HC Deb 27 March 1985 vol 76 cc477-92 3.31 pm
The Secretary of State for the Home Department (Mr. Leon Brittan)

With permission, Mr. Speaker, I shall make a statement about the financing of the BBC.

In December 1981, the BBC was granted increases in the colour television licence fee to £46 and the black and white licence fee to £15, and was required to live within the income thus generated for the period ending 31 March this year. This it has done. The result of the way its expenditure was, as planned, phased over this period is that the cost of its service in the current year equates to a £51 licence fee. As the House knows, the corporation applied last year for an increase in the colour licence fee to £65 and in the black and white licence fee to £18, to last for a further three years.

That application has stimulated renewed discussion about the possibility and desirability of some or all of the BBC's services being financed through advertising or by means other than the licence fee. On the one hand, it is suggested that at least a proportion of the BBC's services are of a character that would not be materially affected if it was financed in whole or in part by advertising. On the other hand, it is said that the impact of advertising is bound to lead to a lowering of standards, and that if advertising were introduced in one area the pressure for it to be extended to all BBC services would be irresistible and damaging. In considering these issues, however, it is essential not just to consider the impact on the BBC of any change in its methods of financing; it is also necessary to take account of the impact of any such change on independent broadcasting, on other media supported by advertising revenue and on the Exchequer.

The issues raised are complex. In my view, they require more detailed, careful and, above all, comprehensive analysis than they have so far received before any conclusions can be reached. I am therefore appointing a committee to review all of these matters and I am glad to announce that Professor Alan Peacock, chief economic adviser to the Departments of Industry and Trade from 1973 to 1976, more recently vice-chancellor of the university of Buckingham, and now at Heriot Watt university, has agreed to chair it. I hope to announce the names of the other members of the committee before long.

The review will be required to assess the effects of the introduction of advertising or sponsorship on the BBC's home services either as an alternative or as a supplement to the income received through the licence fee and to identify a range of options with an indication of their advantages and disadvantages. One of the central questions for the committee is the possible impact the introduction of advertising would have on the character and quality of all broadcast services. It will also consider the scope for the BBC to obtain additional revenue from the consumer other than through the licence fee. I am circulating a copy of the full terms of reference in the Official Report, and copies are also available in the Vote Office.

I must stress that the appointment of the committee does not in any way imply that the Government have decided to make changes in the present arrangements, still less changes of any particular character. None the less, the appointment of the committee does mean that options for a change will have to be considered in the light of its report. I cannot, of course, commit the inquiry to a precise time scale, but I hope that the committee will have completed its work by the summer of next year, after which its conclusions will have to be carefully considered.

I have therefore decided that the present licence fee settlement should be for a period of two years, with the intention that any possible changes in the system of financing broadcasting should be considered in the light of the committee's report before the licence fee falls to be further renewed. But if decisions cannot be made in the light of the report within two years, or if it is decided that there should be no change to the system, this settlement will run for a third year with the licence fee continuing at the rates I am announcing today. The BBC should therefore plan its expenditure for the next three years on the basis that it must for that period live within the income equivalent to that generated by fees at the level announced today.

As to the level of the fee, my task has, as always, been to balance the interests of the licence fee payer with the need to ensure that the corporation's home services are adequately funded.

I start from the present cost of operating the BBC's services. The 1981 settlement provided the BBC with an income at the rate of £46 per colour licence until the end of March 1985. Taking account of inflation, it was clearly understood at the time that the effect of this was that the BBC would be spending at less than the rate of £46 per licence at the beginning and more at the end of the period. Currently, services are being provided at a cost of approximately £51 per colour licence.

There will no doubt be some inescapable cost increases over the next three years, and the corporation would like to improve and enhance its services in various ways. On the other hand, it is right that the BBC should strive for greater efficiency and economy, and there is a limit to what licence fee payers can reasonably be expected to afford.

In accordance with previous practice, I do not propose to give a detailed account of the way in which I have balanced these various factors and it will be for the corporation to decide how to use the money available to it. I believe, however, that the BBC could and must achieve greater productivity than it has done in the past or has so far planned for the future. The BBC already has a useful programme of activity reviews and has stressed its commitment to achieving value for money. But, in the light of the report from Peat Marwick Mitchell commissioned by the BBC with my agreement and subsequently published, I believe there is scope for the BBC to achieve greater efficiency through improved management procedures and strengthened management attitudes.

The BBC has already produced an action plan to implement all but two of the specific recommendations in the Peat Marwick report by the end of 1985–86, with three quarters of them being implemented within the next six months. The governors will also be calling for reports every six months not only on the implementation of these specific recommendations and the continuous programme of activity reviews but also on the management training programme and other steps designed to ensure that the change in emphasis in management style and approach sought by Peat is being achieved. [HON. MEMBERS: "What is the fee?"]

Taking all the various factors into account, I believe a settlement substantially below the level requested by the BBC should enable the corporation to maintain its present level and range of services. But the BBC's ability to enhance its services will depend very largely on the degree to which it achieves the improvements in efficiency that I have referred to. [Interruption.]

Mr. Nicholas Winterton (Macclesfield)

Get a move on.

Mr. Speaker

Order. I think that the Home Secretary is just coming to an important point.

Mr. Brittan

You have been prescient, Mr. Speaker, but characteristically so.

On that basis I have decided to increase the fee for a colour television licence—[HON. MEMBERS: "Ah!"]— from £46 to £58 and for a monochrome television licence from £15 to £18. I have laid the necessary regulations which bring the new fees into effect at midnight tonight.

I of course recognise that the licence fee represents a substantial sum for many people, particularly so when it is seen as an annual payment. There are now a number of schemes to enable those who wish to do so to spread the cost in advance over the year. In addition to the television savings stamp scheme, it is possible for people to pay towards their next licence by instalments through a direct debit from their bank account or by cash instalments over post office counters. Payments may also be made by credit card. But I am conscious that far too few people pay for their licences in any of these ways compared with the number who would find the licence fee easier to pay if they did so. I shall therefore be urgently examining with the BBC and the Post Office whether any improvements can be made in those arrangements and whether any new arrangements can be made to help people to pay the licence fee without greatly increasing costs of administration or imposing extra burdens on the taxpayer.

I appreciate that the review that I have announced will lead to a period of uncertainty, not only for the BBC but for the other media, in particular independent broadcasting. But our broadcasting system has inevitably had to develop over the years, and there is nothing new in the fact that it has to face the possibility of change now. What will not change is the Government's commitment to broadcasting services which achieve the highest standards, in quality, popularity and diversity of consumer choice.

Following are the terms of reference:

  1. (i) To assess the effects of the introduction of advertising or sponsorship on the BBC's Home Services, either as an alternative or a supplement to the income now received through the licence fee, including
    1. (a) the financial and other consequences for the BBC, for independent television and independent local radio, for the prospective services of cable, independent national radio and direct broadcasting by satellite, for the press and the advertising industry and for the Exchequer; and
    2. (b) the impact on the range and quality of existing broadcasting services; and
  2. (ii) to identify a range of options for the introduction, in varying amounts and on different conditions of advertising or sponsorship on some or all of the BBC's Home Services, with an assessment of the advantages and disadvantages of each option, and
  3. (iii) to consider any proposals for securing income from the consumer other than through the licence fee.

Mr. Gerald Kaufman (Manchester, Gorton)

The Home Secretary's statement lasted 11 minutes. It could have been limited to the three words, "I cop out." The statement is another example of the shoddy and opportunistic approach — [Interruption.] — that is the biggest cheer so far today from the Conservative Benches — the shoddy and opportunistic approach which has characterised the Home Secretary's tenure of office. His reception from his own side shows that such an approach satisfies nobody.

The Government have announced an inquiry, but let me make it clear that Labour Members consider that it is the wrong inquiry. An inquiry into the finances of the BBC, and, indeed, of broadcasting in general, is one thing. An inquiry almost solely confined to the effects of the introduction of advertising and options for advertising is unacceptable. It is based on an assumption that advertising is the only alternative to the present system that is worth considering, and that is an assumption that Labour Members utterly reject.

Therefore, let me make it clear that, whatever the outcome of the inquiry, there are no circumstances in which a Labour Government will permit advertising on either BBC television or radio. Professor Peacock must take that into account in his activities—

Hon. Members


Mr. Robert Atkins (South Ribble)

We do not take any notice of you; why should he?

Mr. Kaufman

Those Conservative Members who jeer will not be here when the licence fee next comes round for renewal.

Professor Peacock must take that into account in his activities as a firm statement of policy and principle.

Despite shortcomings which we could all illustrate, Britain has the highest standards of broadcasting and television in the world. Those standards are set, and they are maintained by ITV, and by the BBC as a public broadcasting organisation. It is that standard that prevails in Britain and to which ITV has to live up. Advertising would change the nature of the BBC permanently and irrevocably, and we reject it.

As the licence fee rises ever higher, it becomes ever more regressive. The lower the income, the bigger the burden. Schemes for staggering the burden over the year do not make it any less of a burden.

A Labour Government will consider how the licence cost might be taken into account in assessing the needs of those on supplementary benefit. A Labour Government will also phase out the licence so that no retirement pensioners will have to pay for a television licence. Television is one of the few pleasures available to many pensioners. We shall make sure that that pleasure is not taxed. I make that commitment clearly and firmly on behalf of the Labour party and the next Government of this country.

Mr. Brittan

The right hon. Gentleman began his observations by referring to what he called the Government's shoddy and opportunistic approach. His strictures might have carried a touch more weight if they were not applied to everyone and everything said on any occasion. Such observations have a ritualistic character that totally debases them.

The right hon. Gentleman says that it will be the wrong inquiry, relating only to advertising. He is mistaken. The inquiry does not relate only to advertising but will also consider sponsorship and any other proposals for securing income from the consumer other than through the licence fee, including such measures as subscription.

As for the right hon. Gentleman's ringing statement that in no circumstances will a Labour Government permit advertising, that commitment is not something that we need greatly fear. It is most unlikely ever to be put to the test.

The right hon. Gentleman referred to the highest standards of broadcasting. I do not disagree with that assessment. The question is not whether standards should be reduced but how they should be financed.

The right hon. Gentleman made another ringing statement, to the effect that pensioners would no longer have to pay the licence fee. The cost of implementing that pledge would be £325 million a year. If the right hon. Gentleman believes that that pledge has any credibility or will put him in the position in which it would be up to him to decide whether advertising should be taken, he gravely misjudges the judgment and good sense of the British people.

Mr. Mark Carlisle (Warrington, South)

I totally reject the squalid electioneering of the right hon. Member for Manchester, Gorton (Mr. Kaufman), and assure my right hon. Friend that I believe that, although many people will find the increase from £46 to £58 a considerable one, they will nevertheless still feel that the television licence represents some of the best value for money in this country.

While fully accepting the need for an inquiry into the future financing of the BBC, I should like to ask my right hon. and learned Friend two questions. First, can I take it that the inquiry will be allowed to consider the scope and role of the BBC today? Secondly, can I assume that the terms of reference of the inquiry will not prevent it from deciding that there should be no advertising on the BBC?

Mr. Brittan

Among many other things, the inquiry will investigate the impact of any changes on the BBC. That being so, I do not see how it can fail to look closely at what the BBC is doing today.

On the second point, I assure my right hon. and learned Friend that the inquiry would be perfectly free to come to the conclusion that he mentions.

Mr. Clement Freud (Cambridgeshire, North-East)

We accept the rise in the colour television licence fee but greatly regret the more than index-linked rise in monochrome licences. It is right that the terms of reference for Professor Peacock's committee should be so wide-ranging, but will the Home Secretary assure the House that the members of the committee will reflect a wide range of expertise in public service broadcasting?

Mr. Brittan

My intention is that those who are appointed should have no preconceived notions and should be broadly based and qualified to bring judgment and wide experience to their task.

Sir Paul Bryan (Boothferry)

Does my right hon. and learned Friend agree that, owing to the pace of change in all broadcasting, the report of any committee is almost out of date before it appears? For example, the accepted view on cable television, direct broadcasting by satellite, the fourth channel or the income of television companies one year ago would already be out of date now. We know nothing about what will happen on our screens with the invasion of satellites from other countries. We should need the wisdom of Solomon to decide on the future of the BBC's role in one committee. Does my right hon. and learned Friend agree that we need a standing advisory committee on broadcasting of the highest calibre, to which the Government could turn for advice as required?

Mr. Brittan

I accept that the pace of change in the industry is extremely fast. Nevertheless, decisions have to be taken using the best information at the time. Now is the right time to set in hand an inquiry to consider the impact of financing changes, such as advertising on the BBC and its impact on other parts of the system. The inquiry might conclude that the impact is uncertain, for the reasons that my hon. Friend has given. That would be an important part of its deliberations. I see the force of what my hon. Friend says about a standing advisory committee but, for the moment at least, we should let Professor Peacock continue with his deliberations.

Mr. Joseph Ashton (Bassetlaw)

Does the Home Secretary accept that 13 million people in Britain do not regard £58 as disposable income? Does he accept that the committee has the right to consider Government subsidies? Does he also accept that the committee can examine sponsorship in sport and current advertising on the BBC such as the Canon league and the Milk Cup? Will he guarantee that the House will eventually have a vote on the matter, as otherwise my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) will be making policy without giving a ballot to the rest of us, rather like the Prime Minister does?

Mr. Brittan

I know of the hon. Gentleman's support for a remedy in the form of advertising. How he has that out with his right hon. Friend is beyond my ken. The committee is not being asked to consider Government subsidy, but sponsorship is included in its terms of reference.

Mr. Tim Brinton (Gravesham)

Is my right hon. Friend aware that many people feel that he has got the answer right today? The temporary rise was necessary, but the inquiry was urgent. Will he add two things to the committee's term of reference — first, that it must consider what the licence fee should be used for in terms of services, if it continues to exist; secondly, that it should consider whether to look towards sponsored programmes but deny the BBC straight advertising as, if it advertises, there will be a question mark over whether we need a BBC?

Mr. Brittan

I am grateful to my hon. Friend. I agree that examination of these matters is urgently needed and that any increase announced today should not prejudice the outcome of the examination. I hear what my hon. Friend says about sponsorship. That is within the inquiry's terms of reference. As to examining what the money is used for, in producing a range of options, which is what the inquiry will be asked to do, it is bound to consider the consequences in terms of what will be provided for any combination in that range.

Mr. Donald Stewart (Western Isles)

Is the right hon. and learned Gentleman aware that the shortfall between the figure he has announced and that which the BBC thought essential might postpone and even cancel the five-year plans for a broadcasting service in the Gaelic language? Does he recall that in the 1981 licence fee settlement there was an allocation which gave a great boost to Welsh language broadcasting? Is he now prepared to consider a similar recommendation in respect of Scotland?

Mr. Brittan

I believe that what I have announced will enable the BBC to carry on with its current plans. If it wishes to make any advances or changes, that is a matter for the corporation. I have said that the extent to which it would be able to do that will depend on the extent to which it is able to keep its costs down and to improve productivity. I have clearly indicated why I think there is scope for both.

Mr. John Stokes (Halesowen and Stourbridge)

Is my right hon. and learned Friend aware that some Conservative Members would be more enthusiastic about an increase in the licence fee if the BBC generally showed a more patriotic stance and, for instance, did not denigrate our national heroes?

Mr. Brittan

I am aware that that is a sentiment which others, as well as my hon. Friend, share.

Mr. Robin Corbett (Birmingham, Erdington)

Will the Home Secretary try again to justify this inquisition into the future of public service broadcasting? Will he give the House a categoric assurance that, by the appointment of this inquisition, he is not implying that he expects it to come to his foregone conclusion that there should be advertising at least on BBC1 and BBC2?

Mr. Brittan

There is no question of it coming to my foregone conclusion, because I do not have one.

Mr. Peter Bruinvels (Leicester, East)

Will my right hon. and learned Friend accept that the figure announced today will be seen as a victory for the BBC? Will he make it quite clear to the BBC that, unless it economises in the way that is necessary and accepts some limited advertising, it cannot expect such increases in the fee? It should also be encouraged to continue with its local radio services, which are at least successful.

Mr. Brittan

When yesterday I told the BBC what I would announce today, the demeanour of those emerging from my room was not that of victors.

Mr. Willie W. Hamilton (Fife, Central)

Does not the Home Secretary agree that the BBC is probably the best television and radio service in the world and that any attempt to change its method of financing would jeopardise that? Does he not understand that many Labour Members have great suspicion of the enormous vested interest in advertising firms among Conservative Members? More than 50 Conservative Members have private vested interests in advertising agencies. Are not these the people, along with the Prime Minister, who are urging the increased financing of the BBC by advertising, and would that not be the death knell of the BBC's present quality?

Mr. Brittan

The difference between the hon. Gentleman and Conservative Members is that he seems to be interested in the personalities—

Mr. Hamilton

Yes, we are.

Mr. Brittan

—and we are concerned about the arguments. If what the hon. Gentleman says is right, he will have ample opportunity to make that case before the Peacock committee.

Sir Anthony Kershaw (Stroud)

While accepting that £325 million is too much for the rest of us to pay so that retirement pensioners like myself can have television licences, will the committee have scope to examine ways in which the extra cost can be mitigated for retirement pensioners living alone?

Mr. Brittan

No, that will not be within the committee's terms of reference.

Mr. Merlyn Rees (Morley and Leeds, South)

May I express the hope that the Home Secretary will not listen to talk of patriotism and the BBC—[HON. MEMBERS: "Why not?"]—because the most patriotic broadcasting and television system in the world comes from Moscow and we do not want that kind of thing here. Does the right hon. and learned Gentleman agree that, whatever happens about finance, there must be no Government or political control of any kind?

Mr. Brittan

I agree that the BBC should be independent, and I seek no political influence whatever over it. I am sure that the right hon. Gentleman accepts that broadcasting is moving as fast as my hon. Friend the Member for Boothferry (Sir P. Bryan) has suggested and that it is irrational to approach the matter with a closed mind, as some people have done. It is for exactly that reason that the committee is being appointed. To say, as the right hon. Member for Manchester, Gorton (Mr. Kaufman) did, that in no circumstances would advertising be contemplated by the Labour party is to approach the matter with a closed mind.

Sir Dudley Smith (Warwick and Leamington)

Does my right hon. and learned Friend agree that it is essential for the committee to look into the vast amount of free advertising on BBC radio and television day by day, which has reached almost scandalous proportions?

Mr. Brittan

Yes, I do agree.

Mr. Norman Buchan (Paisley, South)

Does the right hon. and learned Gentleman agree that there are few more unpleasant, unpatriotic or obscene images in society today than that of Conservative Members slavering at the chance of picking over the bones of a dismembered great national institution?

Has not the committee been set up specifically to follow the Prime Minister's dictum that advertising should now be introduced? Will the right hon. and learned Gentleman ensure that the Committee is not as loaded as its terms of reference? Will he bear in mind that there are other ways to deal with the matter besides advertising, such as taxation and the measures suggested by my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman)?

Above all—

Mr. Speaker

Briefly, please.

Mr. Buchan

Above all, will the right hon. and learned Gentleman bear in mind that advertising is a concealed tax which hurts the poor more than the rich?

Mr. Brittan

I do not favour financing the BBC out of taxation, for the reasons advanced by the right hon.

Member for Morley and Leeds, South (Mr. Rees), himself a former Home Secretary. I cannot believe that that is the way to preserve the independence of the BBC.

As for the other matters, the hon. Gentleman's suggestions about the motives behind the setting up of the committee are wholly unfounded. It is astonishing that a party which regards itself as progressive in its thinking should have such a completely closed mind on an issue.

Mr. Willie W. Hamilton

We do not. We just know what you are up to.

Mr. Brittan

To refuse even to recognise the possibility of change in a constantly changing situation is an extraordinary attitude.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Does my right hon. and learned Friend accept that this has been a week of strange birds, with cuckoos, grouse and now a peacock, and that the last is the most unnecessary of all? Does he agree that most Governments set up commissions when they know what they should do but do not want to make a public statement about it? Is it not time that we accepted that "Blankety-Blank", "The Eastenders" and sport will not be depraved by advertising? Should we not now have some limited advertising to see how we go instead of giving way to the BBC and offering it a £58 licence fee? Is my right hon. and learned Friend aware that many of us would be inclined to congratulate the governor and director general of the BBC on their great victory in this respect?

Mr. Brittan

Governments who do not want to make decisions do not appoint committees with such a short time scale. My hon. Friend's view contrasts with the almost unanimous view of the Opposition that the whole thing was a plot. In fact, it is neither a means of avoiding a decision nor a way of imposing a decision. It is a way of bringing independent expertise to bear on a problem which has implications not just for the BBC but for the independent television sector and broadcasting generally, for the newspapers and for a wide variety of other interests. If my hon. Friend makes that comparison, he will find that other interests do not necessarily take the view to which he has sought to give currency.

Rev. Martin Smyth (Belfast, South)

Having asked everyone to keep an open mind about financing, will the Minister himself keep an open mind on the question of pensioners living alone, especially those on supplementary benefit?

Secondly, although we may not wish the BBC to become a patriotic body, we expect it to be neutral, especially when dealing with terrorism. Does the Home Secretary appreciate that many taxpayers and licence fee payers take strong exception to paying a licence fee which is often used to portray terrorism? Does he agree that we should follow the example of Radio Telefis Eireann and keep terrorists off the screen?

Mr. Brittan

I understand and respect the hon. Gentleman's deeply held views about terrorism, which I think we all share.

The cost of a concession for single pensioners living alone would be about £125 million. That is a very considerable sum to add to the Exchequer.

Mr. Nigel Forman (Carshalton and Wallington)

I welcome the Peacock review as an eminently sensible way to proceed, but will my right hon. and learned Friend recognise that at a little more than £1 per week the licence fee is still good value and does not greatly exceed the usual cost of subscribing to a newspaper for the same period? Does he agree, however, that a Gresham's law of broadcasting has been evident since 1954—that the bad drives out the good?

Mr. Brittan

Those matters are at the very centre of the Peacock inquiry and I do not wish to prejudge that, but I know that what my hon. Friend has said represents a standard opinion.

Mr. Allen McKay (Barnsley, West and Penistone)

Has not the right hon. and learned Gentleman already closed his own mind to the plight of the pensioners? Will he consider the numerous 10-minute Bills that we have had on this, in consultation with old people's associations which have suggested methods of providing concessions for pensioners? Does he agree that it is brass neck for him to talk about the millions that this would cost, when he is a member of a Government who have just spent billions of pounds trying to destroy the National Union of Mineworkers and the trade union movement?

Mr. Brittan

I do not think that that comparison assists us. It is worth pointing out, however, that the cost of the television licence is a component in the retail price index on the basis of which increases in pensions are assessed.

Mr. John Butterfill (Bournmouth, West)

Does my right hon. and learned Friend accept that more than 30 per cent. of my constituents who are pensioners will welcome the Peacock inquiry but will be appalled at the 26 per cent. increase in the licence fee? Will he accept that many of them have legitimate reservations about the need for the BBC to expand its services so greatly in local radio and in the provision of breakfast television, which many of them regard as totally unnecessary? Does my right hon. and learned Friend feel that economies could be made in those areas?

Mr. Brittan

It is only fair to point out that the cost of breakfast television is £8 million per year, or just 1 per cent. of the BBC's total income. Traditionally, these have been regarded as matters for the BBC and not for the Government. It is precisely because maintaining the BBC's financing in the way that has previously obtained has led to increases that many people find it difficult to bear that we are asking the Peacock committee to examine alternative methods of financing the BBC, either in whole or in part. Until the committee has completed its work, however, it would be unrealistic to assume that we could proceed other than in a balanced way by applying the system that has existed so far.

Mr. John Ryman (Blyth Valley)

The right hon. and learned Gentleman has mentioned he cost of concessionary television licences for old people. Does he recognise and deplore the anomaly in the law which compels old people to pay the full cost of the television licence unless they live in certain types of accommodation with a warden? Does he agree that that is utterly unfair because it means that some pay the full licence fee while others pay only a nominal fee? Is it not also an encouragement for all sorts of schemes with titular wardens to avoid paying the full fee? Will the Home Secretary do something about that?


Mr. Speaker

Order. One question is enough.

Mr. Ryman


Mr. Speaker

Order. It is unfair.

Mr. Ryman


Mr. Speaker

Order. The hon. Member has asked one question and that is enough.

Mr. Brittan

I accept that the hon. Gentleman has pointed out an anomaly, and I would not seek to say that the present system is exactly right. We are constantly considering that, but it is not easy to find a solution.

Mr. Albert McQuarrie (Banff and Buchan)

My right hon. and learned Friend will not be surprised that his statement will be greeted with great dismay in Scotland at a time when people are facing massive rate increases because of revaluation. A 26 per cent. increase for the BBC, which is completely inefficient, cannot be justified. Why does he not dig his heels in and give the BBC only an increase in line with inflation, instead of 56 per cent.?

Mr. Brittan

When my hon. Friend talks about a 26 per cent. increase, he does not take adequate account of the time scale. The last increase was in December 1981, which must be taken into account. There may well be a case for changing the system, which is what the Peacock committee will look into, but we cannot prejudge the issue by changing it by default in advance.

Mr. John Cartwright (Woolwich)

Does the Home Secretary accept that continued dependence on a flat rate poll tax system, such as the licence fee, inevitably involves hardship and some injustice, and that it is therefore perfectly sensible to have a serious examination of alternative sources of finance, including advertising? Does he also accept that the review would carry greater conviction if he had set up the inquiry last year when the problem first arose, and if he had established a tighter time scale than the two or three years implied in his statement.

Mr. Brittan

I am glad that the hon. Gentleman welcomes the inquiry. The time scale must be sufficient to allow proper examination of these matters. The impact on areas outside the BBC requires proper consideration. I do not think that the time scale that I have envisaged, but which I cannot impose, is unreasonable. The question whether to set up the inquiry last year or this year is not a fruitful area of controversy. The point is that it has been set up now.

Mr. Robert Key (Salisbury)

Will my right hon. and learned Friend tell us whether the committee will be asked to look at the financing of community radio, bearing in mind the fact that some areas of the country have neither local independent radio nor local BBC radio, and that there is great uncertainty surrounding the future of community radio?

Mr. Brittan

Community radio does not exist at present. I have made a positive announcement of its introduction. I hope to report about the precise financing and regulation of community radio soon, but I am not yet in a position to do so.

Mr. Dennis Skinner (Bolsover)

Is the Home Secretary aware that he has announced a bailing-out system, which flies in the face of monetarism, for the BBC, which consists of uneconomic units of production without reserves, unlike the philosophy that the Government applied to allegedly uneconomic pits? He has brought a bloke from the cloisters to organise a committee which will last until after the general election. Why did he not appoint Lord Bridge for the job — he deals with things extremely swiftly? If the Home Secretary wants to know where money for pensioners can come from, he could cancel Trident. There is plenty of money there. Then the pensioners would be on the same basis as all hon. Members who manage to see television without paying a licence fee.

Mr. Brittan

I do not believe that the licence fee and Trident are viable alternatives.

Mrs. Elaine Kellett-Bowman (Lancaster)

My right hon. and learned Friend referred to the scope for greater efficiency, but that does appear to be included in the inquiry. Does he accept that many teams of the BBC are grossly over-inflated, that there should be room for greater efficiency, and that an increase to £58 will bring great hardship to many elderly people and to the lower paid in regions such as my own?

Mr. Brittan

The fact that I am greatly worried about efficiency in the BBC is reflected in my suggestion that the Peat Marwick review should take place, my statements this afternoon about the follow up, which is of great importance, and the measures taken to deal with the specific recommendations and its more general criticisms of the Peat Marwick review. The six-monthly review of those matters is of great importance. Those matters need to be examined, and the machinery is in hand for doing so.

Mr. Barry Sheerman (Huddersfield)

Is the Home Secretary aware that our public broadcasting system is the envy of people throughout the world? Is he further aware that many people are suspicious, because of the ideological drift of the Conservative party, that this is yet another committee which will attempt to undermine public broadcasting? The Government have already started with local radio and are now moving into national radio and television. Are we to be assured that the chairman, Professor Peacock, is an independent chairman, or is he another member of the Conservative party who is as Right-wing as can be found?

Mr. Brittan

The hon. Gentleman may have overlooked the fact that Professor Peacock was an adviser to the Labour Government from 1974 to 1976, although he was appointed from 1973. There is not much to be gained from such statements. Opposition Members must get their heads together and decide whether their case is that this is a subtle plot to force advertising on the BBC, or a way of seeing the problem through until after the general election. It is neither. Curiously enough this is what it says it is — an independent inquiry into the methods of financing the BBC, without any foregone conclusions attached.

Mr. Richard Holt (Langbaurgh)

Does my right hon. and learned Friend accept that many hon. Members will be disappointed that he has been unable in the past six months to make a statement of this nature to enable us to debate the subject fully and properly before the announcement of the increase? Will he bear inimind that one of the bodies which should make representations to the Peacock committee is this House? Will he encourage the Leader of the House to set at least two days aside for a debate in the Chamber to allow all hon. Members to speak on the subject?

Mr. Brittan

There will be two views about whether that is the best way of giving evidence to the Committee. I will draw my hon. Friend's remarks to the attention of my right hon. Friend the Leader of the House.

Mr. Ian Wrigglesworth (Stockton, South)

Will the Home Secretary reconsider his reply to the question about the anomaly that some pensioners pay only 5p for a licence and others the vast new sum that he announced today? It is totally discredited and objected to by people right across the political spectrum. It is no good the Government saying that they are trying to look into that. Will the Home Secretary not submit the matter to the inquiry but do something about it long before the inquiry reports?

Mr. Brittan

I will not submit it to the inquiry, as the hon. Gentleman suggests. We are considering the matter. The right hon. Member for Morley and Leeds, South will agree that it is fair to say that successive Governments have examined the anomaly, and that the task of finding a solution which would not either cost vast sums to the Exchequer or deprive people of something to which they are accustomed is not easy.

Mr. John Watts (Slough)

While I welcome my right hon. and learned Friend's decision to set up a committee of inquiry, can he justify the excessive level of the increase that he has announced, which, by my calculation, is 14 per cent. above the current cost of £51, to which he referred in his statement, and far ahead of any anticipated increase in inflation for the two years over which the fee is intended to run?

Mr. Brittan

My hon. Friend must bear in mind that the figure may have to stand for three years. He should also take into account that we must consider both the prospective rates of inflation and costs. Costs are affected by what the BBC has to pay. The market leader in this is not the BBC, but ITV. BBC costs are 30 per cent. below those of ITV.

Several Hon. Members


Mr. Speaker

Order. I must bear in mind the fact that we are operating under a timetable today. Therefore, I may be unable to call every hon. Member who wishes to speak. Nevertheless, I shall bear in mind those whom I do not call for any debate that may take place. I shall allow questions to continue for another five minutes.

Mr. Francis Maude (Warwickshire, North)

Is my right hon. and learned Friend aware that the £6 a year increase that he has announced is almost as much as the BBC asked for to cover three years, and that that places him under very little pressure to implement the improvements in efficiency which the Peat Marwick Mitchell report identified? Does he accept that it is crucial that the result of the inquiry leads the way to breaching the principle of inviolability to which the BBC is so attached? Is it not crucial to introduce another form of finance so that the outdated licence fee system can be scrapped as soon as possible?

Mr. Brittan

The last point is a matter for the inquiry. On the first point, the BBC asked for £65.

Mr. David Maclean (Penrith and The Border)

Although my right hon. and learned Friend is to be congratulated on going some way down the road which my hon. Friends have been urging, does he accept that many Conservative Members believe that the increase, which is three times above the level of expected inflation, cannot be justified and that the time scale for the inquiry is too lax? Furthermore, when we see the paranoia in the Opposition about having an inquiry into the dark corridors of the BBC and when advertising is mentioned, does he not smell a rat? Does it not make him think that Conservative Members may be right?

Mr. Brittan

I agree entirely with my hon. Friend about the paranoia of the Opposition, and I made clear my view on that in answer to questions from some Labour Members. As this matter will have implications for the rest of communications, not just for the BBC, I do not believe that the time scale is anything other than tight. As to costs, in answer to my hon. Friend the Member for Warwickshire, North (Mr. Maude), I made it clear why a straightforward comparison with inflation is misleading, because the BBC is, in many respects, a price taker, not a price maker. Anyone who knows the relationship between BBC costs and ITV costs will confirm that that is so.

Mr. David Harris (St. Ives)

In view of the importance of the subject to millions of people, and taking into account the obvious anxiety of hon. Members on both sides of the House, does my right hon. and learned Friend accept that the time has come when a decision of such importance should be made by the House? Many of us believe that we do not need yet another committee to tell us that the BBC is thoroughly overstretched in what it is trying to do, and also overmanned.

Mr. Brittan

I do not believe that the Committee will be concerned only with the point made by my hon. Friend. It will be concerned with the impact of specific changes, the nature of which may be stated in general terms by some of my hon. Friends, but which have not been outlined specifically. Nor have we studied the impact of what hon. Members have suggested on the independent television sector, on newspapers and on the Exchequer. There is a need for an inquiry, and I defend its setting up.

Mr. Harry Greenway (Ealing, North)

Will my right hon. and learned Friend confirm that the licence fee appears on the retail price index and is taken into consideration for supplementary benefit? Will he ask the Peacock committee to consider a two-tier licence fee, with wage earners paying the normal fee, and pensioners, who are currently ineligible for the 5p licence, and the unemployed paying a substantially reduced fee?

Mr. Brittan

I confirm that the RPI includes the cost of the licence fee and that the increase in the licence fee will be reflected in all benefits that are related to the RPI. The Peacock committee will take a wide range of evidence and will be able to consider all the matters which my hon. Friend raised.

Mr. Robert B. Jones (Hertfordshire, West)

Is my right hon. and learned Friend aware that, by granting a licence fee increase above the rate of inflation, he is encouraging the BBC to become less efficient instead of more? Does he accept that his point about the IBA is invalid? Many Conservative Members believe that, if advertising appeared on the BBC, it would encourage the IBA to become more efficient.

Mr. Brittan

My hon. Friend's latter point is of the greatest importance. However, he must remember that that desirable process cannot take place under the present system. At present, the BBC depends, to some extent, on what the ITV companies can pay. The position might be different if we introduced changes such as those suggested by my hon. Friend and others, but we do not have that system yet.

Mr. John Townend (Bridlington)

Does my right hon. and learned Friend accept that many of my constituents would consider an increase of 26 per cent. as excessive? When many organisations, private and public, have had to keep down increases in costs to the level of inflation, why could not the BBC's costs have been kept down to that level since 1981? Why were manning levels excluded from the investigation by Peat Marwick Mitchell?

Mr. Brittan

The investigation by Peat Marwick Mitchell disclosed many matters. There were 30 specific recommendations, apart from the general ones. Peat Marwick Mitchell was in no way inhibited, and, in the part of my statement which was perhaps less audible, I gave a clear commitment on my part and on the part of the BBC that what Peat Marwick Mitchell recommended should be pursued vigorously.

Mr. Christopher Chope (Southampton, Itchen)

Does my right hon. and learned Friend accept that the most offensive aspect of the increase is the element of compulsion? Will the Peacock committee consider the idea of people who wish to opt out of receiving the BBC television signal being able to have their television sets so adapted?

Mr. Brittan

That is certainly something which the Peacock committee will be able to consider.

Mr. Robert Atkins (South Ribble)

How do I explain the anomaly to my constituents who live in council-owned sheltered accommodation next to private sheltered accommodation, that those who live in the council accommodation pay only 5p for their licence fees, whereas those who live in the private accommodation, which is identical, must pay the full rate? Will my right hon. and learned Friend ask the committee to consider that ridiculous anomaly?

Mr. Brittan

That is not a matter for the Committee, but I am acutely conscious of the anomaly. In answer to previous questions, I explained the problems that we have in dealing with it.

Mr. Peter Griffiths (Portsmouth, North)

Does my right hon. and learned Friend accept that, although the inquiry will be widely welcomed, there is no evidence in the actions or statements by the BBC that it will ever be willing to seek economies or alternative sources of finance? Whatever the result of the inquiry, change will have to be imposed by his Department.

Mr. Brittan

When the committee reports we shall have to consider its conclusions and the alternatives that it proposes. The decision about what to do at that point will not be made by the BBC.

Mr. Michael Brown (Brigg and Cleethorpes)

I congratulate my right hon. and learned Friend on appointing Professor Peacock to chair the inquiry. He is a distinguished man, in so far as he taught me economics at York university. I lament the fact that my right hon. and learned Friend will probably be surrounded by those who will not be anxious to publish the results of an inquiry which may be in line with what Conservative Members look forward to.

Mr. Brittan

My hon. Friend will have observed during his studies that Professor Peacock is not a man who is readily persuaded to take a view different from the one that he holds.

Mr. Norman Buchan (Paisley, South)

On a point of order, Mr. Speaker. There is a general welcome in the House for the recent development of your allowing extended questions on statements so that the House can have almost a mini-debate. In the past, such important matters were sometimes dealt with by written answer, with no opportunity for debate. We must thank you for that, Mr. Speaker. However, would you consider another innovation? When we have such statements, which relate not only to political matters but to matters of interest, should not hon. Members preface their questions with a statement of interest?

Mr. Speaker

The hon. Gentleman knows that there is a Register of Members' Interests. What he suggests will not be necessary.