MEMORANDUM SUBMITTED BY THE DEPARTMENT
FOR CULTURE, MEDIA AND SPORT
This memorandum is provided at the request of
the Culture, Media and Sport Select Committee to inform its inquiry
into the Funding of the BBC.
BACKGROUND TO
THE DAVIES
REVIEW
The BBC's Royal Charter guarantees the future
of the Corporation until 31 December 2006. A separate formal Government
Agreement with the BBC guarantees the licence fee until 31 March
2002 and provides for a review, before that date, of the funding
arrangements between 2002 and 2006 in the light of technological
and other developments.
The Government's aim for the review was to ensure
the BBC's continuing ability to meet its public service obligations
effectively, while at the same time ensuring that it retains the
ability to operate effectively in a competitive marketplace.
The Government decided that the review should
be a closely defined one. It did not consider that the time was
right for an extensive review of the BBC's purpose and governance;
that would more appropriately be carried out in 2003-04, when
issue of Charter renewal was approached.
The Government also decided that it was not
appropriate at this stage to consider alternatives to the licence
fee as the main source of BBC funding. The licence fee is an imperfect
funding mechanism, but the Government considers that it is the
best means of providing the BBC with sufficient security to continue
to meet its obligations. The Government decided therefore that
the review would start from the position that the licence fee
is sustainable, at least until Charter review.
The Review Panel was, therefore, requested to
focus, within the exisiting framework, specifically on a number
of closely defined issues, as set out in the terms of reference.
The Panel was requested to take a strategic, high level look at
these issues.
PANEL'S
REPORT
The Panel reported to the Government, on time,
at the end of July. The Report was published for public consultation
on 5 August, with a closing date for responses of 1 November.
The Report has provoked a vigorous debate and the Department for
Culture, Media and Sport is now analysing all the responses received.
The Government considers that the Davies Panel
produced a measured, thoughtful and comprehensive Report which
demands careful consideration. It raises a number of important
issues, including the BBC's role in the digital era and whether
it would be appropriate to fund the Corporation's full services
vision, primarily from the licence fee, as well as the mechanism
for doing so. The Report has also raised important issues surrounding
efficiency, transparency and accountability.
The Government will consider the Davies Panel's
Report carefully in the light of the responses received to the
consultation and the Select Committee's Report.
INDEPENDENT SCRUTINY
The Davies Panel recommended that, before the
Government reached final decisions on the recommendations relating
to the BBC's funding needs, it would be a useful exercise to repeat
the independent review of the BBC's finances which was carried
out by Braxton Associates in 1996. The Government has decided
to act upon this recommendation and has placed an advert in the
EC Overseas Journal inviting expressions of interest in tendering
to carry out this study.
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