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
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
- 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 "
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
shortlysince the cost is a broadcasting cost, that is how
we expect it to be met".
She went on to say she specifically disagreed with the Committee's
recommendation in this area.
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: "
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 televisionthey
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 vulnerablepeople 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
HC deb, col 153. Back
Ibid, col 1544. Back