Select Committee on BBC Charter Review Minutes of Evidence

Examination of Witnesses (Questions 1960 - 1979)


Mr Michael Grade CBE and Mr Mark Thompson

  Q1960  Lord King of Bridgwater: You said how important it was that the public had confidence in the justification levels of the licence fee and the BBC. You said that you gave it unprecedented scrutiny this time in making this bid and you brought PA Consulting in to advise you. Did you publish that report?

  Mr Grade: No we have not yet; no.

  Q1961  Lord King of Bridgwater: Would you be willing to?

  Mr Grade: In due course; yes.

  Q1962  Lord King of Bridgwater: This is my ignorance, but I am not quite clear about how long this settlement is supposed to run.

  Mr Grade: Seven years.

  Q1963  Lord King of Bridgwater: Are you then going to call in the trust, presumably, at arm's-length which will want annual confirmation, as will the licence fee payer, that in these rapidly changing circumstances the original judgments remain valid?

  Mr Grade: Absolutely.

  Q1964  Lord King of Bridgwater: Would you envisage calling in maybe PA or other consultants every year to advise the trust on the annual situation, looking at the annual budget, looking at the annual expenditure, the experiences which have come out, the variances from budget during the year and, as a measure of public confidence, publish their report, the report that goes to the trust.

  Mr Grade: Yes. I have no problem with that at all.

  Q1965  Lord Armstrong of Ilminster: Do we know what your licence fee bid would be if you were not making these efforts to achieve efficiency savings? RPI plus five per cent or ...?

  Mr Grade: It would be even higher than that. I should have to go away and look at the compound arithmetic, but yes, it would be substantially higher, very substantially higher.

  Q1966  Lord Peston: We have partly covered some of this, but I am still very lost in following the argument put forward by the Government rather than by you. The Government seem to be saying that it is in the national interest that we have digital switchover. They think it would be a good idea if you took the lead in it, but then they come to what seems to us to be a completely illogical conclusion that it ought to be paid for out of the licence fee. We can understand the argument that we should switch over. We certainly would very much favour you taking the lead role, but we have some difficulty working out why, if it is in the national interest, it should not be paid for in the normal way if things are in the national interest, namely out of general taxation. What are your thoughts on that?

  Mr Grade: There are several constituent elements to the cost of digital switchover. There is the cost of re-engineering the transmitters, which is a reasonable cost for the BBC to bear since that is the means by which it will get the signal into the homes and is no different to moving from 405 to 625 lines, from black and white to colour and so on. Re-engineering the transmitters is unquestionably a matter for the BBC. In addition to that, the Government are potentially concerned about the ability of Channel 4 going forward, which is a statutory corporation, it has no shareholders and may—I am not sure whether it will, but it may—depending on the state of Channel 4's finances ask us to help in the quite low cost of Channel 4's switchover. The costs are not greatly material in the great scheme of things. The issue of targeted help seems to me to be the issue that has raised eyebrows around the place using the licence. Those who argue against our involvement suggest that using the licence fee payer to pay for equipment in the lowest income homes and so on is a form of social policy which has no part in the licence fee. It is a debate we can have. So far as the BBC are concerned, it is entirely consistent with our objective of making all our services available universally throughout the four home nations in every single home. That is an absolute pre-requisite of the licence fee and we have to achieve that. Targeted help is directly designed to achieve universality which seems to me entirely consistent. I would lay down some conditions on that, which I have done with the Government. One is that if the quantum of targeted help were to put at risk support for the licence fee, then I think we would have serious objections and/or, if there were a risk that in order to meet the targeted help quantum we had to cut services to licence fee payers, that would be absolutely unacceptable on behalf of the licence fee payers. So overall, to achieve universality is entirely consistent with the BBC's raison d'être.

  Q1967  Lord Peston: Just to make sure I understand, universality would still mean universality for all broadcasters. It would not mean just for the BBC. In making this technological change all broadcasters—

  Mr Grade: Yes, the commercial players will pay their share.

  Q1968  Lord Peston: I did not realise that.

  Mr Grade: We are not paying for ITV.

  Q1969  Lord Peston: Are you saying that the cost of digital switchover will be borne in part by the commercial players?

  Mr Grade: We are not paying for ITV's transmitters.

  Q1970  Lord Peston: I do not mean that. There is much more to it.

  Mr Thompson: Just as point of information, the unique part for the BBC alone, which the Government are proposing to pay through the licence fee, is around targeted help. The broader costs are being borne by all the broadcasters with the exception, potentially, of Channel 4 bearing some—

  Q1971  Lord Peston: I can understand about Channel 4.

  Mr Thompson: It is proposed that targeted help should be—

  Q1972  Lord Maxton: And Sky?

  Mr Grade: Sky is already digital.

  Q1973  Lord Maxton: I appreciate that, but it is not paying anything towards the costs of setting it up.

  Mr Thompson: The costs the other commercial broadcasters are paying are the costs of conversion from analogue to digital. That is not a cost that is relevant to Sky because they are already a digital broadcaster. The same will be true effectively of the cable operators.

  Q1974  Lord Peston: Just to make sure I really understand this, there are equipment costs—

  Mr Grade: Transmitters.

  Q1975  Lord Peston: These apply specifically to different broadcasters.

  Mr Grade: Yes.

  Q1976  Lord Peston: And then there are further digital costs.

  Mr Grade: There are some marketing costs for ensuring that the public gets what one might call customer service to enable them to make the switchover effectively and efficiently. So there is some marketing; there is a lot of public ignorance about what this all means, so there are some marketing costs around what it means, how it is going to be effected, how they are going to be affected, helplines and all the rest of it, which we shall pay our fair share of.

  Q1977  Lord Peston: Leaving Channel 4 on one side, what you are really saying is that it is only, in a sense, the BBC side of the costs of digital switchover that the licence fee payer is paying, is that right? Leaving Channel 4 on one side.

  Mr Thompson: No. I think it is fair to say that the contentious part of the costs of digital switchover is around the so-called targeted help costs. These are the costs of helping some disadvantaged groups—those over 75 and those in households with people with severe disabilities—to pay for and to effect the change to digital. This is a government plan to ease the universal switchover and specifically the ability to switch off the analogue signal by making sure that these disadvantaged groups are in a position to receive digital television. The Government are proposing this tranche of costs should be borne in the licence fee. The biggest point of contention in this area is the so-called targeted help costs, just to clarify that.

  Q1978  Chairman: You said the over-75s. Is that one of the broad definitions?

  Mr Grade: We do not know yet My Lord Chairman.

  Q1979  Lord Peston: Could you give us some idea of how much of the total cost corresponds to these? I shall very soon be one of this deserving group.

  Mr Thompson: There is currently a large-scale trial going on in Bolton, which is fairly advanced now, to try, as it were, in microcosm to gauge what the likely costs of this are going to be by trying it with real households and real people. When the results of that trial are clear we shall have a much better idea of both the organisational challenges in achieving it, which are probably not inconsiderable, and also what the likely costs will be.

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