House of Commons Culture, Media and Sport Committee A public BBC First Report of Session 2004–05 Volume I Report, together with formal minutes Ordered by The House of Commons to be printed 8 December 2004 HC 82-I Published on 16 December 2004 by authority of the House of Commons London: The Stationery Office Limited £14.50 The Culture, Media and Sport Committee The Culture, Media and Sport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Culture, Media and Sport and its associated public bodies. Current membership Sir Gerald Kaufman MP (Labour, Manchester Gorton) (Chairman) Mr Chris Bryant MP (Labour, Rhondda) Mr Frank Doran MP (Labour, Aberdeen Central) Michael Fabricant MP (Conservative, Lichfield) Mr Adrian Flook MP (Conservative, Taunton) Mr Nick Hawkins MP (Conservative, Surrey Heath) Alan Keen MP (Labour, Feltham and Heston) Rosemary McKenna MP (Labour, Cumbernauld and Kilsyth) Ms Debra Shipley MP (Labour, Stourbridge) John Thurso MP (Liberal Democrat, Caithness, Sutherland and Easter Ross) Derek Wyatt MP (Labour, Sittingbourne and Sheppey) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/parliamentary_committees/culture__media_and_sport. cfm Committee staff The current staff of the Committee are Fergus Reid (Clerk), Ian Cameron (Second Clerk), Grahame Danby (Inquiry Manager), Anita Fuki (Committee Assistant) and Louise Thomas (Secretary), Jonathan Coe (Office Support). Contacts All correspondence should be addressed to the Clerk of the Culture, Media and Sport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6188; fax 020 7219 2031; the Committee’s email address is [email protected] 1 Contents Report Page Foreword and summary 3 1 Introduction 5 2 Context 6 Viewing and listening figures 7 BBC programming expenditure 12 BBC resources 14 3 Technological development 15 Overview 15 Visits 16 Technology and the BBC 19 Digital switchover 20 Creative Archive 22 4 The BBC’s scope and remit 23 Today’s BBC 24 Digital services 28 Views of the BBC’s portfolio and performance 29 Performance of the BBC as a supporter of independent production 31 Provision of public service broadcasting 32 5 BBC funding 34 The licence fee 34 Funding options 35 A financial settlement 37 Affordability 38 Collecting the licence fee 39 6 BBC governance and regulation 40 Ofcom’s present role 40 The Governors’ role 41 The BBC’s interaction with the commercial sector 43 Competition regulation 43 The way forward 44 Content regulation 45 Accountability 46 7 Nature and length of settlement 55 The Royal Charter 55 Length of settlement 57 Alternatives to a Charter 58 Conclusions and recommendations 61 2 Formal Minutes 66 Witnesses 78 List of written evidence 81 List of unprinted written evidence 83 3 Foreword and summary The BBC is subject to periodic review courtesy of the need to renew its Royal Charter and associated Agreement with the Secretary of State. Charter review and renewal provides the opportunity for all interested parties to examine all aspects of the Corporation and its performance and for the Department for Culture, Media and Sport to develop proposals for the BBC’s next mandate. The current Charter review is the most significant for a long time; perhaps since 1927 when the first Royal Charter was granted. This is for two reasons. First, within the next ten years Britain is expected to “go digital”. The analogue TV signal will be switched off and the country will enter a brave new world of abundant spectrum with great potential for increased viewing choice. In addition to the quantitative leap that this represents, there is also the qualitative dimension of new routes and devices for receiving content; increased control over where, when and how that content is viewed or heard; and new capacity for tailoring content and interactivity between broadcaster and viewer. In addition to digital switchover affecting patterns of media consumption, Ofcom asserts it as “inescapable” that the return expected, in terms of public service broadcasting, from the commercial broadcasting sector will reduce significantly over the next decade with the BBC and Channel 4 left to pick up the burden. Secondly, there is a strong perception, and some evidence, that the constitution of the BBC is unworkable and out-of-date in the light of developments such as: evolving governance elsewhere in both public and private sectors; economic and technological developments in the wider broadcasting ecology; changing audience, and licence fee payers’ expectations; devolution; the establishment of Ofcom; and the findings of the recent Hutton inquiry. It is unarguable that the BBC governance has evolved extremely slowly over the years with the Corporation itself citing significant innovation only in 1972—separate meetings of the Governors and the executive—and 1997 when the Governors’ precise functions and duties were set out in the Charter for the first time, 70 years after establishment. What is clear is that the BBC Governors’ dual role, as simultaneous champions and regulators of the Corporation, is, as the Secretary of State told us: “unsustainable”. Accordingly the Committee has identified four key inter-linked issues and one over- arching question, that must be tackled head-on. The over-arching question is whether, in the light of the potential upheaval surrounding digital switchover, the BBC requires a charter for change, or a strategy for stability? The key issues we believe must be settled are: x The BBC’s scope and remit and the extent to which these need explicit refocusing to clarify the Corporation’s public service remit, and proper inter-relationship with other broadcasters, or whether its own Charter-inspired initiatives are enough. x The level of the financial settlement and the prospect of an alternative to the licence fee (a good way of funding a national broadcaster but a very bad way of taxing people); if not, then what flexibility exists to be less regressive with those on low incomes and less aggressive with those who have no licence (especially when they have no television). 4 x Increasing the accountability of the BBC: in terms of responsiveness to licence fee payers; in terms of ex post openness and transparency with external bodies—such as this Committee—on performance against objectives and value for money granted via the licence fee; and in terms of ex ante challenge with regard to commercial activities. x Dealing with the BBC’s creaking constitution: separating governance from regulation, judge from jury, champion from challenger; as well as the case for switching from a Royal Charter to a modern statute. The status quo is not an option and the test is a crucial one for the Department and indeed the Government as a whole. Our work and recommendations are aimed at assisting with the development of proposals that will take a strong and properly independent BBC into the future as far as that future can be seen. 5 1 Introduction 1. On 11 December 2003, the Secretary of State for Culture, Media and Sport issued a written ministerial statement on the BBC Charter Review. This marked the launch of the first of three phases, each involving public consultation, though with the declared pre- emptive result of “a strong BBC, independent of Government”. The initial consultation, which closed on 31 March 2004, was supported by a “very broad” consultation document.1 A green paper—with ‘white edges’—is expected in the early part of 2005,2 with a conclusive white paper to follow later in the year. The Government will conclude the process with “a full and formal opportunity for both Houses to contribute their views.”3 Lord (Terry) Burns has been providing the Secretary of State with advice throughout the process, as chairman of the Independent Advisory Panel on Charter Review (IAP). He has been conducting a series of seminars aimed at exploring options and developing arguments, and earlier this month published a preliminary document on “emerging themes”. 2. The key questions posed by the Government were open-ended in nature. They solicited views on BBC services and how they might adapt to changes in technology and culture. The funding, organisation, regulation and accountability of the BBC were also covered. 3. Feeding into the Government’s Charter Review have been a number of parallel exercises, notably: the Office of Communications’ statutory review of public service television broadcasting (PSB); and independent reviews, commissioned by DCMS, of BBC Online (bbc.co.uk), digital television channels and digital radio services. 4. The Office of Communications (Ofcom) began the first of its quinquennial reviews into PSB, as required by the Communications Act, in November 2003. The review’s purpose was to examine the effectiveness with which the public service broadcasters – BBC, ITV, Channel 4, S4C, Five and Teletext – have, taken together, delivered their public service obligations, and to make recommendations for maintaining and strengthening these. A report on the first phase of this review was published in April 2004.4 A second phase report was published on 30 September, and contained a number of proposals for consultation. That consultation ended on 24 November and will inform Ofcom’s third and final report, containing firm recommendations which is expected in the coming weeks. 5. The independent review of the BBC online service by Philip Graf was commissioned by the Secretary of State as the second in a rolling programme of reviews of the BBC’s new services (the first was Richard Lambert’s review of BBC News 24 in 2002).