Examination of Witnesses (Questions 215
- 239)
WEDNESDAY 25 NOVEMBER 1999
SIR CHRISTOPHER
BLAND, SIR
JOHN BIRT,
MR GREG
DYKE, MS
PATRICIA HODGSON
AND MR
JOHN SMITH
Chairman
215. Sir Christopher, welcome to yourself and
your colleagues. We are grateful to you for coming along this
morning. My colleagues and I were just discussing that if you
were to sell tickets for this session the money could go towards
your digital licence bill.
(Sir Christopher Bland) We accept what so far has
been the first positive offer of help to us from this Committee
with some alacrity. We will take the money.
Mr Maxton: The television rights would
be even more.
Chairman
216. Thank you very much indeed for coming today.
In view of the fact that you have provided us with a very great
deal of written information we will not trouble you with an additional
opening statement unless you are very anxious to make one, in
which case you are welcome.
(Sir Christopher Bland) I am, Chairman.
217. In that case we shall be delighted to hear
you. Could I, in addition to welcoming your other colleagues who
have been here before, pay a special welcome to Mr Dyke who is
here in his new incarnation. Welcome, Mr Dyke.
(Mr Dyke) Thank you.
218. Sir Christopher, please go ahead.
(Sir Christopher Bland) Chairman, I would like briefly
to set out the perspective from the BBC's point of view, and indeed
to set out the BBC's stall. The Davies Committee rightly spoke
of the fourth broadcasting revolution, a revolution in which technological
developments will increase the number and change the nature of
services available, drive the UK's economic growth through the
switch to digital broadcasting and increased Internet use, and
provide powerful new tools to create an education.dot.society
and make citizens.dot.uk of us all. We set out in detail a range
of service proposals for this new world designed to achieve a
step change in the contribution we believe the BBC can make to
the UK's creativity, to learning and to citizenship. These new
BBC services are essential in driving digital take-up to the level
at which analogue switch-off becomes possible. That level will
not be reached by pay-per-view and subscription services on their
own. As viewing and listening fragments, market pressures drive
commercial operators to concentrate on a more limited range of
popular and profitable activities: films, game shows, sport, soaps,
e-commerce, and all have a worthwhile place. In the week beginning
the 6 November, a week in which you could have watched The
River, Ivan the Terrible, Walking with Dinosaurs,
The Cops, Real Women, How Do You Want Me?
and The League of Gentlemen on BBC television, or listened
to a new Nicholas Nickleby or the original Under Milk
Wood on BBC radio, ITV's peak time offerings included nine
episodes of Coronation Street, five episodes of Emmerdale
and Who Wants To Be A Millionaire? stripped across every
night of the week. There was no peak time science, no religion,
no mid-evening news, no current affairs. It was a week in which,
on Monday night, there were over 40 per cent more viewers for
the BBC's One, Six and Nine O'Clock News
than for ITN's three news bulletins. This is the inevitable result
of commercial pressure. The contrast between ITV and the BBC is
stark and will become starker with each passing year. The BBC
only deserves to exist if it offers—and we believe it can—something
different, something distinctive, a richer, a more varied, a more
innovative diet under three headings: creativity, learning and
citizenship. First, in creativity, we can fulfil our creative
purposes even more effectively in the future than we do today.
We will ensure that everyone has access every week to innovative,
ambitious, landmark programming made for UK audiences across a
range of genres, and we will bring more of Britain's cultural
and creative life to the whole population. Second, education.
We will use new technology to create a learning archive for the
nation based on our existing major offerings in history, in science
and in the arts. We plan a children's channel offering original
British entertainment in science, drama, news and information
rather than a diet based on cartoons and imports which is the
staple of today's multi-channel children's services. We will use
Online and interactivity to support the whole national curriculum
and offer learning packages at home and at school which individuals
can follow of any age at their own pace. Third, citizenship. The
new technology offers us better ways of reaching out to individuals
to involve them in their community in voluntary activity and in
democratic debate at the very time that the commercial sector
is being forced to reduce its commitment to news and current affairs.
Our recent consultation, plus the BMRB research on the licence
fee, shows widespread support for a strong, broadly-based BBC
and for our present methods of funding. There is a fundamental
choice to be made, a choice between a BBC in what would become
gradual and genteel decline, or a BBC which can help deliver a
confident, informed, knowledgeable society in the next century,
a BBC which can meet the concerns this Committee rightly has for
the cultural life of the nation, a BBC which, as the Davies Committee
concluded, "deserves a chance to grow with the new technology
and to succeed in the digital world". In the BBC's view,
and this is a view shared throughout the Corporation from the
top to the bottom, this is one of the most important broadcasting
decisions of recent years—for the Governors, for this Select
Committee, for the Secretary of State, for Parliament. It will
shape broadcasting; it will shape the future; it will play a part
in shaping the United Kingdom.
Mr Fearn
219. In October 1998 Sir John Birt told this
Committee that "we can go a very, very long way to funding
the vision that we have outlined" on the basis of the current
financial settlement. Has your vision changed, or did you make
a massive financial miscalculation that year?
(Sir John Birt) No, Mr Fearn, we did not. The critical
thing to understand about the BBC over the last five to 10 years
is that, unlike almost any other public sector organisation and
certainly unlike any other broadcaster, our income has been largely
fixed in real terms. We have had during that period, until the
increase granted to help us into the first phase of the digital
age by Virginia Bottomley and subsequently endorsed by Chris Smith,
our revenues expanded at below one per cent a year compound during
the period. None the less, the BBC as an organisation constantly
developed and expanded and introduced new services. Five or so
years ago Radio 5 Live continued to expand and develop its programmes
on all services and in recent years introduced new services in
the first phase of the digital age. Most of the funding for those
services came from an efficiency programme which Gavyn Davies,
I know, spoke to you about, which has been a painful experience
for the BBC but has transformed our efficiency and has released
literally billions of pounds which should be reinvested in new
services. Although we were extremely grateful for the increase
in the licence fee and we are in the third year of a five year
settlement, the overwhelming majority of our new services have
been funded by our efficiency programme. Going forward, we still
see substantial opportunities for further efficiency and that
has been built into our forward financial projections, whatever
the level of the licence fee settlement still is. There continues
to be scope for major efficiency savings at the BBC.
220. Why is it then that during that year and
from there on you have started on so many ventures—and we
have heard a few in the opening statement—that could not
be funded at that particular time? Did you say millions were saved
on efficiency savings?
(Sir John Birt) Billions.
221. From what particular source did that come?
(Sir John Birt) It came from many different sources.
The BBC as an organisation was not alone in the public sector
in not starting that journey as a perfectly efficient organisation.
We had massive spare capacity both in terms of our technical facilities
and our staff. We embarked on an efficiency drive by a whole range
of measures, most importantly restructuring the organisation,
introducing internal trading, moving (which we were obliged to
do anyway) towards commissioning 25 per cent or more of our programmes
from the outside world, thus putting pressure on our in-house
programme makers to provide not only programmes of high quality
but programmes at a competitive price, and further, bunching together
all of our technical facilities and allowing our programme makers
to purchase facilities inside or outside the BBC. That put massive
competitive pressure on an organisation which hitherto had been
a command economy. The big picture is that during the course of
the 1990s, and John Smith, the Director of Finance, may want to
expand on this, we are heading for our programme costs in real
terms to have almost halved. We are not quite there yet but by
the end of the 1990s our programme costs will have reduced massively.
That has been why we have been able to continue and expand and
develop as an organisation. There are thousands more programme
makers and journalists working in the BBC, I think it is 2,000
more programme makers and journalists, at the end of the period
than there were at the beginning, and many fewer managers and
support staff.
222. So it was grossly inefficient before?
(Sir John Birt) Choose your language. It was inefficient
but not out of line with the generality of the public sector in
the UK and not out of line with the generality of the private
sector.
(Sir Christopher Bland) Not out of line with the ITV
companies. This was a period in which London Weekend, which all
three of us were at, halved its staff. In a period of about three
years it came down from 1,500 to 750. Was it grossly inefficient
at the beginning? Yes, it was. There were a lot of complicated
reasons that we could go into, but the ITV sector, famously described
as "the last bastion of restrictive practices" was inefficient,
as was the BBC. But that has changed. The BBC has shed staff.
223. How many?
(Sir Christopher Bland) It has gone from 30,000 down
to about 23,400 today, but at the same time that masks a reduction
greater than that because we have added about 2,000 people in
direct programming, so about 7,000. It has been a very painful
and long process.
(Mr Smith) Would it be possible, Chairman, to add
something if it helps to clarify for Mr Fearn the spirit of his
question? The five year plan that we embarked on when we started
the move into digital presumed that we would spend about 10 per
cent of our revenues on digital, that would be about £200
million a year broadly speaking. Over a five year period that
is about a billion. Of that billion about half of it came from
the sale of transmission, which gave us £244 million, which
we were allowed to keep, as you know, together with a cash balance
we had built up ourselves from our efficiency drive leading up
to the point where we started digital, giving us a total of about
£300 million, and in addition to that the new settlement
that the previous Government arranged gave us about an extra £200
million in cash, so in total about £500 million of the billion
was provided from those sources, that is, the sale of transmission,
the cash balance we had built up, and the settlement from the
previous Government, so about half. The other half of course has
to come from our own efforts, from self-help, from improving the
licence collection and evasion effort, from improving on efficiency,
and from improving in terms of our commercial activities. That
was the picture in the five year plan when we embarked on digital.
If you then look at the vision we laid out for the Gavyn Davies
Panel and the cost that we laid out in there of meeting that vision,
over a period that leads to chartering in round about 2007, the
cost of that vision was about an extra £1.2 billion per annum
by the 2007 year. Of that amount £600 million would come
from the BBC's self-help from now until then. Broadly speaking,
taking both periods, about half of all of those costs are coming
from our own self-help activities.
224. I noted what you said about children's
television and I think that is very good on BBC. What about children's
radio? You seem to have ignored that altogether.
(Sir John Birt) Quite a long time ago, and certainly
not in recent times,—and I was talking to a retired member
of BBC staff just this week about it and talking about the difficulties
back in the 1960s and 1970s with listening to children's programmes
on radio, and we all remember Children's Hour that at least
some of us grew up with—it became clear that radio was not
children's first choice for certain sorts of programme. It is
not that they do not listen to radio. Older children manifestly
listen to Radio 1 and we are mindful of that in the services that
we offer there, but it became clear decades ago that the best
way of reaching children was through television and the BBC focused
its resources there. We have to move with the times, we have to
move with the way children wish to consume their services. It
is now clear that children in multi-channel homes have a wide
variety of choice, a lot of opportunity to watch children's programming
provided by quite a number of services focused on children, but
what they do not have at all the hours that they would like it
is a public service choice, a choice of children's viewing which
is informed by the BBC's classic approach developed over decades
throughout its history to a richer diet of material, whether it
is news for children that we have on BBC 1 or a tradition of drama
and entertainment which is always designed to extend and expand
their horizons and enrich their lives. If we are to serve children
in the future as we have done effectively throughout our 75-year
history, then we are absolutely certain we need to introduce our
own children's channels.
Mr Fearn: I differ with you on that.
I still believe that radio for children is a great thing.
Mr Fraser
225. Given that the issue of concessionary licences
was taken up in this House by myself amongst others on a cross-party
basis over a year ago, giving over-75s free licences, do you not
think that at this stage of the political cycle the initiative
put forward by the Government will be seen as political expediency
and would it not have been better had the BBC championed such
a proposal to ensure that it was seen as completely impartial?
(Sir Christopher Bland) Our view is that concessionary
licence fees are a matter for Government. The BBC ought to remain
neutral. We ought to administer whatever it is the Government
decide on concessionary licence fees. The BBC ought to point out
the advantages and disadvantages from its perspective, but I do
not think that the BBC should advocate what is in effect a re-distributive
mechanism. I think that is for Government to do.
226. But you would have liked perhaps to see
the Bill that I put forward last year, perhaps on an all-party
basis, being something that you could work with rather than being
a Government initiative?
(Sir Christopher Bland) I confess I am not familiar
with every line of the Bill you put forward.
227. I will send you a copy.
(Sir Christopher Bland) But had you been in Government
and had this been a Government Bill and in due course had become
an Act, then of course the BBC would have worked with you.
Chairman: Mr Fraser's legislation is
in an entirely different category, perhaps imperial even.
Mr Fraser
228. That is very kind, thank you. Are you confident
that the scheme for granting the free television licence to the
over-75s can be implemented without jeopardising your systems
of collection and in addition will it affect your independence?
(Mr Smith) We are obviously working with the DCMS
and indeed the DSS on it to make sure that it is implemented as
fairly as possible. We have to make sure that all those people
who are eligible for it manage to get it, but at the same time
have arrangements which minimise fraud, as you would expect. what
we would like to move to with the DSS and the DCMS too is a system
where we are able to find some form of proof that the eligibility
does exist in a home, and be able to issue a licence of nil value
as a means of providing that proof so that fraud can be minimised.
As I say, our emphasis is to make sure that everyone who should
be eligible for it actually can get it. What we also need to ensure
is that the BBC is adequately compensated for the loss of revenue
which has been estimated at around £300 million, and that
is something we are working on with the DSS and the DCMS, and
indeed the extra costs of collecting it, because there will be
an extra cost, we believe in the order of £10-20 million
a year. We would be supportive of introducing the measure earlier
rather than later because, following the announcement, as you
might expect, anyone who falls into the category of licensee over
75 is eligible for the new scheme is already starting to think
about whether it applies to them and we are, as you might expect,
getting a lot of phone calls saying, "Does it mean I now
no longer have to pay?" The sooner it is introduced the better
from an administrative point of view.
(Ms Hodgson) Perhaps I might add to your independence
point. Obviously, the BBC has always been very keen on the direct
relationship that the idea of the licence fee and the relation
of the individual to the BBC services provides, so we are very
anxious in the administration of this scheme that we continue
the idea of a licence fee for the individual and the household
concerned and then a reimbursement that is linked to the precise
numbers of licence fees involved and the arrangements that are
being put in place will honour that system. The important thing
is that there should be no movement to any kind of block grant
with the Government beginning to take a view on that, and that
we sustain the individual licence principle which we believe the
scheme will do.
Chairman: May I just intervene on that
point because I have been asked by a constituent to put something
to you on the very matter of the individual licence payment. There
was a regime I am told a while ago in which people who had two
homes only paid one licence fee on the basis that they would only
be watching in one home. That has been done away with and I think
it is perfectly reasonable that it has been done away with. On
the other hand, my constituent has asked me to put this point
to you. She has two homes and one television set. When she goes
away at the weekend to her other home, she takes her television
set with her, but she has to pay two licence fees and she regards
this as very unfair. I wonder if you could give me a response
on that.
Mr Maxton
229. If she had a caravan she would not.
(Sir Christopher Bland) It is a simple response, Chairman.
It is unfair and so is life. There are certain aspects of the
licence fee that will inevitably remain imperfect. You could not
deal with that. I agree: it is unfair.
Chairman
230. But Mr Maxton makes the point that if her
weekend home was a caravan she would not have to pay two licence
fees.
(Sir Christopher Bland) I feel less sorry for her
now.
Chairman: Sir Christopher, I do not think
she is going to be very willing to pay for a digital licence should
she have digital now that you have hardened your heart towards
her. Anyhow, I have taken that up and she can pursue it.
Mr Fraser
231. Am I correct in saying that in terms of
establishing how this operates you have not yet worked out how
the BBC will get the full licence fee amount back from those over-75-year-olds
who are currently benefiting from the accommodation in residential
care areas where they get concessionary fees already?
(Mr Smith) Of course the decision was only announced
a short number of weeks ago, so we are still working with the
DCMS and the DSS on exactly how it will work. They are the kinds
of things we are obviously talking to them about now.
232. I am sorry to push the point about these
issues, but I need to clarify a couple of things. In the commercial
world, hotels for example, and operations make a great deal of
money out of people walking through their door, can you tell me
something about the licence fees they pay and how perhaps on occasion
that may change because I am not sure how competitive that is
compared with what we all pay as a licence fee.
(Mr Smith) The scheme, as you probably know, is that
there is one licence for 15 rooms in a hotel, and then one licence
for every five rooms thereafter, and that is enshrined in the
regulations we administrate and we collect it from hotels because
it is a requirement of the law.
233. Are you comfortable with that ratio or
is it something you would like to look at?
(Mr Smith) As the Chairman said, in the end the question
of the law surrounding licensing is a matter for the Government;
it is not a matter for the BBC.
234. The Davies Panel does not appear to recommend
any specific measures to recompense the lost revenue that you
may get from 50 per cent discount to the registered blind. Can
you come back to me on that?
(Ms Hodgson) This is something that will need to be
worked out as we address the details of the concession scheme
that was announced. For example, about 75 per cent of people who
are in receipt of blind concession are actually over 75. What
the solution to it will be I think will take another few weeks
to work through.
235. So it appeared to be quite a good idea
when it was announced but you really have not received any more
information about how it applies?
(Ms Hodgson) We have been working very hard with teams
from Treasury, DSS and DCMS and I think it fair to say that we
are moving very fast and the majority of the big issues, as, for
example, as to how the collection and enforcement will operate,
the reimbursement per licence, the issue of licences and so on,
has moved very well, but clearly it is a major undertaking affecting
a large number of homes and it will take another week or two for
all the details to be able to be bottomed out.
236. The over-75s: the scheme will only work
if the over-75s themselves obtain a free licence. Is that correct?
Why should they?
(Mr Smith) The answer of course is to do with the
DSS' own efforts to minimise fraud. One way or another a way has
to be found to ensure that everyone who is eligible is genuinely
eligible, so some proof of eligibility is necessary, and that
is the way proposed between us of proceeding.
237. With all Government proposals the devil
is always in the detail. Would you not have preferred to see the
detail before the announcement?
(Sir Christopher Bland) I have already said that life
is not fair or perfect. We are working very hard to implement
the scheme.
238. But you would have liked to see more detail
before it was announced?
(Sir Christopher Bland) I think in a perfect world,
yes.
Mr Maxton
239. Sir John, you actually did say in 1996
that you did not think a digital licence was necessary or warranted.
You did not support it then. Why have you changed your mind?
(Sir John Birt) I have changed my mind. Go back to
1996 and we have come before your Committee, Chairman, on quite
a number of occasions to discuss these matters. Our, and everybody
else's, understanding of the digital age was imperfect. We had
as good an understanding as anyone else, but I think our vision
when we go back to that period was to see the digital age chiefly
at that point as being an opportunity to introduce more channels.
We have continued to work really hard as an organisation in developing
our understanding of the new technologies. I think our understanding
is as good as that of any organisation of our kind anywhere in
the world and our understanding has moved on. What we saw then
perhaps as being evolutionary we now see as being revolutionary
and we now recognise that the characteristics of an industry which
have been determined chiefly by analogue technology over 75 years,
the characteristics of the new technology are fundamentally different
and they are going to transform fundamentally the nature of the
broadcast experience. We are not the only organisation to understand
that and I pay tribute to Gavyn Davies and his colleagues in a
very short space of time for getting to grips with these issues
and appreciating how fundamentally broadcasting will change and
the opportunities that it offers organisations like the BBC to
deliver services in completely new services and to deliver services
in wholly new ways that neither we nor anybody else was thinking
about at the time. We have all thought about it harder and we
will see the significance of it in a way that we did not then.
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