Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 1900 - 1919)

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 all.

  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 fee.

  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.

  Q1908  Chairman: 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.

  Q1909  Chairman: 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.

  Q1910  Chairman: 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 task.

  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.

  Q1915  Chairman: 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 voice.

  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 the matter.

  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 critical mass.

  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.


 
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