BBC Licence Fee Settlement and Annual Report - Culture, Media and Sport Committee Contents

Letter to the Chairman from Rt Hon Jeremy Hunt MP, Secretary of State for Culture, Olympics, Media and Sport

Dear John,

Thank you for your letter of 17 February.

I am grateful to you for providing the opportunity for me to contribute evidence to the Committee's report on the BBC Annual Report 2009-10 and the licence fee settlement. I will respond under your two headings.


The discussions with the BBC on the licence fee arose from discussions undertaken by Government in the context of the Comprehensive Spending Review. Officials in my department informed the BBC on 11 October that the Government was assessing the scope for the BBC to take financial responsibility for some areas of spending currently covered by the Exchequer. Transferring the funding of TV licences for those aged 75 and over and the World Service from the Government to the BBC were two of the options under consideration.

These options arose from Ministerial discussions and, in line with the Coalition's approach to policy making, both Liberal Democrat and Conservative Ministers were involved.

I attended four meetings with the BBC in the course of securing the licence fee settlement and met the Chair of the Trust in one of these meetings. The Chair did not personally attend all the meetings but I was satisfied that those with whom I was dealing had the full authority of the BBC and were in close contact with him.

From the initial discussions with the BBC on the BBC's contribution to reducing the fiscal deficit, it quickly became clear that it was in the interests of both parties and of licence fee payers to finalise a new licence fee settlement. During the course of discussions, we discussed several issues including the scale and scope of the BBC's commercial activities and the future carriage of public information broadcasts.

Given the scale and pace of the spending review and licence fee agreement discussions, it was not practical to have in-depth discussions with all interested parties or undertake an indepth impact assessment. However, during four years as a frontbench spokesman for media issues I have publicly set out my views on the BBC and direction of travel in relation to the licence fee and had thought long and hard about these issues. My priorities were to secure a contribution to reducing the fiscal deficit and to ensure that the deal represented excellent value for money for licence fee payers in line with the principles I had previously articulated. I am delighted that the settlement achieved all of those objectives.


The outcome of these discussions is reflected in the settlement letter that I sent to the Chair of the Trust on 21 October.[13] This letter covers both the policies agreed and the additional funding responsibilities. The calculation of a 16% saving over the four years is expected to be achieved through the BBC absorbing these additional responsibilities coupled with a freeze in the level of the licence fee until 2016-17.

The BBC Trust set out its view on issues relating to the future scale and scope of the BBC, in light of the BBC's strategy review completed last year. The BBC's position was confirmed in a letter to me of 21 October from the Chair of the Trust.[14]

I do not believe I have changed the parameters for future negotiations between the BBC and Government or restricted in any way the Government's ability to negotiate in future. The deal represents excellent value for money for licence fee payers who will pay less in real terms for their TV licences between now and 2016-17. In particular, licence fee payers will benefit from the transfer of the World Service to licence fee funding as this will increase the BBC's ability to maximise scope for sensible efficiencies and economies across the whole of the BBC family. Licence fee payers will continue to have access to the World Service.

From 2014-15, the Government will relinquish control over the funding of the World Service but, as now, the written approval of the Foreign Secretary will be necessary for the opening or closure of any foreign language service.

In response to your question about supporting non-BBC services, the settlement means that the licence fee will be used to support non-BBC services to a far greater extent than at present.

Some of the provisions in the BBC Agreement need to be amended to give effect to the changes arising from the licence fee settlement. On 14 February, I laid in Parliament an amendment to the BBC Agreement that ensured the BBC Trust can decide to use licence fee money to contribute to the cost of restructuring the World Service ahead of it transferring to the licence fee in 2014-15. The BBC was keen for this amendment to be made as soon as possible in order to give them as much time as possible to plan for the changes.

My officials are working closely with those at the BBC on amending the text of the existing Agreement, where it is necessary to do so, to give effect to the other changes and I expect to make an announcement on the amended Agreement as soon as possible. This will cover the arrangements in relation to local television and the roll-out of superfast broadband, as well as implementing the other changes set out in the letter of 21 October. The Agreement is an agreement between the Secretary of State and the BBC and, therefore, changes have to be made by mutual consent.

I do not intend to consult on the amendments to the Agreement, in that the amendments are formalising what has already been agreed with the BBC in the licence fee settlement. The one exception to this is in relation to the new partnership arrangement with S4C. I proposed the new arrangements in relation to S4C because the existing funding model is unsustainable in its current form and it was in the best interests of the future of Welsh language broadcasting, to which I am fully committed. In taking forward the work to implement the new partnership that is described in the settlement letter, my officials are in discussion with the BBC and S4C and have sought views from other parties, including independent producers in Wales and officials from the Welsh Assembly Government.

Rt Hon Jeremy Hunt MP
Secretary of State for Culture, Olympics, Media and Sport

9 March 2011

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Prepared 19 May 2011