TUESDAY 7 DECEMBER 1999
_________
Members present:
Mr Gerald Kaufman, in the Chair
Mr David Faber
Mr Ronnie Fearn
Mrs Llin Golding
Alan Keen
Miss Julie Kirkbride
Mr John Maxton
Mrs Diana Organ
Ms Claire Ward
Mr Derek Wyatt
_________
MEMORANDA SUBMITTED BY THE DEPARTMENT FOR CULTURE, MEDIA AND SPORT
EXAMINATION OF WITNESSES
THE RT HON CHRIS SMITH, a Member of the House, (Secretary of State), and
MR PAUL HERON, Broadcasting Policy Division, Department for Culture,
Media and Sport, examined.
Chairman: Secretary of State, we welcome you here today. We are very
much obliged to you for going out of your way to see us at this stage. We are
also obliged to you, Paul, for having agreed to take into account this report
in your consultations on this issue. Naturally we do not expect you to state
any conclusions here today. Although I am sure my colleagues on the Select
Committee do not need warning, nevertheless I remind them that it is pointless
to ask you questions about what you are going to decide. Nevertheless, I am
sure we can have a very valuable session here this morning. You have kindly
sent us material, for which we are grateful. The new streamlined Select
Committee procedure is that we do not even ask for an opening statement
although, of course, you are welcome to insert anything into any answers that
you put. Mr Fearn.
Mr Fearn
630. Good morning. In spite of what the Chairman was just saying
about deciding, why should you decide now on BBC funding up to 2006 when the
nature of the broadcasting environment seven years from now is so hard to
predict?
(Mr Smith) First of all, Chairman, before I specifically answer Mr
Fearn's question, can I just say two things. One is how much I welcome the
Committee's decision to look at this whole issue because it will undoubtedly
help us in coming to our conclusions over the course of the next couple of
months about the issues raised by the Gavyn Davies Report. Secondly, because
this is the first opportunity that I have to say it, can I say how deeply
sorry I am that our much loved colleague, Roger Stott, is not able to be with
us. In answer very specifically to Mr Fearn, the reason is very simple and
that is the broadcasting environment is changing very rapidly, the development
of digital television on all three platforms opens up a new broadcasting
environment with much greater choice of services for viewers and a much
greater possibility for a public service broadcaster like the BBC to provide
new services. The crucial questions that then arise are what new services
should the BBC be seeking to offer to the public and how best, if at all,
should they be seeking to pay for those? If we delayed answering those
questions for two years, three years, four years, until we knew more precisely
what the nature of the future broadcasting environment was precisely going to
be then I think we would have been faced with a fait accompli rather than
trying to shape the broadcasting world for the benefit of the viewing public.
It is because those decisions need to be made now that I asked the Gavyn
Davies Committee to have a look at these issues and we are now looking at the
results of their inquiry and the results of the consultation that have since
come through to us.
631. So the decision will be made some time this year then?
(Mr Smith) I would hope to be able to reach conclusions, and obviously
I will need to consult other Government colleagues as well in order to make
an announcement, some time in January.
632. Setting aside the merits of the digital licence supplement on
which you will pronounce in January, have you formed any view on the competing
claims about the impact of such a levy on digital take-up?
(Mr Smith) I have not yet formed a precise view on that, although I note
that the evidence produced by both Gavyn Davies and his Committee and by the
BBC seems to indicate that they believe it will not have very much of an
impact on the take-up of digital services. On the other hand, the evidence
produced by NERA, working on behalf of the commercial broadcasters, seems to
indicate that it will have an impact on the take-up of digital services. In
considering whether to move to digital I suspect that the viewers will have
two considerations in mind. The first is cost and the second is what new
services and what better quality of picture do I get for making this decision.
Every viewer will be balancing those considerations in their mind. The impact
of a digital supplement would be one of the items of cost that they would need
to bear in mind in making such a decision.
633. Finally, could I ask were you disappointed that the Davies
Review did not consider decriminalising licence fee evasion? What is your
view on that matter?
(Mr Smith) Ultimately, of course, that would be a matter not just for
myself but for my legal and home affairs colleagues in Cabinet as well. My
view at this stage is that the present system, particularly in terms of
ensuring quite a high level of compliance, has tended to work well. The
criminal sanctions have not had to be applied in enormous numbers. I am not
sure that it requires review at this stage.
634. When you say "not in enormous numbers", what percentage?
Have you any idea?
(Mr Smith) Certainly it is not particularly great numbers but I do not
know the exact figure and will be happy to write to the Committee.
Mr Fearn: Thank you.
Chairman
635. I would like to follow up, before I call Mr Wyatt, on your
answers to Mr Fearn. You answered three of the questions that Mr Fearn put
to you and I will start with the last one. When we did our first inquiry into
the BBC as the National Heritage Committee we discovered that the largest
group of people who were prosecuted for non-payment of licence were women,
often lone mothers on very low incomes. Taking into account the Government's
policies on social exclusion, would it not be a good idea for the Government
to consider the situation of people who are liable to be fined and even sent
to jail for not paying their licence when it could be argued that the most
appropriate thing to do would be simply to follow it up as a bad debt and get
the debt paid?
(Mr Smith) I would certainly hope that in pursuing non-payers of the
television licence that a certain amount of natural justice would be followed
by those doing the following up. If it were a case of someone who was in very
straitened circumstances and who genuinely had difficulty in paying then one
procedure might be rather more appropriate than for someone who was perfectly
able to pay and was simply wilfully refusing to do so. These are judgments
which ought to be made, and made sensitively, by the pursuing authorities.
636. Secondly, in your exchanges with Mr Fearn you referred to the
NERA Report. Do you take the conclusions of the NERA Report seriously?
(Mr Smith) I certainly take them seriously. We do have the difficulty
in all of this that the various reports before us appear to come to different
conclusions on this subject. However, this is not the first time, and nor I
suspect the last, that I am faced with reports coming to different conclusions
and having to make a series of decisions between them. I certainly take it
seriously and am considering the NERA evidence very carefully.
637. That is interesting because, without seeking to set up any
disagreement, Mr Gavyn Davies sought to debunk the conclusions of the NERA
Report when he came before us.
(Mr Smith) I would simply add that the Department's chief economist will
be analysing all the reports that we have in front of us and providing us with
his impartial advice on the matter.
638. Thirdly, Mr Fearn asked a highly legitimate question relating
to the licence settlement. We have a licence settlement up to 2002 and a
licence settlement will be required through to the end of the Charter in 2006.
When do you anticipate coming to a conclusion about that?
(Mr Smith) I would hope that what we would do in coming to our
conclusions on the Davies Report, and any decision on whether we have a
digital licence supplement or not, is that we would at that same stage be able
to give a clear view of what our intention would be over the whole of the next
five to six years in relation to the basic analogue licence fee.
639. Would there be as specific a view, including figures year by
year, as Mr Bottomley came to in the present settlement?
(Mr Smith) We would certainly hope to give a clear indication of what
our intentions were. Now, of course, what we cannot do is predict precisely
what the electorate are going to decide in a year or two years' time, so we
cannot bind the hands of future governments. What we can do is give an
indication of our own intentions.
640. Without haggling about that, Mrs Bottomley was aware, as
every government is aware, that the electorate is going to intervene at some
stage but nevertheless she came to a settlement which carried over from the
last Parliament into this Parliament. Without asking this Government to
indulge in hubris about its election chances, one would assume that it would
build in a possibility, whatever government emerges from the next election,
to carry over its settlement in the way that this Government carried over Mrs
Bottomley's settlement?
(Mr Smith) We would obviously hope that any such intentions would be
fulfilled by an incoming government of whatever political colour. One has to
put the small caveat in place that is not a 100 per cent guarantee.
Chairman: Thank you. Mr Wyatt.
Mr Wyatt
641. Good morning, Secretary of State. I was at your lecture last
week and if I have got the notes right you said about public service
broadcasting, that it had four guiding principles: freedom from the profit
motive; independence from commercial interests; a remit from a public
authority; and universal access. Two things seem to come from that. Do you
not consider market failure an issue with regard to public service?
(Mr Smith) Yes. It is why I would add a fifth criterion to those that
you have just adumbrated and that is that public service broadcasting has as
its primary role the need to act as a bench mark and driver of quality
programme making because not always does a free market in television
programming produce good quality. Some of the highest quality programmes are
very expensive to make, do not necessarily produce the prospect of a
commercial return and do represent potentially a failure in the benign
operation of the market. It is because of that drive for quality that I think
you do need a public service broadcasting element within the mix of the
broadcasting environment.
642. With respect to universal access, in digital that cannot be
achieved either on radio or on television. I do not know whether in your
sense universal access is 98 per cent or whether it is 51 per cent, I know you
said that it is more likely to be in the 90s. If it cannot be achieved, at
what stage should you spend money?
(Mr Smith) Universal availability is something that I believe to be
absolutely crucial before the analogue signal can be switched off. I would
define that as being the 99.4 per cent availability of the current analogue
signal. What we must not have in making any overall switch from analogue to
digital is anyone who can at the moment get an analogue system unable to get
any television signal at all. Now, where however you are right to flag up a
concern is that if we proceed, as we are at the moment, with the direction of
transmitters for digital terrestrial coverage across the country, it is
relatively easy - I stress the word "relatively" - to get digital terrestrial
coverage up to around about 90 per cent availability. The final nine or ten
per cent, however, is much more difficult because of remote areas and
intervening buildings or mountains or whatever. What I have consistently made
clear is that in seeking to secure that universal availability, we may well
need to look at means other than digital terrestrial aerial transmission in
order to achieve it.
643. Ten years ago the BBC decided that it would not get involved
in British satellite broadcasting which itself was a digital service.
Eventually that led to a merger of the two satellite systems and in a sense
the BBC lost a ten year window on digital broadcasting. It has now in a sense
come back to us to say "sorry about that, but now can we have a licence fee
because we should have been there in the first place but we were not".
Because of the lack of vision and leadership inside the BBC in the last ten
years, do they really deserve to be given a fee to catch up when the market
has already invested billions of pounds in this area?
(Mr Smith) You may well be right in identifying a missed opportunity ten
to 15 years ago. I would add in parenthesis that I suspect that was not the
only missed opportunity at that stage because the enormous success of CNN
Worldwide is something that perhaps others could have predicted before and
done even better. In terms of what we are now faced with, I believe it is a
second window of opportunity and what I am keen to ensure, depending on the
finance being available in a reasonable way, is that the BBC should not miss
out on that second window as perhaps they did on the first.
644. When we started the Open University we borrowed œ3 million
from the licence fee. The National Grid for Learning, the BBC have chosen to
do a part but not to do it as the whole. This is something which in my view
a public service broadcaster should do. United, Granada and Carlton wish to
do part of the National Grid for Learning too but they do not get a licence
fee for that. Do you feel that as we move forward the licence fee should
always 100 per cent go to the BBC?
(Mr Smith) I think it would be difficult to argue that broadcasters
whose primary role is commercial and who are at the moment wholly funded
through advertising revenue with some commercial revenues should receive a
portion of the licence fee which up until now, I believe sensibly, has gone
to the funding of the BBC.
645. Lastly, can I just talk about a public service internet
provider. We talked last week to the Consumers' Association and we have also
talked to some of the internet groups. A public service internet site might
include Yellow Pages, the Encyclopedia Britannica, educational stuff,
Consumers' Association, Central Office of Information. That seems to me to
be a public service internet site. Do you think that it is right that a sole
public service internet owned and run by the BBC is the right way forward in
the internet environment?
(Mr Smith) The crucial thing, the wonderful thing, about the internet
environment is that it makes space available for many providers. The crucial
question for the BBC is are there bench mark public service services which the
BBC can, because of its public service role, provide better and more
appropriately than anyone else? I happen to believe, for example, that BBC
On-line as a news service is extremely good, provides a service that is
unrivalled anywhere in the world, and is part of the very heart of the BBC's
public service responsibilities. I think it is right that that service has
been developed with licence fee funding.
Mr Wyatt: Thank you.
Chairman
646. Are you then telling Mr Wyatt that you do not necessarily
believe that the BBC should do everything, that things that others can do and
do do are not necessarily obligations that the BBC ought to take on?
(Mr Smith) I do not necessarily believe that the BBC should do
everything. What I do believe is that the BBC should be seeking to reach
everyone. That is a very different proposition. The BBC should be providing
something of relevance and interest to the whole viewing population. What it
should not necessarily be seeking to do is providing everything that the
entire viewing population wants.
647. That does not go as far as what one might categorise as the
Heineken view put forward by ITV, namely that the BBC should reach the parts
that others do not reach?
(Mr Smith) If you try to corral the BBC into a ghetto of simply doing
the things that no commercial broadcaster would touch then you diminish the
quality and range of the BBC's outputs and would do the viewers a disservice.
648. Thirdly, again emerging from your responses to Mr Wyatt, you
have taken a decision, which certainly is in line with the recommendations of
this Committee, about setting a date for analogue switch-off. There have been
concerns expressed that some people might fall in the gap. Is there any
information about whether any quantifiable number of people fell between a
comparable gap when the BBC changed from 405 to 625 lines?
(Mr Smith) My immediate answer is I do not know. We will certainly seek
to identify whether such information is available and let the Committee know.
Mr Maxton
649. Can I firstly ask a question about the reach. What is the
present position on allowing BT to be a broadcaster?
(Mr Smith) The prohibition on BT from delivering broadcast services is
due to come to an end in 2001, as has always been put forward by the
Government since the very early days of coming into office.
650. That immediately could extend the reach of digital because BT
could provide it to many more homes.
(Mr Smith) The availability of broadcast material down the telephone
line would become one of the range of options available to people at that
stage, yes.
651. Given the speed of technology and the ever driven down costs
of technology too, is it not possible that by 2006 for the ten per cent who
are left it would be just as cheap to give them a telephone line and a box as
it would be to switch off analogue and leave those nine per cent without
anything?
(Mr Smith) That is of course a decision that cannot be made now because
at this stage, although it is a reasonable guess that the cost of technology,
the cost of set-top boxes, the cost of making the switch will have tumbled to
extremely low figures by that stage, this is not something that we can predict
with any precise accuracy. That is not really a decision that we can take at
this stage.
652. I think on that you can make assumptions if you went back
seven years and then went forward seven years.
(Mr Smith) The pattern, however, is different for different forms of
technology. The one common feature is that prices fall.
653. To some extent this inquiry has become about the future of
the BBC almost as much as about the funding of the BBC. Would you agree with
me that the quality of the BBC is inextricably linked to being funded
independently, whether it be through a licence fee or by whatever means? Is
that not correct, that you would not have the quality of the BBC if it was
funded either directly by Government or if it was funded commercially?
(Mr Smith) I would agree with that. Indeed, the proposals that I
noticed just this morning from the National Consumers' Council for shifting
the funding of the BBC from a licence fee on to general taxation would, I
think, very sharply diminish the BBC's independence and quality.
654. Would you also agree with me that that licence fee actually
does make the BBC probably - in my view definitely - the best broadcast
producer in the world of quality programmes?
(Mr Smith) I would hesitate to make quite such a formidable assertion
because I have not seen every television station's output around the world.
However, it does seem to me - it has always seemed to me - that the BBC is
capable at its best of producing programmes of undeniable quality that inform,
entertain and challenge viewers in a way which few other broadcasters match.
655. How important do you think that the reputation of the BBC as
a broadcaster around the world is to the image of Britain as a whole, not just
in terms of broadcasting but in terms of the way in which the rest of the
world looks at Britain in terms of tourism, in terms of its theatre, in terms
of its cinema and many other things? Do you think that the BBC plays an
integral part in that?
(Mr Smith) Yes, and the BBC has a formidable international reputation.
It is, of course, assisted in this by the BBC World Service which is funded
itself by the Foreign Office but with a very cherished independence of
operation. The BBC generally in terms of the programmes that it produces, in
terms of the quality of its news reporting, in terms of its general standing,
is highly regarded internationally and long may that remain to be the case.
656. Therefore, within the fast changing world of technology and
given that the BBC must change within that world, should we be doing
everything we can to foster the BBC's ability to change, to adapt and to
retain the quality that it is providing not just for the people of this
country but also for the rest of the world?
(Mr Smith) I believe it is important to do two things. One I have
already touched on, which is to ensure that the BBC continues to act as a real
bench mark of quality. That is in some ways its most important function in
a multi-channel age. Secondly, it must also endeavour to continue to be at
the heart of most viewers' patterns of viewing. On the whole the BBC is a
much loved institution. People trust the BBC in a way that they do not
necessarily trust other institutions, companies or entities. I think it would
be of great detriment to the broadcasting ecology in this country if the BBC's
role were to diminish because it was not involved in the development of any
of the new services for the digital age.
657. I accept that and obviously agree with you but, as with
almost everything else, we are now in a global situation, it is a global
economy, broadcasting is global. We have one of the best broadcasters in the
world, should we not ensure that they can become a global player as well as
providing that home market?
(Mr Smith) The BBC, of course, is already becoming a global player of
some significance. The development of BBC America and their link with
Discovery has produced quite a substantial growth in what the BBC can offer
across the whole of North America. There are good plans in place to extend
that much further. However, and it is an important however, the search for
new fields to conquer should not in any way distract the BBC from its core
responsibility of providing good quality programmes and services to viewers
here at home. What is also important is that search for new fields to conquer
should not be done at the expense of the licence fee payer.
658. No, but the website in that case you are almost saying should
not be funded through the licence payer.
(Mr Smith) The BBC On-line website is a core news and current affairs
service provision that is directed primarily at the licence fee payers in this
country and it is right that it is funded by them. I have to say it does
sadden me sometimes that the services of BBC On-line are used so extensively
by people abroad and particularly by news organisations abroad who use it as
a quarry for their own material. If we could find a way of distinguishing the
way in which the service is provided between users at home who pay the licence
fee and users abroad then that would be extremely useful. I have not yet
found such a way but it is certainly an issue that I have been applying my
mind to.
659. You do not actually know how many of those users abroad are
licence payers from this country who happen to be travelling abroad who are
using the BBC service to keep up to date with what is going on here?
(Mr Smith) We certainly do not know that although I suspect it is not a
high proportion of the hits that the On-line site has from abroad.
Mr Maxton: I know at least two of this Committee who did exactly that
when we were on one of our trips abroad.
Chairman: We do it everywhere. Could I ask three questions
concentrating on your interchanges with Mr Maxton. Right on this last one,
Mr Maxton is one of the most devoted and expert users of the internet that we
have around.
Mr Maxton: That is not saying much. It is the one eyed man in the
kingdom of the blind, I hasten to say.
Chairman
660. That is all very well but it is like the person who was
heckling Norman St John Stevas when he was a candidate for Dagenham and Mr St
John Stevas said that the Labour Parliament was a two-headed monster and the
heckler said "well, two heads are better than one". One eye is better than
none. You just said, and I agree with you rather than John on this, that it
is highly likely that most foreign hits on BBC On-line are foreigners. That
being so, would it not make sense for the BBC to take advertising on BBC On-
line, because it would not interfere with the integrity of the service in any
way and it would not be obtrusive in the way that commercials on BBC tv would
be, in order to help fund something that is being used by a lot of people who
do not pay the licence fee?
(Mr Smith) That is certainly, as you will know, Chairman, a proposition
that I have in the past not ruled out and I still do not rule that out. There
may be, however, a slight problem with European Union regulation on this
matter because what we might end up with in such circumstances is a hybrid
service, part funded by the licence and part funded commercially, and that
might cause European Commission problems. It is certainly a proposition that
is on the table for us to examine. We will look carefully at any observations
the Committee might wish to make on the subject.
661. You assented to the argument Mr Maxton put forward about the
need for the integrity of the licence and for it not to be replaced, as the
National Consumers' Council are advocating, by a cash grant. Nevertheless,
the Government, as in the announcement made by the chancellor in his pre-
Budget review, decided that several million households at the cost of several
hundred million pounds are to be relieved of the licence. Without asking you
to anticipate or prognosticate, one cannot rule out that other sections of the
population might also be given a free licence at some point. That being so,
and certainly far from being critical about it, I applaud it, the Government
has taken steps whereby the licence paid by the viewer is not going to be
universal.
(Mr Smith) Indeed, I share your welcome, Chairman, to the Chancellor's
decision on this matter because I think it does provide a real benefit to many
of the poorest households in this country. We have to remember that this is
more a social security payment than it is a broadcasting subvention. Although
we will not be announcing the precise mechanism whereby the payment will be
made to individuals until the detailed work has been completed, which is
currently well under way, nevertheless the principle is that this is a payment
to and for individuals, it is not a payment handed over to the BBC
specifically labelled "broadcasting".
662. I think that is a very acute justification, Secretary of
State, for once the Department of Social Security gets involved in funding the
licence, who knows where it will stop? I would not like it to stop, I would
like it to be very much extended. Mr Maxton most validly talked about the
high international reputation of the BBC and the BBC's logo and the need to
build on it. Every day one picks up the newspapers and today one has got
further news about the News International news corporation signing up
agreements abroad. Last week we had the announcement about the would-be
merger between Carlton and United News Media. Today there are stories in the
financial press about the possible merger between Telewest and Flextech, with
the latter of whom the BBC is already a partner. That being so, with the
global dimensions and many, many millions of pounds of some of these
partnerships which extend into this country taking place as they are, should
not the BBC with that huge international reputation for its logo be building
up partnerships of that kind rather than simply the peripheral commercial
activities which it is involving itself in?
(Mr Smith) I think the BBC is beginning to develop serious partnerships,
such as the partnership with Discovery in the United States, in a way that
perhaps it was not doing five years ago. However, I would very strongly
assert that this has to be an activity that does not become the tail that wags
the dog. The BBC has to continue as its prime duty to be the broadcaster to
the UK. Anything that it does in terms of asserting global authority and
seizing global opportunities has to be something that is additional to and
complimentary to its UK responsibilities, they must never take primacy.
Miss Kirkbride
663. I too would like to take you up on a couple of things. You
have said already in answer to the Chairman about the fact that 75 year olds
will get free licences and that will be introduced by your Government. You
said that it is more of a social security payment rather than a tax on
broadcasting which makes many 75 year olds and pensioners in general quite
unhappy. If that is the case, why does the Government not give them œ100 and
let them decide what they want to spend it on?
(Mr Smith) There are two reasons for that. One, that the payment of
œ101 for a licence fee is a major lump sum payment which pensioners face at
some stage during the course of the year. If simply by an addition to the
pension generally you put funds directly into their pockets then you still
face the difficulty of a lump sum payment unless, of course, you make it
available as a single lump sum but then effectively that is what the present
proposal is doing. The second thing to say is that if it becomes part of the
general pensioners' income it begins to be taken into account, for example,
in matters such as the calculation of Housing Benefit payments and so forth
and becomes worth rather less to pensioners than if it is earmarked for a very
specific purpose.
664. Is it not a bit patronising to say that pensioners cannot
manage their budgets?
(Mr Smith) I do not think it is patronising at all; it is a simple
reality of life that the presentation of a lump sum payment demand at one
point during the course of a year can be rather more difficult to meet than
a general regular payment might be - that is true for all of us.
665. You were paying tribute to the World Service, and how
independent and good quality the World Service is, and you then referred to
the fact it is paid directly from a Foreign Office grant. At the same time
you seem to reject the idea that the same principles could apply to the BBC
and that could be directly funded rather than the principle of anybody paying
a licence fee. You said in some way that would be in addition to the quality.
I do not quite see how those two statements are reconciled?
(Mr Smith) I think what you have with a very specific grant in aid
payment made by the Foreign Office is something that is highly visible, that
is for a very specific purpose; and because of that the desire to ensure that
the independence of the BBC World Service is preserved has been a very clear
totem of BBC World Service principle and practice throughout, ever since it
was first established. If you moved to the funding of the entire BBC by means
of a subvention from the taxpayer you would lose that clarity and specificity
with exists, because it is simply the World Service operation that is funded
in that way. I do not think the analogy holds.
666. I disagree. One of the Davies recommendations is that if
there were to be an increase in the licence fee for digital subscribers then
that would be attached to an audit by the National Audit Office. Would you
stand by that recommendation if you were to accept the increase?
(Mr Smith) Of course, you tempt me to preempt decisions which are not
yet taken. However, I would say that I do note very carefully the arguments
in the Davies report for greater openness and transparency in the way in which
the BBC accounts are examined and are available for public scrutiny. I note
also the proposals for increased accountability, particularly to Parliament,
of the BBC's financial affairs. These are matters which I am examining with
great care and interest.
667. You might share some of the views that have been expressed on
this Committee, that that is the only public funded body that does not have
proper scrutiny and you might need to change that?
(Mr Smith) I share many views expressed by this Committee; I fear I
cannot tell you immediately whether this is one of them, but I hope to be able
to tell you that in the next six to eight weeks.
668. One of the other things that I think has taken hold with some
of us here has been representations from commercial broadcasters at just how
they feel the licence fee is very unfair to them and their commercial
operations, and if you are going to put real money into the marketplace you
must lose it, whilst the BBC come along and use taxpayers' money to change
fundamentally the market in which they operate. I know that is quite a wide
question but it would be helpful if you gave us some idea as to why you think
the parameters exist between what is fair and reasonable competition for the
commercial broadcasters. I perhaps draw one to your attention which I think
is quite difficult to justify: and that is to say, that the cable operators
are now taking BBC News 24 and not Sky any more because, of course, they have
to pay for Sky, and there are still public interest issues surrounding that.
(Mr Smith) The first thing to say is that the commercial operators have
focused primarily on two broad issues in their response to Davies. The first
has been the digital licence supplement issue. Their case there is they fear
that the imposition of a digital licence supplement will deter take-up of
digital television. The second area they have focused on is precisely the one
you refer to, and that is the question of whether licence fee funded services
by the BBC give the BBC an unfair competitive edge in a market where normal
competition rules ought to apply. This is, in many ways, a perennial issue,
and one that does need to be very carefully addressed. The basic principle
has to be that licence fee funding should go to support core public service
services from the BBC. The licence fee should not be used as a subvention for
the delivery of commercial services. If the BBC engages in commercial
services well and good, but they must stand on their own two feet and must not
be in any way supported either openly or behind the scenes by the licence fee.
In most cases that is a very easy judgment to make. In some cases the
judgment is a more difficult one to make, and the case of the commercial
operations needs to be examined very carefully. The BBC, of course, at the
moment has to come to me for approval to start any new service, and those
issues about the protection of the core licence fee purpose and the
transparency of any commercial subvention which may be being used, those
issues are very much uppermost in my mind in making those decisions. The
Davies Committee does make some recommendations about opening up that
approvals process rather more than is the case at the moment. That is
certainly one of the Davies recommendations that I am looking at with
considerable sympathy.
669. Finally, the other difficulty I certainly will have when the
Committee decides its report is just how easy it is to reconcile an increase
in tax for digital subscribers, where you have found in a lot of areas the
core public service services you describe are not necessarily matched by the
BBC's present output. Basically we perhaps take some of the view that it is
difficult to justify this increase when we have not discussed what the BBC is
about in this modern multi media digital age. There are some things which
have been mentioned, Radio One and Radio Two channels, which seem to be more
difficult to justify in this day and age. Do you really think it is possible,
given that we are considering a compulsory tax for digital services, to decide
that in isolation from the wider remit the BBC should have in this day and age
(Mr Smith) The starting point in all of this has to be: what should the
BBC be in the business of doing in five years' time or in ten years' time?
The answer to that question is the basis that then leads us on to deciding:
how should it be paid for? It is those two questions that need to be
answered, and those two questions I bear very much in mind in coming to any
conclusions on the Davies Report. I am sure the Committee will also be having
something to say about those two fundamental questions. Just very briefly in
relation to your mention of Radio One, which is an interesting case in point
because superficially the lay observer might say Radio One does exactly what
commercial radio stations do: it broadcasts pop and rock music throughout the
day with a little bit of news and comment from DJs and others. The argument
from the BBC, with which I have some sympathy, has always been that Radio One
acts much more as a showcase for new talent and new cutting edge groups, bands
and musicians, than any commercial station is prepared to do; and that that
gives Radio One a special quality that is not available from the more
commercial pop and rock music stations. I take some of that argument, but
those are the sort of considerations you need to bear in mind. It is quite
a good example of having to think through: what is it that is distinctive
about the BBC?; what is it that it is doing that is different from what a
commercial broadcaster might do in any of the various areas it is involved in;
and where does the balance lie between expecting the licence fee payer to pay
for something, and the degree of distinctiveness and the importance of that
distinctiveness that you achieve for that licence fee.
Mrs Golding
670. Minister, you said your concern be that the BBC reaches
everyone. The question I ask is: at what cost? The present licence fee per
colour television is œ101. If you are on a budget where you have to be
careful and, say, pay quarterly by bankers order you are in fact charged œ106
by the BBC for that television licence. Do you think that it is a public
service to charge the less well off a higher licence fee than people like you
and me who can afford to pay straight out?
(Mr Smith) That is an issue which, of course, is not strictly a matter
for Government to decide on. However, it is certainly a point which is worth
making quite strongly to the BBC and to the collectors of the licence fee.
I would not be averse to the Committee making that point.
671. Do you think that the BBC should be advertising this more
widely? In fact, if they have a digital supplement it is going to cost the
poor much more than it will cost the rich. They have spent quite a lot of
money advertising it but this point has not been made at all.
(Mr Smith) I think the importance of making it very clear to viewers,
what the exact cost of choosing different methods of payment for their licence
fee actually is, is very important.
672. It is not just that, it is the very fact that they do it.
Most utilities charge less if you pay by standing order; the BBC charges you
more. Surely that cannot be right?
(Mr Smith) As I say, that is an entirely valid point. It is one which
the BBC themselves ought to address and address very carefully.
Chairman: When I get my gas bill I am told if I pay within a given
period I will get a big discount, so I pay within the given period!
Mrs Golding: Because you can afford to.
Chairman: Yes.
Mr Faber
673. Secretary of State, you have discussed both with Mr Wyatt and
Miss Kirkbride the whole issue of the public service remit of the BBC. In his
report, Mr Davies says: "We decided we may not be able to offer a tight new
definition of public service broadcasting, but we nevertheless each felt that
we knew it when we saw it". Although, by his own admission, that was a
somewhat flippant remark, does it not highlight the problem of the whole
report that Mr Davies' remit was not wide enough? A lot of the evidence we
have had put before us questions the more specific aspects of public service
broadcasting - not what you were saying to Mr Wyatt but the more specific
broadcasting output. Might it not have been better if Mr Davies had had a
chance to consider that as well?
(Mr Smith) The remit was drawn fairly tightly, although I would observe
that the Davies Committee strayed well beyond its remit (and I welcome the
fact that it did) in quite a number of aspects. I think what we had not
realised fully at the time we established the Davies Committee was the degree
to which these two fundamental questions, which I mentioned in response to
Miss Kirkbride - the question of how you pay for the BBC over the next six to
seven years, and, the question of, what services should the BBC be aiming to
provide over the next six to seven years - are so intimately bound up. That
issue became much clearer as the Committee's inquiry developed, and as the BBC
began to come forward with proposals for the development of new services in
the digital age. What I deliberately did not want to see happen was the
Committee limit itself so that it could not consider both of those two
fundamental questions - and I think they usefully did.
674. You have made a very robust defence of the public service
remit of BBC ON-line (it is probably more robust than any other witness we
have had, including the BBC itself), that certainly the news organisation on
BBC ON-line should continue to be funded by the licence fee. I think that is
what you said earlier. In evidence last week somebody who works at BBC
Worldwide, who was here as a representative of BECTU, said to us: "I am aware
that BBC Worldwide at the moment and the BBC are rejigging the mix of
commercial and non-commercial internet services that are provided. A lot more
has to be seen of what falls out from that. Some of those plans are at very
early stages at the moment". Given your remarks a little bit earlier about
EU legislation and the fact you consider BBC ON-line as a public service
requirement, are you aware that this rejigging is going on within the BBC and
are you happy to hear that?
(Mr Smith) I know there is considerable thought being given to the
balance between beeb.com, which is of course a commercial service, and BBC ON-
line, which is a publicly funded/licence fee funded service. I know the BBC
are considering a whole variety of options between these two services. What
I do not know at this stage is where their consideration of all of this is
leading.
675. It does suggest it is being actively considered at the
moment, possibly in advance of anything you may come out with post-Davies?
(Mr Smith) Of course, one of the things that may be a possibility is to
look at whether the development of commercial services under the beeb.com
umbrella is something that could be developed specifically for the global and
particularly for the North American market, to try and overcome this problem
of BBC ON-line being something that is used around the world, rather than just
by licence fee payers here at home. These are issues we know the BBC are
looking at. What we do not know at this stage is where their thinking is
going. We will obviously be looking with very great interest at any
conclusions and information that arises out of that.
676. Could I move on to licence fee collection. One of the
figures that always jumps out from how the licence fee is spent, and it is in
the BBC's own statement of promises, is the figure for licence fee collection
costs, and it works out at roughly some 6.5 per cent. of how the licence fee
is spent - which always seems a lot of money to people. Are you concerned
that imposing a digital licence supplement might add to the problems of
licence fee collection?
(Mr Smith) One of the issues that obviously needs to borne in mind in
considering this matter is the ease and cost of collection of any digital
licence fee supplement. One of the points that has been made is that if you
went for a licence fee supplement that was very considerably lower than
Gavin Davies has suggested the costs of collection might outweigh the amount
you would actually collect. The cost of administration is undoubtedly one of
the factors we need to bear in mind in coming to any conclusions on this
particular proposal.
677. In your written evidence to us on the over 75s concessions
you confirm that even those who are entitled to the concession who are over
75 will be required to buy a television licence, even though it will be given
to them free. Are we not going to be in a rather perverse situation where my
80-something year old father might be entitled to a free television licence
but he could still be sent to prison for not getting it?
(Mr Smith) What you state there is a technical possibility, but I think
it would be very unlikely to occur. There is a basic legal requirement to
possess a licence if you are in possession of a television set. That is part
of the law of the land. It is not our intention to change that part of the
law of the land. Nonetheless, I do not think we should allow that to stand
in the way of a rather good proposal to make such licences available free to
a portion of the population.
678. It should not stand in its way but, as you say yourself, it
is a technical problem and it could lead to technical problems which the BBC
themselves will have to sort out at greater cost to them?
(Mr Smith) I think it is such a hypothetical problem it is not one which
should disrupt a sensible administrative procedure. However, because it is
a technical problem we will undoubtedly look at it.
679. We have had a lot of evidence from other organisations about
the type of problems of take-up that a digital licence fee might impose (and
Mrs Golding mentioned it this morning) on poorer people in society. It is
likely to be seen as an unpopular move, if a digital licence supplement is
implemented. It is likely to be seen as a form of taxation. You confirm
again in your written document to us that, nonetheless, you would introduce
it through secondary legislation subject to a negative resolution. Are you
happy that a potential new tax, a potentially unpopular new tax, should be
introduced in this way and not seek full parliamentary approval for it?
(Mr Smith) Of course, secondary legislation does require parliamentary
approval. This is, of course, an entirely hypothetical question, because we
have as yet not come to a conclusion on whether we would wish to proceed with
this proposal or not.
Chairman
680. Could I ask you, Secretary of State, if you have available
what the costings are of a payment through the social security system to
people aged 75 and over, and then the cost of a transaction in purchasing a
licence by the 75s, and the cost of administration compared with simply
relieving that section of the population of having to own a licence?
(Mr Smith) I am sorry, I did not catch the final part of the question.
681. Those costings compared with simply relieving that section of
the population of having to buy a licence at all which, in the end, is the end
product of the Government's policy?
(Mr Smith) The issue which would need to be added into the equation, and
we are looking at a variety of different ways of implementing the Chancellor's
offer in all of this - we are looking in detail with the BBC and the licence
collecting authorities - the other issue that needs to be borne in mind is not
just the cost of administration but the potential cost of evasion by other
households that would not qualify under the 75 rule but might, nonetheless,
seek to do so. That is the other issue we need to bear in mind at the same
time.
Ms Ward
682. Obviously you are needing to tread very carefully regarding
your view on the digital licence fee. Have you assessed so far the competing
claims that a digital licence fee will affect take-up?
(Mr Smith) I have certainly looked very closely at the competing
evidence from the BBC and Gavin Davies on the one side, and from the
commercial broadcasters on the other. As I indicated earlier, this is not the
first and only time in which examination of competing claims has to be
carefully made.
683. Have you reached any conclusion?
(Mr Smith) As yet, no. I am awaiting with particular interest what the
Select Committee has to say on this.
684. I am sure it is welcome news to hear that a Cabinet Minister
values the work of a select committee. Perhaps I could ask about the budget.
You are saying obviously you want to look at budget issues. Do you think it
is really appropriate to determine the budget for the BBC for what would be
another six or seven years, when clearly broadcasting issues are changing at
a phenomenal rate?
(Mr Smith) Broadcasting issues are undoubtedly changing at a phenomenal
rate, and that is one of the reasons why, for example, next year we will be
embarking on consultation in relation to overall broadcasting regulation.
However, I think what can be sketched out now with reasonable confidence is:
a vision of what the BBC is in business for; what menu of services the BBC
ought to be aiming to provide in a digital age; and a reasonable expectation
of what the costs of that are, and how those costs should be met. Those are
issues I think it is possible to come to a reasonable judgment about at this
stage. That is the real nub of the decision-making that has to take place.
685. Do you think there is still fat to be cut from the BBC
organisation?
(Mr Smith) I certainly think, as indeed Gavin Davies himself suggests,
there is money to be extracted from further efficiency savings within the BBC.
As I have said on a number of occasions, I very much welcome the commitment
from the incoming Director General of the BBC to seek to shift more resources
out of bureaucracy and into programme making.
686. I certainly welcome that. In relation to BBC ON-line, do you
not think, given the commercial nature of internet services and ON-line
services, that this is a prime area where the BBC could actually fund its
services through advertising from commercial business, rather than through the
licence holder?
(Mr Smith) As I have said on a number of occasions before, this is not
something I would rule out. We do, however, need to be careful about European
regulation on state aids in this respect. However, what I do believe is the
case is that the provision of news and current affairs information on an
interactive basis through the internet is very much a public service service
which the BBC ought to be providing.
687. Going back to the issue you raised in response to
Miss Kirkbride's comments about the commercial sector - you talked about
Radio One and, I have to say, there is a very distinct service provided by
Radio One. Do you think that really applies to Radio Two, Radio Three or,
indeed, Radio Five? Do you think it is fair that Radio Two, for example, can
change its remit in terms of the audience and the types of records it plays
when the commercial sector commercial radio is so tightly bound by regulations
on what they can and cannot do?
(Mr Smith) Of course, one of the things we will be looking at in our
overall review of broadcasting regulation next year is that tight binding of
the commercial sector to which you refer. Secondly, I do think there is a
fairly clear case for most of the radio environment - certainly Radio Three
is a very distinctive service for example which would not be provided in the
format that it is provided by any commercial broadcasters; it is very
distinctive, for example, from the excellent Classic FM. One of the proposals
that has been made during the consultation to us, which I think is certainly
worthy of consideration, is whether approvals of particular services from the
BBC should be given on a time-limited basis with built-in reviews to seek to
put into the process a genuine reassessment on a regular basis in the light
of a changing broadcasting environment, changing tastes, changing commercial
rivalries, to build in a review process to see whether such services should
and can continue. That is an argument I find, certainly initially,
attractive, but it does require careful thought before coming to a final
conclusion.
688. I think your answer shows what the real problem is in trying
to separate out an inquiry or review into BBC funding and a separate review
into broadcasting. Does it not show that both of those areas should be taken
together and that they are inseparable in determining how much the BBC should
get and actually what they do with it. They are two sides of the same coin.
(Mr Smith) Certainly those two questions (which I would put the other
way round - what should they do and how much should they get for it) are
inseparably bound together. Related, but not quite as inseparably related,
are the issues about how the rest of the broadcasting environment is regulated
and what the rest of the broadcasting environment can and cannot do within
that umbrella of regulation. That is not a completely integral part of the
same decision-making process, but it is related and that is one of the reasons
why we have thought that now is certainly the time to embark on a more general
review of regulation and broadcasting overall,
Mr Keen
689. Setting aside quality, is not the main difference between the
BBC and other broadcasters the source of income and the ownership, rather than
the content? When people try to work out what is public service broadcasting
and what is not is that not the main difference?
(Mr Smith) I think both are important. The source of ownership and the
funding does mean there is a major broadcaster in this country which is not
driven primarily by commercial considerations. That is an important factor.
At the same time, there are parts of the public service remit - the inform,
educate and challenge bits of the equation, alongside the entertain bit of the
equation - that I believe do have to do with quality and content.
690. You represent the Government so it is a fair arm's length
from the public on a day-to-day, week-to-week basis. The BBC is even further
away from the public that actually owns it and funds it. Is there not a
democratic deficit; could we not have more direct involvement of the public
with the bureaucracy of the BBC?
(Mr Smith) The BBC will tell you, sometimes at great length, about the
provisions they have in place to consult the public, to listen to the opinions
of viewers, to ensure that through the regional panels that they establish
they try and draw information about the response to their services from all
parts of the country. All of that is important. I do not want to denigrate
it. However, I think what the Davies Report has done is to throw up some
questions about the degree of public transparency and accountability,
particularly in terms of the use of funding, that the BBC has. Those are
issues which I think need seriously addressing in the response we make to the
Davies Report.
691. I understand what you are saying about consultation and the
breadth of consultation. I could give quite a long list of dictators who
would justify it in the same way. Do you not think we should give some
thought to extending democracy as part of a complete review, as Claire Ward
talked about. Is this not another angle to it as well that we should look at?
(Mr Smith) It depends how you are envisaging, as you put it, extending
democracy. What I do not think would be right is giving the Government, which
is answerable of course through the ballot box to the people, a role in
deciding in any sort of detail how and what the BBC should be doing. That I
think would be a breach of the rightful impartiality of the BBC as a
broadcaster. If you are seeking some alternative means of governance of the
BBC, or some alternative means of regulation of the BBC, that is an issue
which I think legitimately can be examined. I would certainly listen with
great interest to anything that the Committee had to say on that. I would
hasten to add - that cannot form part of my immediate response to the
Davies Report. It might, however, be something that could usefully be
considered alongside many of the other regulatory issues in broadcasting as
we develop our consultation over the next year.
Mr Keen: In conclusion, I would say that it is no criticism of the
DCNS, my game would be the other way, to remove government further from it
rather than involve it more.
Chairman
692. Secretary of State, thank you very much indeed. I let that
run on just a little bit because the factual information you have been giving
us is valuable not only to us but to the BBC who have been sitting behind you
and listening with great attention. We are most grateful to you, Secretary
of State. We would wish you a very Happy Christmas and a Happy New Year.
(Mr Smith) Thank you very much indeed, Chairman. I have to say, perhaps
one of the pleasurable things is that I have been looking at your faces rather
than the faces of the BBC behind me. I will certainly return the compliment
and wish the entire Committee a very Happy Christmas.
