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Audiences want the BBC to remain a universal service. They also see that the value of the licence fee is that it should keep the BBC at arm’s length from Government but should bring it closer to the public who are footing the bill.”
For those reasons, it was decided that the television licence fee should remain as the main method of funding the BBC for the period of the BBC’s current charter.
In supporting the case for the television licence to continue, it is worth—particularly in the context of the Bill introduced by the hon. Member for Christchurch—revisiting some of the research on which the conclusions of the charter review were based. The Government relied on evidence from various sources, including independent research commissioned by my Department. We commissioned Cragg Ross Dawson to undertake qualitative research, which it completed in April 2004. Its report noted:
“The main perceived advantage of the licence fee system was that it allowed the BBC to operate in the absence of commercial pressures. Only those with the most negative opinions of the licence fee did not appreciate this benefit at some level.
Most recognised it at a superficial level as the lack of advertising. They saw this as a ‘cosmetic’ advantage that the BBC had over commercial broadcasters, without considering more fundamental effects it might have on programming. Most did not like having their programmes interrupted by advertising (or indeed their films interrupted by the news).”
“In this context, many complained about the amount of advertising on other UK channels and stations, and some mentioned US television, where there was said to be”—
my own experience suggests that this is nearly true—
“almost as much advertising as programming.
When asked which aspect (if any) of the BBC made it a better broadcaster than its competitors, respondents often answered ‘the lack of advertising’. This fact alone seemed to be enough to justify the licence fee to many.
Only a minority considered the effects of freedom from commercial pressures more fully than this. They tended to be most appreciative of the BBC’s output, and the most in favour of the licence fee as a method of funding.
There was a belief that the absence of commercial pressures helped the BBC to stay ‘independent’, although understanding of this varied, with some feeling that the influence of government outweighed the potential influence of business.”
“A number also felt that it helped to keep the quality of programmes high and the range of programming wide. Again, there was uncertainty about why this might be the case—some were making a comparison with what they saw as the inferior quality of commercial broadcasters.
Other advantages of the licence fee system were mentioned by those who thought carefully about the issue. Public-service broadcasting commitments (such as niche and minority interest programming)”—
“Yesterday in Parliament”, perhaps—
“were imagined to be easier to meet under a system which provided an overall income rather than funding linked to the success of individual programmes.”
On the income aspect, the report said:
“Some also felt that a degree of external control over income was good for the quality of the BBC’s output. They believed that the corporation received its income on condition that all profits were ploughed into programming, unlike commercial broadcasters who were expected to turn in a profit for their shareholders.”
Another important piece of evidence commissioned by DCMS was a report on deliberative research undertaken by the Corr Willbourn research and development agency and published in 2004. That report found that
“ultimately, the vast majority—regardless of their degree of consumption—could see no better way to fund the BBC. The majority of participants recognised that if the BBC were to be funded by other means, given the long history of its non-commercial status, it would almost certainly lose its essential character. Overall, supporters of an advertising-free BBC outnumbered those who resent paying the licence fee.
To sum up, by the end of the deliberation the great majority felt that the licence fee, although far from perfect, was to date the best, or more accurately the ‘least worst’, way to fund the BBC.”
Further research, which was compiled from about 5,000 pieces of correspondence from the general public, mostly responses to an eight-question consultation issued by the DCMS, found that the majority felt that the BBC was the
“greatest bargain in the world”.
“Generally, respondents compared the cost of the BBC services very favourably with the comparable costs of a subscription to Sky; very rarely, respondents made the contrary assertion that the Sky packages represented better value. One respondent made the observation that ‘when the cost per head in the average UK household is approximately 8p a day, for 10 television channels, 50 radio stations and a top-notch website, you have to wonder where the argument against the licence fee can be made.”
Mr. Chope: Will the Minister give way?
Barbara Follett: Yes, happily. [ Laughter.]
Mr. Chope: I am reluctant to intervene in the Minister’s long and dogged analysis, but has she considered the fact that the BBC’s audience share is 30 per cent., and that the figure is falling, not increasing? Her argument would suggest that the figure should be going in the opposite direction. Many of her arguments date from several years ago and the caravan has moved on.
Barbara Follett: My arguments date back because they were part of the research that was done for the general charter review. One reason that there has been a fall-off in audience for a great number of things is the huge variety of outlets that are available. A particular example that is cited in relation to younger people, particularly younger men, is the availability of computer games and other calls on people’s time. What I am trying to do—I agree that it is dogged—is to prove to the hon. Gentleman that we looked at the funding of the BBC in every way possible. We have concluded that the current system is the best, and public research backs that up.
Richard Younger-Ross:
The Minister makes a point, but the reality is that the way information is conveyed is changing rapidly. We have the internet, Sky and all the other means by which people can view, and all TV companies under pressure at the moment, and ITV in particular, have fewer viewers. Another consideration is
the fact that the BBC has followed the example of Sky and others and now broadcasts for 24 hours, which places greater pressures on its budget.
Barbara Follett: The hon. Gentleman is completely right. Television has changed and is changing almost as we are standing here. We must take the final point about why people like the licence fee: it is seen as a way of guaranteeing high quality public service broadcasting. There are good and bad public service broadcasters, and I think that the BBC is second to none. We get an excellent service from it, which is partly based on the fact that the corporation’s annual income is unaffected by commercial factors and economic fluctuations.
Let us imagine what would happen if people had to rely on subscriptions from some of the firms that are facing an economic downturn. We would definitely suffer.
Richard Younger-Ross: Is not one of the BBC’s advantages the fact that it knows where its funding comes from and knows that that funding is there for a certain period? That allows it to plan in a way that others cannot, and that is an advantage in enabling it to produce high quality public service broadcasting.
Barbara Follett: It also allows it to broadcast programmes such as “Yesterday in Parliament”, which can be seen as loss-leaders, to appeal to a niche market. If that ability is removed, there is a danger that the situation could end up like that with the buses, where only the popular routes are served. That can be very dangerous.
Mr. Vaizey: I forgot earlier to correct something that the Minister said. I was not talking about “Yesterday in Parliament”. I was talking about the Parliament channel, the broadcasting channel on which we appear live at the moment. I am an enormous fan of “Yesterday in Parliament”, particularly if this soundbite is used on it later.
Barbara Follett: I do so hope that it will be, for the hon. Gentleman’s sake.
Richard Younger-Ross: Was that the commercial break?
“that the future is bleak if the fee is abolished”.
A considerable number of other respondents expressed similar sentiments. The licence fee is viewed as a necessary evil, justified by the benefits that it funds, and considered by the majority to be the only viable means of ensuring that the BBC continues to have such a high standard.
People who favoured the licence fee had a strong affection for the BBC. The hon. Member for Wantage touched on this issue. The BBC is family. I am probably the only one in this room who can remember almost when it first started broadcasting, I am that old. Muffin the Mule played a formative part in my life.
Mr. Vaizey: The Minister should be aware that the BBC started broadcasting in 1936. I know that she is older than she looks—she looks a lot younger than she is—but she cannot be that old.
Barbara Follett: I am sorry. In my enthusiasm I forgot to mention that it was BBC television that started in 1955—[Hon. Members: “No, it didn’t”.] I have obviously got my dates muddled, so I shall return to what I remember very well, which is “If it ain’t broke, don’t fix it”—the common mantra of a significant number of respondents. Their strong support for the licence fee was secured by the belief that the current system was tried and tested. The House can imagine the response if in these economically turbulent times we suddenly announced that we would change the way in which we set the licence fee. People would say, “Why don’t you just leave it alone? It’s working well enough.” One respondent said:
“I have yet to hear a convincing argument for an alternative to the licence fee, and cannot conceive of one emerging before or after 2016.”
However, if the hon. Member for Christchurch can think of another method, I am sure he will find Ministers who will listen. There has been examination and elimination of alternative funding methods, but most people were concerned that they would result in the dumbing down of what the BBC offered.
Senior researchers at the Work Foundation studied people’s willingness to pay and found clear recognition of the public value of the BBC. Most agreed that
“the BBC makes a moderate contribution to British life”,
and enjoys strong support among British people by providing impartial news and being a global UK brand.
It was valuable to hear the BBC’s support for retention of the licence fee. As a contribution to the charter review debate in 2004, the BBC published “Building public value”, which set out its views on its future. The document stated:
“The licence fee has many advantages as a way of paying for the BBC. That is because, in broadcasting, there is a direct connection between the source of funding and the nature of the broadcaster.”
That is an important point. As long as the British public want the BBC to be an independent, universal broadcaster, committed to serving everyone on equal terms and to delivering quality and originality, the licence fee will remain a powerful and effective means of paying for its services. It is the BBC’s licence fee funding that enables it to focus solely on serving the British public. It gives the BBC the time, breathing space, freedom from commercial pressure and stability to take risks and to aim to serve the widest possible range of audience needs. The first obligation of commercial broadcasters is to their shareholders.
As competition intensifies over the next decade, the divide between culture and commerce in broadcasting will inevitably widen. Cultural, political and economic considerations all support the conclusion that licence fee funding is the best way of paying for the BBC.
First, I shall look at the cultural considerations.
Mr. Chope: I hope I can be helpful. As the Minister has been speaking for 40 minutes and is obviously frightened that I might win the vote if the matter came to a Division, it might help her for me to indicate that when I have the chance to reply I shall seek leave to withdraw my Bill. That may enable her to make her remarks briefer.
Barbara Follett: I thank the hon. Gentleman. Fear does not come into it, but his remarks are indeed helpful.
I shall finish my speech by considering the BBC’s views about why the licence fee is the best way of funding the service. The UK’s culture, society and democracy benefit greatly from the universal availability of high quality broadcast services that create public value. Licence fee funding confers on the BBC an obligation—a responsibility to treat everyone in the country fairly and equally, ensuring that they receive the high quality programmes they want, even if the audiences are not always large. That direct connection between the BBC and the British public has conditioned the way the BBC behaves and the programmes it makes. Because rich and poor, old and young pay the same, the BBC treats all the same. In the words of a Member of the other place, Lord Puttnam:
“The licence fee remains the most effective and equitable form of funding that has ever been created for a public body.”—[ Official Report, House of Lords, 21 April 2004; Vol. 660, c. 325.]
The second consideration is politics. A conundrum in public service broadcasting is how to ensure that a publicly funded broadcaster can remain independent from political influence, given the old saying, “he who pays the piper calls the tune”. Licence fee funding solves that conundrum by ensuring that it is the British people who pay for the BBC, and not the Government, who control its output. Although the Government set the licence fee at regular intervals, the BBC’s finances do not form part of their annual spending reviews or budget setting. The licence fee is therefore an important pillar of the BBC’s independence.
The final consideration is economics. Broadcasting has unusual economic characteristics. Like street lighting and public parks, it is a public good: one person consuming it does not prevent others from doing so. Without intervention, public goods tend to be priced too high and to be under-supplied; as a result, some people who could have consumed the goods at no additional cost go without. Those welfare losses represent a market failure, in the sense of an inefficient allocation of society’s overall resources. The effect is compounded by the tendency of private providers of public goods to become monopolists. Licence fee funding for the BBC recognises the public good characteristics of broadcasting and ensures a low price and universal availability.
There are other advantages. Because it is independent of the economic cycle—that is extremely important at the present time—the licence fee enables the BBC to behave counter-cyclically, ensuring that investment in the UK’s creative economy, training and technology is maintained, even in times of downturn. It also supports the BBC in taking longer-term risks.
In May 2005, the BBC published its response to our Green Paper. Its findings include the following:
“In broadcasting, there is a most effective and equitable form of funding. The licence fee is a distinctive funding mechanism that underpins the unique identity and mission of the BBC.
Licence fee funding enables the BBC to focus solely on serving the public. It is a universal way of paying for what is essentially universal provision, while at the same time safeguarding the BBC’s independence.”
“The public understands that the BBC’s distinctive method of funding leads to a distinctive service. Research commissioned by
the BBC showed that over 80 per cent. of people are willing to pay the current level of the licence fee to continue receiving BBC services and on average, people value the BBC at twice that amount.
The fundamental strengths of the licence fee will persist in a fully digital world. While the spread of new technology may make it possible in future to change how the BBC is funded, this does not mean that it would be in the public interest”—
despite what the hon. Member for Christchurch says—
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