Examination of Witnesses (Questions 1900
TUESDAY 17 JANUARY 2006
James Purnell MP
Q1900 Lord Peston:
I would have thought that digital will benefit ITV, Channel 4
and everybody else. There is nothing BBC-specific about it at
James Purnell: There are general public policy
gains and there are also BBC-specific gains. As I say, the BBC
has always played a key role in supporting the spread of broadcasting
and communications culture and that is completely in keeping with
its traditions. Not having to transmit in analogue will be a saving
for them and the fact their services will be universally available
will be a bonus for them as well.
Q1901 Lord Peston:
Obviously I do not understand so I will look at the transcript
and try and follow the argument you are putting forward. I cannot
see anything BBC-specific in digital switchover at all. It may
be just a use of words rather than anything else.
James Purnell: I am really not attempting to
obfuscate the matter. I think this is exactly the same argument
that the BBC made when they came to you.
Lord Peston: Maybe they did; it does
not mean they are right.
Q1902 Baroness Bonham-Carter of Yarnbury:
There is one thing I want to clear up that others might have understood
but I am not absolutely clear about. When you and indeed the Secretary
of State talked about special help being supplied by the Government
to those who need it, will that come out of Government funds or
is that another thing that you expect the BBC to fund?
James Purnell: That will come out of the licence
Q1903 Baroness Bonham-Carter of Yarnbury:
That will also come out of the licence fee?
James Purnell: That is the package for the vulnerable
so there is the switchover cost and then there is the package
for the disabled and those over 75.
Q1904 Baroness Bonham-Carter of Yarnbury:
So that is also licence fee funded. You have said you do not know
what is going to happen to the spectrum that is released. At the
moment there is no charge for analogue spectrum. Is the Government
considering allocating free digital spectrum to PBS channels like
Channel 4 and the BBC or do you support the decision by Ofcom
that everyone should pay for digital spectrum?
James Purnell: I do not think that is the decision
that Ofcom have taken. Lord Curry said in terms that a decision
had not been taken and the process is for them to look at the
digital dividend consultation process that I refer to. The advantage
of having regulators is that they can weigh different objectives
against each other, for example, both the importance of public
service television and the importance of allocating spectrum efficiently.
We will look at their recommendations. We also have backstop powers
so if we disagree with the decision they have taken we can intervene,
but we are a long way from taking decisions on that.
Q1905 Baroness Bonham-Carter of Yarnbury:
I understood him to be saying he very much felt it should be a
market for digital spectrum in order that the broadcasters were
efficient about the use of it.
James Purnell: I think that general approach
is right. We are just not applying it to broadcasters; we are
applying it to emergency services and we are applying it to the
whole range of public sector uses of spectrum. This is not something
specific for broadcasters but, as I say, the Digital Dividend
Consultation Group will look specifically at that issue. The general
approach is that market mechanisms have been the best way of allocating
spectrum. We do not always take those decisions. For example,
in radio licensing we have continued to make decisions where different
considerations have applied but we will take those decisions in
due course based on the consultation which Ofcom is carrying out.
Q1906 Baroness Bonham-Carter of Yarnbury:
Because it would seem to me that in the instance of public service
broadcasting, money would be better spent in pursuing those programmes
rather than paying for spectrum which will be an additional cost.
James Purnell: Sure, there are two issues there
and one of the issues is programme making resources and whether
the BBC and indeed Channel 4 and other broadcasters are properly
resourced to achieve their public service goal. There is also
the issue of efficient allocation of spectrum and it is important
for all users of spectrum to have the right incentives to do that.
One of the ways of doing that is through auctions. There are other
ways of doing it and people can also take decisions not to allocate
spectrum on that basis. We are not ruling anything in or out.
We are just saying that we will look at the consultation which
Ofcom will do and we will take decisions from there.
Q1907 Baroness Bonham-Carter of Yarnbury:
In this particular case of the BBC it could be seen as a spectrum
tax on the licence fee payer.
James Purnell: As I say, we have not made any
decisions on that and we will look at their proposals as part
of the licence fee and we will take decisions based on what Ofcom
says in their consultation. I think there is a legitimate point
about weighing those two objectives against each other. There
are plenty of people who complain to us about spectrum hoarding
by various organisations. That is not a cost-free option. If spectrum
is not properly allocated people who want to offer services like
extra community radio stations, extra local radio stations, new
TV services, new mobile phone services, new data services, all
of those services would be prevented and the consumer would suffer.
What we need to weigh up is the various policy objectives here,
and the right way to do that is through proper consultation.
Where you have made a decision that it is not from Ofcom (and
it does not appear from what you are saying to be from consultation
either) is that the special help as far as people with special
needs is concerned is a cost that is going to be borne by the
licence fee payer.
James Purnell: Yes.
What is the difference between that and currently what we do as
far as licence fees for the over-75s are concerned? Surely the
cost of that is not picked up by the licence fee payer, it is
picked up by social services funding?
James Purnell: That is essentially social policy
whereas the other is essentially broadcasting policy. As I said,
we believe there are BBC-specific reasons why switchover will
be of benefit to them, why up to five million homes who currently
do not have access having access to digital television will be
of benefit to the BBC. It will mean that people can access BBC
services. I think most people would think in the long term it
is not sustainable for the licence fee to be funding services
which licence fee payers were not able to access. That is why
we say there are BBC-specific reasons for doing that.
I do not see the sharp difference that you are trying to make
between the two. One is social policy you are saying and one is
strictly broadcasting policy?
James Purnell: One way of looking at it is that
the social policy about help for the over 75s will continue and
is not bound by any one project. The whole point of the switchover
policy is to achieve switchover and once that is achieved that
particular package will not continue. The difference is this is
about achieving a broadcasting policy objective which is digital
switchover. It has benefits for the whole of the industry but
it also has benefits for the BBC, in exactly the same way for
example as the BBC gets involved in the use of the licence fee
for training which is not just for the BBC. The whole thrust of
the Green Paper was to say that we believe that the BBC underpinned
the whole of the broadcasting ecology and we believe that that
is an appropriate use of the licence fee for exactly that reason.
Q1911 Baroness O'Neill of Bengarve:
Just a supplementary on that. I think we can all see why the BBC
should lead on the task of digital switchover, that is not the
problem, but the question might be formulated why is it not a
win/win situation for the Government and for the BBC to distinguish
those costs which legitimately fall on the licence fee payer from
those costs which more appropriately fall on the taxpayer? Although
nearly all taxpayers live in households that pay a licence it
is not the case that the class of taxpayers and the class of licence
fee payers is one and the same because any household with more
than one person in employment earning income has multi taxpayers
but a single licence. The question we are raising is distinctly
a question about the appropriateness of loading the charge on
the licence fee payer. It is not a question of the appropriateness
of the BBC leading on the institutional and technical and cultural
James Purnell: I am really starting to sound
like a stuck record but the point is the BBC has always carried
out policies which have helped the whole of the broadcasting environment.
It has always used the licence fee to do that, from training,
to R&D, and now digital switchover. It is completely in keeping
with that tradition to use licence fee money for those projects
because there will be general policy benefits but there will be
also be specific benefits for the BBC. If we started to try and
work out which ones of those were general benefits and which ones
were BBC-specific benefits and split the funding of that appropriately,
you would get into a very difficult policy decision issue.
Q1912 Baroness Howe of Idlicote:
I want to be quite clear about this, following on Baroness O'Neill's
point, that as a result of the second policy we have heard your
views but as a result of that second policy if it comes into being,
and if there is to be a charge, the settlement will have to take
account of the extra costs of the BBC?
James Purnell: Yes, absolutely.
Q1913 Baroness Howe of Idlicote:
So that would have to go up?
James Purnell: Yes, absolutely.
Q1914 Lord Maxton:
You see all this is based upon technology as it is now and what
it would appear you have decided will be the form of technology
in 2012, six years from now when the switchover comes. If you
look back six years and see the way technology has changed and
now go forward six years, then what you are going to have in 2012
will be totally different from what it is today. In particular
if you are talking about scarce spectrum why is the Government
deciding to use that spectrum (because if it has got high-definition
television included in it it will be using a lot of spectrum)
instead of looking at other solutions which do not use spectrum,
which are cable and telecommunications, which to me is the way
to go to switchover? If you do that the argument the BBC pays
for it becomes irrelevant because BT and the cable companies will
be the major beneficiaries and may well wish to pay for it.
James Purnell: I can answer that because I spent
an hour and a half answering exactly those questions in front
of the CMS Select Committee last week. Briefly, we believe it
is vital for people to continue to have access to television without
having to pay a subscription and the only way of guaranteeing
that is by having the option of digital terrestrial there. People
may want to buy other options like cable and broadband and other
technologies may come along but we believe that having that basic
easy access to DDT was important and is the only way of guaranteeing
that we will be able to have subscription-free television otherwise
we will be relying on commercial operators to be prepared to deliver,
for example the Freesat from Sky offer, and we do not think that
is the right approach. We also think it is important to have a
choice of platforms and people should be able to choose between
DDT, cable, satellite, broadband and the other options. The final
point is if you are right and it does turn out that another technology
is much more successful than DDT that underlines the case for
switchover. It does not argue against it.
Lord Maxton: We are all in favour of
switchover, it is how it is done.
Let's cut it off at this particular point. I would like to move
on to the Bishop of Manchester but I think perhaps you have got
the message from this Committee that we are unhappy with several
aspects on the way that costs are being put on to the licence
fee and to the licence fee payer when we believe that there are
better ways and more just ways of that money being raised. You
have got that message.
James Purnell: I can hear that in the Committee's
Q1916 Bishop of Manchester:
Can I look at another area of costs. This afternoon the BBC announced
that it is focusing on two of the suggested sites for the move
to Manchester and that suggests to me that the momentum is building
up towards that move. I have to say that on this Committee we
have looked a little askance at some of the financial figures
that have been presented to us over this. At the very beginning
we were being told the cost would be £600 million which spanning
out was an equivalent of £50 million a year. Later we have
been told it is down to £400 million, £25 million a
year. These still seem to be very considerable sums and when I
pressed the Director-General on his commitment to this move to
Manchester he added that although he wanted it to happen it still
depended on suitable funding being agreed. So my first question
to you is to ask your opinion about the costings as we know them
for this move to Manchester?
James Purnell: We have, as I say, our consultants
PKF who are looking at those costs in detail and they will be
thoroughly scrutinising not just the costs of the move but also
the savings that could be made because of the move. We will also
be assessing it in terms not just of the purely financial aspects
but also the benefits to the regions, the economic and cultural
benefits which come from that and also generally the benefits
to the licence fee, the acceptability of the licence fee and to
the BBC. We think that having a BBC of which the whole country
feels ownership will be an important part of building that consensus
around the BBC and that will be an important consideration in
Q1917 Bishop of Manchester:
Presumably some of the savings you are talking about will be from
the vacated assets in London when they move?
James Purnell: Sure, one could imagine savings
from vacated assets, one could imagine savings from the costs
of employing people outside London rather than in London. I think
also at the time we would want to move to a situation where there
was a genuine critical mass of production outside of London and
that will bring down the cost of that production. If you are in
a situation where people are just being trained up and down from
London to various parts of the country to make productions that
may have a certain amount of benefit but may not be terribly cost-effective.
If you develop a genuine production infrastructure in other parts
of the country they can start to compete on costs. Bristol is
a great example of that. The fact that natural history programmes
have been in Bristol for a while now does mean that there is a
network of independent companies round there which are also able
to provide good programmes at competitive cost. We would hope
that the out-of-London strategy would support development of that
Q1918 Bishop of Manchester:
You were explaining a moment ago the Government has got people
looking carefully at these costings. Would you not think it is
good idea for the National Audit Office to come in on this?
James Purnell: The National Audit Office has
a role in terms of value-for-money studies with the BBC already
and we will look at the recommendations which you made on that
in a previous report and we will make a decision on that in the
White Paper, but we felt the right way of scrutinising these proposals
was by engaging PKF to do that work and we believe that they provided
a very good service. It is not a question of whether there is
a value-for-money audit, there is a value-for-money audit and
there may be various roles for the NAO at various times. We will
make a decision on that in the White Paper.
Q1919 Bishop of Manchester:
Can we explore a bit further this concept of value. As you know,
if there is something new happening then there is a public value
test whether the BBC pursues but it is said in the move to Manchester
it is not going to do that because the departments are not new
in that sense. I think what is slightly disturbing about that
is we heard from Pat Loughrey when he came to see us that the
prime concern of the BBC over the move to Manchester was not in
terms of public value, and I wonder what your view is on that
because it seems to me that we are all concerned about protecting
the licence fee payer and value for money being given to them.
James Purnell: The public value test is really
designed for services and changes to services so we would not
anticipate it being applied to, for example, property decisions
or location decisions. We see those as management decisions for
the BBC. You could imagine certain changes by the BBC that they
might want to involve licence fee payers or other partners in
discussing or having consultations but I do not think the mechanism
of the public value test should be transferred over to management
decisions of this kind. It is really about what services the BBC
should involve itself in. That is not to say there are not public
value considerations in those decisions; it is just the public
value test is designed for new services.