HC Deb 15 February 1971 vol 811 cc1210-20
The Minister of Posts and Telecommunications (Mr. Christopher Chataway)

With permission, Mr. Speaker, I should like to make a statement.

The Government have been concerned at the financial difficulties in which both broadcasting organisations have found themselves. In order to ensure that the B.B.C. and I.T.A. remain in a position to provide services of a high standard, the Government now propose changes in relation to the financing of both organisations.

First, the finances of the B.B.C.: It will be recalled that under Regulations made in the last Parliament, the licence fee is due to be increased on 1st April next by 50p; that is, from £6 to £6.50 for monochrome television, and from £11 to £11 to.50 for colour television. The B.B.C. has represented to me that this increase of 50p will not suffice; and that it is faced with the prospect of either make severe cuts in its present services or of accumulating a serious deficit which, initially, the B.B.C. put at .70 million by 31st March, 1975. It considered that licence fees of £7.50 and £12.50 would be needed to meet this situation.

However, after a close review with the B.B.C. of its forecasts, the Government have concluded that the increase in the licence fee should be limited to £1, making it £7 for monochrome and £12 for colour television. This increase is designed to meet the foreseeable needs of the Corporation until March, 1975; the B.B.C. accepts that this should be sufficient for this purpose. The new fees will take effect from 1st July next. The increase of 50p due on 1st April next will not now take effect. The necessary Regulations will be laid as soon as possible.

Second: the Independent Television Authority has represented to me that in the circumstances of a continuing decline in advertising revenue over the last year, together with rising costs, the levy at its present rate is seriously threatening the companies' ability to provide a television service of high quality.

The Government have, therefore, decided, after a careful study of I.T.V.'s finances and of the recent report of the National Board for Prices and Incomes, that the rate of the levy should be changed so as to reduce the yield in a full levy year by an estimated £10 million. The Order to give effect to the new scale will be brought before Parliament as soon as possible.

I am satisfied that these reductions will provide Independent Television with the resources that it needs. They are also designed to enable the companies to im- prove the quality of their programmes and those of Independent Television News. The Authority has assured me that it is its intention to use this opportunity to secure such an improvement. The Government regard the present reduction as a holding measure designed to stabilise I.T.V.'s financial position at least until 31st July, 1972—that is, until the end of the next full levy year. In the meantime, the Government will review the basis on which the levy is charged.

Mr. Richard

The Minister and the House will recognise, I hope, the extraordinarily regressive nature of the statement which the Minister has made. On the one hand, the licence fee is to go up for everybody, and then the television companies are to benefit by no less than £10 million a year.

May I ask one or two specific questions? First, as to the B.B.C., what will this increase actually bring in, in terms of revenue, to the Corporation? Secondly the right hon. Gentleman said that this increase is designed to meet the foreseeable needs of the Corporation until March, 1975, and that the B.B.C. accepts that this should be sufficient for this purpose. May we take it that that sum includes provision for the local radio service which the B.B.C. was going to provide and that there is now, therefore, no financial argument for attempting to curtail the B.B.C.'s proposals for local radio?

As to the levy, may I ask first what is the projected advertising revenue upon which this £10 million reduction is supposed to be based, or is it merely a holding operation? If it is a holding operation pending the review to which the right hon. Gentleman refers, would he recognise that we on this side of the House would welcome such a review provided that it is accepted and that the general principle is established that the public have a right and are entitled as of right to a participation and a share in the revenue of the programme companies?

Finally, on a day when the Minister, in respect of both broadcasting authorities, has had to announce that they are both in major financial trouble, does it not now become clear that his decision to abolish the commission which was to be headed by Lord Annan was extremely hasty and ill-considered, and is not the case overwhelming for a Royal Commission to look into the whole subject of broadcasting in this country?

Mr. Chataway

It is a sad reflection on the urgency with which the hon. Gentleman would have treated the financial difficulties of the broadcasting organisations had he been in my place, if the meaning of that last remark is that he would have handed over the problem to the Annan Committee which was concerned with broadcasting after 1976. Our reason for not proceeding with the very curious Annan Committee was that we took the view—not unreasonably, I would have thought—that to settle into a pattern of committee reports of this kind every 10 years, the last five or six years of each 10 being taken up with an inquiry, would be a very unhappy situation.

In reply to the hon. Gentleman's question about finance, these increases for the B.B.C. will bring in £l6 million extra each year. In addition to that, there is, of course, an increased revenue to the B.B.C. which arises from the increased sale of colour sets.

As far as 1975 is concerned, and the other services, I am satisfied that whatever decision is taken about the allocation of frequencies and functions between the B.B.C. and the new independent radio service, £7 is none the less the right figure for the B.B.C.'s licence fee. Obviously, if after 1972, or whenever the date might be, the B.B.C. were to make alterations in some of its radio services, this would give it greater room for manœuvre in other directions, but the fact is that since these changes can only take effect towards the end of the period we are considering—in the last year or two—the sums involved are from the point of view of this exercise fairly marginal.

As regards the commercial television companies, I cannot do better than refer the hon. Gentleman to the Report of the National Board for Prices and Incomes, a Report which was commissioned by the previous Administration and which shows very clearly that if the commercial television companies are to continue to provide an adequate service and to see anything like a reasonable return on capital a very substantial reduction in the levy is needed.

Mr. Richard

Obviously, the right hon. Gentleman did not understand the last point I made. What I asked him on the levy was this: is this a holding operation pending a review, or is the £10 million designed to be a considered reduction based on the criteria of the Report of the National Board for Prices and Incomes?

Mr. Chataway

It is a considered reduction based on the criteria of the National Board; and the Government take the view that the levy is not an entirely satisfactory instrument. We should like to see an alternative system introduced if we can find it. Therefore, it will be the intention to study with the I.T.A. a range of alternative suggestions with a view to trying to introduce an alternative by July, 1972.

Several Hon. Members


Mr. Speaker

Order. I propose to give priority in calling hon. Members to ask supplementaries to those who had Questions on the Order Paper today on this matter.

Mr. Bruce-Gardyne

I am grateful to you, Mr. Speaker.

Can my right hon. Friend confirm that the Scottish commercial contractors under the abatement he has proposed today will escape the levy altogether? If so, is my right hon. Friend aware that this will be very welcome in Scotland, where the commercial contractors alone have made a serious effort to provide regional services? On the other hand, is he aware that the increase in the B.B.C. licence fee will not be particularly welcome, because the B.B.C.'s attempts to provide regional services in Scotland are largely confined to the horizons of the city of Glasgow and that B.B.C.2 is unobtainable in very large areas of Scotland?

Mr. Chataway

I cannot confirm that Scotish television will not be liable for any levy payments whatsoever, but I believe that this reduction will be of help to Scottish television and will tide it over what I know has been a very difficult period indeed. I take note of my hon. Friend's other observations.

Mr. William Hamilton

Does not the right hon. Gentleman recognise that the £7 licence fee proposed for the B.B.C. in July will be inadequate to enable the Corporation to avoid a decrease in the quality of programmes, for which the Corporation is rightly renowned, and particularly in view of the increasing inflation which will erode much of the increase that the right hon. Gentleman has announced? What assurances has the right hon. Gentleman had or is he seeking that the £10 million reduction in the levy will result in improved programmes from the I.T.A.?

Mr. Chataway

The Corporation does not believe that the £7 licence fee will be inadequate in the way the hon. Gentleman describes. The Corporation believes that this increase should be sufficient to enable it to maintain the quality of its programmes. It is strange for the hon. Gentleman to be criticising us for setting a licence fee of £7 at this moment when, as he knows, the previous Administration deliberately shelved this issue and they were criticised by us when we were in Opposition for having deferred the licence increase to £6 10s. for almost two years. It is largely that deferment which has put the B.B.C. so far into the red and brought about so many of the present difficulties.

I have already indicated that the Independent Television Authority has assured me that it believes that the arrangements which are now proposed should enable there to be an improvement in programme quality.

Mr. Stratton Mills

I recognise that the relief to be given to the independent television companies is fair and perhaps overdue. What is the total which has been paid by the companies in levy and in corporation tax to the Exchequer? Is the £10 million reduction an across-the-board reduction or is it weighted in favour of the small and medium-size companies? Will any of the companies be exempt?

Mr. Chataway

The levy has been running at about £22 million a year. The reduction will be a help to the small companies, because although the Independent Television Authority is increasing its rentals by £3½ million it will be apportioning the rentals in such a way as to lighten the burden on the smaller companies. Four of the smallest companies will have substantial rental reductions despite the overall increase in the rentals.

Mr. Arthur Lewis

All the figures which the Minister gave in answer to the last supplementary but one were known to him and the Prime Minister before the last General Election, but even that knowledge did not stop the Prime Minister from saying that he would reduce prices at a stroke. Has the Minister had discussions with the Prime Minister—if not, will he do so—to see whether, rather than increase the licence fee, he will now take the opportunity of at least implementing one of his promises, namely, to reduce prices at a stroke?

Mr. Chataway

That is very typical of the totally inaccurate charges that are so often levelled from the benches opposite. The record will show that my right hon. Friend the Prime Minister in the debate in December, 1969, positively criticised the then Government for having deferred the increase to £6 10s. and made it clear that the B.B.C.'s finances required an earlier increase. It is largely because in this field, as in so many others, the previous Government were prepared to pass on the bill to us that we now face the increase that we do. Having said that, however, it will be absolutely clear that this Administration have subjected the application that the B.B.C. has put to us to a very rigorous scrutiny.

Mr. Boyd-Carpenter

As the increase in licence fees will undoubtedly hit a number of old and sick people who are provided with sets by charitable organisations but who must themselves find the licence fee and, as to such people a set is sometimes their only remaining interest in life, will my right hon. Friend enter into discussions with my right hon. Friend the Secretary of State for Social Services with a view to finding a means of cushioning the impact of these further increases on this limited but important section of people?

Mr. Chataway

I appreciate the importance of the point raised by my right hon. Friend and I will certainly discuss the matter, as he suggests, with my right hon. Friend the Secretary of State for Social Services. My right hon. Friend and the House will know that successive Governments have maintained the principle that benefits in kind are not the right way to help. The view has been taken, therefore, by successive Governments that it would not be appropriate to make reductions for specific categories.

Mr. Whitehead

All those in the House who are concerned about broadcasting will welcome the Minister's statement that extra revenue is to be made available. However, can the Minister give two assurances?

First, can the right hon. Gentleman give an undertaking that the extra hand-out to the I.T.V. companies will be made available only to those companies which can give an assurance that the money will not be spent in that diversification into bingo halls and motorway cafes which has distinguished many of the larger companies?

Second, will the right hon. Gentleman now recommend to the I.T.A. that it carries out another recommendation of the P.I.B. to the effect that where a change of control has taken place within an I.T.V. company there should be mergers or a renegotiation of the tender and not a mere acquiescence in that change of control?

Mr. Chataway

The latter was not a recommendation in the P.I.B. Report; and it raises a number of interesting questions. I am surprised that the hon. Gentleman of all people—a former employee of I.T.V.—should refer to this as a handout to the independent television companies, as I thought that he would know better than many people here that the levy has borne very hard on a very large number of the companies. It is only the diversification that has taken place in previous years that has enabled a large number of the companies to maintain the programmes as they have; because many companies that have been running their television services at a loss—Granada and others—have been able to do so because of the interests they have spread across quite a wide range of fields.

Sir R. Cary

I congratulate my right hon. Friend on lifting the 10s. originally suggested to an increase of £1 for the B.B.C. I am sure that that will bring great comfort to the Corporation, but does my right hon. Friend agree that, even with that increase, the service will still remain one of the cheapest in Europe?

Mr. Chalaway

I entirely agree. My hon. Friend is absolutely right.

Mr. Hugh Jenkins

First, on the question of the levy itself, will arrangements be made SO that the largest amount of relief from the levy does not go to the largest companies? The right hon. Gentleman has not talked about the distribution of the levy. Will he say something about that, because there may be a tendency for companies which do not need it to receive the most relief?

Second, as regards the review, will the right hon. Gentleman consider the possibility of a different application of the levy so as to ensure that the revenue goes towards programme expenditure and not just to profits? For example, will he consider the possibility of deduction from gross income less certified programme expenditure?

Mr. Chataway

I have seen that suggestion made by the hon. Gentleman in a letter to the Press. It is an interesting point which we ought to bear in mind in the review of the levy which we shall be undertaking, as I said, with a view to trying to find an alternative before 1972. On the first point, the I.T.A. will be doing all it can by means of the rental to ensure that the cross-subsidisation which there already is between television companies is carried a stage further to enable those smallest companies, which have the most difficulty, to provide a good service.

Captain W. Elliot

Does my right hon. Friend agree that, in spite of this increase, taking into account the amount of entertainment and education which is provided, the average viewer gets his service dirt-cheap? In the circumstances, would it not be reasonable to reconsider the whole thing, so that people who can do so pay a realistic price and categories of people who cannot pay the higher figure are allowed a lower licence fee?

Mr. Chataway

I should consider any specific proposals which my hon. and gallant Friend cares to put to me, but I believe that he would find it extremely difficult to work the kind of system which he has just proposed.

Mr. Urwin

In view of the Government's abysmal failure to fulfil their election pledges to control prices, let alone reduce them, and in view of the deleterious effect of the increase especially upon old-age pensioners, will the right hon. Gentleman pay more serious attention to the suggestion made by his right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter)? If something could be done along the lines of a 50 per cent. reduction in licence fee, I am sure that it would be well worth consideration.

Mr. Chataway

There is a choice to be made here. If large concessions are to be made which will substantially reduce the income of the B.B.C., obviously, poorer services or fewer services will be provided by the Corporation. In the circumstances which we have found to prevail in the Corporation, we believe that the increase to £7 is the minimum necessary for the continued provision of good services.

Mr. John Mendelson

But does not the right hon. Gentleman accept that, although the B.B.C. needs the increased income, and there will be general support for it in the country, there have been widespread demands by old-age pensioners' associations that the Government should provide a sum of money to allow retirement pensioners living alone—as individuals or as couples, both retirement pensioners—to have a licence fee concession bringing the fee down to 50 per cent. of the actual figure? The right hon. Gentleman must know that this scheme has been worked out. It would relieve retirement pensioners living alone, and can he not persuade the Government to spend a sum of money to that end?

Mr. Chataway

Principally, that must be a matter not for me but for my right hon. Friend the Secretary of State for Social Services. It must be for him to decide whether the sort of sum which would be involved in providing a service of that kind would be justified in relation to the other demands upon him.

Several Hon. Members


Mr. Speaker

Order. We must move on.