Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by Mr Hugh Small


  Summary: The Government's present policy will encourage the BBC to misuse the remaining £12 billion of licence fee money to prepare itself for privatisation in 2006. If the money were spent instead on the purposes for which the viewers subscribed it, it could have an enormous impact on the intellectual life of the country and could justify the continuation of the unique licence fee system after 2006. The misuse of licence fee money violates European legislation and Parliament should act to stop it.

  Hugh Small is a historian and author who has worked with the BBC on documentaries.

  The BBC's generous Charter now has five years left to run, promising it a further £12 billion in revenue from household television licence fees. Few people believe that a new Charter in 2006 will keep the licence fee money flowing in the same way, given current dissatisfaction with the BBC's performance. The chances that the Government will toughen up the present Charter before then may seem slight. But the chances improve if you take into account that the current arrangements violate the strict European laws on the use of state aid—which is what the European Commission has already declared the license fee to be. If Parliament can ensure that European legislation is implemented, the dream shared by many of those who pay the license fee—that they are enabling one of the world's most powerful cultural machines to work for the preservation and enhancement of our culture—could become a reality. If not, we will never know whether £12 billion in cash and a free monopoly of airwaves could, correctly used, have stemmed the tide of ignorance successfully enough to justify the continuation of the unique licence fee system.

  Although national governments have defended their broadcasting territory by securing an amendment to the Treaty of Rome specifying that they and not Brussels will police the content of their public service broadcasters, this still leaves them vulnerable on the state aid issue. The European Commission has already begun proceedings against the French and Italian authorities for providing illegal state aid to their public service broadcasters. Two months ago the Commission published a detailed set of guidelines explaining under what circumstances state aid to broadcasters can be legal, and it is clear that the BBC fails the test. This is because the guidelines say that state aid is illegal if there no independent body to impose content requirements and monitor performance against them.

  The only body presently charged by the government with defining and monitoring the BBC's public service obligations is the BBC's Chairman and Board of Governors. This does not meet the EC Treaty's requirement that the monitoring authority be independent of the broadcaster. The Governors have listed their "criteria for assessing BBC public services" but these are not detailed enough to allow independent observers to see whether the BBC is meeting the Governors' goals. The Governors themselves, in the BBC Annual Report, say that the BBC has not met their goals but there is no suggestion that this may affect state aid.

  Culture Minister, Tessa Jowell has announced the Government's intention to measure the BBC's performance as a condition of having granted it new digital frequencies, but even if she succeeds in implementing this intention her conditions do not meet the EC Treaty's test for justifying state aid. She proposes only to see that the BBC does not reduce the quality of material currently broadcast on its existing channels.

  The proposed new legislation described in the UK government's recent Communications White Paper will not bring the BBC in line with EC Treaty obligations. The White Paper proposes to "give the public service broadcasters the opportunity to demonstrate that they can be better delivered and monitored through self-regulation." In the case of the BBC this self-regulation will continue to be exercised by the BBC Board of Governors. The White Paper does not propose to introduce any measurable performance criteria for the BBC, only stating that the BBC must produce an unspecified mix of educational, comedy, drama, religious, children's, arts, etc programmes.

  Without the backing of European legislation, the UK government alone could not regulate the BBC even if it wanted to because the BBC is too powerful. This is a problem to which the influence of Brussels is an excellent solution, as has been shown in the telecommunications industry and elsewhere. The BBC's power, contrary to public imagination, does not come from its ability to support of oppose government policy. It is the power of money: the BBC is too big a source of patronage for any individual in the UK Government or civil service to want to interfere with it. This power of money is increasing at the economy declines: there is no other organisation in the country which is guaranteed £12 billion of revenues over the next five years and can spend it without being required to achieve any measurable goals. While the economic slowdown and plunging advertising revenues are causing difficulties for other businesses, the BBC's relative strength increases.

  An example of the BBC's power over the government accidentally emerged during the summer, when new Europe Minister Peter Hain proposed to criticise the BBC and the newspapers for their "primitive level of coverage" of European issues. A draft copy of Mr Hain's speech reached the press, who discovered from annotations on it that the Foreign Office had suggested that he remove his criticism of the BBC but not of the newspapers.

  Television in increasingly the dominant medium for informing the public, and the more pluralistic broadcasting regime of the last few years has done much for the economy but very little for the intellectual level of the country. £12 billion may not be the correct sum to spend over the five years on public service broadcasting in the UK but the public has bought the dream at that price and if correctly administered the impact of this money would be huge. Many influential critics of the BBC think that it should not receive the whole of the £12 billion. They argue that the BBC's competitors should be allowed to tender for public service tasks. Others propose the abolition of state aid or its reduction to fund only those services that cannot be provided by advertising-funded television. The BBC's critics include powerful competing private broadcasters who can take advantage of the legal uncertainty surrounding the BBC's funding to argue for its reduction. Nearly all of the interested parties converge on the view that at the end of 2006, when its current Charter expires, both the size of the licence fee and the BBC's monopoly of it will be challenged.

  In 2006 the UK Government will have the option of deciding that the UK broadcasting market is sufficiently pluralistic to remove the need for any state aid at all for public service broadcasting. The continued failure of the BBC to even meet its Governors' targets on public service during the next five years may help to persuade the public that the dream could never have worked. The removal of any public service mandate will improve the chances of a successful privatisation of the BBC under the leadership of a new CEO who previously headed a private broadcaster and a new Chairman who was an investment banker.

  The appointment of Messrs. Dyke and Davies doesn't prove that privatisation has been decided on. If it has, these two certainly look like the people to make it succeed. But even if the two leaders have no bias to privatisation, the whole political environment does. If the BBC remains publicly funded, it will be a source of never-ending angst for politicians who will have to appoint the people who regulate the programmes as required by the EC state aid rules. If they let the whole public service remit go belly-up by simply ignoring it, the BBC can use the last £12 billion of licence fee money to build a global broadcasting colossus. (All leaders of large companies pursue such goals—British Telecom comes to mind and the appointment of Davies and Dyke certainly shows some lessons have been learned from that). Nobody will weep for public service remit that will by 2006 have been a dead letter for a decade, and a privatisation of the new global broadcasting colossus will be simply too attractive. £30-£40 billion of new money will appear in the exchequer overnight, and there will be no Railtrack-style fatalities. Once safely privatised at a price befitting the dominant owner of the airwaves, the government can then suddenly discover a whole new range of frequencies that they can auction off to new entrants to the market. Sound familiar? With such a brilliant outcome from doing nothing, who is going to try to make the licence-fee payer's dream work?

  Could the Government give the public service mandate to some other organisation, to preserve the mandate without obstructing BBC privatisation? Would Branson offer to do it? This would be a bad result, because the BBC has a unique combination of strengths if properly used in a public broadcasting service with legal security under the EC Treaty. This unique combination of strengths include its good public image, a high public tolerance of its powerful funding system (which would probably not transfer to a new operator), and the fact that it seems to know how to make good programmes. It wildlife programmes are widely admired, but they can't justify the licence fee on their own, contrary to a recent press article where a favourable review of the BBC's expensive Blue Planet series about marine wildlife was headlined in all seriousness "The fish that could save the licence fee."

  What would save the licence fee is a control mechanism that causes the BBC to focus of saving our culture, not just on saving the planet. Parliament now has a unique opportunity to create this by demanding conformity with the European Commission's recent guidelines on state aid to public sector broadcasters. If Parliament delays, the opportunity may be lost forever.

February 2002

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