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British Broadcasting Corporation (Licence Fee)

– in the House of Commons at 11:52 am on 19th December 1980.

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Photo of Michael Meacher Michael Meacher , Oldham West 11:52 am, 19th December 1980

I wish to discuss the funding and role of the BBC at a time when significant cuts are being forced on public service broadcasting. The background is provided by the director-general's letter to all BBC staff in February this year, stating that over the next two years the corporation was aiming to make cuts in planned expenditure of £130 million.

It is proposed to achieve those savings by cutting back on new items of budgeting expenditure and by deferring indefinitely improvements that the BBC had proposed to make in the conditions of service of its staff. Even so, £40 million still had to be saved by cuts in existing services. While they were spread over all areas of domestic service, those cuts were particularly heavy in the regions and in local radio.

I wish to raise the question of the Government's responsibility for driving the BBC into this position, the justification or otherwise for the policy, and the alternatives. In particular, I wish to raise the question of the role of public service broadcasting in an era of cuts, without conceding—because I do not—the case for the Government's misguidedly monolithic obsession with the public sector borrowing requirement and public expenditure cuts in general

I shall leave aside that essential wider point. I wish to question, within the constraints of the cuts, the whole direction of Government policy on broadcasting. My hon. Friend the Member for Derby, North (Mr. Whitehead) wishes to speak briefly after I have finished and I hope that he will be able to do so.

The background to the present position lies in the Home Secretary's publication a year ago of the BBC's forward plan. It acknowledged that the BBC's productivity had improved markedly over the past decade. For example, it showed that, at constant prices, expenditure in 1978–79 had risen by nearly 5 per cent. compared with the figure in 1969–70 but that during the same period the hours of output had increased by 20 per cent. in television and 38 per cent. in radio and, since 1971–72, by 63 per cent. in local radio. The plan also indicated that the cost of each hour of output had reduced during that period by 13 per cent. in television and 25 per cent. in radio and, since 1971–72, by 22 per cent. in local radio.

Nevertheless, the Home Secretary chose to award a licence fee increase which, while it was the highest-ever percentage increase, provided a licence fee for colour sets of £6 or £7 less than the right hon. Gentleman knew was needed if the BBC was not merely to begin the first two years of its 10-year plan but to maintain even existing services. I contend that, as a result, the BBC remains under-financed, even though its output remains substantially greater than that of its competitor.

For example, net advertising revenue to ITV is expected to be about £550 million this year, while the BBC's total income for the year will be about £500 million. The BBC therefore has less money to operate two television channels, four radio networks and 22 local radio stations, as well as all the regional services, than ITV has to run a single network. In addition, the average production costs of an hour of network BBC television is less than half the cost of an hour of network ITV.

I do not believe that anyone can defend those huge discrepancies as a fair and justified distribution of the nation's resources. They reflect purely the anomaly of different forms of financing. The implications are profound. The Government's decisions on the fourth television channel, the expansion of independent local radio and the licence fee imply a significant shift in the balance of resources away from the BBC and towards independent broadcasting. Those decisions raise the fundamental question whether the BBC will be able to maintain its charter obligations to educate, inform and entertain. So far, the BBC has shown clear signs of retreating from regional and local broadcasting and from its commitment to educational programmes.

There are two aspects to the central question. The more important is to determine what should be the BBC's role in the 1980s and, hence, what is an adequate level of finance to meet that role and the most appropriate form of funding. The other aspect, which is a shorter turning point, is to maintain the fabric of the BBC and its existing services and to prevent what could otherwise be a precipitate adoption of a course of action that would transform the BBC into a London-dominated organisation primarily concerned with competing with independent broadcasting for mass audiences.

On the first issue, it cannot be stated too strongly that what is wrong is that the enforced so-called economies of £130 million have evolved not from the presentation to the public of a coherent or structured plan for the future of the BBC but as a resigned reaction by BBC management to political pressure. The Government's policy on cash limits is being used to shift the balance of influence from the public to the private sector by hamstringing the BBC.

Can it really be claimed that it is a considered strategy for survival to cut back on regional broadcasting, and to finance a half-hearted local radio expansion at the expense of existing stations, at a time when the commercial sector on both television and radio is set for unprecedented expansion? Can our foremost national cultural institution really hope to survive if its response to commercial expansion is to shrink back into its metropolitan shell and reliance on big city production centres? Can it be right that the BBC's news gathering operations, which are second to none, should be crippled in some of its key elements by cutbacks in the regions and in local radio? Surely, this is a classic example of sacrificing in the interest of short-term cost-cutting appeal assets which are crucial to the BBC's very survival as an organisation.

I am aware that there are two possible objections to this line of argument, and I want to deal with each. The first is to ask whether it is justified to put such emphasis, which I and others have, on the preservation and expansion of the BBC's present position. I believe that the answer to that question is positive, because there is clear evidence both that the BBC is cheaper than independent broadcasting and that it is run more efficiently. I am not saying that the BBC does not suffer from many faults. I am not making a "commercial" on its behalf. I am saying that the comparisons are clearly in its favour, and that should be taken fully into account by the Government in their funding proposals.

I take as an example a straight comparison between the BBC and ITV for the year 1978–79. I draw the ITV figures from those that have been published by the IBA. One sees that the BBC has an operating cost of just over £19,000 per hour while ITV has an operating cost of nearly £35,000 per hour. The cost advantages are in the BBC's favour by almost two to one. Furthermore, there is no question but that the BBC operates with manning levels that are far below those of its commercial competitors, and it works with substantially fewer facilities. For example, in 1977 it had 10 fewer studios and six fewer outside broadcasting units. The situation certainly has not improved since then.

Not only that; the private sector makes almost no contribution to training, and ironically it receives substantial indirect public financial support from the fact that the £385 million spent on television advertising is tax-deductible. Indeed, Annan itself concluded that: The BBC's production costs are three times lower than those in America, and it is more economical in resources, costs and output than ITV ½ we conclude that the public is getting good value for money for the licence fee. Therefore, I submit that the efficiency argument tells only in favour of the BBC.

I recognise that there is a second objection that may be used against the argument that cash limits should not be the basis of forcing the nation's single important cultural institution to change its identity in an unplanned manner. It is that the nation cannot do otherwise because the money is just not available. That is simply not true, for two reasons. First, money is available, but it is not distributed appropriately according to the national interest. The BBC is being depleted, and is asked to compete with a new television channel and a great many new independent local radio stations, when its competitors have soaring profits and an enormous cash flow. The problem is not the overall lack of national resources but rather the unwillingness of Governments—the previous as well as the present—to grasp the problem of dealing with the disparity of resources available to independent broadcasting and of those available to the BBC.

Secondly—this is an absolutely central point—this whole situation of cutbacks arises out of the inadequacy of the current licence fee funding. If, since the colour licence was introduced in 1968, the licence fee had kept up with wages, it would now be £54 instead of £34. If it had kept up with the cost of a newspaper such as The Daily Telegraph, it would now be £72. In fact, out of 13 European countries, the BBC's black and white licence fee is the lowest, Only two countries have a lower colour licence fee, while no fewer than eight countries have colour licence fees ranging from £40 to £67. To save the BBC from cuts, decline and even rundown as a public service broadcasting institution would require only an additional 2p a day on the licence fee. At 11p, which is what it would then be, it would still be cheaper than The Daily Telegraph, and in the view of many a great deal better.

What is the alternative to the present policy of forcing the BBC to cut its cloth according to arbitrary cash limits? It is to the great credit of the unions—the Association of Broadcasting Staffs and the National Union of Journalists—that they have faced this question and begun to provide positive answers at two levels, both on the primacy of the question of role and on alternative systems of funding. The unions have insisted above all that the BBC must remain the major instrument of broadcasting in this country. It is they who have insisted that the BBC must provide television and radio programmes of high quality for both majority and minority audiences, operate throughout the United Kingdom and be provided with the finance to enable it both to maintain its position and to compete effectively with independent television and radio.

Having said that, it is only fair to add that the unions have by no means rejected the idea of economies as such in the public sector. Both the ABS and the NUJ have made it clear that in their view—I entirely agree—economies can be made only when there is a political consensus on what the role of the BBC should be in the 1980s.

The other crucial matter, which the unions and others as well have rightly stressed, is the need for an urgent reappraisal of the way in which the BBC is funded. The licence fee is far from satisfactory, in that it is obtrusive and hard to collect, unfair, regressive and hard to adjust. Many consider that at the very least it ought to be index-linked. An alternative proposal, which would achieve the same goal of buoyancy, would be an extra percentage on VAT sufficient to finance the BBC's requirements as agreed. It would be unobtrusive and easy to collect via the existing machinery and it would have the attraction of being close to the way in which ITV is financed, since the cost of advertising on ITV also puts up the price of goods.

An even better suggestion, perhaps—one that retains those benefits but adds a further important one—is that a small percentage, perhaps 0.3 per cent. would be about right, should be added to the current level of national insurance cintributions. That has the extra advantage that it would be paid exclusively by the working population, and it would thus exempt pensioners from what has for many of them become quite an onerous tax.

I ask the Minister to confirm his support for the several points that I have raised—first, that there is an urgent need for a public debate to achieve a political consensus, which I do not believe exists at present, on the role and coverage of the BBC in the 1980s; secondly, that the BBC has been chronically under-financed and that comparative efficiency indicators justify a substantial improvement in funding; thirdly, that serious examination of alternative methods of financing should now be set in hand, and in particular the drawing of a percentage from the national insurance levy should be considered; fourthly, that whatever alternative system is adopted, Government control over the finances of the BBC should be phased out either in favour of an automatically inflation-proofed system or reviewed by an independent "buffer" committee which could protect the recipients of public money from political control as is already done—the Minister should not laugh—in the case of the University Grants Committee and the Arts Council.

I very much hope that the Minister will be positive on all those points.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine):

Has the hon. Gentleman the permission of the hon. Member for Oldham, West (Mr. Meacher) to intervene?

Photo of Mr Phillip Whitehead Mr Phillip Whitehead , Derby North 12:10 pm, 19th December 1980

I congratulate my hon. Friend the Member for Oldham, West (Mr. Meacher) on his lucid presentation. I support him in his view that the licence fee should be increased. I cannot entirely follow him in all his ingenious variations. I spent three years on the Annan committee agonising over replacements for the licence fee. If the House wishes to will the achievement of good broadcasting and sees the consequences in social and economic terms and the crisis of morale that now affect the BBC, we should be prepared also to will the means. That means all hon. Members saying that they believe in a higher licence fee. It is a regressive tax. It is unpopular with our consitituents. We should, however, say why we believe in it and what is at stake.

The only point that I wish to make concerns the crisis of morale in local radio, which is now acute. At the House recently my hon. Friend chaired a meeting of the staff of local radio on the day when they took industrial action as a protest against the constraints under which they are placed. Local radio is now being forced through the cost-cutting to which my hon Friend referred into producing what will be much more of a network service—a kind of Radio 5—rather than the comprehensive community service that was planned for local radio and is still envisaged in the announcement of the working party made yesterday.

The Minister said in the House yesterday that he cannot tell the BBC how it must dispose of its services, because that would be political interference. I should like to examine the proportion of the budget that goes to BBC radio. This amounts to 21 per cent. for Radio 2, 24 per cent. for Radio 4, 18 per cent. for the regional services and 11 per cent. for local radio. Does the Minister believe that the BBC can sustain expansion and maintain a genuine community service on the basis of 11 per cent. of the total radio budget that it now receives? Is he prepared to say in the House that he feels that the future of local radio, or, at least, the BBC segment of it, is secure? My own view is that it is not. Morale in local radio stations throughout the country is lower now than at any time since local radio was introduced. That is directly the fault of the Government, who are not providing the means for the expansion that is needed.

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby 12:15 pm, 19th December 1980

The hon. Member for Oldham, West (Mr. Meacher), who presented this subject before the House, as is so often his wont, presented the Government's policy in a slightly sinister context, portraying it as if there was a deliberate intention on the Government's part to have it in for the BBC and to support the independent sector of broadcasting. The hon. Gentleman talked of a shift of the balance of resources and matters of that kind. I suggest to the hon. Gentleman and to the House that in talking in those terms he failed to accept that whether the broadcasting services provided by the BBC are financed through the licence fee or by some other method, such as his proposed surcharge on national insurance, there must be a profound difference between the financing of a public institution through public money and the financing of an independent system.

It is idle, however hard one tries to think of alternative methods of financing, to think that an institution such as the BBC which, at the last analysis, by whatever mechanism one chooses, is financed by the decisions of the community through the Government and through this House, can do anything other than reflect economic circumstances and economic whims blowing through the economy as a whole as they affect the public sector. The hon. Gentleman's comparison between what is happening in the BBC and what is happening in the independent television world and the independent local radio world will not lead us to a solution of the real problem in regard to the funding of the BBC. The hon. Gentleman made much of the alleged lack of efficiency of the independent sector compared with the BBC. I do not propose to deal with that point in any detail except to point out one or two aspects of the matter to which the hon. Member has perhaps failed to do justice.

If the hon. Gentleman's argument is true, it goes very much against the theme of his speech. The more efficient the BBC is, the higher its productivity and the more it can achieve with a given sum of money. If one is trying to mount that argument and to say that the BBC is able to produce programmes at lower cost than the ITV and the ILR, that is an argument for allowing it less money rather than more. That is not an argument that I seek to make. I merely make those remarks to show the fundamental irrelevance of that sort of comparison. If one is talking of independent television and its costs, it is right to say that the income of independent television companies is not wholly spent on programmes. Part goes to profits, but of those profits substantial sums come back to the Government in both levy and corporation tax.

Secondly, it is right to say that independent television is a federal system. It necessarily follows that the same economies of scale cannot be achieved by a company whose output of programmes is only a small percentage of that of the BBC. That applies even to the largest of the ITV companies. If one is looking at the cost pressures, and if the hon. Gentleman chose to meet some of the companies involved in independent television and heard what they say about the additional expenditure involved in financing the fourth channel, he might take a different view.

I would also mention in this context that my right hon. Friend told the House on the Third Reading of the Broadcasting Bill that he and my right hon. and learned Friend the Chancellor of the Exchequer were reviewing the levy on independent television. That remains the position. There is no question of hypothecating the proceeds of the levy for any particular purpose. All that indicates that the picture presented by the hon. Gentleman of a flush independent sector made more flush in some sinister way by Government policy as compared with a lean, taut and spare BBC is one that I do not think really bears close scrutiny even if it was relevant to the substantial point that I had understood the House would be debating—namely, the role of the BBC licence fee in financing the BBC. I do not think that it is.

It is reasonable, if one is having a system of public funding—I shall come in a moment to the question of alternative approaches and alternative mechanisms—that the community should decide at a given point how much it will require its citizens to pay for a service such as the BBC. Nothing that I say is meant in any way to detract from, or reflect on, the tremendous achievements of the BBC and its central role in our national life. I feel that the hon. Gentleman did a disservice to the reputation of the BBC with his dark hints and statements about the consequences of the cuts that the BBC had to make as a result of the level of licence fee which was fixed by my right hon. Friend the Home Secretary.

The hon. Gentleman talked about a threat to the BBC's charter obligations. However, the BBC has not come to the Home Office saying that it is unable to maintain its charter obligations, and anyone who listens to the output of the BBC or watches what it puts on television will see readily that there is no truth in such a suggestion, if it is made.

A little later in his remarks, the hon. Gentleman went a bit further in his flights of hyperbole and said that the very survival of the BBC as an organisation was at stake. I find it difficult to feel that the cuts that the BBC has had to make in its expenditure as a whole can possibly be described as threatening its survival as an organisation.

On 18 April, when the governors announced their decisions about the economies that they were to make, they made it clear that £90 million of the £130 million cuts involved the postponement of desired improvements and planned increases in expenditure. I am not saying that those improvements were not desirable, but there are many other things which are desirable and have to be postponed if economic circumstances necessitate that.

I do not think that it can be said with any pretence of credibility that the postponement of desired improvements to that sort of tune threatens the very survival of any organisation. To use language of that kind is to endanger one's very credibility, and it is important, because reputations are crucial in this matter, for us to put the matter in proportion.

Looking at the position in this sort of way, we see that the BBC has had to make cuts which undoubtedly it did not want to make. It would have been ready, willing and able to spend public money if the public money had been provided. I have little doubt that that is the case. But that does not mean that the consequences of the licence fee level reached have been as dire as the hon. Gentleman suggested.

What is more, for the hon. Gentleman to say that the BBC made those cuts in an unplanned manner is to do less than justice to the BBC. It is no part of the duties of the Government, nor should it be, to express a public view about the distribution of resources within the BBC. That must be a matter for the BBC. Although on occasion I am tempted by events such as the present ones to express views about what the BBC should do, I have no doubt that, the moment such views were expressed in any firm form, the line of attack would rightly change and there would be criticism about undermining the independence of the BBC by attempting to dictate to it the structure and pattern of its planning and programmes. That is a temptation into which I shall not fall. However, whatever the BBC did in its announcement on 18 April and whether it chose wisely, it was not an unplanned response.

We are left with a genuine and real problem. The BBC can find things on which to spend almost unlimited sums of money. I do not say that in any critical sense, because the frontiers are always moving forward and it is possible, perfectly responsibly and without any kind of inefficiency, to find new things which could usefully and valuably be done if the money were there. But the question which the Government have to decide every time this comes up is how much of this we as a nation can afford and whether the financial arrangements, as opposed to the programming arrangements, of the corporation are such as to justify compliance with a request for a particular licence fee. The corporation produces its plans and programmes, and a decision has to be taken.

A proposal has been made by the BBC that an independent body should be set up to provide an impartial assessment of any request by the corporation for increases in the licence fees. There are obvious difficulties about that in that an independent body could no doubt pronounce upon the efficiency of the operation and the viability of what is proposed. But it might be more difficult for such a body to go beyond that and express a view about the share of national resources which the BBC should take. That is a very different matter from looking at specific proposals from the point of view of whether they make sense on their own as opposed to whether they make sense in the context of the public financial picture as a whole. None the less, my right hon. Friend is considering that proposal. I am not in a postion to express a concluded view on it either way and would not wish to be interpreted as doing so.

If the total level of the spending that the BBC can be allowed to carry out in a given year is determined in any other way than the present—with the assistance of an independent body or in some other way—even if that is possible, it will still be necessary to consider the question of the means by which the money is raised. Here I come to the licence fee. I hope that the hon. Member for Oldham, West will not think that I am teasing him too much if I say that when it came to the practical suggestion of an alternative, as opposed to the more philosophical call for a public debate leading to a political consensus, his hon. Friend the Member for Derby, North (Mr. Whitehead) was noticeably less enthusiastic, in his brief intervention, for the solution reached with admirable speed by the hon. Member for Oldham, West.

It may just be that the experience of serving for three years on the Annan committee, which considered in considerable detail the merits and disadvantages of alternative means of funding the BBC, gave the hon. Member for Derby, North an assessment of the matter founded on realism. I am not suggesting that he did not have it before. Joking aside, if one is on a body looking specifically at the alternatives, one looks fully at the pros and cons over a period. The committee came down firmly in favour of the licence fee as the method of financing the BBC.

The hon. Member for Oldham, West suggested an alternative in the form of an addition to the national insurance tax. Although it is true that the overwhelming majority of people have radio and television—television is the only one that is relevant to this debate—they choose to have them; they are not obliged to have them. Although television is a central part of the lives of millions of people, there are sound objections to financing the BBC out of general taxation. Those who do not have television would have legitimate cause to object.

The tax suggested by the hon. Gentleman would be a tax on jobs. Whether that would commend itself to everyone is another matter on which there may be some debate. No doubt one could find another tax to which that objection would not apply, but I have little doubt that there would be an alternative objection of equal cogency. That is, no doubt, one of the reasons why no such tax has been found suitable, even if one accepted, which I do not, that taxation was the alternative.

I do not believe that the interests that the hon. Gentleman has at heart would benefit in any way from a transfer from a licence fee system of funding to a taxation system. I cannot see how that would help. It certainly would not help in giving the BBC more money, unless one assumed that the £500 million or so that the BBC costs would simply be absorbed in the general maw of taxation and that increases in its finances could be forgotten, being lost by sleight of hand in the general level of taxation.

The hon. Member for Oldham, West shakes his head. I am sure that someone with his intellectual rigour would not wish that to happen. If it does happen, one will be faced with the problem that we have at the moment of deciding how much the country should be required to pay for the BBC.

It is not an easy task, but I suggest that it falls on the Government and must fall on the Government. I say to the hon. Gentleman, in support of the proposition that the Government have got it right, that when the licence fee went up the Home Office was not inundated with correspondence complaining that the increase was too low.