Snouts in the BBC trough: The 'grotesque' pay-offs handed to BBC bosses - revealed by the crusading politician who called them to account

• Sharon Baylay was given £400k redundancy after just 17 months with BBC
• Pat Loughrey was given a massive £866k pay-off - twice his notice period
• Caroline Thomson got £680k - including £14 for her lawyers to negotiate
• Mark Byford got £1million pay-off in 2010 - double what he was entitled to

As former chairman of the Commons Public Accounts committee, Dame Margaret Hodge has spent years investigating how public money is spent. Yesterday, in our serialisation of her new book, she revealed how millions are wasted by the NHS and Ministry of Defence. Today, she skewers the BBC . . .

BBC director-general George Entwistle had been in his job for just 54 days when he resigned. Few people shed any tears at his departure. He was not only an ineffective leader, but he’d just given a lamentable interview to John Humphrys on the Radio 4 Today programme.

Still, after 20 years of moving through the corporation ranks, Entwistle was clearly due something.

His pay-off, however, was astounding. As the BBC told the Public Accounts Committee, there had been £450,000 for starters, which was double Entwistle’s contractual entitlement. On top of that, he got the legal costs involved in negotiating his pay-off.

Plus a further £107,000 to pay costs he’d incurred while appearing as a witness at the Jimmy Savile sex-abuse inquiry — which was investigating dozens of allegations of rape, sex abuse and paedophilia by the BBC star. Plus 12 months of medical insurance. Plus £6,000 to cover PR costs — because his reputation was being trashed by the media. All funded by licence-fee payers.

I was appalled. Yet there was another shocking revelation to come: the BBC, it turned out, had failed to tell us the whole truth. As we learned later, Entwistle had also been given £25,000 for 20 days’ work between the date his resignation was announced and his day of departure. There was just one problem: he hadn’t actually worked during those 20 days.

One of our committee members, MP Stewart Jackson, put it well. Turning to Lord [Chris] Patten — then chairman of the BBC Trust — he said: ‘Entwistle was paid more or less the equivalent of what one of my constituents earns as an average annual salary. What did he actually do in those 20 days?’

‘Very little,’ Patten replied.

So Entwistle, a failed DG, had been paid £25,000 of public money to sit on his backside — a grossly inappropriate use of licence-payers’ funds. But this BBC ‘oversight’ turned out to be par for the course.

During the ensuing months, we uncovered a great deal more evidence of the BBC’s cavalier attitude to licence-fee payers’ money. One highly-paid executive after another, it turned out, had left with far more than he or she was entitled to claim.

Believe me, we tried very hard to establish who was responsible. But senior BBC executives blamed each other, changed their stories, suddenly found documents they’d said didn’t exist and remembered conversations they’d originally claimed had never taken place.

By the time we’d finished, the self-inflicted damage on a much-loved British institution was nothing less than tragic. And it had happened largely because the people at the top had lost sight of their responsibility to act as guardians of the public purse.

Entwistle was just one of many who had gone for everything he could get. He’d pursued unbridled self-interest, instead of reflecting on the impact his actions would have on the BBC’s reputation.

After all, he could easily have accepted less — or he could have returned some of the money when the public reacted with fury to his vast settlement. He did neither.

Yet during his short-lived reign, the BBC had plunged into one of the worst crises it had ever faced, when Newsnight abruptly dropped legitimate investigations into the sexual abuse of children by the late Jimmy Savile.

A bruised Newsnight team, keen to restore its damaged reputation, had then decided to show a film alleging that a senior Conservative — later revealed to be Lord McAlpine — had sexually abused children in a care home in Wales.

No sooner had the programme been shown than the alleged victim, on whose evidence the report was based, recanted. The person he had previously identified as Lord McAlpine was not the man who’d abused him, he said.

All hell broke loose. It emerged that the journalist involved had not shown the victim a picture of Lord McAlpine; he hadn’t corroborated the story by finding other victims; he hadn’t even put the allegations to Lord McAlpine.

Entwistle completely failed to get a grip on this crisis. On Today, he admitted he had ‘found out about the Newsnight programme after it went out’ because he ‘was out’. A tweet about the content ‘was not brought to [his] attention’; nor was a newspaper article revealing the victim’s retraction the following morning.

He even claimed he hadn’t read the paper because he’d been busy preparing a speech. ‘When something is referred to me and brought to my attention, I engage with it,’ he pleaded in justification.

If such a terrible performance could reap such rich rewards, we knew that his pay-off had to be the tip of the iceberg. So we started asking more questions.

Examining only three years to December 2012, we found that 150 senior BBC managers had received severance payments — the total cost of which was £25 million. The average payout was £164,200.

Of these managers, 22 had been paid more in lieu of their notice than they were contractually entitled to. The same amount of money could have funded Radio 4 for four months or Radio 1 for eight.

Here was the clearest example of just how irresponsible people in the public sector can be with other people’s money — our money.

At our second hearing, in July 2013, we looked at all the recent senior management severance and redundancy deals. I got so fed up with inconsistent and conflicting stories I decided the only way to establish the truth was to call all the key people to give evidence together.

So on September 9, 2013, they sat together in front of the committee, seven senior figures: Lord Patten; Mark Thompson, the former director-general; Marcus Agius, former chairman of the BBC remuneration committee; Anthony Fry, BBC trustee; Sir Michael Lyons, former BBC Trust chairman; Lucy Adams, director of human resources; and Nicholas Kroll, the Trust’s administrative director. It was a most unedifying spectacle.

By then, we were deeply concerned about a number of cases:

• Sharon Baylay, the former director of marketing, ecommunications and audience, was made redundant after only 17 months and walked away with nearly £400,000. This included a year’s pay in lieu of notice and £1,763 to pay for BUPA health cover.

• Caroline Thomson, who had once hoped to became director-general, left with £680,000 when she was made redundant. This included £14,000 for lawyers to negotiate her pay-off.

• John Smith left his post as chief executive of BBC Worldwide at the age of 55, and immediately started drawing a pension of £212,000 a year. He had negotiated a staggering £2 million pension top-up and £1.6 million in severance pay. All this five weeks before he signed a contract with Burberry to join them as their chief operating officer. (After adverse publicity, he later paid back £200,000.)

• Pat Loughrey, director of nations and regions, received £866,000. This included £300,000 pay in lieu of 12 months’ notice, even though he’d already worked his notice and been paid for it. Before leaving the BBC, he secured a £200,000-a-year job as warden of Goldsmiths, University of London.

• Roly Keating, director of archive content at the BBC, had applied to become chief executive of the British Library. Once his new job was in the bag, he negotiated a severance pay package worth £376,000. (Following a public outcry, he later returned the money to the BBC.)

In many of the cases, extra money had also been paid out as long-service awards and for private health insurance and legal fees. One senior manager received £49,000 for IT equipment and training on how to use it. In another case, an agreement was reached to buy at least £60,000 of consultancy services from the departing manager over the following two years — at a rate of £1,000 a day.

As Stewart Jackson remarked: ‘If this was any other organisation, that would be called corporate fraud and cronyism.’

But then there was the most jaw-dropping case of all:

• Mark Byford, the former deputy director-general. Although the decision to scrap his post was taken in October 2010, he didn’t leave until the following June — with £1 million in his pocket.

He’d received a year’s salary as a redundancy payment. Plus £73,000 for leave accumulated before 2004. Plus another year’s salary ‘in lieu of notice’, even though the decision to axe his job had been taken nine months before he left.

Yet there had been no contractual obligation to pay him money ‘in lieu of notice’. That had been fabricated in order to reward him with half a million pounds over and above an already very generous redundancy package.

As I remarked: ‘An ordinary worker on average earnings would have to work for 40 years to earn the £1 million that Mr Byford got in redundancy pay.’

The size of this settlement astonished us, but Mark Thompson — who was DG at the time — thought it was justified. The BBC, he told us, had been in the midst of some ‘gigantic projects’, such as preparations for the broadcasting of the Royal Wedding and the Olympics.

‘We wanted Mark Byford, through this difficult transition, fully focused on the enormous task that we had. We did not want him worrying about his future or taking calls from head-hunters; we wanted him fully focused.’

Was Thompson serious? It seemed utterly grotesque to me that an extra half a million pounds of public money should be given to an employee to keep him ‘fully focused’.

I was also aware that Thompson and Byford had known each other for 30 years and were friends outside the workplace. This type of camaraderie at the top was not unique, and may well have influenced the approach taken to pay-offs for senior staff.

As the pay-offs crisis deepened, everybody started scuttling for cover. The BBC Trust — a body that provides strategic oversight and represents the interests of licence-fee payers — claimed it hadn’t known the pay-offs went well beyond contractual commitments.

As trustee Anthony Fry maintained: ‘We were assured they were within contractual terms. We were told that they had been signed off in the proper fashion.’

But Mark Thompson was clearly furious that the Trust was feigning ignorance and piling the blame on him. He sent me a 25-page memo, along with documentary evidence, claiming that Byford’s and Baylay’s pay-offs ‘were made with the full prior knowledge and extensive involvement of the BBC Trust . . .

‘The claim they were kept in the dark about these cases and the wider policy and practice is untrue.’

Who was telling the truth? It was extraordinary to find these Establishment figures squabbling like children over differing versions of the facts.

As committee member Chris Heaton-Harris wryly remarked: ‘It is the most bizarre game of Whac-A-Mole I’ve ever seen in my life. You hit one fact down and out pops another bunch of questions.’

Trustee Anthony Fry hit back, telling us he’d argued vociferously against enormous pay-offs. ‘A series of particularly unpleasant discussions’ had taken place, and he thought BBC executives were ‘completely out to lunch’. All to no avail: ‘People like me were asked in not particularly pleasant terms to get back in our box.’

This infuriated Mark Thompson, who denied he’d never used such words. Furthermore, he had complied with everything the BBC Trust had wanted him to do.

‘I don’t accept that,’ protested Fry. ‘The records will show that there were months and months of arguments between the Trust and the executive . . .’ As a committee, we may have found it difficult to establish the facts; we did, however, uncover an utterly dysfunctional set of relationships.

Similar tensions emerged when we questioned Lucy Adams, the BBC director of human resources, who earned £320,000 a year. She came before us parading designer glasses and eye-catching jewellery.

Her first appearance was marked by her attempts to distance herself from controversial pay-off decisions, particularly the one to give Byford £1 million.

‘I don’t think . . . that it was acceptable for him to get such a large payment in lieu of notice,’ she said, blaming Mark Thompson.

But it was difficult to believe that on such a major HR issue, the BBC’s exceedingly well-paid HR director had nothing to do with it.

We asked her about a memo, sent by the director-general to the BBC Trust, which spelled out the cost of making Mark Byford and Sharon Baylay redundant. Surely the head of human resources would have helped to draft such a note?

Adams denied all knowledge: ‘I am not aware of the letter that went to the Trust. I did not actually write that letter,’ she declared.

I didn’t believe her. Two months later, Adams sent me an apologetic letter in which she confirmed that she had, after all, been ‘involved’ in drafting the memo.

In fact, we discovered she had written it herself. We also obtained copies of various emails she’d sent which provided clear evidence of her role in negotiating Byford’s outrageous £1 million package. Far from being an innocent bystander, she had been a central player in the pay-off deals all along.

Lucy Adams left the BBC in April 2014. She did not receive any severance pay and was asked to work her notice period.

Back at the Public Accounts Committee, executives continued to clash furiously over who knew what. Marcus Agius — a non-executive director who chaired the BBC’s remuneration committee —was quite open. He’d approved the pay-offs, and he insisted that the BBC Trust was aware of them.

Lord Patten was having none of this. The fault lay with Agius and the director-general, according to him. His predecessor as chairman, Sir Michael Lyons, agreed, claiming he had no memory of approving the pay-offs personally.

But Sir Michael Lyons, it seemed, was horribly forgetful. We later obtained a note from the DG’s office to the chairman’s which clearly set out the options for dealing with Mark Byford’s redundancy. There was a further trail of emails between the BBC Trust and the BBC management.

So what did we make of all this dreadful evidence? Well, it told us that these highly-paid individuals and respected members of the Establishment were either guilty of gross inefficiency, collective amnesia or deliberate obfuscation.

And it told us that, without any doubt, there had been grotesque squandering of public money by a public corporation.

Had this happened in a private company, it might well have been regarded as a breach of the directors’ duty to their shareholders.

Similar stories abound across the public sector. In my view, regulatory bodies do not provide sufficient oversight and protection for the taxpayer or licence-fee payer.

It may well be time to consider placing a similar duty on public-sector leaders that private-sector directors have imposed on them by law: a duty to act in the best interest of their shareholders (taxpayers) in good faith and honestly at all times.

One final reflection. Had George Entwistle agreed to a reasonable pay-off, this BBC scandal might never have come to light.

• Extracted from Called To Account: How Corporate Bad Behaviour And Government Waste Combine To Cost Us Millions by Margaret Hodge, published by Little Brown on September 15 at £18.99. © Margaret Hodge 2016. To order a copy for £15.19 (p&p free, offer valid to September 23) visit mailbookshop.co.uk or call 0844 571 0640. Margaret Hodge will be speaking at the Henley Literary Festival on October 1, henleyliteraryfestival.co.uk