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Select Committee on BBC Charter Review Second Report


CHAPTER 3: THE COSTS OF DIGITAL SWITCHOVER

34.  The plan to switch-off the analogue television signal is a huge project. It will involve the conversion or replacement of millions of television sets, aerials and VCRs across the whole of the country. The House of Commons Culture, Media and Sport Select Committee are currently taking evidence on the Government's proposals in this area. Therefore we have not taken evidence on the details of the plan.

35.  However, one of the most controversial elements of the current licence fee bid is that the BBC has been asked to cover some of the costs of digital switchover. In our first report we stated that "Given the financial benefit that the Government will accrue we do not believe that the costs of promoting and co-ordinating digital switchover and providing targeted help for the vulnerable and disadvantaged should fall on the licence fee payer. Such costs should be covered by the Government (i.e. the general tax payer). Switchover is a Government policy which applies to, and affects, all broadcasters and all viewers and listeners".[9]

36.  In its licence fee bid, the BBC has split the costs it is to cover into three separate categories:

  • First there are the costs associated with the BBC's role in Digital UK the independent, not-for-profit organisation, established to lead the switchover programme and communicate with the public. The BBC estimate these costs will be £200million cumulatively.
  • Second there are the possible costs of a spectrum tax (if Ofcom decide that the BBC should be charged for its use of the radio frequency spectrum). The BBC estimates this could cost £300million cumulatively. We will look at this in more detail in the next chapter.
  • Third there is the cost of providing targeted help with switchover to the elderly and disabled (a group that the Government refers to indiscriminately as "vulnerable"). What this will entail, and therefore how much it will cost, has not yet been worked out in detail. We are particularly concerned about this final cost category.

37.  We note that the Government has already rejected the recommendation in our first report that the cost of providing targeted help should be borne out of general taxation. In the House of Commons on 19 December 2005 Tessa Jowell MP, the Secretary of State for Culture Media and Sport, stated that "…we have announced a package of help, which will be funded by the BBC as part of the new licence fee settlement that will be negotiated shortly—since the cost is a broadcasting cost, that is how we expect it to be met".[10] She went on to say she specifically disagreed with the Committee's recommendation in this area.[11]

38.  We think there is a particularly strong argument for changing the policy of requiring the BBC to pay for targeted help with digital switchover. We support the views of Mark Darcey, the strategic director at BSkyB, when he told us why he thought the Treasury should cover such costs: "…the marketing costs, the disruption that will be faced by people who are forced to convert, the assistance to the vulnerable and that category of costs. They largely come about because of a decision… to switch off the analogue signal and then to be able to sell on the spectrum that is released. It strikes me that at least in the first instance the beneficiary of that is the Treasury and it might then be sold on... Again it seems perhaps slightly odd to ask for the licence fee payer to bear the costs associated with delivering that benefit to the Treasury" (Q 122). Other witnesses shared this view. Jocelyn Hay, Chairman of the Voice of the Listener and Viewer, told us "what we do not think is right is that the BBC should bear the social costs of helping vulnerable viewers to access a highly desirable service which previously and normally would be paid for out of general taxation" (Q 2038).

39.  We asked Michael Grade whether he was happy that the BBC was being asked to pay help with switchover. His answer showed he had reservations: "in agreeing with the Government to use the licence fee for that purpose, it is conditional that it is not so onerous that it brings into question, or increases resistance to, the licence fee. It is also a condition that we must not be in a position where, in using the licence fee for this targeted help purpose, we have to cut services in order to meet that requirement. There is a large measure of conditionality in terms of our support" (Q 1946).

40.  Currently those aged over 75 already benefit from a form of targeted help with the costs of receiving television—they are exempt from paying for the licence fee. The cost of exempting over 75s is covered by the general tax payer. We can see no reason why help for the over 75s, and other vulnerable viewers, with the costs of switchover should be borne by the BBC when the Government already accepts that it is responsible for bearing the costs of the licence fee for over 75s.

41.  We raised this matter with James Purnell MP. He repeated that providing targeted help was broadcasting, not social security, policy and that "there are BBC-specific reasons for why the licence fee is the appropriate way to do this. We think it helps make sure that the BBC's digital services are universally available. We think that it is a progressive use of the licence fee because it will be benefiting in particular people who are vulnerable—people over 75 and people who are disabled" (Q 1890). We do not feel this answer explains why exemption of over 75s from the licence fee should be borne out of general taxation. Nor do we agree that this social policy should be paid or through a regressive form of taxation.

42.  We therefore urge the Government to consider again covering the costs of providing targeted help with digital switchover from general taxation.


9   First Report of Session 2005-06; para. 200. Back

10   HC deb, col 153. Back

11   Ibid, col 1544. Back


 
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