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BBC: Licence Fee

Volume 688: debated on Thursday 18 January 2007

My Lords, with permission, I shall now repeat a Statement made in another place on the future funding of the BBC. The Statement is as follows:

“Over the past three years, the public, industry and Parliament have all had many opportunities to put forward views about the BBC’s future shape and funding, as has the BBC itself. I am now in a position to announce what the funding settlement will be over the first part of the new charter period.

“The settlement will be for six years, with annual increases in the licence fee of 3 per cent for the first two years and 2 per cent in years three, four and five of the settlement. There will be an increase in the sixth year (2012-13) of up to 2 per cent, depending on a further review nearer the time. I have written to the BBC Trust today setting this out.

“These are cash increases, so licence fee payers can have certainty on the price of a colour TV licence, which will rise from its current level of £131.50 to £135.50 from 1 April this year, reaching £151.50 in 2012. Based on the Treasury forecast of the consumer price index—the Bank of England’s inflation measure—this will be either above or in line with inflation for each year of the settlement. It will enable the BBC to deliver its new public purposes set out in the new charter, and as digital technology transforms the media world, it will enable the BBC to take a leading role in making the most of it. Investment in high-quality content—the driver of creative industry and what audiences value most of all—will remain high. This settlement will enable the BBC to do all that.

“It will also allow the BBC to move key departments, including children’s, sport, new media and learning, to Salford, in the north-west of England. I welcome the trust’s confirmation, due later today, that this important project will happen. This is a vital opportunity for the BBC to widen its geographical spread, making better use of the creativity and talent that exists across the UK and bringing huge benefits for the regional economy, estimated at £1.5 billion and 15,500 jobs. This will allow the BBC to maintain all of its current services and, depending on the level of efficiency it achieves, will provide up to £1.2 billion for investment in new activities.

“The people of the United Kingdom spend more money on the BBC than any country in the world spends on public service broadcasting, except Germany. The new BBC Trust must ensure that licence-fee payers get the best possible value for that investment, so we will expect the trust to ensure the efficiency of the BBC.

“Based on independent evidence from our consultants PKF and others, we believe that the BBC can realise up to 3 per cent cash-releasing savings annually from 2008. A separate report by the National Audit Office, published today, confirms that our judgment is based on adequate evidence. It will be the trust’s responsibility to set specific targets and hold the BBC management responsible for meeting them.

“The BBC has been given a leading role in digital switchover for the delivery of this broadcasting revolution. In particular, the licence-fee settlement will fund the £600 million scheme we are putting in place to help the elderly and disabled people make the switch. The Government’s expectation is that the BBC will lead the delivery of the scheme. We respect the independent status of the trust and there are clearly details of the scheme still to be discussed.

“The BBC will also pay for the £200 million public communications campaign being run by Digital UK to ensure that people are properly prepared and informed about switchover. These sums will be ring-fenced within the settlement and will not impact on the BBC’s core budgets and services.

“We are giving the BBC a 12.5 per cent increase in its borrowing capacity to help deliver this commitment. We will ensure the BBC's services are protected from any cost increases in the help scheme, above our existing estimates.

“In last year's White Paper on the BBC, we also noted that Channel 4 was likely to face major financial challenges in the future. Ofcom is currently assessing the potential scale of this. We said we would consider potential forms of help, including asking the BBC to help towards meeting its capital switchover costs, and possible access for Channel 4 to some of the BBC's digital TV capacity. Ofcom's review of Channel 4 is looking in detail at its financial prospects and is expected to report towards the summer. I am therefore keeping open, within the licence fee settlement, the possibility that we may require the BBC to contribute to the first six years of Channel 4's switchover costs. This will be no more than £14 million in total.

“I also welcome the BBC's conclusion that, in principle, it can make available some spare digital terrestrial capacity—amounting to a TV slot in England and three radio slots—at switchover. Under the BBC agreement, I can direct the BBC to make capacity available to another public service broadcaster where it is in the interests of public service broadcasting in the UK. I shall decide whether and how to use that power in the light of Ofcom's review.

“The settlement I have set out for the BBC provides stability and certainty over the next crucial period of digital switchover. The sixth year will, in effect, also form the first year of the following settlement. This will allow us to undertake a further review of the licence fee level in the run-up to the mid-charter point, taking account of the wider review of public service broadcasting, consistent with our commitment in the White Paper.

“A strong, independent BBC, accountable to the licence payer, valued by the public and providing the highest public value, has been our fundamental goal throughout this long process. It is now complete and the BBC, along with all the other broadcasters, can now plan and prepare for digital switchover, the next great revolution in television, ensuring that the most vulnerable are protected and the fundamental principle of universal access to public service broadcasting is secured. I commend this settlement to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for repeating the Statement made earlier today by his right honourable friend the Secretary of State for Culture, Media and Sport. It is regrettable that, yet again, an important announcement such as this has been so comprehensively leaked. It shows a disgraceful lack of respect for Parliament when business is conducted in this way.

The BBC is a national institution, but to be given a guaranteed income for so long a period is a luxury for which anyone else in the media industry would be extremely grateful. It would enable them to adjust their costs according to their income. Let us hope the BBC will do that. Let us also hope that, in the absence of the discipline of market forces, the National Audit Office will be allowed to give the BBC the thorough examination which spending more than £3 billion a year of public money merits and ensure that the 3 per cent annual savings identified by PKF are implemented.

Included in the Statement is a sum of £600 million to assist the elderly and disabled to switch to digital television. Has the BBC Trust agreed to take on the role of delivering this assistance? Will the £600 million be sufficient, or does the comment contained in the Statement—that,

“We will ensure the BBC’s services are protected from any cost increases in the help scheme, above our working estimates”—

mean that there is already concern that the costs will go far above the initial estimates, as with so many other projects undertaken by the Government? These costs would then be paid for by the increased BBC borrowings, which must ultimately be paid for by the public.

It is stated that the move to Salford will create 15,500 jobs. How many jobs will be lost at the same time?

Will the Minister ensure that it is made clear on TV licences how much of the cost relates to the cost of the digital switchover? When we receive our council tax bills it states how much is allocated to various bodies—parish councils, the police and so on. A similar statement on TV licences would enable the public to know when they have finished paying for the digital switchover.

My Lords, I, too, thank the Minister for repeating the Statement. I declare an interest in that I used to work for the BBC and am presently an associate at an independent production company.

For more than 80 years the BBC has been the envy of the world. It has a reputation for setting the gold standard for TV and radio. Does the Minister acknowledge that the extra burdens the Government have placed on the licence fee this time mean that this below-inflation increase will put at risk that reputation, and that it will be a huge disappointment to many people? Does he accept that a survey commissioned by the Government showed that the vast majority of licence fee payers are willing to pay more in real terms for improved quality? Last year, Mark Thompson, director-general of the BBC, said at the end of two years of public debate which was much heralded by the Government that the BBC must be given the finances to deliver the mission that emerged out of that consultation. He referred to,

“this piece of settled public policy”.

Why are the Government setting their face against the views of the majority in this country?

The BBC is being asked to run far more than its existing services and to shoulder costs that should be borne out of general taxation. Can the Minister explain why the licence fee is being used to pay for the Government’s policy of switching to digital and for the social costs of helping the vulnerable and elderly involved in the switch? How do the Government come to the view that a targeted assistance programme is a broadcasting cost? It is not a broadcasting cost but a social cost, and it is not appropriate for the licence fee to be used to pay for a social cost. In effect, this is a new tax collected in the disguise of the licence fee. As the noble Lord, Lord Howard, said, what happens if it costs more than the £600 million which the Government predict? Will the Government fund the extra, or will the BBC have to make further cuts in its programme budgets?

The disagreements which have marked the process of this licence fee settlement—apparently both within government and between government and corporation—and the damagingly late date on which the settlement has been reached underline the flawed nature of the system for agreeing the settlement. Why is the process not more transparent? Why do negotiations take place behind closed doors at White City and Whitehall? The BBC should publish its revised figures, and in future the setting of the licence fee should be open to proper scrutiny involving greater parliamentary oversight.

Bearing in mind the obvious conflict of interest, will the Minister assure the House that the Government have not been influenced in any way by lobbying from Rupert Murdoch’s News Corp in determining the settlement? The one person who we know will be cheering the Statement is Rupert Murdoch.

We on these Benches wholeheartedly support the move to Greater Manchester. However, it is another obligation that needs to be paid for and that the Government have placed on the BBC. Over the six-year period of the settlement, the BBC will have approximately £2 billion less than it said it needed to deliver the Government's White Paper vision. Is it not the case that under the settlement the bulk of the licence fee increases will not be spent on things that the viewers and listeners rightly want—fewer repeats, more landmark programmes and high-quality information, education and entertainment, which the BBC is mandated to supply and, given the opportunity, does so well—but be swallowed up by funding, in one way or another, the digital switchover and a move to Salford Quays. This is a black-and-white TV settlement for a digital TV age.

My Lords, I am grateful to the two noble Lords who have spoken. I particularly welcome the noble Lord, Lord Howard, to his first significant contribution in the brief that he has taken on. I look forward to establishing a constructive relationship with him. He would do well to follow the fine example of his predecessor, the noble Viscount, Lord Astor, who graced these debates on many occasions.

The noble Lord, Lord Howard, asked me a number of specific questions. The final details on the switchover costs need to be worked through with the BBC and with the trust. That is one of the more challenging and difficult areas for the BBC. In speaking to that, perhaps I may also answer the allied question put by the noble Baroness, Lady Bonham-Carter, about why that is thought of as a broadcasting cost. The answer is that it is about broadcasting. It affects those who receive television signals. It does not affect and is not the responsibility of the general taxpayer. Not everyone in the country has a television licence. This is about enhancing the digital revolution and the extra provision that it will bring to all licence holders. It is therefore entirely appropriate that we define this as a broadcasting cost.

It is also appropriate to look to Britain's premier broadcasting organisation to give effect to a principle to which we all subscribe; namely that there should be universal access to the public sector broadcaster. That is why we are concerned that there is sufficient support for the elderly, the disabled and those who are less well off, so that they are able to engage in the digital switchover and benefit from it on the same basis as the rest of us in the United Kingdom.

The noble Baroness, Lady Bonham-Carter, indicated that the move to Manchester is an additional cost, as indeed it is. She said that these things should be more open. The BBC made clear in its bid what it thought the cost of moving to Manchester would be. That has been taken into account in the settlement. The whole House will have derived enormous reassurance from the fact that the director-general of the BBC, on the one o'clock programme today, said that he had been in favour of the move to Manchester all along. It will bring all the benefits outlined in the Statement: broadening the regional remit of the BBC; encouraging the development of talent other than that close to the south-east and London; and generally bringing significant benefits to the north and north-west of England.

I understand that the Liberal spokespersons in this House and in the other place think that the Government should have rolled over and given the BBC everything that it asked for because, by definition, it is a wholly benign organisation. It is a highly respected organisation and the Government give way to no one in their admiration of the work of the BBC. We all recognise the premier role that it will continue to play in British broadcasting. However, licence fee increases have always been a bargaining process. The BBC has a right to identify what it would like to do in a world in which it has as many resources as it feels it can obtain from the Government’s decision on the licence fee. That is perfectly natural. How could creative journalists not think that they could use more money than the amount that they are likely to get?

By the same token, the Government have a responsibility to the rest of the community. They have a responsibility to other broadcasters. The noble Baroness summed up all other broadcasters as the Murdoch News Corporation, but there are other broadcasters besides the Murdoch concerns. They, too, have an interest in the costs of television, to which the BBC is bound to make a contribution on prices. They have an interest in the amount of resources available to the BBC because they are inevitably in a competitive position. The Government have to take that into account. Last but not least, the licence is a set fee for all licence fee payers. The Government certainly have an obligation to licence fee payers.

My Lords, in the Statement the Minister said that the United Kingdom spends more public money on public service broadcasting than any other country in the world except Germany. It is fair to add that the BBC also provides the best public service broadcasting in the world, including Germany. I agree with what the Minister said—that there should be no automatic link between the RPI and the licence fee. Surely that does not mean that the Treasury can simply load costs on to the licence fee which are entirely inappropriate.

I listened to what the Minister said, but I still do not understand how it can be right for licence fee payers to cover the £600 million cost of helping the elderly and the vulnerable with digital switchover when the cost of free licences for the elderly and the vulnerable come out of general taxation. The Minister has to defend that distinction somehow. Is there not an overwhelming case for allowing Parliament—he has already heard the criticisms—to challenge and to change a licence fee settlement such as this one, rather than being confined simply to accepting or rejecting the eventual order that will be placed before us? Is there not a very strong case for Parliament to become part of the bargaining process of which he has spoken?

My Lords, I am grateful to the noble Lord, and I recognise the role that he plays in this House in chairing the broadcasting committee. He asked me why the costs of the enhancement of television through the digital revolution should be borne by licence fee payers. The answer is: because that is what it is—an enhancement of the opportunities which digital brings. It is a broadcasting concept. As for whether people should have access to television at all and why the television fee is dealt with for certain groups, it is a matter of being part of our citizenry and enjoying the same benefits as the rest of the nation. The noble Lord is not prepared to accept that distinction. On previous occasions I have heard him indicate that he does not accept that argument. That is the Government’s case and we will sustain it. The rest of the nation will recognise that taxpayers should sustain what is a broadcasting development. The Government will defend their position accordingly.

I also hear what the noble Lord says about the parliamentary contribution. In the course of these great debates on the licence fee, the development of the BBC, the governance of the BBC and all the aspects of that, I have not noticed that this House is particularly reticent about expressing its views on those matters. Nor has the noble Lord sat quietly in a corner while these debates have taken place. In fact, he has taken a lead in the exercise, to the great benefit of all who have to form a judgment on such matters. So of course Parliament has its role, both this House and also the Commons.

When it comes to the actual fixing of the licence fee, can we not conceive of a situation where locked into the room would be an eminently sensible member of the Government? There is the noble Lord, Lord Fowler, with his great interest in these matters and his very clear scrutiny of them; some of his colleagues, who are hostile to the concept of the licence fee altogether; and then the noble Baroness, Lady Bonham-Carter, who thinks the BBC should get all it wants. The situation is far too complex to be resolved by public debate alone. The Government have to reach a decision.

My Lords, I wonder whether other Members of your Lordships’ House noticed the short phrase that the noble Lord seemed to add to the text which we were given outside the Chamber. Was the phrase stating that a strong, independent BBC should be,

“accountable to the licence payer”

the noble Lord’s own addition or was it the addition of the Secretary of State in the other place? I wonder whether he could spell out what exactly it means. To exactly whom is the BBC accountable, and through whom is the BBC accountable to the licence payer if it is not through Parliament, as the noble Lord, Lord Fowler, has just said? Is it not right that if we are to accept that concept of accountability, then Parliament should have a wider role in the eventual settlement, rather than being faced by a fait accompli such as the one this afternoon?

I wonder whether the noble Lord would like to say something more about the representations made by Mr Rupert Murdoch and his media empire, particularly on the question of the criteria for capability transfers to other public service broadcasters. As my noble friend Lady Bonham-Carter said, and it must be clear to all in your Lordships’ House, Mr Murdoch has every interest in anything that weakens the BBC. That is his commercial interest and surely the Government must recognise that.

Finally, is the Minister confident that this settlement will enable the BBC to deliver precisely the improved and enhanced service of the parliament channel called for by the commission under the chairmanship of the noble Lord, Lord Puttnam, on which I was very pleased and proud to serve? If this House and the other place are to communicate more effectively with the public, very important investment has to be made in those services. Can the Minister assure us that this settlement will secure that?

My Lords, on the latter point, that is a decision for the BBC. That is the whole point of the independence of the BBC; neither Parliament nor Government dictates to it on the question of programming content. But of course the BBC is mindful of these representations from parliamentarians and is well aware of its obligations. The noble Lord has added his voice to that.

I have nothing to add on the Murdoch position. Of course Murdoch’s enterprises are an important player in the media in this country and they enjoy a situation where they prove to be more competitive than the BBC. This has been shown in the great struggle over the broadcasting of major sporting events and a highly competitive bidding process in recent times. I return to the point I made earlier. Murdoch’s enterprises are only one dimension of this. There are other aspects of independent television and other broadcasters. The BBC has an obligation to look at the picture in the round.

The noble Lord asked me whether I had added to the Statement. No, I did not. What I did add was what the Secretary of State added when she was on her feet. I would not be so rash as to offer any interpretation of my own on that front.

My Lords, the Minister is answering questions in his usual courteous and comforting way but I am not sure I heard him answer the question put by my noble friend about the loss of jobs in London as a result of the move to Salford. Fifteen-thousand gained in the north-west—how many lost in London?

My Lords, the BBC is presently evaluating its position on the workforce in London. The noble Lord will recognise that under the existing funding arrangements it is having to make some tough choices. The expansion of opportunities represented in Manchester will not obtain in London if the jobs and the activities are to be located there. So it is a transfer of responsibilities. But as the noble Lord will also recognise, the commitment of many broadcasters to the aspects of BBC television that are going to Manchester mean that many will go to Manchester to carry out their functions there.

My Lords, many of us welcome the acceptance of the move to Manchester. There was some doubt about whether it would happen. I would like to be reassured that the finances for the World Service, both television and radio, will be continued, and that there is proper agreement on that. I would also like to stress that the cost of switchover for the elderly and disabled will not be accepted by this House because it quite obviously should come out of general taxation. But perhaps the Minister can help me by saying what will happen about the broadcasting black spots around the country. When switchover takes place, who will be responsible for that, and is there a realistic estimate of just how expensive it will be to deal with? I would be grateful for answers.

My Lords, as the £600 million costs involved in the switchover are about seeking to create universal access to the public broadcaster, the noble Lady is right to say that there are areas where transmission signals are currently not effective. We will look to provide the best universal service that we can. That will mean some enhancement, and the costs built in to switchover take that into account. On the World Service, both this House and the other place constantly attest to the very great value the World Service provides not only to British listeners, who greatly enjoy the programmes, but as an independent truth-teller on world events. So many people rely on the BBC for their understanding of what is happening in the world, often in very troubled circumstances. The BBC is all too well aware of the extent to which the informed public put a very high value on the World Service.

My Lords, the Minister quite rightly referred to the premium role in broadcasting enjoyed by the BBC. I am sure that he will agree with me that that applies no less to the BBC’s output in Scotland—although that has been questioned recently following the 15 per cent cuts instituted over the past two to three years, which has led to job losses and, some would say, a diminution in some programme content and quality. Given that the licence fee increase which the Government have announced today falls some way short of what the BBC were seeking, albeit that that was no doubt embellished for purposes of negotiation by the BBC, will the Minister undertake to speak with the Minister for Culture, Media and Sport, the BBC director-general and the new BBC Trust to ensure that this settlement is spread in such a way as to ensure that programme content and quality in Scotland is maintained at a level that ensures public service broadcasting in Scotland is at the highest possible level?

My Lords, I am grateful to my noble friend for that representation. He has confirmed the BBC’s very important role in the range of services it provides across the United Kingdom. I know that there were expressions of doubt about the move to Manchester, but could there be a stronger commitment to the BBC’s regional role and the universality of it position, which also affects Scotland, than its determination to effect this move?

Perhaps I may offer a correction on one point. Unfortunately I slipped in my answer to the noble Baroness, Lady Howe. I wanted to emphasise that it would be very remiss of the BBC Trust if it did not take into account the general opinion about the World Service, but the World Service gets its resources from a Foreign Office grant and not from this settlement.

My Lords, I welcome the licence fee settlement that the Minister has announced this afternoon. I believe that it gives the BBC the income that it will require to carry out its services in the way it has done in the past, but does not impose unnecessary burdens on the licence fee payer, as I think the BBC was suggesting. I do not believe that the £600 million will not cover the costs of digital switchover. Arguably, the costs will be considerably less than that. Given the speed with which digital take-up is already taking place, by 2012 there may be few people left to give the service to. That is to be welcomed. However, my concern is that, in the rapidly changing technological world in which we live, where broadcasting is increasingly becoming what I suppose could be called “narrowcasting”—in other words, we watch programmes when, where and how we want to—the Government and the BBC must constantly review services, in particular looking at digital switchover, to ensure that the right technology is being used, so that in 2012 those few people are not left using a technology that is so out of date that it will be almost useless to them.

My Lords, I am grateful to my noble friend, who always exists at the cutting edge of technology and therefore helps to inform our deliberations. He is right: 70 per cent of British households have already switched to digital, so the costs may decrease as people voluntarily move over before the switchover date. Nevertheless, I think that the £600 million is a realistic estimate. We have also indicated that, if there are additional costs, we will look at that further. But I think that my noble friend has confirmed that today’s settlement is appropriate.

My Lords, disabled people, perhaps especially blind people, have a particular interest in the issues with which the Statement is concerned and in broadcasting generally. Indeed, I think that the Minister touched on this when he referred to disabled people being particularly dependent on the BBC for their access to news and information. That is certainly very true of blind people. I therefore congratulate the Minister and the Government on the content of the targeted help scheme. I do not wish to get into the question whether the targeted help scheme for elderly and disabled people should be funded out of the licence fee or out of general taxation. I am more concerned with the content of the scheme and the range of people for whom it will provide assistance. The Government have been very responsive to the representations that have been made by disabled people’s organisations and certainly by blind people’s organisations. They have come up with a package of which we are very appreciative and which takes account of the various needs that we have put to them.

That said, does the Minister agree that the BBC is a priceless asset? In fact, it is one of the few priceless assets that this country has left. It underpins the country’s cultural life in its widest sense through its acceptance of responsibilities that the market will not sustain. I was in general sympathetic to the remarks made by the noble Baroness, Lady Bonham-Carter, but I do not hold that the BBC should be feather-bedded; indeed, I am not sure that it was correct to impute that belief to the noble Baroness.

I invite the Minister to accept that the settlement that he has announced is very tight. In the new charter, which was agreed in advance of the licence fee settlement, many new obligations and responsibilities were laid on the BBC. The BBC is performing at the top of its game; it is already very efficient and cost-effective. In view of the additional responsibilities that have been laid on the BBC, a settlement of this order, which barely matches inflation, is likely to lead to some degradation of the service and make it difficult to keep up with technological developments. The Minister will perhaps understand why I am not the world’s leading expert on television technology—

My Lords, I am none the less assured that there is new technology in the form of higher-resolution digital transmission, which it will be important for the BBC to be able to develop if it is to keep its place at the cutting edge of broadcasting. It seems to me that the settlement that the Minister has announced will make it difficult for the BBC to do that.

My Lords, I am grateful to the noble Lord for his representation on behalf of disabled people. The BBC is a valuable asset, but it is not priceless—that is the licence fee.

My Lords, I ask the Minister to think back to the replies that he gave to my noble friend Lord Fowler and to the noble Lord, Lord Tyler. As my noble friend Lord Hurd said, he did so in a very comfortable and comforting way, but is not what he said, properly paraphrased, “Man from Whitehall knows best”?

No, my Lords, it is democratically elected representatives of the nation having a view on the licence fee and the significance of the BBC.