APPENDIX 68
Memorandum submitted by Mr Hugh Small
HOW PARLIAMENT
CAN MAKE
THE BBC SPEND
THE LICENCE
FEE CORRECTLY
Summary: The Government's present policy will
encourage the BBC to misuse the remaining £12 billion of
licence fee money to prepare itself for privatisation in 2006.
If the money were spent instead on the purposes for which the
viewers subscribed it, it could have an enormous impact on the
intellectual life of the country and could justify the continuation
of the unique licence fee system after 2006. The misuse of licence
fee money violates European legislation and Parliament should
act to stop it.
Hugh Small is a historian and author who has
worked with the BBC on documentaries.
The BBC's generous Charter now has five years
left to run, promising it a further £12 billion in revenue
from household television licence fees. Few people believe that
a new Charter in 2006 will keep the licence fee money flowing
in the same way, given current dissatisfaction with the BBC's
performance. The chances that the Government will toughen up the
present Charter before then may seem slight. But the chances improve
if you take into account that the current arrangements violate
the strict European laws on the use of state aid—which is
what the European Commission has already declared the license
fee to be. If Parliament can ensure that European legislation
is implemented, the dream shared by many of those who pay the
license fee—that they are enabling one of the world's most
powerful cultural machines to work for the preservation and enhancement
of our culture—could become a reality. If not, we will never
know whether £12 billion in cash and a free monopoly of airwaves
could, correctly used, have stemmed the tide of ignorance successfully
enough to justify the continuation of the unique licence fee system.
Although national governments have defended
their broadcasting territory by securing an amendment to the Treaty
of Rome specifying that they and not Brussels will police the
content of their public service broadcasters, this still leaves
them vulnerable on the state aid issue. The European Commission
has already begun proceedings against the French and Italian authorities
for providing illegal state aid to their public service broadcasters.
Two months ago the Commission published a detailed set of guidelines
explaining under what circumstances state aid to broadcasters
can be legal, and it is clear that the BBC fails the test. This
is because the guidelines say that state aid is illegal if there
no independent body to impose content requirements and monitor
performance against them.
The only body presently charged by the government
with defining and monitoring the BBC's public service obligations
is the BBC's Chairman and Board of Governors. This does not meet
the EC Treaty's requirement that the monitoring authority be independent
of the broadcaster. The Governors have listed their "criteria
for assessing BBC public services" but these are not detailed
enough to allow independent observers to see whether the BBC is
meeting the Governors' goals. The Governors themselves, in the
BBC Annual Report, say that the BBC has not met their goals but
there is no suggestion that this may affect state aid.
Culture Minister, Tessa Jowell has announced
the Government's intention to measure the BBC's performance as
a condition of having granted it new digital frequencies, but
even if she succeeds in implementing this intention her conditions
do not meet the EC Treaty's test for justifying state aid. She
proposes only to see that the BBC does not reduce the quality
of material currently broadcast on its existing channels.
The proposed new legislation described in the
UK government's recent Communications White Paper will not bring
the BBC in line with EC Treaty obligations. The White Paper proposes
to "give the public service broadcasters the opportunity
to demonstrate that they can be better delivered and monitored
through self-regulation." In the case of the BBC this self-regulation
will continue to be exercised by the BBC Board of Governors. The
White Paper does not propose to introduce any measurable performance
criteria for the BBC, only stating that the BBC must produce an
unspecified mix of educational, comedy, drama, religious, children's,
arts, etc programmes.
Without the backing of European legislation,
the UK government alone could not regulate the BBC even if it
wanted to because the BBC is too powerful. This is a problem to
which the influence of Brussels is an excellent solution, as has
been shown in the telecommunications industry and elsewhere. The
BBC's power, contrary to public imagination, does not come from
its ability to support of oppose government policy. It is the
power of money: the BBC is too big a source of patronage for any
individual in the UK Government or civil service to want to interfere
with it. This power of money is increasing at the economy declines:
there is no other organisation in the country which is guaranteed
£12 billion of revenues over the next five years and can
spend it without being required to achieve any measurable goals.
While the economic slowdown and plunging advertising revenues
are causing difficulties for other businesses, the BBC's relative
strength increases.
An example of the BBC's power over the government
accidentally emerged during the summer, when new Europe Minister
Peter Hain proposed to criticise the BBC and the newspapers for
their "primitive level of coverage" of European issues.
A draft copy of Mr Hain's speech reached the press, who discovered
from annotations on it that the Foreign Office had suggested that
he remove his criticism of the BBC but not of the newspapers.
Television in increasingly the dominant medium
for informing the public, and the more pluralistic broadcasting
regime of the last few years has done much for the economy but
very little for the intellectual level of the country. £12
billion may not be the correct sum to spend over the five years
on public service broadcasting in the UK but the public has bought
the dream at that price and if correctly administered the impact
of this money would be huge. Many influential critics of the BBC
think that it should not receive the whole of the £12 billion.
They argue that the BBC's competitors should be allowed to tender
for public service tasks. Others propose the abolition of state
aid or its reduction to fund only those services that cannot be
provided by advertising-funded television. The BBC's critics include
powerful competing private broadcasters who can take advantage
of the legal uncertainty surrounding the BBC's funding to argue
for its reduction. Nearly all of the interested parties converge
on the view that at the end of 2006, when its current Charter
expires, both the size of the licence fee and the BBC's monopoly
of it will be challenged.
In 2006 the UK Government will have the option
of deciding that the UK broadcasting market is sufficiently pluralistic
to remove the need for any state aid at all for public service
broadcasting. The continued failure of the BBC to even meet its
Governors' targets on public service during the next five years
may help to persuade the public that the dream could never have
worked. The removal of any public service mandate will improve
the chances of a successful privatisation of the BBC under the
leadership of a new CEO who previously headed a private broadcaster
and a new Chairman who was an investment banker.
The appointment of Messrs. Dyke and Davies doesn't
prove that privatisation has been decided on. If it has, these
two certainly look like the people to make it succeed. But even
if the two leaders have no bias to privatisation, the whole political
environment does. If the BBC remains publicly funded, it will
be a source of never-ending angst for politicians who will have
to appoint the people who regulate the programmes as required
by the EC state aid rules. If they let the whole public service
remit go belly-up by simply ignoring it, the BBC can use the last
£12 billion of licence fee money to build a global broadcasting
colossus. (All leaders of large companies pursue such goals—British
Telecom comes to mind and the appointment of Davies and Dyke certainly
shows some lessons have been learned from that). Nobody will weep
for public service remit that will by 2006 have been a dead letter
for a decade, and a privatisation of the new global broadcasting
colossus will be simply too attractive. £30-£40 billion
of new money will appear in the exchequer overnight, and there
will be no Railtrack-style fatalities. Once safely privatised
at a price befitting the dominant owner of the airwaves, the government
can then suddenly discover a whole new range of frequencies that
they can auction off to new entrants to the market. Sound familiar?
With such a brilliant outcome from doing nothing, who is going
to try to make the licence-fee payer's dream work?
Could the Government give the public service
mandate to some other organisation, to preserve the mandate without
obstructing BBC privatisation? Would Branson offer to do it? This
would be a bad result, because the BBC has a unique combination
of strengths if properly used in a public broadcasting service
with legal security under the EC Treaty. This unique combination
of strengths include its good public image, a high public tolerance
of its powerful funding system (which would probably not transfer
to a new operator), and the fact that it seems to know how to
make good programmes. It wildlife programmes are widely admired,
but they can't justify the licence fee on their own, contrary
to a recent press article where a favourable review of the BBC's
expensive Blue Planet series about marine wildlife was headlined
in all seriousness "The fish that could save the licence
fee."
What would save the licence fee is a control
mechanism that causes the BBC to focus of saving our culture,
not just on saving the planet. Parliament now has a unique opportunity
to create this by demanding conformity with the European Commission's
recent guidelines on state aid to public sector broadcasters.
If Parliament delays, the opportunity may be lost forever.
February 2002
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