Examination of Witnesses (Questions 1880
TUESDAY 17 JANUARY 2006
James Purnell MP
Let's then go back to where we were and what you referred to as
the BBC's "opening bid". The history over the last 20
years has been quite interesting because the licence fee was first
linked to RPI in 1988 and until 1998 it went on matched to RPI
and below. Since 1998 the licence fee has been more than RPI in
each year and we are now coming to the situation where if the
BBC's proposal were to be accepted it would be RPI + 2.3 per cent
and that does not take account of the costs of switchover so it
could be in fact with the elderly and disabled something like
2.8 per cent. Do you think that this size of increase is sustainable
year after year after year?
James Purnell: As I was saying before we broke,
I am not going to give a running commentary on what we expect
the level of the licence fee to be however I think we can set
out some clear principles. We will look at the services proposed
by the BBC, we will take an overall policy decision on what the
BBC should be doing for the next Charter review period, and we
will want to make sure that the BBC is adequately funded. We will
look at their financial proposals and we will scrutinise them
in an extremely robust way and we will also want any decision
we arrive at to be bounded by the public acceptability of the
licence fee. So those are the principles within which we will
make that decision, but I cannot at this stage give you an indication
of where that will end up.
Just taking those principles, what you said about public acceptability
seems to me very important. Are you not concerned that if it goes
on like this year after year after year the public acceptability
of the licence fee is going to reduce if not disappear?
James Purnell: I think public acceptability
is a very important point. The next Charter review period presumably
in 10 years' time will be happening in an all-digital environment
(assuming the Government's policies are successful) and to achieve
Charter renewal at that time the BBC will have to have a significant
level of consensus for the continuance of its role in a digital
world, and acceptability of the way that it is funded will be
an important part of that.
So I think we can take it from what you are saying, leaving aside
what the figures are, that you are seeking to work to oversee
this bid and if possible to bring it down?
James Purnell: Yes, we want a strong and independent
BBC. We will look at what services will be necessary to deliver
that. We will be robust in the way that they propose to finance
those services and we take the acceptability of the licence fee
into account in making those decisions.
Q1883 Lord Holme of Cheltenham:
I understand that you do not want to negotiate publicly with the
BBC at a delicate moment, and that is quite understood, but since
one of your principles is public acceptability, would it not be
fair to say that the reaction to the BBC's opening bid was surprise
and I would even say shock at the quantum that they seem to envisage
as being necessary to discharge their responsibilities?
James Purnell: I do not want to start sounding
too much like a broken record but there are pitfalls on both sides
here. If the BBC were not adequately funded to deliver services
which would enable it to retain audience reach in particular,
having services which people are using pretty much every week
and which they value and see as an important part of British culture,
if they were not doing that, there would be a problem with acceptability.
On the other hand, if they also thought that they were not getting
good value for money from the licence fee then that would also
be a problem, so acceptability and the value for money of the
BBC's services will be a key part of how we decide to level the
Q1884 Lord Holme of Cheltenham:
And you could not imagine any situation where they would get more
than what they have asked for?
James Purnell: I think that is unlikely.
Q1885 Lord Maxton:
I argued at the last review for RPI plus on the basis that one
of the things that has to be done is the digitalisation of the
whole archive of the BBC however the only way really that the
public can have access to it is through the Internet through the
BBC's website, and that is great, that is fine, and I fully support
that. The problem is that that archive is not just available to
the licence fee payer in this country; it is available to every
person on the Internet in the whole world, and that means the
licence fee payer is basically subsidising the broadcasting of
material for other people elsewhere, is he not? I believe it is
right but I think there is an argument there that people will
James Purnell: Yes, at the margins I think that
is true. It would be interesting to think through whether that
is a good thing or bad thing overall for Britain, in the same
way people using the World Service is a good thing for Britain
in a general sense for people understanding us and our point of
view. Whether the cost of preventing access to those programmes
(and I do not know if it would be possible) would be justified,
given the marginal benefit of other people around the world seeing
it I do not know. Obviously the BBC does exploit its programmes
in other markets and should continue to be able to do so.
Q1886 Lord Maxton:
In my view, by the time of switchover in 2012, and I will come
to digital switchover, most broadcasting will be done by broadband
in this country and elsewhere so, given that, why has the Government
set its face, as it already has, against the proposal in our first
report that the taxpayer should pay for the digital switchover
rather than the BBC, which is only one of the broadcasters of
course which will benefit?
James Purnell: We will be commenting formally
on the recommendations in your previous report
Q1887 Lord Maxton:
In a Parliamentary Question on 19 December the Secretary of State
made it clear
James Purnell: We will be reporting back to
you on your recommendations, again very shortly before the White
Paper is published and we will give full responses to all of the
points that you made. As you say, the Secretary of State answered
a question on that and indeed I gave evidence to the Culture,
Media and Sport Select Committee on this issue last week. The
reasons are that we believe that supporting and spreading Digital
Britain is an important part of the BBC's role. It has always
been part of the BBC's role to support new technology and to provide
content for new technology, for radio when it was created, television,
the Internet and now digital TV. Therefore we think there is a
general public benefit in the licence fee being used for that.
We also think there are important BBC-specific reasons. First
of all at the moment the BBC is funding a number of services that
people can only access with digital television and we think that
is right. It is right for the BBC to be able to pioneer technologies
that are not yet universally available but I think there comes
a point at which you do have to seek to make universally available
the BBC-funded services. This approach will mean that everybody
will have the opportunity to have digital television and be able
to access BBC Three and Four and other services on digital. Also
there is a benefit for the BBCand I think the BBC said
this in their last session to youwhich is they share an
interest in there being universal access to public service television.
They also share a financial return because they will not have
to broadcast in analogue and digital. I think for all of those
reasons it is quite appropriate to use the licence fee to support
switchover costs and also the package for the vulnerable that
we have identified.
Q1888 Lord Maxton:
Let's leave the package for the vulnerable to one side. The actual
switchover cost will be of benefit to a small percentage by 2012
who are not already paying for digital. A large percentage of
us are already paying. It is not rich and poor, by the way. If
you go to any council house area in Glasgow and see the number
of Sky dishes and so on there, you will know it is not a poverty
thing, it is an area thing and a variety of other reasons. So
why should those who have already got digital be paying for the
rest of the population to get it?
James Purnell: Your first point is quite well
made which is the difference in proportion of people who have
digital TV between the top half of the income scale and the lower
half is pretty minimal, but we think this is an important use
for public money from the licence fee for exactly the reasons
I have just laid out, which is that we think people should have
access to services they are paying for. They are paying for BBC
services through the licence fee and therefore they should have
access to them. Also in general if we did not have a policy of
switchover, in effect, people would be wasting a public resource.
The spectrum is a very important public resource and it is important
Q1889 Lord Maxton:
No-one is arguing with the importance of switchover. What we are
arguing about is whether it should be the BBC who pays for it
rather than coming out of general taxation when, after all, it
is the government and the taxpayer that is going to benefit from
the sale of the analogue spectrum, not the BBC, unless you do
intend giving all the money from the analogue switchover to the
BBC and reducing the licence fee.
James Purnell: I would question your premise
that it is the government and the taxpayer who are going to benefit
from switchover. I think it is right for the country and I think
it is right for British television. British TV, arguably, has
been the best in the world because we have been at the forefront
of technology and I think we need to maintain that. If we did
not and if we started to go to a world where we were falling behind
compared to other countries then I think in 10 or 20 years' time
people would criticise us for not having taken the right decision.
I think the BBC is the right way.
We are slightly at cross-purposes. The point being made is who
actually bears the cost? Is it the licence fee payer or is it
the taxpayer? This Committee supports the licence fee but we do
understand that it is a regressive form of taxation, there is
no question about that. Would it not be fairer and more sensible
for the switchover costs to be borne by the general taxpayer?
James Purnell: No, I do not agree with that.
I do not want to repeat myself but we think 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 benefitting in particular people
who are vulnerablepeople over 75 and people who are disabled.
I think that helps to answer the point about regressivity. As
the BBC themselves said, they share an interest in there being
universal access to digital television and they will also share
an interest in their not having to broadcast both in analogue
and digital. We think that using the licence fee (which is paid
by virtually everybody in the same way that taxation) is the appropriate
way of funding it.
Okay, we will go on to the value of the spectrum and Lord Holme
but just to pick up the point on the response from the Secretary
of State to our first report, you said shortly; in fact, you mean
on this occasion very shortly because I think it has to be by
the end of this month?
James Purnell: That is right.
Chairman: Just so we are planning on
the same basis. Lord Holme?
Q1892 Lord Holme of Cheltenham:
I would really like to pursue the point we have been talking about
because presumably you would concede that if the BBC are to bear
the cost as the Government proposes then whatever the increase
in the licence fee would have been it will be higher because of
James Purnell: Because of the cost of the spectrum?
Q1893 Lord Holme of Cheltenham:
No, the switchover. Whatever the increase in the licence fee would
have been it will be higher if the BBC is bearing the cost?
James Purnell: Of switchover, yes.
Q1894 Lord Holme of Cheltenham:
This brings us to the question of spectrum because the analogue
spectrum that is left after this switchover of course is of value
and it is of value two ways. We have the Government's own estimate
that it is worth between £1.1.and £2.2 billion to the
economy but there is also the issue which we explored with Ofcom,
whom I gather will be charged with selling it, of the potential
sales value of the spectrum. So the Government and the Treasury,
and I do not know whether it is an uncovenented bonus, but they
certainly have a bonus accruing both to the economy and specifically
in terms of revenue coming. I think that this really makes the
previous questioning by Lord Maxton and the Chairman even more
relevant because what does the Government propose to spend that
money on? Why would it not most appropriately be spent on paying
for the digital switchover which is highly relatable?
James Purnell: I think we are a long way from
being in a position of deciding how to spend any of that money.
If I can just lay out the process by which this happens. The decisions
about how to allocate spectrum in particular and whether to charge
for it are for Ofcom. That decision was taken by the House of
Commons and the House of Lords in the Communications Act and we
charged Ofcom with that responsibility. Ofcom will now carry out
what they call their digital dividend review in which they will
look at the uses to which the spectrum will be put and the most
effective way of allocating it. The general approach of Ofcom
and the Government is we believe that the market mechanism is
the right way of ensuring efficient allocation of spectrum, but
we will make those decisions taking into account the interests
and the views of other stakeholders including the public service
broadcasters. So we have not completed consultation, we do not
know what the spectrum will be used for, and we have not got anywhere
near allocating it, so decisions about what to do with any money
which was raised by this would be made by future Ministers.
Q1895 Lord Holme of Cheltenham:
You do not even have any estimates of what the likely revenue
or possible revenue might be or a min and max range of revenues?
James Purnell: No, we do not and we have answered
Parliamentary Questions on that. It is important to realise that
the policy is generally not led by a desire to raise revenue;
it is led by the importance of allocating the spectrum efficiently.
I am sure that you would all accept and support the importance
of spectrum allocation. If we do not use it properly we are preventing
people from launching new services, we are damaging consumer interests,
we are potentially raising prices, we are undermining the competitiveness
of British industry, and therefore spectrum allocation is an important
issue that needs to be led not by any revenue raising goals but
by the issue itself, how you promote efficient spectrum allocation.
Q1896 Lord Holme of Cheltenham:
It is very difficult to argue with that but I think the thing
that is exercising this Committee is there is direct cause and
effect here. As a result of switchover revenues will accrue, so
if you look at the whole project, Project Switchover let's call
it, it seems difficult to understand why at least a possibility
would not be to defray or meet the cost of switchover from these
uncovenanted revenues that accrue as a result of this switchover.
I think that is the part people find very puzzling.
James Purnell: We are firm in our belief that
we think the licence fee is the right way of funding the switchover.
As I say, we think there are general public reasons but also BBC-specific
reasons why the licence fee is the right way of doing it. One
of the BBC's specific purposes is to build Digital Britain. It
is in keeping with their tradition of supporting the spread of
radio, television, the Internet and digital TV. As I have just
explained, that revenue if it does materialise is dependent on
a whole range of decisions which have not been taken yet and so
therefore we think that is the right way of approaching that policy.
Q1897 Lord Peston:
I am very lost by all this. I used to be a Reader in Public Finance
in the University of London when I taught the subject and anything
that was right for the country I then went on to say therefore
that is what you use taxation for. I am totally at a loss as to
what has happened to economics since I gave up the subject, and
everything you are saying is denying that proposition. I simply
do not understand the BBC-specific thing that you mentioned. That
means the BBC will get gains that no other broadcaster will get;
is that what you are saying?
James Purnell: Yes.
Q1898 Lord Peston:
Could you give us some examples?
James Purnell: I thought I just had. They will
not have to broadcast both in analogue and in digital. They are
providing services at the moment to homes which have got digital
and once we have analogue switchover every home that has a digital
TV will be able to receive that and that is a specific gain for
them, that they will be funding services which everybody can receive.
At the moment we get quite a lot of criticism saying, "My
licence pays for BBC Three and BBC Four, I cannot receive it,
that is not acceptable." The BBC's specific gain would be
by having universal access everybody will be able to receive those
Q1899 Lord Peston:
I thought what you meant by BBC-specificand obviously I
do not fully understand thisspecific to the BBC and not
to any other broadcasters.
James Purnell: Both of those are BBC-specific.