fee payer quite a chunk of money, which could have been used on other things?
Anne Bulford
BARB is a joint venture among broadcasters, of which the BBC is one. A great deal of work goes in through the BARB board and at operating level to keep the industry-wide statistics up to date and accurate. Of course there are lessons learned from this, but it has been picked up and dealt with.
Chris Evans
What do you think the problem is, then? Why are fewer evaders being caught, despite an increasing number of visits by Capita? Is there some problem with the field team? Perhaps Mr Gysin can help out with that one. What is the problem there?
Anne Bulford
Overall, the licence fee collected has gone up through the period. The number of evaders caught from site visits has reduced, but the overall level of sales has increased as a result of the site visits. That number of evaders picked up through visits from enforcement has dropped, as highlighted in the Report, but at the same time sales have increased. We have been looking to get people to buy a licence higher up the chain through more letters, more email contact and other sorts of contact. The number of evaders caught on-site through visits has reduced relatively.
Chair
Can I check, Ms Bulford, whether you term an evader someone who has to have a chaser letter? When do they become an evader?
Anne Bulford
That is very helpful—I am confusing being out of licence with evasion. The evasion rates that we were speaking about at the top of the meeting—the 6%—are for people who should have a licence and don’t have one. We have seen that holding, rather than increasing, against a target to reduce it.
Chair
So these are people who have had the reminders and haven’t paid.
Anne Bulford
Yes, they haven’t paid.
Chair
How many reminders do they get?
Anne Bulford
That depends on how far through it goes. Pipa, do you want to just talk through the way in which the different letters come?
Pipa Doubtfire
We operate a series of letters. If somebody has not renewed their licence, we would start with a reminder and we would have follow-up reminders. In fact, until we are able to get a response, we will keep sending letters on a regular basis, because it is a very cost-effective way of us encouraging compliance. Somebody would expect to have at least three letters before they are made available to the field team for visiting. And just to build on what Anne was saying about encouraging compliance at a much earlier stage, one of the things that we have been working very—
Chair
Sorry, but we really need to know this. It’s really just three letters. They get three letters, then they are listed for a visit. That would be the typical—
Pipa Doubtfire
That would be typical. There are lots of different contact cycles that we operate, depending on the circumstances of a household. I would also add that even though they are available for a visit, we would not stop writing to them, so we would be continually reminding them.
Chair
Mr Evans wants to come in on some of the types of people you are targeting.
Chris Evans
Do you have any idea of what social groups are being targeted by visits and eventual prosecutions? I did ask the National Audit Office for information about socioeconomic groups, but Ms Bulford, you touched on this earlier; you said that people are becoming far more sophisticated when it comes to evading the TV licence fee, through, I imagine, Twitter campaigns, Facebook and so on. What I am really concerned about when we are talking about visits from Capita is: are we talking about the lower-end socioeconomic groups? Do we have any information like that?
Anne Bulford
The visits are targeted on households that are not in licence and therefore are visited to encourage people to buy a licence. The report that David Perry undertook for the Government in the run-up to the charter looked specifically at whether there was any evidence of discriminatory enforcement policies, in terms of either visits or prosecution, and found no evidence of that at all. The way in which visits are programmed is a function of whether people are in licence.
Chris Evans
But the Perry report says that more women are being convicted of TV licence offences than men. Why is that?
Anne Bulford
Again, David Perry’s report identified no evidence of any discriminatory enforcement policies, but it was nevertheless the case that there was a disproportion, relative to the population as a whole, of women going through enforcement procedures. One of his recommendations was that we undertook further research on that to understand why that was. That work is being undertaken with the DCMS; it is not complete, but a number of early findings are coming through from it. One is that there is a mismatch between households: broadly, 10% more households are female, so you would get that. Secondly, there is evidence that more women tend to be the licence fee holder and more women are there and answering the door.
Chris Evans
But will you have any information about socioeconomic groups? I don’t want to speak anecdotally, but the people who are most at risk are people who are renting, who are just moving in and then getting hit by letters for somebody else, who hasn’t paid for a TV licence. Is any information coming forward that you are disproportionately targeting people at the lower end of the socioeconomic groupings—the D and E class rather than the C1 and 2s?
Anne Bulford
There is no evidence of disproportionate targeting. I go back to the fact that the visit programme, the prosecution programme, is to do with people who need licences and don’t have one. The scenario that you describe, where people are in rented accommodation—who owns the licence and how long have they been there?—is more complicated. Those are the sorts of issues that are picked up through field visits and addressed. We work, in the Licence Fee Unit, with a large number of community bodies and voluntary bodies to pick up these sorts of issues and try to support people through them.
Chris Evans
What I am concerned about when I am talking about vulnerable customers is the payments. I want to look at the Report—page 29, figure 10. As you can see, there has been a huge push on direct debit. Obviously, I understand that since the Post Office lost the contract, you can pay for your TV licence in that way only in the Channel Islands, but the figure for PayPoint is still not very high. What I notice about direct debit and what is concerning me is: why are you charging people who want to pay quarterly up front an extra £5 on their TV licence? Why are you doing that?
Pipa Doubtfire
All the payment schemes are set out in the regulations, so we can only offer the payment schemes set out in regulations. The quarterly direct debit scheme attracts a premium of £1.25 a quarter. Our monthly direct debit scheme, which obviously allows you to spread the cost more, and also our cash schemes, which allow for weekly, fortnightly or monthly payments, don’t attract any premium at all.
Chair
So one method of payment attracts a £5 a quarter additional cost—
Pipa Doubtfire
No, £1.25 a quarter.
Chair
Sorry, £1.25 a quarter, £5 a year in total. Fine. As Mr Evans says, that affects certain people without the right sort of bank account, who will probably pay more, effectively, or if they are unable to pay up front—
Pipa Doubtfire
That’s a direct debit method, and there are other direct debit methods that don’t attract any premium.
Chair
Which leads us to ask: why? Why one method and not the other? We just don’t understand that.
Pipa Doubtfire
It is because of the way that the payment scheme is structured. The quarterly payment scheme is like a pay-as-you-go structure. So you pay for your licence one quarter at a time and you effectively get a licence one quarter of a time, whereas the other payment schemes are structured whereby you’re saving towards your next licence while your current licence is—
Chair
So, one is paying in advance—
Pipa Doubtfire
With one, you’re paying six months in advance and six months after the start of your licence.
Chris Evans
But who gets the £5?
Pipa Doubtfire
The BBC gets the £5.
Chris Evans
So that’s an extra £5 you get off potentially vulnerable customers, then?
Pipa Doubtfire
We would encourage vulnerable customers to use a different scheme, if they were worried about that payment. Vulnerable customers would typically use our cash schemes, particularly if they have a bank account that doesn’t have access to direct debit—
Chris Evans
But have you not for 30 years been driving to push people on to direct debit? That’s borne out by the report—73.5% are on direct debit, compared with the previous year—
Pipa Doubtfire
Yes, and direct debit has been our most popular scheme, and the vast majority of those customers are on the monthly direct debit scheme, not the quarterly direct debit scheme.
Chris Evans
There are two questions I want to ask, so I will come to the second one now. As the Chair said, if someone is on a basic bank account, where you cannot have direct debits, overdrafts, payment cards, and they are the most vulnerable customers because they only have the basic bank account—money in, money out—how are you helping those people if you are pushing for direct debit? I know with PayPoint there is a 4.3% payment, as well.
Anne Bulford
For people who don’t have access to the direct debit facility, our cash instalment schemes allow payments in weekly, fortnightly and monthly amounts. Those are available to be made at any PayPoint outlet, or through the TV licensing website. There are 28,000 PayPoint outlets around the UK, and in the Isle of Man and in the Channel Islands it can still be done in the post office. Those schemes are widely adopted and we encourage people to take them up. In addition, one of the recommendations from the Perry review, which you may remember, was that we work with the Department for Culture, Media and Sport to look at legislation to enable a simple payment plan, which would enable people finding it most difficult to move on to a scheme whereby you don’t have to pay so much in advance, so that the initial entry into the scheme is smoother. That requires that change in legislation to enable it.
Chris Evans
The other bugbear I’ve got with the TV licence is that if you pay yearly or monthly, you have to pay six months up front.
Anne Bulford
That’s right.
Chris Evans
Again, that seems to be not a flexible way of paying for a TV licence. This is a lot of money if you’re paying six months up front—
Anne Bulford
The payment in advance is a concern, and that is why we’re very keen to have the change in legislation so that we can introduce the simple payment plan, which would give a smoother entry for people finding it most difficult to pay.
Chris Evans
Ms Doubtfire, how much extra are you making out of the licence fee if people are paying by direct debit? Do you have any idea of that? And what is that money being used for? Is it just going straight into the BBC pot, or is it being directed towards citizens advice bureaux, or—
Chair
So how much is it hypothecated, or does it go into the pot?
Pipa Doubtfire
It goes straight into the consolidated fund, as do all other payments collected, and it’s about £16 million per annum.
Chair
£16 million per annum?
Pipa Doubtfire
That is the total value of the £5 premium.
Chair
Wow. And have you done an analysis of which households—the demographics—are paying that?
Pipa Doubtfire
It’s very popular with students who don’t want to buy a full year’s licence, for example. That’s probably the category of licence payers who use that method the most frequently.
Chair
Right, so students particularly. Do you have any percentage of those who are likely to be students who are paying that way?
Pipa Doubtfire
I don’t have that with me, no.
Anne Bulford
Just to reiterate, what the quarterly scheme does is enable people to buy a quarterly licence, which is a different product from buying the full-year licence in instalments.
Caroline Flint
I can’t quite see why, if you are paying quarterly and presumably paying up front for the next quarter, you are asked to pay an additional admin fee compared with those paying six monthly or yearly. To be honest, the idea that after three months of watching the BBC someone is going say, “I don’t want it any more”—
Anne Bulford
Well, people’s circumstances change. What this does is give people an opportunity to buy licences quarter by quarter. Our objective is to encourage people to come into licence. For people finding it most difficult, the cash payment schemes that are available weekly, fortnightly and monthly are there and available to people.
Chris Evans
But what has happened with the £16 million? Has anything been given towards helping vulnerable people by funding the citizens advice bureaux, or are there any special schemes for the most vulnerable who are struggling to pay their TV licence, so that they avoid court appearances?
Anne Bulford
We have a number of schemes to help people to come into licence.
Chris Evans
That £16 million could be funding directly for them—perhaps I am being facetious.
Anne Bulford
The money that is coming through as the additional fee on the quarterly scheme goes into the general pot. As I have tried to explain, for people who are finding it difficult to pay the licence fee we have a number of schemes that help, including the cash payment schemes that are widely available. We also work with large numbers of organisations—something like 450 different charities and community organisations—to support people who are more vulnerable.
Chris Evans
Before I move on from collection, I have one final question. There is obviously going to be a voluntary payment towards it by the over-75s. How are you communicating that to the over-75s so that they are not confused and believing that they have to pay it anyway? That is going to be a real problem.
Anne Bulford
We are very aware of the issues around asking elderly and vulnerable people in particular for money. While there are many people in a position to, and wanting to, make a donation to the BBC, we have to be extremely careful about how we position the voluntary scheme, and be absolutely clear with people that it is not at all a request for a sum of money. We are still thinking about how we are going to do that, but it is highly unlikely that we would operate direct mailing techniques or anything like that. It will be a much more general—
Chair
What if somebody is already paying by direct debit or an automated payment and they hit 75? Under the new scheme, will they get something? Will it stop automatically, and will they be asked to recontribute if they want to make a voluntary contribution?
Anne Bulford
The way in which the over-75 scheme works at the moment is that people are asked to apply for their over-75 licence. That process will absolutely continue as it does at the moment. At the moment our thinking is that the way in which we publicise and make clear that there is an opportunity to make donations will be separate from that process so that it does not confuse. It is very, very important that there is no confusion as to what people might like to do versus what people are required to do.
Chris Evans
I want to move on to Capita’s performance in the field. Mr Gysin, you must be very embarrassed by the Daily Mail investigation. Do you have anything to say about that before I go into it?
Vic Gysin
Sorry, I didn’t quite hear the end of your question.
Chris Evans
The Daily Mail investigation talked about the conduct of Capita field staff. Were you embarrassed by that? Would you like to make any comment on it?
Vic Gysin
Yes, of course. The first thing I will say is that we were shocked and extremely disappointed by what we saw in the Daily Mail article. I have seen the full footage and read the transcripts, and it does make pretty unedifying viewing and reading.
Chair
Sorry, can you speak up Mr Gysin?
Vic Gysin
Yes; it makes unedifying viewing and reading—that is absolutely clear. What is particularly disappointing is that what we saw in the film footage and the transcript is in no way indicative or reflective of the behaviours that we have corporately. I am here as a PLC board member as well, by the way, and we have spent an awful lot of time over the last two or three years recalibrating our values. We have seen a lot of organisations in the UK who have really imploded because of a failure in their own corporate—
Chair
Right. We are asking particularly about the coverage on 27 February in the Daily Mail—other organisations and what they are doing are not really what we are talking about today.
Vic Gysin
Okay; in direct response to the Daily Mail article, as soon as we were aware of this, we took action. We suspended the two officers in question and they remain suspended pending the conclusion of our investigation. We immediately commenced an investigation and agreed its terms of reference with our colleagues in the BBC. That investigation is ongoing; it probably has another two or so weeks to run. I can share with you that the results that I have had back thus far—as recently as this morning—do not indicate that this is a systemic issue. I can explain the scope of the investigation if that helps your understanding.
Chair
So you are saying that so far you do not think it is a systemic issue, but in two weeks’ time, you will have your final results through. To be clear, where will those be published? Will they be given to the BBC? Will they be public?
Vic Gysin
This is an internal review that we have undertaken within the Capita Group, with our own risk and audit functions.
Chair
It is an internal review, so it is not really published.
Vic Gysin
The intention is that what we find from our review will inform the response that we send back formally to the BBC—to the director-general’s letter of 27 February.
Meg Hillier
We are going to come back to the BBC in a minute; I am just going to bring in Mr Boswell on this point, then go back to Mr Evans.
Philip Boswell
I just want to pick up on something we will look into in more detail later—performance contracts and contracts tied to remuneration. Ordinarily these target-driven deliverables at the main contract level are passed down through the various performance contracts right to the frontline, because your performance contract is tied to your boss’s performance contract, which is tied to the objective of the contract. Do you think, Mr Gysin, that by the very nature of the remuneration structure, these types of contracts encourage this type of behaviour?
Vic Gysin
Incentives are absolutely designed to focus behaviours, as you mentioned, and therefore it is very important that the flow-down of what is agreed corporately, or at a contract level, is appropriately matched at the field team level. We have over 300 people in our field team, which is the general subject of this review. None of them is incentivised to tackle evasion as such. They do not undertake prosecutions. They take records of interviews with people on the doorstep. They are purely incentivised on revenue collection. We have a contract with the BBC that is designed to support the aims of—
Chair
So can you just be clear to me, Mr Boswell and the Committee? If it is revenue—if one of your team knocks on the door, they want to get any money they can out of that person at that point, and that is better for their performance than it is to get enough evidence to take someone to court for evasion. Is that what you are saying?
Vic Gysin
I wouldn’t quite characterise it by saying that they are incentivised to get any money. They are incentivised to make sales, which is slightly different.
Chair
That is very different.
Vic Gysin
There is a distinction. As my colleague Pipa has explained, there is a finite number of schemes that our visiting officers can actually sell. There is no deviation from those schemes, therefore it is not a question of just getting any money. There is a finite number of licence schemes that they can actually sell.
Chair
But they can sell those on the doorstep, just to be clear.
Vic Gysin
They can, yes.
Philip Boswell
I understand that partial payments can be accepted on the doorstep, as is common with these types of contracts as well, so there really is quite a drive in the end. To follow on from that, from the BBC’s perspective—this will probably be best answered by Ms Bulford—do you think that the numbers prosecuted driving performance contracts with contractors is the best way to enforce licensing while protecting the integrity of a national broadcaster’s reputation?
Anne Bulford
I think a lot of work has been done on the method of enforcement of the licence fee. The David Perry review looked at this specifically and concluded that that was the fairest and most appropriate way to enforce the licence fee if that is the system that we are operating, which under the new charter it is. Our objective is to bring as many people as possible into licence to maximise revenue. We have no objective whatsoever to maximise prosecution; rather, the opposite. Of the enforcement visits that take place, something like 300,000 result in some kind of interview statement being taken. The vast majority of visits that go on in the field do not result in any further procedure, either because there is no one there or there is no reason to proceed, but of those 300,000, immediately—something like 130,000 in 2015-16—there is no further action taken, because people buy licences. As it proceeds through to prosecution, the opportunity remains to buy a licence. As we set out in the prosecution code that we published, which is available on our website and given to households that are visited, if people buy a licence and they are first-time evaders, it doesn’t—
Chair
Okay. Mr Evans.
Chris Evans
Mr Gysin, you have a serious problem with your field staff, regardless of the Daily Mail investigation. Paragraph 3.7 says that you only have 327 field staff, against your target of 380. Why do you have such high levels of staff turnover?
Vic Gysin
Just to make the point clear, we do not actually have an agreed target with the BBC about the number of field staff. It is an internal target, if you will. However, the point you make is a good one. It is not easy to retain field staff doing this sort of job. It would be fair to say that the nature of this work is challenging. Not only does it require the ability, willingness and preparedness to work unsocial hours of all types, but a number of our field staff are subjected to pretty unpleasant incidents. In 2016, we had an unprecedentedly high number of assaults. We had 99 assaults last year—
Chris Evans
It says there were 95 in the report—oh, that is for 2015.
Vic Gysin
The figure you have is for a split year.
Chair
So about a third of your staff.
Vic Gysin
A third of staff are assaulted. They vary. I have visited some of them in hospital myself. It can be anything from hospitalisation to punches, kicks and the rest of it.
Chair
As I understand it, when one of your team visits, if they hear the television on, they can take that sort of evidence to help towards a prosecution. Do they always knock on the door when they get to a property? Is that part of the way the field team work?
Vic Gysin
That is the set procedure when they approach a property, yes. They either ring the bell or knock on the door. It is slightly more complicated with multi-occupancy dwellings, because you might be doing that remotely, but yes, effectively, that is what they do.
Chair
So every door gets knocked?
Vic Gysin
Correct, but the issue that they are faced with is that there are clearly a lot more special interest groups and campaign groups specifically designed to undermine the nature of the TV licence scheme and to inform or advise people how they can avoid it.
Chair
Sorry—so your performance is being undermined by people campaigning against the licence fee?
Vic Gysin
No, I am just trying to answer why we have difficulties retaining field staff. They are brought into engagement with some fairly unpleasant stuff and some fairly co-ordinated stuff.
Chris Evans
How much is the average salary for an enforcement officer at entry level?
Vic Gysin
We have staff on a number of different contracts in our visiting officer community. Some of them have been with us for upwards of 15 years. They are former Consignia or Post Office staff who have come across on different terms and conditions, but at an average.
Chris Evans
If you appointed me today, how much would you pay me?
Vic Gysin
It would be a fixed base salary of around £20,000 a year.
Chair
And then bonuses on top?
Vic Gysin
There are commissions on top of that that relate to sales and their own sales performance. Again, it is an average, because there are one or two different schemes in operation, but they can get an average maximum payout, if they hit their objectives, of up to £9,000 a year on top.
Chair
So nearly half their salary again on top?
Vic Gysin
It is about another 40% to 45%. Something of that order, yes.
Chris Evans
That is across the country—£20,000? The same in London as in Cardiff?
Vic Gysin
Correct.
Chair
Mr Evans is tempted.
Chris Evans
Very tempted.
Chair
We are quite good at knocking on doors as MPs.
Chris Evans
Do you think that is enough money? This is a very challenging role. To be honest, £20,000 is not very competitive, even in south Wales. I could manage a chicken shop for the same amount of money and get less hassle.
Vic Gysin
The on-target earnings place the upper two quartiles of our field staff above the average wage in the country, so we think it is appropriate. We do look at it. It is not one shot and done; we are continually looking at our rates of pay. We are a big business—we are a commercial organisation—but if we have difficulty attracting and retaining people, not just in this business but across the board, we understand that the ability to make variable pay through the objectives we set is a key component. We are always looking at that.
Anne Bulford
I think there is another context for this, which is helpful. One of the things that Capita have been doing over recent years is reducing the size of the field force. Going back to what I was saying earlier, the contact via email, telephone and the rest of it with licence fee payers who have fallen behind with payments or have not yet bought a licence is proving more effective. The size of the field force and the number of knocks on doors taking place is therefore smaller. The field force has reduced from over 500 to over 300.
Chair
It is not just about the number of knocks on doors; it is about the geography as well. If what you are saying is right—the Report suggests that people more people are paying in different ways—you can have a longer gap. We know what it is like when we are canvassing. In some areas, Labour voters or Conservative voters are thinner on the ground than in others.
Anne Bulford
But other effective methods—better, more accurate targeting, and apparently simple changes, such as altering the way we deal with missed direct debit payments so people stay in licence for longer while they are given an opportunity to catch up—stop people falling into the pool of people who need to be visited. It is dealt with in a different way.
Chris Evans
Do you know how many days have been lost because of physical assault?
Vic Gysin
I’m afraid I haven’t got that information with me.
Chris Evans
And how much has the cost of those assaults been to Capita, in monetary terms? It seems to be a very serious problem.
Chair
When you say 99, was that in the last year?
Vic Gysin
Correct.
Chair
So a third of your team, roughly, are being assaulted every year.
Vic Gysin
That’s right.
Chair
Or was that a high point?
Vic Gysin
I can’t give you exact details of what the average period of sickness is following an assault. It very much depends on the seriousness and gravity of the assault that they suffer.
Chair
Are all your staff on sick pay—on contracts where they get time off?
Vic Gysin
They are, yes.
Chair
So they have paid sick leave.
Chris Evans
Going back to the Daily Mail investigation, how are you making sure that when people are visiting they conduct themselves properly, in particular around vulnerable customers and others?
Vic Gysin
It is a range of things.
Chris Evans
What key indicators do you have on that?
Vic Gysin
The first thing is, as part of the review that we are undertaking, we have very strict codes of conduct, which are all available on the TV licensing website; management; and what I would call generically supervision and audit. It is probably the supervision and audit question that you are asking there. Just to give you some headlines, last year—2016—to validate the correct behaviours of our enforcement staff, we undertook a wide-ranging poll of 4,000 people who had been subject to a door-to-door visit in the last few months. The results we got back showed that of those 4,000 people, 98% believed that the officer was courteous. I recognise that that is not necessarily the same thing as following the codes of conduct and the rest of it, but it gives some form of assurance that the general behaviours of our staff out on—
Chair
Do you benchmark against other people who go to the door to collect money, such as bailiffs? Do you have any benchmarking?
Vic Gysin
I do not have any figures to hand.
Chair
As a company, do you benchmark for those people?
Vic Gysin
We do not, but we do have our own bailiff business is well. It is something that we will perhaps look at, but in anyone’s book, I would have thought that 98% of respondents saying, “Yes, the visiting officer was courteous,” would be deemed quite high-quality.
Charlie Elphicke
Two very brief questions; the first is to Anne Bulford. The Capita guy is on £20,000 a year, whereas the top brass at the BBC earn an awful lot more. Do you accept that many people will think that this gap is excessive and hard to justify?
Anne Bulford
I think that the rates of pay for the officers are set by Capita in the context of the job that they are doing. We agree a contract where we ensure that the way in which the costs are managed feels fair in the round, and we continue to monitor that. One of the things that we look at in dealing with Capita is the mix between the base pay and the incentive scheme, to ensure that that is driving the right sort of behaviour.
Charlie Elphicke
Mr Gysin, you say that there are about £9,000 in sales incentives. What are they selling? I thought the TV licence was compulsory. Can you take us through exactly what those incentives are?
Vic Gysin
The incentives are commissions, actually.
Charlie Elphicke
For what?
Vic Gysin
They are pegged against licence sales and revenue. As I said, we have a finite number of, let us say, products that they can sell on the door, but they are schemes of one kind or another.
Chair
So if I open the door to you and say, “I can’t afford my TV licence fee,” do you take—as the undercover reporter discovered—buttons? Will you take a fiver from me, or do I have to buy a package? Do you get more if I buy the whole licence fee on the doorstep, as opposed to buying a monthly payment?
Vic Gysin
I might just ask Pipa about the strict legality of what constitutes being licensed, but no, the visiting officers themselves are incentivised to ensure that households are licensed.
Chair
Sorry, does that mean that if they buy a product—
Vic Gysin
It means they buy one of those from our officers.
Chair
So just to be clear, what would be the minimum and what would be the maximum that would mean that an operative from Capita met their target?
Pipa Doubtfire
I was just going to speak about the payment schemes and what a person would be asked to pay—
Chair
So what is the minimum payment, and what is the maximum? The maximum would be the whole licence fee.
Pipa Doubtfire
It would be £5.60.
Chair
The minimum is £5.60.
Pipa Doubtfire
Yes.
Chair
So if I could turn up £5.60 on the doorstep, Mr Gysin, one of your staff would get a bonus payment?
Pipa Doubtfire
Sorry if I misled you; £5.60 is the minimum entry level for someone to make their first payment towards a licence. The incentive scheme may not kick in unless they continue to make payments for that licence in line with the instalment plan. The amounts that visiting officers can offer as payment are tied to the regulations. They offer specific amounts as set out in the regulations, and cannot really deviate.
Chair
Mr Gysin, do your staff get more if they get more money in, or a scheme that is more comprehensive than if they get in someone at entry level who then has to be chased for future payments?
Vic Gysin
They are incentivised on sales: that is, in ensuring compliance at a household level.
Chair
On sales, sales can be—
Vic Gysin
On ensuring that a household is licensed, and therefore they have to make a relatively quick judgment. Our sales people visit circa 30 to 35 addresses per day. They have a very limited time to make a snap judgment on the most appropriate scheme for a particular householder.
Charlie Elphicke
Are there differential commissions? Is the commission structure flat between direct debit, credit cards, payment cards PayPoint, via post and savings cards, or is there a particular higher commission in different areas?
Vic Gysin
I believe that it is flat. We don’t—
Chair
Can you write to us with that? We don’t expect you to know that.
Vic Gysin
I can, but in fact, I have someone behind me who might be able to answer that.
Chair
All right. Perhaps if you could answer before the end of the session, that would be even better. It makes a big difference, as Mr Boswell highlighted, what incentive payment structure your staff get. You are the frontline of the BBC’s credibility on this. I am sure Ms Bulford has some views, but we will not come back to her just now.
Caroline Flint
On page 30 of the NAO Report, at paragraph 3.6, it points out that “Capita has carried out more enforcement visits…3 million in 2015-16… Despite this, the number of evaders it has caught has fallen by 18%”. Could you explain why that is the case, Mr Gysin?
Vic Gysin
Again, I would like to make the point that we are not incentivised on—
Caroline Flint
No, but I am asking you: you have more visits than ever before, but the number of people found evading and caught not paying their licence fee has gone down. Why is that?
Vic Gysin
There are probably three things that I would draw out. The first is that over a period of years we have been a lot more successful at converting people more upstream. Anne Bulford has outlined that we have—
Caroline Flint
When you say “upstream”, what do you mean? Before you get to them?
Chair
Before a Capita representative gets there.
Vic Gysin
Earlier in the process.
Caroline Flint
Can I just stop you there? That is fine, but it still does not get us away from the point that you are doing more visits on the doorstep but finding fewer people. Is the intelligence that you are given to make those visits helpful or not? It sounds to me as if we are paying people to do a lot more visits and they are not actually catching that many more people.
Vic Gysin
I would just make the point that we have actually increased the sales performance across the board with our visiting officer population over the last five years.
Chair
Sorry, can we just be clear? Sales performance is when you are selling a product. That is what it is.
Vic Gysin
That is correct. The sales performance has improved.
Caroline Flint
Okay. Let’s go back. In 2015-16, you carried out 3 million enforcement visits. That is in the NAO Report, which then says: “Despite this, the number of evaders it has caught has fallen by 18%, with some 67,000 fewer caught in 2015-16 than 2010-11.” I am interested in two things. First, of those people you find in—I presume you have some intelligence, which is why you are knocking on their door; I think it is that three letters are sent to their household and then they are listed for a visit if you have got no reply—do you get them to pay for their licence fee? When you talk about sales depending on different forms of payment, that is what the sale is: getting them to buy a licence fee. I am also interested in how much time is wasted knocking on doors if you are going in the daytime rather than in the evening or at the weekend when you are more likely to catch people in. Maybe you could tell me something about how they go about doing these visits, what time of day they do them and whether you are analysing whether that is a good tasking of people in order to get an effective job done.
Vic Gysin
Over a number of years, we have been working on precisely that. Clearly, the worst outcome is that we continue to send letters and continue to send people round to addresses that are empty and we get no appropriate outcomes from that visit.
Caroline Flint
What proportion of the 3 million visits are between the hours of 9 o’clock and 5 o’clock, say? What proportion are between 6 o’clock and 8 o’clock, Monday to Friday, and what proportion are on the weekend?
Vic Gysin
I do not know the exact proportion, because we have over 320 visiting officers and the demographics and the behaviours in the areas that they visit are very different.
Chair
So they make judgments locally, with local targets.
Vic Gysin
They do make judgments locally. To a large part, it is left to the individual teams of visiting officers and their managers as to when they actually—
Caroline Flint
As someone who has knocked on a lot of doors over a number of years, seeking people’s support—
Chair
You are talking to an expert audience here.
Caroline Flint
As politicians we all have a great awareness of the number of people who are working or who are there, and which are the optimum times to catch someone in. Is that something that is fed through to your frontline teams? Could you write to us, if you cannot answer today, about how the tasking of visits is divided between daytime Monday to Friday, evenings and weekends?
Vic Gysin
I cannot give you the exact breakdown of the times when we visit. I can repeat that the individual visiting officers themselves have an awful lot of autonomy over when they make these visits. They know the areas well.
Chair
Do they get paid differentially for visits out of what you might call traditional hours?
Vic Gysin
No. By and large, it is up to them.
Caroline Flint
I am afraid that the data shows that you are doing more visits, but your outcomes are less than they should be.
Anne Bulford
Perhaps I can help with this. One of the ways in which we monitor the contract is the number of successful outcomes per visit. We are looking for successful outcomes at around a 35% level, which is a KPI that Capita are meeting under the current contract. A successful outcome could include a licence not being needed; a licence being bought or someone coming into the licence; establishing that there are special circumstances that we were not previously aware of, such as the sorts of things—
Caroline Flint
With respect, Ms Bulford, if you look at page 30, on each of the outcomes, Capita is not hitting the target it has been set or that it has set itself internally. Therefore, it is either setting targets that are too high or is not meeting the targets negotiated with the BBC.
Anne Bulford
The overall evading through the visits has dropped over the period, as is pointed out in the NAO Report. However, through the same period, the value of sales has increased, so it has moved up from 16% to 18%.
Caroline Flint
Can I move on to telephone calls? If you look at page 14 of the NAO Report, in paragraph 1.9, under the heading “Operations”, there are some bullet points that talk about the different ways that people are contacted. It says, “made 8.3 million calls”; I presume those are outbound calls. How much more effective is it to phone people, where you can, and get them over the phone to sign up to one of the payment schemes?
Anne Bulford
The way in which we have been using different forms of communication, including phone and email, is one contributory factor to the overall reduction in the cost base of the operation of the licence fee. We are achieving a 25% reduction in real terms through the new contract. These sorts of techniques being introduced are part of it.
Caroline Flint
Can I go back to the officers on the door? I understand, Mr Gysin, that officers have handheld devices. Is that correct?
Vic Gysin
They do indeed have handheld devices.
Caroline Flint
Do those handheld devices give data on time of visit, to allow you to segment the data into daytime, evening and weekend?
Vic Gysin
We do record the time of visit; you are absolutely right. After the visit, that will be time-stamped. This is all data that we can look at.
Caroline Flint
So you would be able to provide the Committee with analysis of some of that data, even if we asked you for a sample by region.
Vic Gysin
Yes.
Caroline Flint
My final question is: what needs to change to enable your frontline staff to be more effective in what they do?
Vic Gysin
We are never complacent. I would not draw the inference that our frontline staff have failed.
Caroline Flint
No. I am asking you—
Chair
Ms Flint was not saying that there is a failure. She was asking how they could be more effective.
Caroline Flint
What would help them to do their job better than they already are?
Vic Gysin
Data is key. As much as possible, our visits are targeted by real data and what you might call believable trend analysis—things that typically describe the way people behave, in terms of both when they are available in their household and how they choose to pay. Customer behaviour is certainly one of those things. We continually look at incentives. As a number of members of the Committee have said, it is an important reason why people do the job and why they stay. That is something we continually look at. Certainly, on the back of the current review that we are undertaking, that will be a significant area for us.
Chair
I am aware that a vote is imminent. We will continue in 10 minutes or as soon as we are quorate. Sitting suspended for Divisions in the House. On resuming—
Chair
Welcome back to the Public Accounts Committee on Monday 27 March. We were just discussing enforcement and collecting revenue. I will ask Mr Kwasi Kwarteng to come in on that issue.
Kwasi Kwarteng
With respect to enforcement and sales, I am rather confused about the distinction between the two. In the Report and in your minds, there seems to be a hard and fast distinction between enforcement visits and sales visits, but it would appear to me—maybe I am wrong—that such a distinction cannot be drawn as easily as you suggest.
Vic Gysin
Forgive me, I was not necessarily trying to draw a distinction between the two. I reiterate the fact that we have what I call an output-based contract or relationship with the BBC that is fundamentally about increasing the net revenue that we collect for the BBC. When our visiting officers go to the doorstep, there are a number of outcomes, the most desirable of which, of course, is that we effect a licensed sale and ensure compliance. There are other appropriate outcomes: for example, we may find that a licence is not required for that particular address—that it does not fit the criteria requiring it to have a licence. When we do not effect a sale, a record of that interview will be taken. We undertake about 3 million visits per annum.
Kwasi Kwarteng
But the fundamental point is that before your employees knock on that door and go to the address, they do not know whether it is a sales or enforcement visit.
Pipa Doubtfire
On a point of clarification, sales-only visits are carried out by visiting officers who do not have the training to take a record of interview. Their only objective is to make a sale, whereas in enforcement visits carried out by inquiry officers, they may take a record of interview and try to effect a sale. They have a dual role, and sales-only visits have a single role.
Kwasi Kwarteng
So in terms of the numbers that we are seeing, some of those sales visits will be people who will be exclusively doing sales visits, and some of those sales visits will presumably be done by other people who are qualified to do more of the enforcement, or have I got something wrong there?
Pipa Doubtfire
Enforcement officers will always try to make a sale, as well as completing a record of interview, where that is appropriate.
Kwasi Kwarteng
How many of the sales visits are performed by people who are exclusively devoted to that?
Vic Gysin
To give you an idea of the numbers and the proportion, as of yesterday we have 324 visiting officers who are the type you describe, who are able to take a record of that interview and to effect a sale as well. We have about 25 sales-only people. Looked at in those proportions, it is a relatively small—
Kwasi Kwarteng
It is about a twelfth.
Vic Gysin
It is of that order, yes.
Chair
Are those 25 a sales force, effectively targeting people whom you think you can sell better to on the doorstep?
Vic Gysin
That’s right. They would be armed with management information as part of their visit bundle, if you like—the information they have—and they would be specifically targeted towards those people where we think there is a higher propensity to buy on the door, but that might be through previous buying behaviour.
Chair
It is the sort of places that some of the other companies—the money lenders who sell on the doorstep—go to. It is the sort of places where people traditionally are more likely, demographically speaking, to pay on the doorstep.
Vic Gysin
Not necessarily demographically, but based sometimes on their previous buying behaviour as well. There is a limited amount of customer-specific information.
Chair
These are people who you think will pay if they are presented with someone in person and will be able to pay cash.
Pipa Doubtfire
They have a previously good paying history, but they have lapsed, so rather than go with an enforcement visit, we would go with a sales visit.
Chair
Right, so there is quite a difference, and the enforcement officer goes to the rest. We will have a couple more from Mr Evans.
Chris Evans
I want to move on to complaints. Complaints have dropped by 50%. How do you know that is an accurate reading of the situation?
Pipa Doubtfire
We work with Capita to ensure that we completely understand the management information and the criteria for understanding when a complaint is a complaint versus an inquiry, for example. That is clearly set down in the contract. We carry out reviews on the management information and spot checks on the correspondence that we see. Of course, escalated issues come through to the BBC, so we have a very direct line of sight over the complaints. We work with Capita, and we have an executive forum, whereby we review complaints coming in, and we systematically look for errors where we can learn from complaints and make service improvements.
Chris Evans
What sort of complaints are you getting at the minute?
Pipa Doubtfire
They vary. I would say that a good proportion relate to households that do not require a licence and who do not want TV licensing contacting them to find out about their licensing requirements. That is a good proportion of the complaints we get. We get complaints about the refund policy. As you may be aware, at the moment, we offer quarterly refunds to people who no longer need their licence. We are about to change that from 1 April to monthly refunds. We get complaints where we have been provided with incorrect information about an address, and it has created what looks like a new address on our database, when in fact it is a replica of an existing address. We then have to correct that information when it comes through to us. We also get instances where we have not provided the best customer service—the service that we would like to provide—and we have made a mistake, and we have to correct that mistake and make the appropriate apology.
Chris Evans
And Capita deal with most of these complaints, yes?
Pipa Doubtfire
Capita are the first stage of managing complaints and if a complaint cannot be resolved by Capita; then it comes to the BBC.
Chris Evans
Can you ring Capita directly from the BBC? Is there a telephone number to ring them directly?
Pipa Doubtfire
For customers to ring Capita?
Chris Evans
Directly, yes.
Pipa Doubtfire
Absolutely, yes.
Chris Evans
Where is that number advertised?
Pipa Doubtfire
It is advertised on the TV Licensing website. It is promoted on some letters, but not all letters.
Chris Evans
Why not all letters?
Pipa Doubtfire
We signpost to the TV Licensing website wherever possible, to create efficiencies.
Chris Evans
What oversight do you have to ensure that Capita are dealing with the complaints effectively and efficiently? Are there any reporting mechanisms or anything like that?
Pipa Doubtfire
Capita reports on the time taken to respond to complaints, and as I said, any complaints that are not dealt with effectively to the customer’s satisfaction come to the BBC. We have regular management meetings with Capita to review all the complaints data and issues arising, and we do spot-check audits of complaints and responses.
Chris Evans
I have a final question on this section, before the Chair moves on. In paragraph 2.20 on page 25 of the report, it says there was a particular project to improve contact with customers over the age of 75. Again, we are getting back to vulnerable customers. Why, in particular, were over-75s complaining more than any other age group?
Pipa Doubtfire
What we identified through the complaints we were receiving was that there was a problem in the operation. There were multiple contacts on occasions, because the agents were not sufficiently skilled in dealing with that age group. You have to apply for an over-75 licence, and when the appropriate information was not supplied at the time of the initial call, follow-up action needed to be taken. We have now created a specific team to manage that group, so over-75s get their own number to call through on, and we have managed to really turn that situation around.
Philip Boswell
I want to touch on a few things in relation to the devolved issues. Looking at page 23, figure 7, and NAO paragraph 2.8 on page 22, which says, “According to available data, the rate of evasion varies considerably across the UK”, in Scotland, some of the differences may be explained by a different regulatory environment. In Scots law, the BBC does not have the same powers, there is a requirement to engage the procurator fiscal, and Scots law has higher standards of evidence. Are these contributing factors to explaining the differential between Northern Ireland, Scotland and England and Wales, or is there something else?
Anne Bulford
Our view is that the different arrangements in Scotland, the approach to the fine, and where the fine is generally £75 are contributory factors to higher evasion rates in Scotland. There may also be some socioeconomic factors, as the NAO pointed out, but we believe that that different arrangement is one of the contributory factors, and it was one of the points that David Perry looked at. In Northern Ireland, there have also been some historical difficulties in accessing households, and the requirement that a second person attend has been an issue, but that is actually turning round in Northern Ireland, and the evasion rates are improving.
Philip Boswell
Okay. I will move on to questions around licence fee gathering and spend across devolved countries. Miss Bulford and Mr Prettejohn, do you think the licence fee delivers value for money across the UK, and that Scotland receives its fair share of spending and support, given the licence fee gathered?
Anne Bulford
We have spent quite a lot of time talking about this very topic at the Scottish Parliament, in particular. Across all BBC services, support for the BBC, in terms of value for money, is high. In Scotland, one of the points being raised is the relative balance between the amount of money raised in Scotland and the amount spent directly in Scotland, which is a different measure from that of the value people in Scotland are getting from the BBC as a whole. As many will be aware, people in Scotland enjoy a great deal of television, and are some of the largest audiences for BBC 1 and our national services. It is a point that we have taken very seriously. Relative spend in Scotland versus money raised, compared to Wales, for example, is low. There were a number of reasons for that. The recent announcements that we made about additional investment in Scotland, and in particular the proposal to launch a new channel, including a news service at nine o’clock, will go some way to redressing that balance.
Philip Boswell
I hear that the Scottish Broadcasting Commission stated that such a new channel would need up to £75 million investment to be sustainable, but the BBC’s investment is £30 million. Last year, 68% of the licence fee collected in Scotland was spent in Scotland. This is compared to 74% invested in Wales, and 95% in Northern Ireland.
Anne Bulford
There are differences between the three nations. In Northern Ireland, there is a scale issue, just because the population is smaller. In Wales, we have a substantial network drama facility in Roath Lock, which increases the investment in Wales. Overall, of course, those numbers are higher than relative spend in England. The difference between the two is the money that is spent on network provision for everybody, wherever they live, whether that is sports or music rights, the national radio stations, or whatever. Overall, however, we want to see a BBC that is representative of the UK as a whole. We are very keen on improving portrayal, so that people feel comfortable that they are seeing more people like them on television. When I, and subsequently the director-general, attended the Scottish Parliament, we acknowledged that we wanted to see more investment going into Scotland. The recent proposals, as I say, go some way to dealing with that.
Philip Boswell
Two small points. Additional funding of £1.2 million was provided to BBC Alba in the past year, but this investment means only 7.2 hours of in-house programming can be delivered per week, which is much less than is provided by the Welsh counterpart, S4C. Is there not an argument that additional licence fee funding from Scotland could or should be spent on BBC Alba’s output to get it up to the achievable target of 10 hours, rather than 7.2?
Anne Bulford
One of the proposals coming through, alongside the proposal for the Scottish Parliament and the investment in news, is that that will enable some improvements to the volume of live news provision on BBC Alba, particularly at weekends. Again, this will go some way towards redressing that balance.
Philip Boswell
My final point is a more general one. Scotland raises about £320 million and receives less than £200 million. If you look at Catalonia, which has a slightly larger population, the public broadcaster’s annual budget is lower than the funds raised in Scotland, yet they have six television channels and four radio stations. Obviously, the sector will seize the opportunities the BBC has offered with the new channel announcement, but do you not think there would be potential to have a bigger and bolder broadcasting organisation in Scotland, if there was a fairer share of licence fee?
Anne Bulford
I will go back to what I said at the beginning. I think that all audiences around the UK value the BBC and the range of services that they receive. Levels of audience appreciation, consumption of television in Scotland, and the traffic on BBC 1 are high. There is always a difficult balance to be struck between services designed for the local population versus services for all. We have seen some great programmes come out of Scotland, and we have seen some wonderful events there.
Chair
We have lost nearly half an hour on votes. Members are briefed to be brisk in their questioning. May I urge witnesses, without skimping on what they have to say, to be as brief as they can, as we aim to finish in the next 20 to 25 minutes, if possible? I will hand straight back to Mr Boswell, who is going to talk about the contract and the transition programme.
Philip Boswell
Thank you, Chair. Some of these issues have already been addressed, so there is no need to revisit them. These questions are around managing the contract and the transition programme. First, on page 9, the NAO’s paragraph 13, in respect of the BBC’s contract with Capita, says: “The BBC’s contract with Capita transferred high levels of financial risk to the contractor”—in my experience, that usually costs the client—“but, due to altered circumstances, the two organisations renegotiated the contract in 2016.” I’ll come to this question quickly and won’t go into the detail that I was going to. On page 36, paragraph 4.7 says: “Under its original terms, the Capita contract offered strong incentives to increase revenue, as a means to increase the BBC’s income and reduce evasion.” We have touched on some of that stuff, but there is a lot more to go there. The point on page 37, paragraph 4.8, perhaps has not been covered so much: “The contractor baseline was achieved in every year of the contract apart from 2012-13. However, in three of the four years covered by the original terms of Capita’s contract, the amount collected has been below the contractor forecast (Figure 14), which meant BBC payments to Capita were lower. In 2015-16, when the contractor forecast was met, this was largely because of the Broadcasters’ Audience Research Board’s (BARB’s) underestimate of the number of households with a TV (see paragraph 2.2)”—something we talked about earlier. ”In essence, the target was easier to achieve than it should have been. This has been addressed in a contract renegotiation between the BBC and Capita (paragraphs 4.15 to 4.19).” My question to Miss Bulford is: were the targets in the original 2012 contract over-ambitious?
Anne Bulford
I think the targets in the original contract were appropriate. The way in which the contract works is there is a base target, and that comes through from the estimate of overall licences and an appropriate portion of those targeted to be brought into licence. There is then a second target, which is a stretch target, referred to here as the contractual target. Capita is incentivised to reach that contract target through additional payments. If they do not, the BBC does not pay. Across the four years we are looking at here, although the base target was missed in one year and the stretch target was not met in any year—not surprising; the stretch targets are designed to be stretching—overall £86 million over and above the base target was collected by Capita. Across the piece, through this period, we have seen increasing income, improved levels of service, reducing complaints and reduced costs—a 25% reduction in real terms, through the contract.
Philip Boswell
Okay. Moving on, I have a question to Pipa Doubtfire and Mr Gysin, again referring back to the paragraphs previously mentioned in NAO Report, which obviously you know. Given that a renegotiation was required for targets missed, how close was the contract to falling apart?
Pipa Doubtfire
As Anne said, there were a lot of things that the Capita contract delivered extremely well. We were £86 million above the income baseline. Anne has already referred to the other operational service improvements. We do not think it was close to falling apart, but adjustment from the BARB numbers did mean that it was the right thing to have a look again at the way that the targets were set. We were moving to a position where we would run the risk that Capita would be more incentivised to cut costs, rather than to structure the revenue.
Philip Boswell
Do you have anything to add to that?
Vic Gysin
I don’t have anything to add.
Philip Boswell
Okay, no problem. Moving on, with reference to pages 40 and 41 of the NAO Report, paragraph 4.15 talks about the high levels of financial risk transferred to the contractor; paragraph 4.17 refers to the agreement to extend the contract for two years; and paragraph 4.18 states: “Overall, the BBC told” the NAO “that it expects the new arrangements to have no impact on the net revenue collected, compared with its current revenue expectations.” On page 41, NAO paragraph 4.19 is interesting: “While the contract has been renegotiated to improve its sustainability by changing the balance of financial risk, and the BBC forecasts that net revenue levels will be at least equal to that under the previous arrangements, there remains a risk that the revised terms will provide insufficient incentives for Capita to increase revenue and reduce evasion to the levels originally planned when the contract was awarded in 2011.” So I am asking about the evolution and the efficiency of that evolution in the contract negotiations. First, Ms Bulford, what was the rationale for extending the contract for two years?
Anne Bulford
We had the option when we went through the procurement to extend the contract. We decided to do that because we were happy with the performance overall in terms of revenue and cost, and service levels and KPIs, for the reasons that I previously outlined. Also, given the scale of change that we anticipate through this period with the modernisation of the licence fee, we felt it was a helpful security not to have a change in the contract as we moved through any additional changes that we would need to effect on the base.
Philip Boswell
Thank you. Ms Doubtfire, how will the new contract incentivise Capita to collect high levels of revenue? If there is an incentivisation, is there a penalty for failure?
Pipa Doubtfire
There are some incentives and penalties for not reaching the income targets agreed with the BBC, although the risk reward is not as steep as it was in the previous arrangements. Also, the new arrangements give the BBC a lot more control over the level of resources that Capita deploys in running the services and reaching for the revenue, so we will work very closely with Capita to understand exactly how the resources are deployed, rather than just working with them on an output basis.
Philip Boswell
Okay. Mr Gysin—
Anne Bulford
Sorry, Mr Boswell, just to clarify that there are indeed penalties for not hitting the base and there are rewards that increase the further over the base they reach. I believe the NAO comment was that we would need to keep that under review to ensure that the balance remains right.
Philip Boswell
So, Mr Gysin, how likely are you to meet your revised revenue targets under the new contract?
Vic Gysin
We are very comfortable with the numbers that you are talking about. We think it is a fair outcome for both parties.
Chair
How are you incentivising that down the chain? You have got your local collectors and teams; presumably, through the system, you are all getting pay bonuses as a result of performance.
Vic Gysin
To all intents and purposes the output nature of what we are trying to do remains the same, but the new contract provides greater clarity on what the revenue collection targets are for the next couple of years, and we are comfortable with that. We think it represents a good mitigation of risks for both parties.
Chair
What do you do if you have a team or an individual who is not meeting their bonus? Does that have an impact on bonuses up the team manager’s line right up to your position?
Vic Gysin
Are we talking about field—
Chair
Yes. If I was a field operative and I was just getting my basic and not doing anything more than that, would that performance have a knock-on impact on the team manager, the local director or whatever, and then eventually on you and your team?
Vic Gysin
Yes, it would. Our team leaders now, our area managers, are incentivised on a range of different issues. The largest component of that is the performance of their own sales visiting officers.
Chair
We talked about turnover earlier. Do you shed staff if they are not meeting some of their targets? If your area manager’s or your pay packet—whoever’s pay packet—is being impacted by the performance of people on the ground, does that mean that you shed people who are not performing?
Vic Gysin
We don’t automatically shed people. We do put people into what you might call retraining bays and get them more skilled. We increase the level of supervision. One of the things that we do with all our field staff, actually, is to accompany visits to make sure that they adhere to the various codes that we talked about. Where we have people who are on what you might call a form of improvement programme, that includes supervision. There does come a point, though, where if people haven’t got it in them or they are just not able to do the job, then after a series of measures, yes, we would expect to move people on.
Chair
Earlier, in answer to a question I think from Mr Evans—he asked about what would help your staff do a better job—you talked about believable trend analysis, which sounds quite jargonistic, but I guess you are talking about a demographic analysis of who might pay, or you might look at customer behaviour. What else would help? Is there anything the BBC is not giving you in terms of data or data that you are not collecting that would make both the customer service side and the revenue collection side improve?
Vic Gysin
We share all of our data across the entire operation, from marketing to operations, so I don’t think there is anything that is currently being withheld in that regard. We are careful to make sure that all of the information from our people in our contact centres and our back offices gets fed into the core applications that the field staff use. For example, I think we mentioned one of the issues that the visiting officers had was the duplication of addresses. You might have Ashhill Cottage as one address and 87 Main Street as the other, but they are the same house. There is an awful lot of data there and the way we manage that data prevents a lot of nugatory visits. We are very careful to make sure that that extends to our field teams.
Chair
So you think that you are getting the right data. There is nothing more that would make life better on the ground.
Vic Gysin
I actually think we are pretty good at continuous improvement.
Pipa Doubtfire
We do have a continuous improvement programme whereby we seek other sources of data that we could use to complement our own data. Where it is appropriate, we will buy third-party data to provide extra insight into an unlicensed address.
Philip Boswell
To close this question, and to deal with a possible contradiction I may have heard, Ms Doubtfire, you mentioned earlier that the risk reward is not as steep. Mr Gysin, does that mean that your bonus is less than £9,000 now—no longer 35% to 40% of the pay, or whatever the exact percentage is you quoted earlier?
Vic Gysin
I think the risk reward that my colleague on the left mentioned is at corporate level.
Philip Boswell
It’s the high level.