Examination of Witnesses (Questions 1960
WEDNESDAY 18 JANUARY 2006
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
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
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
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
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
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 mayI am not sure whether it will, but it maydepending
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
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
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
Q1972 Lord Maxton:
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
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 groupsthose over 75 and those in households
with people with severe disabilitiesto 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.
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.