HC Deb 21 February 2000 vol 344 cc1239-52 3.30 pm
The Secretary of State for Culture, Media and Sport (Mr. Chris Smith)

With permission, Madam Speaker, I should like to make a statement setting out the Government's decisions on the future funding of the BBC.

I should say at the outset that, together with my right hon. Friend the Leader of the House, I gave the most careful consideration to the Opposition's formal request for a delay in the making of this statement until tomorrow. However, because of the intense speculation that there has been over the past few days and because of the commercially sensitive nature of some of the information that I have to give, I thought that it was important to come to the House at the very earliest opportunity.

The future funding of the BBC is a matter that has generated considerable interest, because the BBC is an institution which is central to the United Kingdom's view of itself and of the world.

I want to leave the House in no doubt about the Government's commitment to public service broadcasting and to retaining the BBC at its heart. The BBC is the UK's most important cultural institution, and we have a duty to ensure that it can continue to play a central role in the nation's life. Specifically, the BBC should provide a strong and distinctive schedule of benchmark quality programmes on all its services and should drive the take-up of new digital and online services. A strong BBC is crucial in ensuring that everyone can have access to information, news, education and current affairs, using efficient modern methods, so that we can build a society for the 21st century on the solid foundations set down for us in the 20th.

We welcome the fact that the BBC's main priorities for the next seven years are: improving established services; expanding education work; developing interactive services; and devolution in national and regional broadcasting. We particularly welcome the BBC's intention to re-establish BBC 1 as the corporation's flagship, its commitment to education—in particular learning support for schools and for lifelong learning—and the exploitation of new learning possibilities opened up by interactivity. We also welcome the BBC's plans for enhancing services in Scotland, Wales and Northern Ireland, together with a greater regional emphasis within England.

It is to enable the BBC to deliver these priorities that I am prepared to offer it more support. We shall be keeping the BBC's implementation of these plans closely under review, and ensuring that it meets the commitments that it makes in return for that additional support. The BBC must understand the basis of our decision and continue to satisfy Parliament that it can and will deliver.

I want to leave the House in no doubt that to achieve this vision and to improve its services, the BBC needs to raise its game; it must become even more cost-effective and quality-conscious. That is why we are not going to allow the BBC the massive injection of funds that it has sought from the licence fee—an increase reaching more than £700 million a year by 2006. We are setting it a number of challenges, in terms of sources of finance and in operations.

In our consideration of these issues, we have been enormously assisted by the work of the independent review panel into the future funding of the BBC chaired by Gavyn Davies, which reported last summer. We asked the panel to examine options for providing the BBC with additional funding, assuming that the licence fee remains the principal source of revenue during the current charter period. The panel was also requested to consider the arrangements under which the BBC achieves a proper balance between its public and commercial services, and the concessionary scheme for pensioners. Broadly speaking, I am today accepting the panel's analysis although not, in every respect, the detailed solutions that it proposed.

The report was published in July 1999 for public consultation, and more than 2,000 responses were received. In reaching our decisions, we have taken account of them. I shall shortly place a summary of responses in the Library of the House, and—provided respondents have given permission—the representations by organisations will shortly be made available by my Department's information centre. I have also paid close attention to the report of the Select Committee on Culture, Media and Sport and, now that I have taken the decisions on the way forward, I will publish the Government's response to it as quickly as possible.

I should also mention that the Chairman of the Select Committee, my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman), has apologised to me for the fact that a hospital appointment prevents him from being with us this afternoon.

Today, I am also placing in the Library of the House the report of the independent consultants, Pannell Kerr Forster, entitled "Review of the BBC's Financial Projections", which provided a key input into my decisions on finance, together with my Department's chief economist's analysis and a copy of my letter to the chairman of the BBC, which will set out the detail of this settlement.

I shall now deal with the Government's decisions under four headings—finance, programming, transparency and licence fee concessions. They provide a balanced package of measures, which I hope can be widely welcomed.

We accept the judgment of the Davies panel that our vision for the BBC cannot be realised within the existing funding framework. We agree with the panel that, without the BBC's provision of high-quality free-to-air digital services, the penetration of digital television could end up being capped at around 50 to 60 per cent. of the population. The first place to look for new funding should be self-help by the BBC; new licence fee funding should be secondary. We are therefore providing for an increase in licence fee funding that will raise on average around £200 million per year between now and 2006. In addition, however, we are challenging the BBC to help itself by increased efficiency savings, and raising more revenue from its subsidiaries, to the tune of £490 million by 2006–07, over and above the £600 million which it itself estimated.

That figure presents the BBC with a higher target than that envisaged by the Davies panel and is in line with the conclusions of the independent analysis of BBC finances that I commissioned. It means that we are demanding, over the period of this settlement, that the BBC generates more than £1 billion from self-help. As envisaged by the Davies panel, a proportion of the proceeds should be reinvested in commercial businesses.

We will leave it to the BBC how it meets the challenge, but we are leaving the BBC in no doubt that we expect it to achieve the figures set out here by efficiency savings, partnerships, joint ventures, reductions in bureaucracy and other means. We believe that the licence fee settlement, together with self-help, should yield enough to ensure that the BBC enhances established services and develops a significant foothold in the digital world.

There has been considerable debate on the method of raising additional funding for the BBC. The review panel put forward the alternatives of a digital licence fee set at £24, which would "fade away" as the normal licence fee rose to meet it, or an increase in the general licence fee payable by all. I have decided not to adopt the new mechanism of a digital supplement payable only by those households with digital television. Although I accept that there are good arguments for such a solution, on balance I believe that the benefits of the increased funding will be available to all through improvements in the BBC core services, and, in the case of educational programming, also through schools. Furthermore, it is my view that switch-over to digital will take place this decade, so the time has now come to recognise that digital television will soon be the norm.

Following my announcement in September, it is now clear that digital switch-over can happen sooner than was envisaged by the Davies panel. Against my belief that digital television brings benefits to all, it would be wrong to signal that it is something special and only for the few. I am therefore going for the general licence fee option, and an increase of 1.5 per cent. over the retail prices index in each year starting in April this year. That means an increase of 3p per week above inflation each year. On 1 April this year, the licence fee will therefore rise by £3. It also means that for each pound that the BBC receives from the licence fee, it is expected to generate almost the equivalent through self-help. I shall shortly be laying regulations before the House in relation to the licence fee from 1 April.

The Davies panel proposed a package of reforms in the areas of transparency, fair trading and accountability. We support the thrust of the panel's recommendations. In particular, we intend to open up the process by which I approve new BBC proposals, and we shall also make the BBC's commitment to fair trading more transparent.

We are making it clear that we do not expect the licence fee to fund strands of the market, such as dedicated film and sport channels, to which the distinctive role of public service broadcasting has little extra to offer. More generally, we shall institute new procedures for the introduction of new services. That will include an opportunity for public consultation before I reach decisions on proposed new services.

We also propose to carry out a programme of reviews of all the current BBC digital services—News 24, Choice, Knowledge and Parliament—to ensure that services are achieving what the BBC assured me they would achieve when I approved them. We propose that a priority for such scrutiny should be News 24.

We shall open the BBC to more external scrutiny. It has, hitherto, been too much the judge and jury in its own cause. I am requiring independent scrutinies of the BBC's fair trading policies and its financial reporting, and I shall publish both scrutiny reports. In addition, I shall expect the BBC to have its regular fair trading and financial audits carried out by different auditors in future. The fair trading auditor's full report on compliance and risk will in future be published by the BBC.

I shall also appoint independent consultants to carry out periodic examinations of the systems and controls in place to ensure fair trading, and of the nature and extent of financial systems in place. Those reports will also be published. All those scrutiny and audit reports will, of course, be available for consideration and questioning by the Select Committee. Finally, we shall also be reviewing the public service role and governance of the BBC in the forthcoming broadcasting and communications White Paper.

That means in essence: a review of the governance of the BBC in the forthcoming White Paper; clear separation of BBC fair trading and financial audits; regular measurement of the BBC's performance against its promises on all new services; independent scrutiny of the BBC's financial and fair trading systems and controls; and regular reviews of progress in achieving efficiency savings and commercial targets.

On concessions, we have already gone beyond the Davies panel's recommendation on assistance for pensioners with the announcement of free licences for the over-75s. I can now announce that we expect the scheme to start on 1 November, subject to parliamentary approval of the necessary legislation. From 1 April, those who will be over 75 on 1 November, or who will turn 75 after that date but before their licence would expire, will be able to buy a short-term licence, lasting till 1 November. From 1 November, refunds will be available in respect of licences already paid for. I have also asked that the BBC will take steps to ensure that all those reaching their 75th birthday know that they are entitled to a free licence, and how to apply.

We accept the Davies panel's other recommendations for achieving fairness, and we shall therefore ensure that there is a half-price television licence for blind people from April this year; that subtitling of programmes is further developed; and that the cash easy-entry easy-payment scheme is simplified and made more equitable.

There remains the issue of what to do about the accommodation for residential care concessionary scheme, which is the main focus of current concessions. Although the majority of the current beneficiaries are over 75 and will receive free licences, about 130,000 pensioners and mentally and physically disabled people will be left in the scheme. Notwithstanding the drop in the number of people benefiting from the scheme, we propose to keep the existing arrangements for concessionary licences. Therefore, on concessions, we are: introducing free television licences for the over-75s from 1 November; introducing half-price television licences for blind people from 1 April; setting new targets for subtitling for new BBC digital services; simplifying and making more equitable one of the key easy-payment schemes; and retaining the current accommodation for residential care concessionary scheme.

Our key aims throughout have been to ensure accountability, choice, quality, and value for money. I hope the House agrees that this package is one from which our constituents will benefit. In return for 3p a week extra on top of the RPI, they will be assured of good programming and good value for money from a BBC that will be able to continue to deliver the quality we expect as the new digital world increasingly becomes a reality.

I believe that the settlement will help to ensure the BBC's position and its role as our primary public service broadcaster into the new century. If we are serious about valuing the BBC at its best, about wanting to keep it at its best and about ensuring that we all have programmes of real quality to watch in the future, we must give it the support it needs. This statement will, I hope, give it precisely that.

Mr. Peter Ainsworth (East Surrey)

I thank the right hon. Gentleman for his lengthy statement, and for his courtesy in providing me with advance notice of its content. One thing is certain: whatever people think of the content, they will be delighted that, at last, the dithering is over. The Secretary of State established the Davies committee in November 1998, and it reported in August last year. It is astonishing, although sadly characteristic, that it has taken all this time for the right hon. Gentleman to make up his mind.

The Opposition recognise the BBC's achievements and its important role in setting a benchmark of quality in national and international broadcasting. The BBC has made and, I hope, will continue to make a major contribution to the cultural life of the nation. However, the broadcasting world is changing rapidly: already, more than 3 million households have access to multi-channel digital television. That explosion of choice raises fundamental questions about the current and future role of the BBC. The Secretary of State's approach to the issue of BBC funding is flawed, because he has failed to define what the BBC exists to do in a multi-channel age. It is simply not good enough that he should oblige the licence fee payer to stump up more money for the BBC in the absence of a clear and modern definition of the BBC's role, and with only the vaguest wish list to define how the money is spent.

The House will be aware that the settlement announced today breaches the five-year settlement agreed in 1996 with the previous Government. That settlement was designed to fund the BBC's expansion into digital services and was hailed at the time by the BBC as "an historic breakthrough". In addition to real increases in the licence fee since 1996—it has already risen by £14.50—the BBC has benefited from a £244 million cash sum from the sale of its transmitters, which sum was earmarked expressly for preparing for the digital age; a 1 million increase in the number of licence fee payers; and welcome efficiency gains totalling £462 million. It is not obvious that the BBC is short of money.

The Secretary of State announced his commitment to the five-year settlement in December 1997 and did so again on setting up the panel—indeed, he expressly excluded discussions of the present settlement from the panel's considerations. Why has he changed his mind? Should not the BBC, like everyone else, cut its cloth to match its purse? What other public enterprise has reached agreement with the Government to break a formal funding formula in mid-term? What is special about the BBC? What guarantee can the Secretary of State offer that, if the BBC could not keep to a five-year funding agreement, it will adhere to a six to seven-year settlement?

Will the Secretary of State confirm that the settlement that he announced will in no way prejudice the negotiations or outcome of the charter renewal process, which is due to start in 2003? Is he aware that six years is a very long time indeed in broadcasting? What provision exists to revisit the funding question in the light of changing circumstances? What account has he taken of the impact of household growth on the BBC's fee income over the next six years?

What are the Treasury implications of today's statement, bearing in mind the fact that from September the taxpayer will be funding the licence fee for over-75-year-olds?

We welcome measures aimed at improving external scrutiny, but why has the Secretary of State chosen to ignore the recommendations of Davies on a role for the National Audit Office?

We also welcome the programme of reviews of the BBC's current digital services, and we hope particularly that the review process will examine channels such as News 24 to establish whether they meet their public service remit and represent value for money. Will the Secretary of State provide the House with more information on who will undertake the reviews? Will they be undertaken by departmental officials, or will the review groups include an element of independence?

As for tightening the approvals procedure for new services, will the Secretary of State make it clear that any new education services will require his explicit approval?

We warmly welcome the decision to introduce a half-price licence for registered blind people and to impose tougher requirements for improved subtitling, both of which we have been advocating. Does not the Secretary of State regret ducking the issue of reforming the existing concessionary arrangements, which will continue the inequities affecting people aged between 65 and 75?

While in welcoming mode, may I welcome the decision to do away with the digital licence tax—the tax on innovation—and congratulate the Secretary of State on finally burying that misconceived idea?

Finally, will the Secretary of State confirm that under the Conservatives, the viewer would have paid less? His announcement today will mean that instead of looking forward to a reduction in the licence fee, as they would have done under our settlement, viewers can look forward only to paying more—on average, £200 million more in each year for the next six years.

Does the right hon. Gentleman accept that the public do not have an unlimited appetite for handing money over to the BBC? Is it not the case that the best way further to undermine confidence in the licence fee is to keep putting it up?

Mr. Smith

The hon. Gentleman began by saying that the Opposition recognise the achievements and importance of the BBC. He cannot have it both ways: if we recognise the importance of the BBC and if we want it to continue to achieve into the new century and into the digital age, it must be properly funded. The settlement that I announced today does that.

The hon. Gentleman said that what we are doing breaches the original five-year settlement. It is, indeed, the case that the fourth and fifth years of that settlement will be breached by the new settlement. However, the previous settlement was put in place long before any of us was aware of the rapid take-up of digital television and the rapid development of new digital services. That settlement dictated the timing of the Davies report. The changes that have occurred led the Davies committee to conclude that it would be "incoherent" to maintain the previous formula.

The hon. Gentleman asked about the Treasury implications of today's announcement regarding the over-75s and whether it had been taken into account. The answer is yes, it has been taken into account. My right hon. Friend the Chancellor intends to put in place funding of £300 million for the over-75s concession.

The hon. Gentleman also asked who will undertake the review of new services and whether there would be an element of independence in those reviews. The answer is yes, there will be an element of independence and the reviews will, of course, report to me, as I have the statutory authority to give approval or not.

The hon. Gentleman asked whether any of the new education services would require my approval. The answer is yes. Any new services that the BBC undertakes will require my approval, and, under the settlement that I am establishing, consultation before that approval is given.

The hon. Gentleman asked a fundamental question about the purpose of the BBC in a digital age. We believe that the settlement is necessary because the BBC is a flagship for quality broadcasting and because it needs to increase its activities in its core services, in education, in developing interactive services, and in devolving services to the regions and nations of the United Kingdom.

Mr. John Maxton (Glasgow, Cathcart)

I assure my right hon. Friend that the vast majority of Labour Members welcome his statement and the Government's commitment to the long-term future of the BBC in a digital world.

Does my right hon. Friend agree that if Britain is to continue to play a major role in what is now genuinely a world of broadcasting, it can be led only by a strong, well-financed BBC? It cannot be led by any other broadcasting organisation in this country. Will my right hon. Friend ensure that some of the money is used to digitalise the wonderful BBC archive so that it becomes available to a much wider audience through digital broadcasting and the Internet? Will he ensure that some of the money will be used to improve, develop and constantly update the superb BBC website, which is the envy of much of the world?

Mr. Smith

First, my hon. Friend rightly draws attention to the global importance of the BBC. It is important that the BBC leads our efforts to make available our quality programming, which is often the finest in the world, to the rest of the world. Secondly, he asked about the digitalisation of the BBC archives. That is primarily a matter for the BBC, but I am sure that those who make the decisions will have heard his comments.

Thirdly, my hon. Friend asked about BBC Online, which is one of the BBC's best achievements. As part of the package we announced, we envisage the BBC basing further development of its interactive services on the success of BBC Online.

Mr. Norman Baker (Lewes)

I welcome what Liberal Democrats believe to be a well-considered and balanced statement, which sets out a long-term, secure future for the BBC. If it is the Secretary of State's decision and not the Prime Minister's, I congratulate him on abandoning the idea of a digital licence fee supplement, which would have been an unwarranted poll tax.

I also welcome the ambitious targets that the Secretary of State has set for efficiency savings in the BBC. Will there be constant monitoring by the Department to ascertain whether the BBC is making those savings? The Secretary of State stated his intention to introduce further increases in the licence fee beyond those agreed for this year. Will they depend on the BBC's efficiency savings being met?

I welcome the Secretary of State's intention to take external views on the BBC's finances. Why was not the NAO mentioned in his statement? Will it be given a specific role to monitor the BBC's finances in the years ahead?

I welcome the Secretary of State's commitment to open processes. Will the House and the other place have the opportunity for an annual debate on the matters to which he referred today so that Members are able to assess whether the BBC is fulfilling the commitments that the Secretary of State outlined this afternoon?

I deplore the fact that the digital licence fee has been trailed in the newspapers in the past few days, with clear suggestions of the final decision. Will the Secretary of State confirm that it is not his intention to use Parliament simply as an official stamp for press stories that appear on the previous day? Did he authorise the briefing of newspapers on the matter? If not, will he investigate why the stories appeared in the newspapers yesterday and explain the reasons to Parliament?

Mr. Smith

On the hon. Gentleman's last and very serious point, the newspaper stories were so off the mark in their speculation that they did not provide a pre-emptive view of the statement. On the rest of his remarks, I hope that the proposals are well-balanced. They acknowledge that the BBC deserves additional funding, but we want much greater efficiency and much better scrutiny of what it does in return. He asked whether there would be an impact on the licence fee settlement if the BBC failed to make the savings that we want it to make. The answer is yes. We intend to hold it very firmly to the efficiency targets that we have put in place.

The hon. Gentleman also asked about the role of the NAO. We considered the Davies committee proposal about its role carefully, but made our decision for two reasons. First, the NAO does not have the expertise in fair trading issues and the division between commercial and public sector activity that we require in this exercise, and so is perhaps not the most appropriate body. Secondly, and perhaps more important, a political role is not appropriate in taking on such a degree of scrutiny of the BBC's finances. The detailed scrutiny is best done by an independent body, but its report should be made openly to the House of Commons and made available for scrutiny by it.

Mr. David Winnick (Walsall, North)

Are not a number of Tory MPs increasingly coming round to the view that the BBC, or a large chunk of it, should be privatised and given over to those who dominate the commercial sector? Needless to say, that would be the most undesirable outcome. The concessionary scheme for pensioners has been criticised by the Tories from their Front Bench, but in government did not they oppose changing the system at every opportunity and deny pensioners the concession that the Government are introducing later this year?

Mr. Smith

My hon. Friend is absolutely right, and the Tories continued their opposition even when my right hon. Friend the Chancellor made his welcome announcement a few months ago. A Conservative was reported as saying that the concession was an "empty gesture". It is not; it is of real importance to many thousands of people.

Mr. Roger Gale (North Thanet)

Further to that answer, the Government appear to have taken a bad and inequitable system and made it worse. Now there is division not only between people in different homes, but between ages. However, we have got a start date out of them at last. The Chancellor made the announcement and passed the buck to the Department for Culture, Media and Sport. The DCMS has passed the buck to the BBC. Has the Department considered whether it will make available the relevant age and age-related information to enable the BBC to implement the proposal by 1 November? Given that the Government, for the first time, are paying £300 million in direct grant to the BBC, how long will it be before the Government begin to exercise political control over it?

Mr. Smith

We have chosen such a mechanism for implementing the concession for those aged 75 and over precisely because we do not want the Government to exercise political control over the BBC. Provided that primary legislation can be passed to enable it to do so, and as soon as that happens, the Department of Social Security will make details of everyone aged 75 and over available to the BBC so that they can be contacted.

Mr. John Grogan (Selby)

Does my right hon. Friend welcome the widespread support given in evidence to the Select Committee for the principle of the licence fee, notably from BSkyB and the independent television sector, but also from virtually every witness other than Mr. Kelvin MacKenzie of Talksport? Does he also welcome the fall in licence fee evasion rates in recent years, which has been achieved largely by easy-payment schemes? Will he encourage the BBC to develop such schemes, particularly to allow monthly rather than quarterly payment of the licence fee?

Mr. Smith

I certainly join my hon. Friend in welcoming the wide support for the principle of the licence fee, and agree with him about the need to ensure that we have a properly funded BBC. I also agree with him about the need to ensure that easy-payment schemes are more readily available: that, indeed, is an element of the package that I have announced.

Miss Julie Kirkbride (Bromsgrove)

I am sure the Secretary of State is aware of the majority view expressed by the Select Committee on Culture, Media and Sport, which contains a majority of Labour Members, that the BBC should not be given any further funds until the completion of a proper review of its services, and of what it should be doing in a multi-media age. Is the right hon. Gentleman also aware that many people will be very cross about having to pay more extra tax to watch their television sets—especially pensioners aged between 60 and 74, who are already angry about being left out of the Government's arrangements for free licences for those over 75?

Mr. Smith

Not giving the BBC further funds to enable it to ensure that its core services remain good, worth watching and of real quality, and that it can take a lead in developing new digital services, would render the country lacking in a high-quality BBC into the future. That is not a future that I—or, indeed, those to whom the hon. Lady refers—want.

Mr. Ben Bradshaw (Exeter)

I congratulate my right hon. Friend on standing up to the poodles of Rupert Murdoch and Conrad Black on the Opposition Benches. Does he agree not just that the BBC represents excellent value for money, but that public service broadcasting is still one of the things that this country does better than any other?

My right hon. Friend spoke of efficiency savings. Will he ensure that the BBC makes those savings within the army of bureaucrats, managers and accountants that it has appointed in the last 10 or 15 years, and not among programme makers?

Mr. Smith

I say a robust yes to my hon. Friend. Indeed, I note with great pleasure that in his very first statements as director general of the BBC, Greg Dyke has said that he intends to do precisely that.

Mr. Peter Brooke (Cities of London and Westminster)

The House enjoyed the irony in the Secretary of State's announcement that he had come to the House "at the very earliest opportunity". He went on to say that his financial proposals should be enough, without specifying for what BBC role they were to be enough. Does he agree that if you do not know where you are trying to go, any road will get you there?

Mr. Smith

I much enjoyed the right hon. Gentleman's succinct analysis of the Tory party in its current condition.

We have made it very clear where we want the BBC to go. We want to ensure that it can be a quality programme maker into the future, providing good programmes for the entire population, and that it continues to develop, in particular, education and interactivity services, and devolved services for the regions and nations of the United Kingdom.

Mr. Peter L. Pike (Burnley)

The Secretary of State rightly underlined the Government's support for and commitment to the future of the BBC. He specifically mentioned sport. Can he assure us that those who cannot afford satellite or cable television will still be able to see a fair measure of sport on the BBC?

Mr. Smith

I very much hope the BBC will continue to ensure that sport forms a key part of the menu of services that it offers on its channels. The listed events regulations require great national sporting events to be shown free-to-air in any case; but, in addition to that, the BBC must continue to view sport as part of its public service offering.

Mr. David Davis (Haltemprice and Howden)

I thank the Secretary of State for his letter to me about the National Audit Office, although I did not receive it until 11 minutes before his statement. He will understand, however, if I press him a little on the question of the Comptroller and Auditor General.

Despite the suggestion of the Davies panel, despite the recommendation of the Culture, Media and Sport Committee and despite the right hon. Gentleman's own comment that the BBC will have to satisfy the House in regard to the proper use of its money, he has decided not to allow the Comptroller and Auditor General—the House's Officer—to have access to the BBC.

The answers that the right hon. Gentleman gave a number of hon. Members were ill briefed. He said that the NAO had no experience of fair trading issues. In the past few years that I have been Chairman of the Public Accounts Committee, the NAO has conducted eight oversights of regulatory bodies. Six related to fair trading issues. The right hon. Gentleman also said that he needed to maintain the independence of the BBC. Over the past century, the NAO has overseen universities and maintained academic freedom. He has undermined that himself with the £300 million grant. He finished by saying that the reviews would report to him. Does he consider himself to be more independent than the CAG?

Mr. Smith

We considered very carefully the proposal from the Davies panel and from the Select Committee. The central question is how best to ensure that the BBC is opened up to the most effective scrutiny by the necessary experts, so that it maintains its fair trading commitments and has proper and robust financial systems in place. Our judgment was that that is best done by independent analysts reporting publicly, so that their analysis can be tested in debate and by questioning by the Select Committee. That is the best way to go forward.

Ms Claire Ward (Watford)

I welcome the concessions that my right hon. Friend has set out and the scrutiny that will take place of the BBC. However, when the BBC appeared before the Select Committee, it was unable to give a convincing explanation of why it wanted the extra funding and of what it would do with it. Will my right hon. Friend ensure that account is given of that money and that scrutiny takes place, so that the situation that we have with News 24 does not arise again? A vast sum of money is being spent but there is no accountability to licence fee payers.

Mr. Smith

I can indeed assure my hon. Friend of that. It is precisely because the £700 million demand from the BBC was not well put together that we have concluded that it was not the appropriate figure to go for. Any new services, any development of efficiency in what the BBC is doing at the moment, and any spending of the additional funds that are being made available to it will be subject to the clearest scrutiny and the most open processes.

Mr. Simon Thomas (Ceredigion)

I welcome the Secretary of State's statement, which will be reasonably well received in Wales, particularly the news that there will not be a tax on digital knowledge. May I ask him for more reassurances that the cost-efficiency savings that he is seeking from the BBC should not be to the diminution of English-language BBC programmes in Wales? In fact, we should be working towards the setting up of an English-language digital service for Wales.

Mr. Smith

I can certainly assure the hon. Gentleman that any cost-efficiency savings that we demand of the BBC will not be at the cost of important public service programmes such as English-language programmes in Wales.

Ms Sally Keeble (Northampton, North)

I welcome my right hon. Friend's statement, but will he assure me of two things: first, that local radio stations will also be able to have access to digital broadcasting—for example, BBC Radio Northampton would want to provide services in that spectrum; and secondly, that, if the licence fee is to increase, it is important for the BBC to ensure that everyone can receive it?

The whole of the east of my constituency is unable to get any BBC or other terrestrial channel because they are all wired up for cable television. Even if people pay the licence fee, they will have to pay cable charges on top to get TV. It is important that people should be able to get the BBC, particularly if they are paying increased licence access to fee charges.

Mr. Smith

In response to my hon. Friend's question about digital radio, it is the case that digital radio is expected to roll out probably rather more slowly than digital television and will encompass local as well as national stations. On her key point about everyone having access to BBC services, I have made it clear that, before any overall switch-over from analogue to digital can take place, digital services, including BBC services, must be receivable by everyone who has a television set at the moment.

Mr. Stephen Dorrell (Charnwood)

At a time when virtually every day seems to bring news of another agreement that will break down the distinction between traditional types of media and the new internet technologies, is it not increasingly clear that a nationalised institution that is prevented—and rightly so for as long as it remains a nationalised institution—from fully taking part in the multi-media world is in severe danger of becoming an anachronism?

Mr. Smith

It is precisely because the BBC has done so exceptionally well in the development of BBC Online, which brings together traditional and new interactive media, that we wish to ensure that funding is available for such services to be developed in the future.

Mr. Tam Dalyell (Linlithgow)

How, in the Secretary of State's beguiling words, is BBC Scotland to be enhanced? What can he offer the BBC World Service to prevent the closure of some of its valuable services, which are certainly worth more than missiles?

Mr. Smith

The BBC has in mind the need to develop further services for Scotland. How it sets about doing that will be a matter of considerable public discussion in the next few months. The subvention to the World Service is a matter for my right hon. Friend the Foreign Secretary, not me. My hon. Friend's question would more appropriately be addressed to him.

Sir Teddy Taylor (Rochford and Southend, East)

Does the Secretary of State accept that it is unjust that an old person living in a property specially designed for pensioners can obtain a low-priced television licence only if the property is owned by a council, a charity or a housing association? Is not that terribly unfair to those living in identical accommodation that happens to be privately owned? I know that the Secretary of State did not create the problem, but, as he is trying to change matters for the better, should he not at least look at that problem before he introduces new legislation?

Mr. Smith

I greatly sympathise with the hon. Gentleman's point, although, as he rightly points out, we inherited the situation and did not create it. We have tried to come up with the fairest and most achievable package of reforms for concessions. We believe that our package, which includes free television licences for the over-75s, half-price licences for blind people and the maintenance of the existing accommodation for residential care concessionary scheme, is achievable and affordable and the fairest that we could come up with.

Dr. Tony Wright (Cannock Chase)

Did my right hon. Friend hear the hon. Member for East Surrey (Mr. Ainsworth) ask what was so special about the BBC? Does anyone who has seen the fate of "News at Ten" not know the answer to that? As not a single voice has been raised in support of the digital supplement, may I raise mine? I know that the decision was politically difficult, but would it not have been the fairest solution, certainly in the absence of extra help for low-income households?

Mr. Smith

We considered the digital licence supplement option carefully. As I said in my statement, we decided that it would not be the best option, particularly because the take-up of digital is rising so rapidly. We intend to ensure that an overall switch to digital will take place between 2006 and 2010. Putting a temporary measure in place that would fade out under the Davies formula as the date of switch-over arrived would not provide the BBC with the buoyancy that it requires. It was a difficult decision but on balance of argument we felt that it was better to go for a modest and gradual increase in the general licence fee.

My hon. Friend rightly says that to ask what is so special about the BBC is silly. It is self-evident that the BBC is a broadcaster of great quality, providing the people of this country with news, information and entertainment of the very highest quality. Indeed, it is one of the best things about Britain in this new global world. I want to ensure that we can maintain that.

Mr. Michael Fabricant (Lichfield)

I welcome at least the fact that the Secretary of State said that the BBC is the hub of British cultural life, rather than claiming that for the millennium dome.

In its early years, the BBC avoided the ban on advertising in its broadcast media by having advertising in other media, such as the Radio Times and other publications, and by selling programmes overseas. Why did not the Secretary of State consider a third way for funding the BBC: having advertising on BBC Online using the new medium of the internet, and on some of the new digital channels, which are not the mainstream BBC, as BBC 1 and BBC 2 are? Many—not all—think that those traditional channels should continue to be funded as a public service.

Mr. Smith

Apart from the difficulties under the European Union state aid rules, we have no problem at all with the BBC taking advertising on any of its commercial services and publications. That is done at present, and there is much scope for expanding it further. We do not believe that it is right to have advertising on core BBC services.