Select Committee on Culture, Media and Sport Minutes of Evidence


Examination of Witness (Questions 64 - 79)

TUESDAY 23 NOVEMBER 1999

LORD GORDON OF STRATHBLANE

  Chairman: Lord Gordon, welcome here today. We have obviously read the Report and we have read your own reservation on it. Since we know your view pretty thoroughly, I am going to start the questioning right away.

Mr Fearn

  64. The Davies Report and the Panel, with the exception of you, argued that "it is unfair to charge analogue households for the development of digital services which they cannot receive". Why do you not support this principle?

  (Lord Gordon) To some extent the licence fee, let us be honest, is increasingly difficult to justify. I, however, would justify it in that I think Government imposes a great many universal imposts on people who do not use services and the licence fee is by no means the largest of them. The interesting thing is that the licence payer at the moment is subsidising digital to the extent of about £10 out of the licence fee. What I am suggesting is comparatively small. I also start with a viewpoint that anything which depends on RPI increases does need a look at it every five to ten years because there is no doubt that things do get out of kilter with the general marketplace. You find that inevitably happens with most public services. There is some form of Government inquiry or pay award body which looks at things every now and again just to make sure that things do not get too far out of line. Although you cannot point to any one year where an RPI increase is unfair, the cumulative effect of RPI alone is to leave people a bit behind. I think the BBC needs a little more money, somewhere between £5 and £7 on the licence fee and I do not think the public at large would be too opposed to that—saving your presence, Chairman, and your recent speech. I think particularly, although I do not like disturbing existing settlements, given that the licence fee is set to stay put next year or even fall slightly and fall the year after, that it would be acceptable to increase it very marginally next year, say by £3 and by £4 the year after. I do not think the public would complain about that and it would give the BBC an extra £100 to £150 million which would ease the burden and perhaps improve the quality of BBC terrestrial services which should be their prime concern.

  65. Then over the five years to reach a £7 increase. Is that what you mean?
  (Lord Gordon) Over two years it would reach a £7 increase to be honest and then it would just go on with RPI. An increase next year of £4 would bring it up to £105; the following year, another year, would bring it up to £108. I do agree very much with the Chairman of our Committee, Gavyn Davies, in expressing things as a monthly rate, except I would go for £9 not £8.99.

Chairman

  66. May I just follow up what you have said since you have been good enough to mention me? You say that this kind of increase is tolerable to most people. I was besieged by constituents over the weekend, some of whom were grateful for the new decision to relieve people aged 75 and over of the licence fee and others saying, "If them, why not us?". The licence is expensive; certainly for pensioners and other people on low or fixed incomes it is expensive. A great many of them do not even watch the BBC anyhow. Why on earth should this aggressive poll tax be increased above the rate of inflation simply because the BBC wants to enter into services which others are providing perfectly satisfactorily anyhow?
  (Lord Gordon) There is a continuing role for BBC and I would prefer to see it funded by the licence fee. I would agree that there is a cosy duopoly argument on that. The main argument against the BBC taking advertising is that the pool of advertising is not sufficient to support both the BBC and the independent sector and the quality in both would suffer. I fully accept, particularly when the Government has allowed one concession, that other people on the margin complain because they have not benefited from it. However, in general most people grumble slightly at the licence fee but there are many more things that Government does and sanctions that the average citizen grumbles about and I do not think the licence fee is by any means the worst.

Mr Fearn

  67. Why did you support a privatisation of BBC Resources?
  (Lord Gordon) I am lukewarm about that and I was prepared to go along with the Committee. At the end of the day, if it is something the BBC is using regularly, having it inhouse has to be more economic than having it run by somebody else and paying regular fees to them, otherwise who would take it over?

Mr Maxton

  68. Your background is in commercial radio. Is your reason for continuing support of the licence fee based upon the fact that you do not think there is enough advertising to go round to support the BBC as a service paid for by advertising?
  (Lord Gordon) No, it is one of the reasons; it is not the sole one. It is certainly an important reason and should be borne in mind. I do not go quite as far as the BBC, as in defence of the House of Lords, that they are not accountable and therefore they can do what they want and provide you with quality. That is a rather arrogant assumption. I do, however, think a licence fee is defensible. What worries me about the majority Report of the Committee is that I think the real danger is that it has united the commercial sector against the BBC in a way in which in my 35 years in broadcasting I have never seen before. It raises serious philosophical question marks about the survival of the licence fee in 2006. I would regret that very much.

  69. May I turn to something which tends to be ignored in all of this which is digital radio? The major developers in that are in fact the BBC, are they not?
  (Lord Gordon) Not really. We have to be clear. I shall not take long on this because I imagine my colleagues in the Commercial Radio Companies Association will elaborate on this. One of the problems I have, is that because we allow the BBC to do almost everything it can cross promote in a way which constitutes unfair competition to anybody else. BBC can cross promote their radio services on television. Nobody in commercial radio can do that. That is a severe disadvantage. There are arguments about Radio 1. I am quite content to leave the BBC with the five services they have, but I see no reason for them to expand. Just as I have argued with television, if the BBC want to introduce another service, there should be two thresholds for them to pass: one, an independent review body, a regulatory body, should ask whether it is genuinely public service. If it is, then the second hurdle is: is there nobody else who could provide this under a regulated system? I should be very surprised if there were any services of which the BBC could be the sole provider, given regulation.

  70. That is fine, but let me say that there will be some people, fairly wealthy people, who will buy digital radios for their cars while the rest of us are still listening to analogue radio on our normal car radio. Why should those essentially wealthy people get that for the same amount of money as the rest of us have to pay?
  (Lord Gordon) I was very briefly Chairman of the Digital Forum, looking at the development of digital radio. There is a chicken and egg thing going on here. If the manufacturers see a market, they will bring down the cost of sets and it will not just be the very wealthy people. The received wisdom, as I understand it, is that the first target will be cars, that when you are paying X thousand for a car they will include in that a digital radio. Arguably it will not just be the very, very wealthy people who have digital car radios, it probably will be the vast majority.

  71. Certainly to start with the cars those digital radios will be going into will be Mercedes and BMWs. That is true of almost every development so far. The original CD players in cars went into the bigger cars to start with. They are now in smaller cars as well but they went into bigger cars first. Why should it not be my good friend Mr Fraser there who pays more for it?
  (Lord Gordon) He will be paying a bit more for his car. It is the receiving equipment he is paying for there, not the programme, in my view.

  72. You are in favour of some form of advertising on BBC Online.
  (Lord Gordon) Yes. The Committee's argument against advertising on Online is not sound. Online in my view is not broadcasting, it is allowing the consumer to access material and advertising would be a perfectly acceptable way of doing that and it would also solve the problem the Committee were addressing at your hearing last Thursday of half the hits being from abroad and them not paying anything.

  73. As a licence payer in Scotland, the only way I can listen to BBC Scotland—when I can get it that is—down here in London as a Scottish Member of Parliament is in fact on Online, so why should I not get the service?
  (Lord Gordon) There is always a difficult decision about what should be made available as the generality of broadcasting and what constitutes appealing to a minority market. I am not saying the Scots in London are a majority or a minority, certainly not in the House of Commons, but arguably it may be that is one of the things you have to pay for if you choose to live in London.

  Mr Maxton: I do not choose to live in London, that is where Parliament happens to be.

Chairman

  74. In response to Mr Maxton you made an eminently rational point that the BBC ought not automatically to provide services which other people are serving. You even suggested some outside invigilation which would throw them into calculated hysteria. There are certainly two, namely BSkyB and CNN and some would say quite rightly a third, Bloomberg, who are providing round the clock news. What justification do you think there is for the BBC spending £30 million a year on BBC News 24 which is watched by 0.1 per cent of the viewers?
  (Lord Gordon) A lot of people regard BBC News 24 as a mistake. That is partly because it is not generally held in very high regard in terms of its editorial content. Were it an outstanding success as a programme I imagine there would be a lot of people justifying it. The argument I do not sympathise with is that that is the way we are going to go in the future, we are going to access news when we want it, not when programmers want it and this, that and the other thing and therefore BBC must be there. The BBC News 24 would fall exactly into the category of the regulatory body saying they think there is a case for a public service 24-hour news programme and asking whether anybody can provide it. You have mentioned two. To be fair there is also ITN. There might even be a consortium which includes the BBC and ITN. There are all kinds of possibilities. The idea that the BBC should have been allowed to start that without it having very wide industry discussion is in danger of drawing Ministers into direct control of broadcasting and I think that would be regrettable. The buffer authority principle has been one of the very important developments in British broadcasting and I think it should pass muster with an independent review body before it goes to Ministers.

  75. The BBC can do whatever it wants, can it not? It does whatever it wants regardless of the expense and then demands more money from the taxpayer to fund it.
  (Lord Gordon) That might be overstating the position slightly.

  Chairman: Never; never; never.

Ms Ward

  76. Did you at the time support the principle of pay more for a colour television licence than for black and white?
  (Lord Gordon) I cannot recall. The honest truth is that my family did not have a television set at that point so I am not sure what my attitude would have been, but I would defend colour. Colour actually improves the quality of all programmes. The honest truth is that digital does not. Digital does not particularly improve the quality of any one programme, it just increases the range of programmes which might be available to you and that is a fundamental difference.

  77. On that basis, why should the vast majority of people pay for a service which they are not actually going to get?
  (Lord Gordon) If you look at the licence fee and if we assume for the moment—and indeed in fairness to the Committee part of our remit was to assume—that the licence fee was remaining, and I would defend it in any event, you have a situation that the licence fee funds things that some people do not watch. However, enough people watch a little or listen to a little of the BBC each week to justify it. The BBC should be concerned not about audience share but audience reach. Providing it is reaching people in the population, even once a week or a few times a week, that is a justification for the licence fee.

  78. We have already touched on News 24 as one of the services provided by BBC that is questionable. Are there other areas of services provided by BBC that you believe could be cut back or reduced in order to reduce the amount of expenditure?
  (Lord Gordon) I am not wanting to cut the BBC back. One of the things they had in mind was to turn BBC Choice into a genuine BBC3, a fully fledged channel. Nobody had asked them to do that. I am just slightly concerned. Without echoing too much what the Chairman said before, the presumption must be that BBC would not have started services as prudent managers of a public funded organisation unless they could fund them. Therefore to start them and then say they cannot go on unless we give them a stack of money is not responsible. I do not go as far as the Chairman I hasten to add.

Chairman

  79. Why not? My position is a very good position.
  (Lord Gordon) I think the BBC delivers a very good service and it is value for money. Undoubtedly there will be elements of wastage. In any creative organisation there will be elements of wastage. Frankly that is a small price to pay and I would rather have wastage and creativity abounding in the BBC than the place run by McKinsey.


 
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