NINTH REPORT
The Culture, Media and Sport Committee
has agreed to the following Report:
REPORT AND ACCOUNTS OF THE BBC FOR 1999-2000
Introduction
1. The British Broadcasting Corporation (BBC) spends
over £2 billion a year and the vast majority of its income
derives from a compulsory regressive levy in the form of the television
licence fee. The BBC is an organisation that aspires to and sometimes
attains a leading role in the United Kingdom's cultural life.
It is right that it should be subject to close public scrutiny.
2. In the course of this Parliament this Committee
has been concerned with how the BBC can become more accountable
to the public and to Parliament in ways that do not conflict with
its independence. In the Autumn of 1998 we took evidence from
the BBC on its Report and Accounts for 1997-98 and subsequently
produced a Report on that subject.[6]
In the Autumn of 1999 we conducted a wide-ranging examination
of the BBC's ambitions for the digital era in the context of a
review of the future level of the licence fee.[7]
3. This year, we again took evidence from the BBC
on its Annual Report and Accounts, at the BBC's suggestion. This
hearing took place soon after the publication of that document.
On 13 July 2000 we examined Sir Christopher Bland, the Chairman
of the BBC Governors, Mr Greg Dyke, the Director-General, Dame
Pauline Neville-Jones DCMG, a Governor, Mr John Smith, Director
of Finance, Property and Business Affairs, and Mr Mark Thompson,
Director of Television. We are grateful to the BBC for proposing
that it give oral evidence to this Committee on its Report and
Accounts for 2000-01.
BBC One and BBC Two
4. It is right that any consideration of the BBC's
work should start with BBC One and BBC Two. These two television
channels account for over half of the BBC's total expenditure.[8]
When we last considered the Report of the BBC we observed:
"The BBC needs a strategy
to maintain the appeal of its core programming over the next nine
years when it will continue to be financed primarily by the licence
fee. There is a danger that, in pursuing a strategy to maintain
the legitimacy of the licence fee in ten to fifteen years' time,
the BBC will lose sight of elements which many see as integral
to the licence fee's justification right now."[9]
Sir Christopher Bland quoted this earlier comment
by this Committee and considered that it translated as a call
for the "primacy" of BBC One: "If there is any
clear correlation between one of our services and the general
public support for the BBC, it is how BBC One does".[10]
5. The BBC Governors sought in the Annual Report
for 1999-2000 to re-affirm BBC One as the BBC's "flagship
public service network".[11]
In the same document, the Governors listed what they saw as some
of the successes of the BBC One schedule, but noted that "this
strength was not sustained throughout the year" and then
stated that "BBC One is not held in the same degree of affection
by the public as it once was. Winning that affection back is vital
to the future success of the whole BBC."[12]
As Sir Christopher Bland expressed it in evidence: "We need
to raise the overall level of the BBC's performance further in
order to fulfil our overriding public service objectives".[13]
6. The BBC aims to meet this objective through improvements
to programming. Sir Christopher Bland stressed the BBC's dependence
upon "absolutely outstanding popular but distinctive programming
on BBC One".[14]
Mr Thompson referred to the need for BBC One to demonstrate greater
consistency in its creative strength.[15]
Mr Dyke indicated that a "disproportionate amount" of
the additional income coming to the BBC from the licence fee settlement
and from savings would be devoted to traditional services.[16]
We welcome the renewed commitment by the BBC to its core television
servicesBBC One and BBC Twoand to the flagship role
of BBC One in particular. We consider, however, that the weaknesses
that the BBC Governors note in the recent performance of BBC One
are issues for which they themselves hold the ultimate responsibility.
7. At the same time as placing renewed emphasis upon
its traditional core services, the BBC has also chosen to spark
a debate that has a bearing on whether the BBC itself believes
that its traditional services can retain their distinctiveness
in the future. This issue was brought to prominence in a speech
by Mr Thompson in Banff, Canada, in early June. His main contention
on that occasion was that "public service television has
to changeand change radicallyif it is to remain
relevant and viable in the digital era".[17]
8. In the past, scheduling for public service channels
has been based to some extent on the notion that an audience can
be attracted for worthwhile but less popular genres of programme
by placing them between more popular programmes on the basis that
viewers have a loyalty to a particular channel in the course of
an evening. This process has been referred to as "hammocking".[18]
The main contention underpinning Mr Thompson's speech in Banff
was that these habits were changing, particularly in digital households.
Viewers with digital television are becoming far more willing
to change channels and to avoid certain types of programming.[19]
Digital electronic programme guides also encourage the tendency
to select channels by genresuch as children's channels
and sports channelsthus providing a new challenge for broadcasters
such as the BBC whose main channels are not genre-based.[20]
In addition, from this Autumn, there is expected to be an additional
impact from the introduction on the British market of a new home
video-storage device that enables viewers to record up to 30 hours
of television on hard disk and to select programmes for viewing
through an electronic programming guide, thus making "self-scheduling"
easier.[21]
This device is expected dramatically to change the way some people
watch television.[22]
9. Mr Thompson was keen to dispel any notion that
he had suggested at Banff that "BBC One should become an
entertainment channel and that BBC Two should become a news and
documentary channel".[23]
He said that he had simply argued that it was important to look
hard at the "shape" of the BBC's channels in the light
of current and prospective changes.[24]
Mr Dyke also sought to make clear that the consequence of the
re-evaluation would not be a BBC One "that is devoid of news,
current affairs [or] factual programming".[25]
Mr Thompson re-affirmed that "current affairs, political
debate, news, regional news all should have a place on BBC One"
and considered that there was an argument for enhancing regional
and current affairs programming on BBC One.[26]
10. At present, the debate initiated by Mr Thompson
has not led to any firm proposals for change to either BBC One
or BBC Two.[27]
We were assured, for example, that there are no current plans
to move Panorama, Question Time or Songs of Praise
from BBC One to BBC Two.[28]
Sir Christopher Bland told us that any detailed proposals would
be the subject of "public debate and discussion".[29]
With regard to news, Sir Christopher Bland gave the "Governors'
absolute guarantee" that the BBC would only change the time
of a news programme if it considered that the effect of the change
would be to increase the audience for news.[30]
He said that "the primacy of news and the importance of that
audience to us, both to the management and the Board of Governors,
cannot be overstated".[31]
11. It is undeniable that the technological environment
in which the BBC operates is changing, and changing fast. The
BBC's remit, however, has not changed and the BBC has not sought
a change to the Royal Charter that underpins that remit prior
to 2006. A generalised offer by Sir Christopher Bland for "public
debate and discussion" is simply not good enough. While the
BBC remains a State Corporation funded by a hypothecated tax,
it has public service obligations that it must continue to meet
in full. If BBC One were to become ITV without the commercials
and BBC Two were to become Channel 4 without the controversy,
then this would affect the justification for the BBC as at present
constituted and funded.
Sport
12. The problems that the BBC faces in seeking to
maintain and enhance its core services are demonstrated by the
continuing dilemmas relating to sports coverage, which is for
manyalthough by no means allviewers, at the heart
of their understanding of what the BBC should be for.[32]
The BBC has recently lost the rights to show highlights of Premiership
football with effect from 2001-02 because ITV put forward a bid
of a value that was, according to Mr Dyke, "well beyond"
what the BBC should pay for these rights.[33]
Shortly thereafter, the BBC regained the rights to broadcast live
FA Cup matches, including the FA Cup Final.[34]
The BBC was unwilling on commercial grounds to reveal the amount
paid for these latter rights, but did indicate that the cost per
viewer hour of the FA Cup package would be about the same as the
present cost for Premiership highlights, namely £20 million.[35]
13. In the latest Annual Report, the BBC Governors
established a new objective to "develop an effective policy
for sports coverage at an affordable cost".[36]
When we asked the BBC how effectiveness in meeting this objective
would be measured, Mr Dyke replied that "it will take some
time to come back with a proposal for the Governors".[37]
It is right that the BBC is seeking to develop an effective
policy for sports coverage, but it is regrettable that the wording
of the new objective reinforces the impression that the BBC has
lacked such an effective policy in recent times. We expect the
main elements of the BBC's policy for sports coverage and the
criteria by which its effectiveness will be measured to be included
in the BBC's Report for 2000-01.
Radio
14. According to the BBC's Annual Report and Accounts,
"BBC Radio had one of its strongest ever years, increasing
its weekly share to over 51 per cent of the population".[38]
Sir Christopher Bland was "quite encouraged" by this
performance.[39]
The same document recorded, however, that Radio 3's audience reach
fell from 4.7 per cent in 1998-99 to 3.6 per cent in 1999-2000,
while noting that the methodologies for collecting such data were
revised during the year.[40]
15. We asked the witnesses from the BBC to account
for the falling reach of Radio 3 and to explain what it was doing
to improve upon that performance. Although Mr Thompson, the Director
of Television, did allude to the instability of the statistics
on radio reach referred to in the Annual Report, neither the Chairman
nor the Director-General of the BBC was able to provide any analysis
of the reasons for the apparent fall.[41]
In written evidence, the BBC attributed the fall entirely to the
change in sampling system and said that Radio 3's audience had
increased during 1999-2000.[42]
We are heartened to learn of Radio 3's increased audience and
encouraged by the restoration to a considerable degree of its
former high quality, but we consider it a matter for regret that
neither the Chairman of the BBC nor its Director-General was able
to give any account in oral evidence of the performance of Radio
3. This strengthens the impression that radio is seen within the
BBC as a Cinderella service.
16. This is not the first occasion where our scrutiny
of the BBC's Report and Accounts has been hampered by a change
in the method of collecting statistics. We learned during a previous
inquiry that the method of measuring reach by genre had changed
between 1996-97 and 1997-98, but that no reference to the change
had been included in the relevant section of the Annual Report
for 1997-98.[43]
The latest change is referred to in the Annual Report for 1999-2000,
but no explanation of its effects is given.[44]
This makes scrutiny of the performance of the BBC over time much
harder than it need be. We recommend that, when the methods
of collection of statistics given in series for successive years
in the Annual Report and Accounts of the BBC are changed, the
likely effects of the change on the relevant statistical series
be set out in the Report. Where such statistics are collected
by an outside organisation, the explanation of the change and
its effects should be checked and verified by that outside organisation
before inclusion in the Annual Report and Accounts.
News 24
17. In previous Reports we have carefully considered
whether News 24 represented value for money for the licence fee
payer.[45]
Upwards of £140 million has been spent on the service since
its launch.[46]
In 1999-2000, expenditure on News 24 amounted to £50 million.[47]
The BBC stressed that this was the total cost for News 24 both
as a separate channel and as a service provided on BBC One and
BBC Two at certain times.[48]
Mr Dyke referred to planned expenditure of around £52 million
or £53 million a year, but did not expect the budget to increase
beyond that level.[49]
He said that the marginal cost of News 24 was around £35
million a year; the remaining expenditure represented News 24's
contribution to the BBC's global news-gathering operation and
would not be saved if News 24 were to be scrapped.[50]
18. In its Annual Report, the BBC describes News
24 as "the most-watched UK news channel".[51]
It claims that News 24 "is now watched by more than six million
people every week" compared with "3.6 million for the
only other UK round-the-clock news provider"a somewhat
coy reference to Sky News.[52]
However, to employ one of Sir Christopher Bland's own analogies,
this is to compare an apple and an orange.[53]
Sky News is only available as a channel in multi-channel
households. In addition to availability as a channel, News 24
is available as a service on BBC One overnight and on BBC
Two on Saturday mornings. The claim for an audience of 6.1 million
is based on combining the audience for overnight news output on
BBC One and morning output on BBC Twochannels that are
universally availablewith the audience for News 24 as a
channel.[54]
When we raised this point with Sir Christopher Bland, he suggested
it was "a semantic matter".[55]
We disagree. We consider that the BBC's attempts to conflate
viewing figures from News 24 as a channel and those for
News 24 as a service on other channelsnamely BBC
One and BBC Twoare misguided and misleading. We recommend
that BBC Annual Reports distinguish clearly between the audience
for News 24 as a channel in multi-channel households and the audience
for News 24 services broadcast on BBC One and BBC Two and cease
to combine audience figures for News 24 as a channel and News
24 as a service on other channels.
19. The BBC claimed that, in digital homes, in the
four weeks to 11 June 2000, News 24 as a channel had an audience
share of 0.3 per cent and a "reach" of 7 per cent, where
"reach" is defined as the percentage of the digital
audience which chooses to watch the channel for more than three
minutes a week. According to the BBC, by way of comparison, Sky
News had a 0.5 per cent share and an 11 per cent reach.[56]
BSkyB have subsequently challenged these claims, suggesting that
the audience shares for the four weeks ending 11 June were 0.24
per cent for News 24 and 0.53 for Sky News and that, during the
longer period of 3 January to 11 June 2000, the respective shares
in digital satellite homes were 0.17 per cent and 0.51 per cent.
Sir Christopher Bland did not dispute that, in digital homes,
News 24 continues to have a lower share and a lower reach than
Sky News.[57]
Subsequent figures provided by the BBC indicated that the shares
for News 24 and Sky News in cable homes in May 2000 were 0.5 per
cent and 0.7 per cent respectively.[58]
20. The BBC is confident that it will eventually
see a return on its large investment in News 24. Mr Dyke acknowledged
that "some mistakes" had been made in presentation on
the channel in its early phase, although he considered that it
had "improved considerably" since its "re-launch"
last year so that he was now "quite happy with the quality
and range of News 24".[59]
He thought that News 24 reflected "the way that people are
going to receive news in the future".[60]
Sir Christopher Bland saw it as "a really good service"
that was "getting better by the minute".[61]
The channel will provide extended coverage of the next General
Election and Sir Christopher Bland thought that General Election
coverage "could be as powerful a driver for people to watch
News 24 as the Gulf War was to CNN".[62]
He considered the channel to be of "long-term strategic importance"
for the BBC and an investment the wisdom of which would become
self-evident.[63]
On the other hand, Sir Christopher Bland appeared to be offering
a static prospect for News 24 as it now exists, whereas rival
news providers, including ITN and BSkyB, are already providing
interactive services which offer a better service than BBC News
24. With these choices available to digital subscribers, we are
therefore sceptical of the value of News 24 in relation to what
the BBC says it costs.
Digital services
21. Digital services constitute a growing element
in the BBC's expenditure, requiring £208 million in 1999-2000
compared with £154 million in 1998-99.[64]
Last year, we concluded that the BBC had been "a follower
rather than a leader in the provision of digital channels"
and had failed to make the case for a much expanded role for itself
in the digital era and consequently for additional external funding.[65]
22. In the BBC's Annual Report the Governors appear
to concede the relative weakness of the BBC's digital performance:
"BBC Choice and BBC
Knowledge still have some way to go to establish themselves with
digital audiences. Their reach remains low. We have agreed with
management that their purpose and performance needs [sic] to be
kept under review."[66]
In his speech at Banff Mr Thompson also suggested
that BBC Choice and BBC Knowledge "were launched with rather
confused objectives and as a result have had less impact than
they should have done".[67]
In evidence to us, Mr Thompson said that both BBC Choice and BBC
Knowledge had "improved substantially since their launch"
and were "strengthening in confidence".[68]
He was keen to ensure that these channels offered "real quality
and value to viewers now and in the immediate future" while
fitting into the BBC's long-term plans for its digital services.[69]
23. We still need convincing about these long-term
plans. The BBC considers that 35 per cent of the population will
not adopt any form of pay television and accordingly views its
own development of free-to-air digital services as crucial to
the Government's strategy for analogue switch-off. By the time
of analogue switch-off, the BBC expects to have five or six free-to-air
channels in every home and attaches importance to developing "the
right portfolio of channels".[70]
24. The BBC's case for increased external funding
up to 2006 rested to a considerable extent on its claim that it
would have a crucial role in digital take-up and thus in securing
analogue switch-off.[71]
This argument was accepted in part by the Secretary of State for
Culture, Media and Sport when he reached his decision to increase
the licence fee by 1.5 per cent above the retail prices index
for each year from 2000-01. The Government's view was indicated
in its reply to our Report on the BBC's funding:
"It is the capacity
of high quality BBC programming to help drive digital take-up,
especially for those who do not wish to take up subscription television,
which is one of the key factors in the decision to provide extra
funding".[72]
25. We continue to view this capacity as, at best,
an untested assertion. We are disappointed that none of the BBC's
objectives for 2000-01 refers specifically to the role of the
BBC's digital services in driving take-up of digital television,
even though a number of these objectives are formulated explicitly
"in the context of the licence fee settlement".[73]
We recommend that, for 2001-02 and succeeding years, the BBC
formulate a specific objective of seeking to ensure that its digital
services drive take-up of digital television. We further recommend
that the BBC identify consistent measures for monitoring progress
against this objective that are open to external scrutiny.
26. In seeking to play a significant part in driving
take-up of digital television in a way that it has not so far
done, the BBC may seek to introduce further digital channels,
although Sir Christopher Bland accepted that the BBC would need
to give more consideration to the rationale for new services than
it had always done in the past.[74]
As matters stand, any new service will also be subject to the
approval of the Secretary of State for Culture, Media and Sport,
although we have previously recommended that this power should
in due course pass to the new independent communications regulator.[75]
27. In announcing his decision on the future funding
of the BBC in February 2000, the Secretary of State made it clear
that he did not
"expect the BBC automatically
to seek to expand into every new area of activity or into strands
of the market, such as film and sports channels, which are dealt
with adequately by other broadcasters, unless of course the BBC
chooses to do so as wholly commercial propositions".[76]
The BBC has acknowledged that there are areas that
the BBC should not seek to enter because services are being provided
by the market and Mr Dyke told us that he expected any application
for approval for a public service sports channel to be turned
down by the Secretary of State.[77]
We wholeheartedly endorse the notion that the BBC should not
develop additional public service channels that duplicate those
already provided by the commercial sector or that unduly threaten
the development of a more diverse market in future, but we consider
that the potential for a free-to-air BBC sports channelproviding
distinctive services of public benefit relating, for example,
to sports training and development and to minority sports and
women's sport which are currently neglected by broadcasters, as
well as possibly contributing to digital take-upshould
be further explored by the BBC and sympathetically considered
by the Secretary of State for Culture, Media and Sport rather
than being prematurely ruled out.
Financial planning and efficiency savings
28. Sir Christopher Bland began his evidence by saying
that 1999-2000 had been a good year for the BBC in financial terms
in which "we came in on budget".[78]
The BBC ended the financial year with a "healthy" cash
surplus of £259 million, higher than that in the previous
financial year.[79]
Sir Christopher Bland considered that this balance reflected "prudent
house-keeping" during a year that had begun with an expectation
of a reduction in the licence fee in real terms.[80]
However, the expectation of such a reduction was confounded. On
21 February 2000, the Secretary of State for Culture, Media and
Sport decided to provide the BBC with an average of about £200
million additional external income between 2000-01 and 2005-06
through an increase of the general licence fee of 1.5 per cent
over the retail prices index in each of those years.[81]
29. In the BBC's Annual Report, Sir Christopher Bland
describes that settlement as a "satisfactory outcome".[82]
In oral evidence he said that this phrase was not meant to sound
"grudging". The BBC was grateful for a settlement that
was "fair": it facilitated planning up to 2006 and was
one "that we can absolutely live with".[83]
Sir Christopher Bland also confirmed that there was no question
of the BBC seeking any changes to the new licence fee settlement
for the period up to 2006.[84]
In view of the fact that the increases in the television licence
fee in 2000-01 and 2001-02 overturn the five year settlement originally
intended to cover the period up to 2002, we welcome Sir Christopher
Bland's confirmation that the BBC will not seek additional increases
in the level of the licence fee prior to 2006.
30. The BBC is also seeking to make the money that
it does receive go further. Since Mr Dyke became Director-General,
the BBC has announced a series of measures designed to achieve
greater efficiency savings. These changes are expected to generate
additional income of about £750 million.[85]
We were told that a "major part" of these savings will
be brought about by total staff cuts of between 1,100 and 1,200,
70 per cent of which will be "administrative and back office
jobs".[86]
Mr Dyke said that other savings would be based on "smarter"
procurement policies.[87]
31. In the absence of a profit motive, Mr Dyke saw
the main financial imperative for the BBC's activities as the
obligation to maximise the amount of money received from the public
that is spent directly on services for the public.[88]
Accordingly, in the Annual Report, Mr Dyke stated an aim of increasing
"the percentage spent on content from 76 per cent to 85 per
cent over the next five years".[89]
In oral evidence he went further, stating of the 85 per cent target
that "we think we can get there in three to four years, but
probably in three".[90]
If the public and Parliament are to be convinced that this
target will genuinely be met, it will be necessary for the BBC
to be a good deal more open about its accounting procedures. We
recommend that the Report and Accounts of the BBC for 2000-01
include annual targets for the percentage of total expenditure
committed to programmes in each coming year in order that progress
towards the objective of increasing the percentage spent on content
from 76 per cent to 85 per cent can be monitored. In this context,
we welcome Mr Dyke's drive to reduce management perks and his
campaign to slash bureaucracy.
32. In 1998 the then Director-General of the BBC
told us that independent production had been "a vital stimulus
to greater efficiency" within the BBC.[91]
At the same time, Sir Christopher Bland confirmed that the BBC
saw the independent sector as "beneficial creatively and
financially".[92]
During this inquiry we sought assurances that endeavours to encourage
more efficient in-house production would not be at the expense
of the BBC's willingness to commission quality programming from
independent producers. The BBC confirmed that it was committed
to the principle of "only commissioning the best from whatever
source".[93]
Mr Dyke did, however, argue that the tendency for independent
production companies to be acquired by broadcasters was making
it more difficult to comply with requirements relating to the
proportion of programming from independent producers as currently
defined.[94]
BBC Worldwide and commercial income
33. In previous Reports we have expressed scepticism
about the extent of the BBC's success in generating additional
cash flow as a result of the activities of its commercial subsidiary,
BBC Worldwide.[95]
In 1999-2000, the total cash flow from BBC Worldwide to the BBC
was £82 million, compared with £75 million in 1997-98
and £81 million in 1998-99.[96]
The BBC was keen to dispel the notion that this slow rate of growth
meant that BBC Worldwide was not on course to meet its target
to generate a cash flow benefit of £200 million per year
by 2006. The BBC emphasised that figures for the two previous
years were boosted by one-off profits from the sale of shares
in Flextech. When these profits are excluded, the cash flow from
BBC Worldwide was £52 million in 1997-98 and £73 million
in 1998-99.[97]
According to Sir Christopher Bland and Mr Smith, BBC Worldwide
had achieved a "really good result" in 1999-2000 and
was "exactly on track" to meet the target set for 2006.[98]
34. The BBC continued to view the target of £200
million cash flow benefit by 2006 to be "both achievable
and stretching".[99]
An independent study of the BBC's financial projections commissioned
by the Secretary of State for Culture, Media and Sport recommended
earlier this year that "interim targets should be established,
against which progress is reviewed and monitored".[100]
These targets were provided to us in written evidence by the BBC
and are set out in the following table:[101]
Table: Targets for BBC Worldwide cash
flow to the BBC, 2000-01 to 2006-07
| 2000-01 | 2001-02
| 2002-03 | 2003-04 | 2004-05
| 2005-06 | 2006-07 |
BBC cash flow (£ million) | 92
| 106 | 122
| 140 | 161
| 185 | 212
|
We expect performance against these targets in
each future year to be subject to close scrutiny to ascertain
whether the targets for the latter part of the period are sufficiently
stretching.
Licence fee collection
35. During the year under consideration, the combined
cost of licence fee collection and evasion continued to fall to
10.4 per cent of total income.[102]
Mr Smith was confident that progress towards the target for the
combined cost of collection and evasion of 9 per cent of total
income was continuing.[103]
However, the target for the level of evasion to be reduced to
5.1 per cent in 1999-2000 was not met for reasons that the Annual
Report chooses not to explain.[104]
Mr Smith attributed this failure in part to the uncertain climate
about the future nature of the licence fee as a result of the
review process during the period, but was encouraged by the fact
that the evasion rate was coming down in the early months of the
current financial year.[105]
36. The BBC's Annual Report states that "it
is critical that those who do pay are not disadvantaged by those
who do not, but we are acutely conscious of the difficulties faced
by some licence payers who are on low incomes".[106]
The BBC seeks to promote the use of cash-based easy payment schemes
such as the weekly Cash Easy Entry scheme and the Monthly Cash
Plan.[107]
We have previously expressed concern that one of these systemsthe
Quarterly Budget Schemeattracts a £5 surcharge, supposedly
because the payments are made in arrears.[108]
We recommended last December that this surcharge be discontinued
with effect from 1 April 2000.[109]
This recommendation was not implemented and the cost of a licence
fee under the Quarterly Budget Scheme now stands at £109
for a fee with a face value of £104.[110]
We explored this matter further during the present inquiry, and
were deeply dissatisfied with what we learnt.
37. In oral evidence, the BBC told us that the surcharge
was justified because "all the payments are in arrears"
whereas "the general principle of the licence is that payment
is made up front, at the start of the licensing period".[111]
This echoes a statement by the Government in its reply to our
earlier recommendation when the Government claimed that the Quarterly
Budget Scheme "involves payments which are wholly made in
arrears".[112]
When we queried these assertions, the BBC re-iterated in oral
evidence that, "in the case of the Quarterly Budget Scheme,
the licence begins on that same day, but the first payment is
not due until three months after that".[113]
38. In written evidence, the BBC told a somewhat
different story about the Quarterly Budget Scheme. The BBC acknowledged
that "the first instalment is due on issue, and the
remaining payments are made at three monthly intervals thereafter.
Three of the payments are therefore in arrears."[114]
The regulations which govern the scheme confirm that there is
an "issue fee" in exactly the same way as there is for
other schemes based on payment by instalments.[115]
Under the Quarterly Budget Scheme the first payment is not
made in arrears and the statements of the BBC in oral evidence
and of the Government in its reply to our earlier recommendation
are accordingly inaccurate.
39. In framing our earlier recommendation, we expressed
particular concern that the BBC "actively solicits licence
fee payers" to use this scheme which involves a quarterly
surcharge of £1.25.[116]
In its response, the Government expressed the hope that the BBC
"will ensure that all those currently using the scheme are
advised once again of the other schemes where there is no surcharge".[117]
The BBC's main defence of the scheme is that it does not seek
to profit from it.[118]
This is no more than the minimum to be expected from a State Corporation.
However, the manner in which Sir Christopher Bland chose to express
this case is revealing: "there should be no element of profit
to the BBC in encouraging people to pay quarterly".[119]
We find the notion that the BBC is in any way "encouraging"
people to pay a surcharge on their licence fee puzzling.
40. When we last examined this matter, the Secretary
of State for Culture, Media and Sport expressed some sympathy
with concerns about the surcharge, but said that the issue was
"not strictly a matter for Government to decide on".[120]
In response to our recommendation, the Government stated that
"the decision whether to discontinue the quarterly budget
scheme is a matter for the BBC".[121]
This statement is contradicted by the BBC's written evidence.
It stated that the scheme is "governed entirely" by
the Wireless Telegraphy (Television Licence Fees) Regulations
1997 and that the size of the premium "is defined in [the]
Regulations, not by the BBC".[122]
Since the scheme is prescribed by secondary legislation initiated
by the Government and regularly amended by Government, it follows
that authority for the scheme lies with the Government.[123]
We recommend that the Government introduce secondary legislation
to amend the Wireless Telegraphy (Television Licence Fees) Regulations
1997 so as to abolish the current £5 surcharge on the licence
fee under the Quarterly Budget Scheme with effect from 1 April
2001. We further recommend that a leaflet explaining all budget
schemes and making clear their financial implications be made
available at all Post Offices.
Governance and accountability
41. When we last considered the BBC we emphasised
that any future assessment of the BBC's role was inseparable from
the wider regulation of broadcasting. We argued accordingly that
consideration of the BBC's future role and governance should be
integral to the review of communications regulation that is expected
to result in a White Paper later this year.[124]
We are pleased that, in its response to our Report, the Government
confirmed that the BBC's role and governance will be reviewed
in this context.[125]
As recently as 10 July 2000, the Secretary of State confirmed
that the review was considering the role of the Board of Governors
"which currently acts as both judge and jurymanagers
and regulators".[126]
42. In support of the self-regulatory structures
of the BBC, Sir Christopher Bland referred to the example of parliamentary
coverage on Radio 4. He said that the Governors had made a "mistake"
in agreeing to the original proposals, but saw the reversal of
some of those changes as a decision based on an understanding
of responsibilities under the Charter and a willingness to look
at wider public interest issues in relation to a detailed scheduling
issue which could only have been made from within the BBC. Detailed
control over programming and wider regulatory responsibilities
were thus, in the eye's of the BBC, indivisible.[127]
43. We find this position unconvincing. We have argued
more than once that the BBC's self-regulatory position is no longer
sustainable and that the BBC should be regulated by a Communications
Regulation Commission.[128]
Having taken oral evidence from the BBC during this inquiry,
we are concerned that, even with a new and potentially innovative
Director-General, the views and roles of management and of the
Governors appear indistinguishable. In future, it must be for
the BBC's managers to manage the BBC and for an independent regulator
to regulate the BBC.
44. We have found our efforts to hold the BBC to
account through scrutiny of the Annual Report and Accounts akin
to trying to grasp an eel. The document itself is a disappointment.
As we have had cause to note during this examination, its contents
are often inadequate and sometimes disingenuous. The oral evidence
from BBC witnesses was too often incomplete or evasive.
45. Last year we strongly supported proposals that
the National Audit Office should scrutinise both the BBC's compliance
with fair-trading commitments and the transparency of the BBC's
financial reporting.[129]
In February 2000, the Secretary of State for Culture, Media and
Sport rejected this approach, but stated that he intended to commission
independent reviews of financial systems and fair trading within
the BBC which "will, of course, be available for consideration
and questioning by the Select Committee".[130]
46. The first such independent scrutiny of the BBC's
financial reporting was announced on 27 June 2000. It is to be
undertaken by Pannell Kerr Forster and "will be concluded
by the end of July".[131]
Needless to say, this timetable ensures that, notwithstanding
the Secretary of State's words in February 2000, the study will
be of no value to this Committee in its consideration of the BBC's
Report and Accounts for 1999-2000. We consider it a matter
for regret that the Secretary of State for Culture, Media and
Sport rejected the proposals that elements of the BBC's finances
be subject to scrutiny by the National Audit Office. We expect
this Committee and its successor in the next Parliament to continue
with annual scrutiny of the Report and Accounts of the BBC, but
this does not mean that we consider current arrangements for the
accountability of the BBC to be anything other than incomplete
and unsatisfactory.
Summary of conclusions and recommendations
47. Our principal conclusions and recommendations
are as follows:
(i) We welcome the renewed commitment by
the BBC to its core television servicesBBC One and BBC
Twoand to the flagship role of BBC One in particular. We
consider, however, that the weaknesses that the BBC Governors
note in the recent performance of BBC One are issues for which
they themselves hold the ultimate responsibility (paragraph 6).
(ii) It is undeniable that the technological
environment in which the BBC operates is changing, and changing
fast. The BBC's remit, however, has not changed and the BBC has
not sought a change to the Royal Charter that underpins that remit
prior to 2006. A generalised offer by Sir Christopher Bland for
"public debate and discussion" is simply not good enough.
While the BBC remains a State Corporation funded by a hypothecated
tax, it has public service obligations that it must continue to
meet in full. If BBC One were to become ITV without the commercials
and BBC Two were to become Channel 4 without the controversy,
then this would affect the justification for the BBC as at present
constituted and funded (paragraph 11).
(iii) It is right that the BBC is seeking
to develop an effective policy for sports coverage, but it is
regrettable that the wording of the new objective reinforces the
impression that the BBC has lacked such an effective policy in
recent times. We expect the main elements of the BBC's policy
for sports coverage and the criteria by which its effectiveness
will be measured to be included in the BBC's Report for 2000-01
(paragraph 13).
(iv) We are heartened to learn of Radio
3's increased audience and encouraged by the restoration to a
considerable degree of its former high quality, but we consider
it a matter for regret that neither the Chairman of the BBC nor
its Director-General was able to give any account in oral evidence
of the performance of Radio 3. This strengthens the impression
that radio is seen within the BBC as a Cinderella service (paragraph
15).
(v) We recommend that, when the methods
of collection of statistics given in series for successive years
in the Annual Report and Accounts of the BBC are changed, the
likely effects of the change on the relevant statistical series
be set out in the Report. Where such statistics are collected
by an outside organisation, the explanation of the change and
its effects should be checked and verified by that outside organisation
before inclusion in the Annual Report and Accounts (paragraph
16).
(vi) We consider that the BBC's attempts
to conflate viewing figures from News 24 as a channel and
those for News 24 as a service on other channelsnamely
BBC One and BBC Twoare misguided and misleading. We recommend
that BBC Annual Reports distinguish clearly between the audience
for News 24 as a channel in multi-channel households and the audience
for News 24 services broadcast on BBC One and BBC Two and cease
to combine audience figures for News 24 as a channel and News
24 as a service on other channels (paragraph 18).
(vii) We recommend that, for 2001-02 and
succeeding years, the BBC formulate a specific objective of seeking
to ensure that its digital services drive take-up of digital television.
We further recommend that the BBC identify consistent measures
for monitoring progress against this objective that are open to
external scrutiny (paragraph 25).
(viii) We wholeheartedly endorse the notion
that the BBC should not develop additional public service channels
that duplicate those already provided by the commercial sector
or that unduly threaten the development of a more diverse market
in future, but we consider that the potential for a free-to-air
BBC sports channelproviding distinctive services of public
benefit relating, for example, to sports training and development
and to minority sports and women's sport which are currently neglected
by broadcasters, as well as possibly contributing to digital take-upshould
be further explored by the BBC and sympathetically considered
by the Secretary of State for Culture, Media and Sport rather
than being prematurely ruled out (paragraph 27).
(ix) In view of the fact that the increases
in the television licence fee in 2000-01 and 2001-02 overturn
the five year settlement originally intended to cover the period
up to 2002, we welcome Sir Christopher Bland's confirmation that
the BBC will not seek additional increases in the level of the
licence fee prior to 2006 (paragraph 29).
(x) If the public and Parliament are to
be convinced that the target of increasing the percentage spent
on content from 76 per cent to 85 per cent will genuinely be met,
it will be necessary for the BBC to be a good deal more open about
its accounting procedures. We recommend that the Report and Accounts
of the BBC for 2000-01 include annual targets for the percentage
of total expenditure committed to programmes in each coming year
in order that progress towards the objective of increasing the
percentage spent on content from 76 per cent to 85 per cent can
be monitored. In this context, we welcome Mr Dyke's drive to reduce
management perks and his campaign to slash bureaucracy (paragraph
31).
(xi) We expect performance against these
targets for cash flow from BBC Worldwide in each future year to
be subject to close scrutiny to ascertain whether the targets
for the latter part of the period are sufficiently stretching
(paragraph 34).
(xii) Under the Quarterly Budget Scheme
the first payment is not made in arrears and the statements
of the BBC in oral evidence and of the Government in its reply
to our earlier recommendation are accordingly inaccurate (paragraph
38).
(xiii) We recommend that the Government
introduce secondary legislation to amend the Wireless Telegraphy
(Television Licence Fees) Regulations 1997 so as to abolish the
current £5 surcharge on the licence fee under the Quarterly
Budget Scheme with effect from 1 April 2001. We further recommend
that a leaflet explaining all budget schemes and making clear
their financial implications be made available at all Post Offices
(paragraph 40).
(xiv) Having taken oral evidence from the
BBC during this inquiry, we are concerned that, even with a new
and potentially innovative Director-General, the views and roles
of management and of the Governors appear indistinguishable. In
future, it must be for the BBC's managers to manage the BBC and
for an independent regulator to regulate the BBC (paragraph 43).
(xv) We consider it a matter for regret
that the Secretary of State for Culture, Media and Sport rejected
the proposals that elements of the BBC's finances be subject to
scrutiny by the National Audit Office. We expect this Committee
and its successor in the next Parliament to continue with annual
scrutiny of the Report and Accounts of the BBC, but this does
not mean that we consider current arrangements for the accountability
of the BBC to be anything other than incomplete and unsatisfactory
(paragraph 46).
6 Eighth
Report from the Culture, Media and Sport Committee, Report
and Accounts of the BBC for 1997-98, HC (1997-98) 1090. Back
7 Third
Report from the Culture, Media and Sport Committee, The Funding
of the BBC, HC (1999-2000) 25-I. Back
8 Report
and Accounts of the BBC for 1999-2000,
p 6. Back
9 HC (1997-98)
1090, para 39. Back
10 Q 2. Back
11 Report
and Accounts of the BBC for 1999-2000,
p 15. Back
12 Ibid. Back
13 Q 1. Back
14 Q 2. Back
15 Ibid. Back
16 Q 71. Back
17 "Zapped:
Why public service TV has to change", Mark Thompson, Banff,
12 June 2000, p 1. Back
18 Ibid,
pp 5-6. Back
19 Q 138. Back
20 Q 98. Back
21 Ibid. Back
22 Q 138. Back
23 Q 141. Back
24 Ibid. Back
25 Q 2. Back
26 QQ
97, 96. Back
27 Q 2. Back
28 Q 3. Back
29 Ibid. Back
30 QQ
27, 28. Back
31 Q 27. Back
32 Q 119. Back
33 Q 21. Back
34 Q 19. Back
35 Q 119. Back
36 Report
and Accounts of the BBC for 1999-2000,
p 20. Back
37 Q 19. Back
38 Report
and Accounts of the BBC for 1999-2000,
p 2. Back
39 Q 109. Back
40 Report
and Accounts of the BBC for 1999-2000,
p 78. Back
41 QQ
108-114. Back
42 Evidence,
p 24. Back
43 HC
(1997-98) 1090, para 18. Back
44 Report
and Accounts of the BBC for 1999-2000,
p 78. Back
45 HC
(1997-98) 1090, paras 33-35; HC (1999-2000) 25-I, paras 42-45. Back
46 Q 6. Back
47 Report
and Accounts of the BBC for 1999-2000,
p 6. Back
48 Evidence,
p 21. Back
49 QQ
5, 8. Back
50 QQ
8, 130-132. Back
51 Report
and Accounts of the BBC for 1999-2000,
p 44. Back
52 Ibid,
p 45. Back
53 Q 87. Back
54 Q 39. Back
55 Q 41. Back
56 QQ
7, 14, 45, 47-48. Back
57 Q 43. Back
58 Evidence,
p 21. Back
59 QQ
4, 8. Back
60 Q 4. Back
61 Q 53. Back
62 QQ
11, 13. Back
63 Q 7. Back
64 Report
and Accounts of the BBC for 1999-2000,
p 6; Report and Accounts of the BBC for 1998-99, p 9. Back
65 HC
(1999-2000) 25-I, para 52. Back
66 Report
and Accounts of the BBC for 1999-2000,
p 16. Back
67 "Zapped:
Why public service TV has to change", p 4. Back
68 Q 140. Back
69 Ibid. Back
70 QQ
2, 61-62. Back
71 HC
(1999-2000) 25-I, para 48. Back
72 The
Funding of the BBC: Government Response to the Third Report from
the Culture, Media and Sport Committee, Session 1999-2000,
March 2000, Cm 4674, para 9. Back
73 Report
and Accounts of the BBC for 1999-2000,
p 20. Back
74 Q 71. Back
75 HC
(1999-2000) 25-I, para 114. Back
76 Letter
from the Secretary of State for Culture, Media and Sport to the
Chairman of the BBC, 21 February 2000, placed in the Library of
the House of Commons (see HC Deb, 21 February 2000, col 1240). Back
77 QQ
62, 145. Back
78 Q 1. Back
79 Report
and Accounts of the BBC for 1999-2000,
p 55; Q 37. Back
80 Q 38. Back
81 HC
Deb, 21 February 2000, cols 1239-1243. Back
82 BBC
Report and Accounts for 1999-2000,
p 3. Back
83 QQ
63, 64. Back
84 QQ
105-107. Back
85 Q 72. Back
86 QQ
74-77, 99. Back
87 Q 78. Back
88 QQ
100, 101. Back
89 Report
and Accounts of the BBC for 1999-2000,
p 37. Back
90 Q 78. Back
91 HC
(1997-98) 1090, para 25. Back
92 Ibid. Back
93 QQ
147-148. Back
94 Q 147. Back
95 HC
(1997-98) 1090, paras 11-14; HC (1999-2000) 25-I, paras 59-62. Back
96 Report
and Accounts of the BBC for 1999-2000,
p 7. Back
97 Evidence,
p 23. Back
98 QQ
65-66. Back
99 Q 68. Back
100 Review
of the BBC's Financial Projections: Management Summary of the
Review by Pannell Kerr Forster for the Department for Culture,
Media and Sport, Department
for Culture, Media and Sport, February 2000, para 8.7. Back
101 Evidence,
p 23. Back
102 Report
and Accounts of the BBC for 1999-2000,
p 54. Back
103 Q
15. Back
104 Report
and Accounts of the BBC for 1999-2000,
p 11. Back
105 Q
15. Back
106 Report
and Accounts of the BBC for 1999-2000,
p 54. Back
107 Ibid. Back
108 HC
(1999-2000) 25-I, para 97. Back
109 Ibid. Back
110 Evidence,
p 22. Back
111 Q
16. Back
112 Cm
4674, para 18. Back
113 Q
30. Back
114 Evidence,
p 22. Back
115 Wireless
Telegraphy (Television Licence Fees) Regulations 1997 (S.I., 1997,
No. 290), Schedule 3. Back
116 HC
(1999-2000) 25-I, para 97. Back
117 Cm
4674, para 19. Back
118 Q
34. Back
119 Ibid. Back
120 HC
(1999-2000) 25-II, QQ 670-672. Back
121 Cm
4674, para 19. Back
122 Evidence,
p 22. Back
123 For
the most recent instance of amendment to the 1997 Regulations,
see Wireless Telegraphy (Television Licence Fees) (Amendment)
Regulations 2000 (S.I., 2000, No. 630). Back
124 HC
(1999-2000) 25-I, paras 110-111. Back
125 Cm
4674, para 25. Back
126 HC
Deb, 10 July 2000, col 611. Back
127 Q
26. Back
128 Fourth
Report from the Culture, Media and Sport Committee, The Multi-Media
Revolution, HC (1997-98) 520-I, para 158; HC (1999-2000) 25-I,
para 113. Back
129 Ibid,
para 109. Back
130 HC
Deb, 21 February 2000, cols 1241-1242. Back
131 HC
Deb, 27 June 2000, col 442W; Q 103. Back
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