HL Deb 22 April 2002 vol 634 cc79-96

7.27 p.m.

Baroness Anelay of St Johns

rose to move, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 11th March, be annulled (S.I. 2002/641).

The noble Baroness said: My Lords, this statutory instrument will increase the colour television licence this year from £109 to £112. I have tabled the Motion in order to ask the Government to justify that increase, and to give a progress report on the way in which the licence-fee payers' money—and, of course, taxpayers' money—is being spent on the development of digital programming. Tax increases usually have to be debated in Parliament, but the licence fee can be increased by statutory instrument that is subject to the negative procedure; in order words, it slips silently into operation unless someone tables a Motion to debate it.

Approximately 1.2 million people do not buy a television licence, although they own a television set and are legally required to pay the fee. About 150,000 cases a year are taken to magistrates' courts in order to prosecute those non-payers. I was, therefore, intrigued to read in The Times of 18th March that the chairman of the BBC, Gavyn Davies, went out with the licence detector vans last month to ask some of those people why they were unwilling to pay the £109. He said that he was staggered by the number of people who evaded paying, and commented: There were people who obviously found it difficult to pay £109". I can assure Mr Davies that they will find it even more difficult to pay £112. The chairman went on to say: It was those people who reinforced in my mind the view that we have to serve everybody". Of course, he is absolutely right on that point—but that is the whole point of being a publicly-funded broadcaster and not having to chase ratings for commercial success.

I sat as a magistrate for some 13 years before coming to your Lordships' House. During that time I heard hundreds, if not thousands, of cases relating to people who had not paid their licence fee. To my recollection, not one of those people ever told the court that they did not pay up because the BBC did not serve their needs, but was being hijacked by the middle classes who, according to Mr Davies recently, have a disproportionate amount of programming allotted to them. Their main problem was simply that the licence fee was one more bill among the many that they could not or would not pay. The fact is that the licence fee is now higher than expected when a settlement was reached after the Broadcasting Act 1996 which introduced the plans to launch digital television. We recognised then that there would be costs associated with developing digital programming and the licence fee was adjusted according to the best estimates available at the time.

Then, in 2000, this Government substantially increased the funding for the BBC in order to underwrite its plans to go digital. At that stage, noble Lords may remember that the BBC asked for an extra £700 million a year. The Government said that the BBC had not told them why it needed quite that much money, so they said that it could have just an extra £200 million per year, still, as far as one can tell, without requiring full justification from the BBC. As Claire Ward, the Minister's honourable friend in another place, pointed out on 21st February of that year, 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".—[Official Report, Commons, 21/2/00: col. 1249.] I have always made it clear that that rise may indeed have been justified. The problem is quite simply that we were never given the evidence to prove that it was. The BBC received an extra £200 million a year of our money and the licence fee payer had to face a larger than expected increase in the annual tax on owning a TV set. The fee rose by double the rate of inflation between 2000 and 2001. The Government ignored the evidence produced by the Institute of Fiscal Studies that, under such arrangements, 71 out of every 100 of the poorest households would be worse off.

Over the past year, the BBC has been launching its new digital TV channels. It is also busy developing five new national radio services which will be available through all digital formats. So far the only glitch has been that the plans for BBC3, which were submitted to the Government in February 2001, were rejected. In December last year the BBC resubmitted a new, revamped proposal. We are still waiting for the Government to make up their mind about it.

It really is coming to the stage where it is intolerable for the Government to dither so long over this decision. What the Government need to do is their business; that is, reach a decision, so that the BBC can do what is its business; that is, either get on and develop BBC3 or, if the Government again say no, at least adjust its business plans accordingly.

In the meantime, last month Gavyn Davies told the Westminster Media Forum, chaired by the noble Lord, Lord Lipsey, who is in his place, that the BBC still has at least £80 million in the bank which should have been spent on BBC3. Have the Government taken that into account in justifying this year's increase in the licence fee?

It is rather ironic that the BBC is now chaired by the very same person who in 1999 said in his report on the future funding of the BBC that it was unfair to charge analogue households for the development of digital services which they could not receive. That is exactly what is happening now. Can the Minister confirm that over 64 per cent of households still do not have access to digital programmes but are being asked to pay for their development? What measures will the Government take to provide information to the consumer to help him or her make informed decisions about the take-up of digital television so that we can progress more quickly towards analogue switch-off? Only at that stage will all licence fee payers receive equal value for their annual payment.

While we are on the subject of analogue switch-off, it would be remiss of me not to refer to the fact that it was announced on the news tonight that ITV Digital will be sold off as a going concern after negotiations with the Football League appear, sadly, to have collapsed. I appreciate that that announcement casts a long shadow over the future of broadcasting in the digital age.

The Minister will be aware that it has been reported in the press that the Government expect the BBC to come to the rescue of ITV Digital customers in some form or other and then to continue the development of digital terrestrial television as an alternative platform to those of satellite and cable. If that were to happen, what would the Government expect to be the impact on the licence fee? Would we end up being licence fee payers also paying subscriptions to satellite and cable providers, in effect subsidising the users of digital terrestrial programming? This is a complex issue and one that. after today's announcement, must be addressed as a matter of prime importance.

I appreciate that not all households are required to pay their licence fee, although they must apply for and hold a licence. There are households in which one member is over the age of 75 and their licence fee is paid by the general taxpayer. Can the Government give an estimate of how much the taxpayer will provide for that in the period 2002–03, the year covered by the regulations?

I have approached this debate from my viewpoint as a friend of the general taxpayer, as a friend of the licence fee payer—of which I am one—and certainly as a candid friend, as always, of the BBC. The cost of digital broadcasting is going to be high; today we are even more acutely aware of that. It should be a price worth paying if the Government get it right, but we must be sure that the price is no higher than necessary and that the value we receive is right for the price.

It is right that we should always recognise the BBC's achievements and its important role in setting the benchmark of quality in both national and international broadcasting. I believe that the BBC has made and must continue to make a major contribution to the cultural life of our nation. Personally. I think that our broadcasting environment would be damaged beyond belief if the BBC was not a star player in it. However, we have to recognise that the world of broadcasting is changing rapidly. The explosion of choice raises fundamental questions about the current and future role of the BBC. No doubt we shall have a valuable debate in full on that in the forthcoming communications Bill. I relish taking part in those discussions.

Tonight, however, we have an opportunity to start the ball rolling with a focused debate on the licence fee itself. I beg to move this humble Address and hope that it receives the support of noble Lords.

Moved, That an humble Address be presented to Her Majesty praying that the Wireless Telegraphy (Television Licence Fees) (Amendment) Regulations 2002, laid before the House on 11 th March, be annulled (S.I. 2002/641).—(Baroness Anelay of St Johns.)

Lord Hussey of North Bradley

My Lords. I must first declare an interest as I was chairman of the BBC from 1986 to 1996 and was therefore involved in many discussions about the licence fee. The noble Baroness, Lady Anelay, has proposed that the regulations laid before the House on 11th March be annulled. It is the system under which the licence fee is arranged that I should like to raise with noble Lords rather than the details on the recent adjustment.

The licence fee is an integral part of the BBC's charter, renewed roughly every 15 years, and comprises a high percentage of its revenue. When I joined the BBC in 1986, there was a fierce debate about its level. Into that debate, the noble Lord, Lord Barnett, the vice-chairman and, as noble Lords know, a man of great wisdom, and I were pitched. The executives sought a very much larger increase than we believed could be justified. In those days there was commercial television and Channel 4, but no satellite, cable or digital services.

The debate followed a report produced by Professor Peacock, recommending that the licence fee should be linked to the retail prices index. That struck the noble Lord, Lord Barnett, and myself as a fair solution, acceptable to all those who had to pay it. We also believed, unlike the executives, that the BBC was not short of money. In fact, we thought that it was sloshing through the corridors of Broadcasting House in a great, unending stream.

We argued with the executives that the R PI would be a reasonable and fair settlement, acceptable to the Government and to the public, who had to pay it, but in particular to the Government, whose Prime Minister had already described the licence fee, not inaccurately but certainly not kindly, as a compulsory levy enforced by criminal sanctions.

There are only three ways of financing the BBC: by direct grant from government, by advertising or by an agreed formula. The noble Lord, Lord Barnett, and I settled for the Peacock formula, following the RPI, believing that the BBC already had ample funds for its purposes. Underlying that argument was the power of the BBC, emphasised by the noble Lord, Lord Callaghan, who had added: But with that power comes an equal responsibility for impartiality, honesty and accuracy". The compulsory levy argument illustrates the corollary that the BBC must show that the millions it receives are rewarded by a clear demonstration of those qualities emphasised by the noble Lord, Lord Callaghan.

Many years earlier, Lord Reith had laid down the BBC objective: To carry into the greatest numbers of homes everything that is best in every department of human knowledge, endeavour and achievement". And, indeed, Michael Grade has always regarded the BBC as the arbiter of standards.

The licence fee settlement is normally—I do not know about this occasion—the culmination of endless discussions at the BBC, by the BBC with various interested parties, not least political. Herein lies the clash. If the BBC exercises properly its remit it is inevitable that governments or oppositions will quarrel about the accuracy or justice of BBC programmes. Indeed, I would go further. Although I am no politician I have a keen interest in current affairs, and if there were no disputes between the politicians and the BBC, the BBC would probably not be carrying out its responsibilities so clearly clarified by the noble Lord, Lord Callaghan, and Lord Reith.

The independence of the BBC is rooted in the licence fee. Universally paid by everyone under 75, and enforced by the Government, the funding of the BBC is a touchstone of the confidence Parliament has in exercising the power entrusted to it.

The noble Lord, Lord Callaghan, summed up the current position when he said that democracy can exist only if there is a constant stream of information from politicians, governments, the press, television and radio. But he added that the new technology has radically altered the scene so that the media now not only records the news but can make the news, decide what is the news, or, even more dangerously, decide what is not the news.

There must always be a place for a powerful media voice that is not in the pocket of an individual proprietor nor interest group nor advertiser; a voice which does not give paramount weight to the choice of programmes for what will earn the most money from subscription, advertising or circulation—none of which is a recipe for high standards—but offers instead schedules to tempt audiences and uplift their interest and understanding. This is a demanding and honourable objective and the funds necessary to achieve it are delivered by the Government, usually after a whole series of meetings, luncheons and discreet explanations, all arguing about what is a fair and proper level for the settlement.

We are reaching a stage when the "compulsory levy" might possibly be looked at in a different way. This is a very difficult and confused area. If the National Audit Office, for example, was able to access the process and assumptions, I wonder whether Parliament would feel more comfortable about the result and, in consequence, have done something to lance this regular boil which springs up every time the licence fee is renewed. If it were possible for the National Audit Office to look at this issue, look at the process and look at the results, I believe we would solve a problem which is constantly coming back. That would be very much in the interests of licence payers.

7.45 p.m.

Lord Lipsey

My Lords, the licence fee is a stinking, lousy, rotten, unfair, unjust poll tax. Someone on the national minimum wage has to complete a full week's work to earn enough to pay it. I therefore very much regret to this day that the Government turned down the proposal made by the Davies panel in regard to the BBC licence fee that the extra money needed by the BBC should come from a digital licence fee, which would fall more fairly on less poor people rather than on licence payers. That is water under the bridge, but I shall require the strongest possible arguments before I am convinced that the increase proposed by my noble friend is justified.

I require the strongest possible arguments and I believe that they exist. It is fashionable to argue that the advent of digital TV and the proliferation of channels and programmes means that public service broadcasting no longer has a role to play. It may be fashionable to argue it, but the reverse is the case. For instance, the more of those kind of channels that we have, the more we require public service broadcasting. If you divide the broadcasting cake among 500 channels, the amount per hour spent on programmes plummets. Without the BBC and the public service broadcasters to set standards that would mean cheap programming to the great disadvantage of the viewing public.

If we did not have public service broadcasters there would also be a great worry in regard to monopoly. That has come a step nearer with the near platform monopoly that Rupert Murdoch will enjoy as of tonight unless a buyer is found for ITV Digital.

There are public service broadcasters other than the BBC. It is a great mistake to think of the BBC as being the only public service broadcaster. There is Channel 4 and there are onerous public service obligations on Channel 5 and on ITV. But, at the moment, the commercial public service broadcasters are in a weak position because of the slump in advertising. According to the ITC report last week, it was some 7 per cent down in the year to 11th September, but that underestimates the true situation because it has gone on falling since then.

When advertising falls off a cliff like that there is a delay before the programming falls with it because budgets cannot be cut in an instant. I am afraid that we have not yet seen the full effect on programmes of that cut in the budgets of commercial public service broadcasters. In such a situation we have to rely very heavily on the BBC to provide the quality of public service broadcasting that will complete the crucial broadcasting ecology and keep up the standards of programming.

I do not often disagree with the noble Baroness, Lady Anelay of St. Johns, but I do disagree that the broad case for the increase in the licence fee of 1.5 per cent above inflation when it was accepted by the Government two years ago was not investigated. The BBC put its proposals to Davies. As the noble Lord, Lord Gordon of Strathblane knows, the panel crawled over them for hour after hour, day after day, meeting after meeting and trimmed them back to what it felt was fair. That was not the end of the process. 'The Government then called in their own independent accountants to have a crawl of their own.

It is perfectly true that Gerald Kaufman, the chair of the Select Committee in another place, did not think that the case had been made. He never would. He is against the BBC. He wants it privatised. So he would never think I hat it had made the case for more money. But if ever a case was made, it was made for that increase.

I question whether it is enough. It is not an awful lot— it is only 1.5 per cent above inflation—and as in general broadcasting costs rise not in line with inflation but in line with earnings, there is not a great pot of money being handed to the BBC.

On reflection, however, I think it is enough for the following reasons. First, there have been enormous savings under the John. Birt regime at the BBC of £700 million a year—which is often forgotten in the criticisms made of John Birt—which has made possible its present achievements. Secondly, bureaucracy can be cut further. Last year the bureaucratic costs of the BBC went down from 24 per cent of its budget to 19 per cent. That is good progress, but I do not believe that even the BBC's friends would suggest that there is no more fat to cut. Anyway, if you gave them more money they would want to put more into BBC 3, which is the greatest waste of the licence fee payers' money ever invented by man or beast. I strongly hope that my noble friend will persuade the Secretary of State finally to turn it down.

In all these matters of funding there is a balance to be struck between too much and too little. This is an important moment at which to have a strong BBC and I think that the Government have got the balance just about right in the order.

Lord Blackwell

My Lords, I welcome the opportunity to debate this issue. To borrow a phrase much used by the Government, I wonder whether increased funding ought not to be linked more strongly to reform. Like others, I believe that there is a good case for public service broadcasting in the UK. I also think that there is a good case for the BBC a s an institution. Like others, I am a great fan of the BBC. However, in the current environment it is a huge fallacy to believe that public service broadcasting and the BBC are necessarily synonymous. Given the breadth of competitive broadcasting available, one can no longer sustain the argument that anything broadcast by the BBC is necessarily public service broadcasting just because the BBC broadcasts it. That is clear when we consider some of the output procured on the open market, which is very similar to that procured from the same sources by other channels. How can one be public service broadcasting and the other not?

As the noble Lord, Lord Lipsey, pointed out, it is also a fallacy to believe that the BBC is the only place where public service broadcasting can take place. That is clearly not the case any more, although the BBC may well be the best place for certain public service broadcasting in particular areas, such as the World Service.

It is also a fallacy to believe that if the Government wish to fund digital broadcasting in the UK, the 1313C, through the licence fee, is the best or only place to fund that. There may be a case for some provision that is not part of a general licence fee settlement.

If public service broadcasting is considered as a separate case for funding, the clear logic in the current environment is that, while the BBC might be funded for its public service roles, it should have to move to seeking direct or commercial funding for the other output that does not form part of the public service remit. I do not accept the argument that exploiting the BBC brand to seek commercial funding would necessarily lower standards. If one had the BBC brand as a commercial asset, the first thing one would do is protect the quality and premium rating of that brand and try to exploit it rather than take it downmarket. There is no necessary conflict between the BBC seeking commercial or direct funding from viewers and the desire that we all have to maintain quality standards at the BBC.

The BBC's settlement under the last charter renewal should be seen as funding for a transition period. The BBC should have a plan and an expectation that over the course of that settlement it will move to reflect the reality of the current competitive marketplace, with more of its output being funded commercially and only that part that is truly public service broadcasting being funded through public sources. I would certainly support and accept the funding of a licence fee that was set against such a transition plan.

The problem that I have with this settlement and the annual settlement that we have before us is that they are delinked from any plan of that nature. I do not believe that they will take the BBC any closer at the end of the current charter period to being the kind of organisation that needs to be in place for the future. We should be cautious about simply ratifying a year-on-year increase in the licence fee. The Government should seek from the BBC a plan that more properly reflects the transition that will be needed for the future of the BBC.

Lord Stoddart of Swindon

My Lords, it is useful to have this debate tonight. The more we discuss the BBC the better it will be for the BBC. The proposed increase is very modest, even if it is a little above the inflation rate. The television licence is excellent value for money, bearing in mind the services provided. We get two national terrestrial channels with 24-hour coverage, plus the regional television channels and the digital channels, which are being further developed. The licence fee also covers free national and local radio and the development of new digital radio stations. That is not bad. All that for just over £2 a week is a remarkable achievement and a bargain at any reckoning.

Compare that with buying a daily newspaper for a week. The Telegraph, if you take it at the weekend as well, will cost £4.35 and the Mail will cost £3.50. That is just for a newspaper for a week. We get all those services from the BBC for just over £2 a week, which is probably about the cost of hiring a video film for a weekend. Let there be no doubt that it is good value for money. I therefore remain a supporter of a public broadcasting arm.

However, over the next few years there is bound to be change in management and programming, not to mention the changeover to digital transmission, which the noble Baroness raised in her opening remarks. This is not the time to go into the long-term future, but it is legitimate to reiterate some concerns about the BBC. A public service broadcaster should strive for excellence and shun dumbing down. The great strength of the BBC over its lifetime has been the raising of standards of awareness, taste, education and fairness. Those qualities have gained for the BBC the support and respect of people in Britain and throughout the world. It is unfortunate that the new leadership of the corporation have given the impression that the BBC's role of providing broadcasting excellence is to be subordinated to competing in the ratings chart and that the service is to be allowed to descend into populism as a result. That attitude is a betrayal of all those who have fought over the years to retain the BBC's reputation as the best.

There are other complaints too. There is resentment over certain people who work for the BBC who regard the corporation as their personal fiefdom. Because they have been around for so long, they arrogantly suppose that they are indispensable. It is time the BBC had a look at its long-term employees.

Access to programmes is too narrow and producers and editors are too prone to promoting the Government's agenda and pandering too much to the politically correct line on the issues of the day. There is also an ongoing complaint from members of the Eurorealist organisations that they do not get a fair hearing and that the BBC is not willing to have a deep and searching investigation into the European Union. Above all, they are reluctant even to discuss the possibility and the consequences of withdrawal from the European Union.

That failure to discuss issues that are uppermost in the electorate's mind brings about the sort of upheavals that occurred in France yesterday. It is not only politicians who need to learn lessons from those events in France. The media need to learn lessons as well. The BBC has a great responsibility in that area and I hope that it will discharge it.

8 p.m.

Baroness Howe of Idlicote

My Lords, I thank the noble Baroness, Lady Anelay, for this opportunity to look briefly at the future, and future financing, of the BBC against the background of the forthcoming establishment of Ofcom. The central issue of the licence fee will undoubtedly continue to be debated, but I agree with the noble Lord, Lord Stoddart, that it is not really a great sum. It may be great for certain people, but it is relatively mild for most people's budgets.

I suspect that another matter underlying this debate is the extent to which the BBC should or should not be totally subsumed within the regulatory authority of Ofcom once it arrives. I start from a premise that many others have already mentioned—that it is still accepted in almost any conversation on public broadcasting in any public bar or around any dinner table that our broadcasting system remains one of the best and most independent in the world. I think that the pre-eminent reason for that is the unique role played by the BBC in establishing and maintaining the concept of public service broadcasting. One has only to look to the United States to see the alternative. There, public service broadcasting remains in both substance and style an under-resourced ghetto.

My central point is very simple. If we seek, for the sake of a completely comprehensive system, to harmonise the way in which we finance, run and regulate and at the same time absorb a standard-setting, world-respected institution which has served us so well for so long, we put at risk the future quality of British broadcasting. I accept that Ofcom will have a considerable role to play in regulating many aspects of the BBC, but that does not apply to all aspects. It is important for the corporation to retain real independence, and to continue its investment in quality digital programmes. It is the quality of digital programmes that will help persuade the audience to switch over to digital and meet the Government's hoped for target date.

I admit to being somewhat wary of "giantism"—the current passion, which has existed for some time, for all-embracing, comprehensive organisations. I do not want the BBC's creativity to be stifled by the giantism of Ofcom. My central message is that we must take care not to press the logic too far, whether it is the logic of how we fund the BBC or the logic of including all its activities within Ofcom. But there is an important corollary to that conclusion. There is still much to be done in improving the governance of the BBC. That will be even more important under the "lighter regulatory" regime proposed for all broadcasters. So there is absolutely no room for complacency at Broadcasting House.

The new BBC chairman, to his credit, is plainly aware of that. His latest plans, for example, show a more hands-on role for governors in setting targets and monitoring the public interest in how the licence fee is spent. Again, however, I for one shall need to be more convinced—in the likely absence of something like the Broadcasting Standards Commission—about the independence of the corporation system in handling citizen complaints, whether about unfairness or violence. The BBC has pledged to involve outside, independent auditors when issues of potentially unfair competition arise. Would it not be splendid if an equally expert panel, which was also completely independent of the BBC, could be established to deal with unresolved complaints about unfairness or violence? That might also provide Ofcom with a model of the type of independence and transparency which I believe that it too will need if it is fully to comply with the European human rights legislation.

There is a final example. Despite the hugely competitive world of modern broadcasting, far less attention must be paid to ratings and far more to the range, diversity and, above all, quality of what is shown on BBC terrestrial channels. The ITC's latest annual report has rightly expressed serious and specific concern about "dumbing down". Although ITV bore the main brunt of the commission's justified criticism, the BBC was also shown to have cut both current affairs and arts programmes by up to 50 per cent.

I return to my main point. We must take care not to undermine the organisation which is the principal buttress of British broadcasting's generally high standards and reputation. As the noble Baroness, Lady Anelay, said, we need the BBC to continue as a benchmark. Although its future plans look slightly more encouraging, the BBC needs to know now more than ever that we expect results.

Lord Pearson of Rannoch

My Lords, I support my noble friend Lady Anelay in her prayer.

I start by reminding noble Lords of a debate in your Lordships' House on 11 th March 2002, at cols. 653 to 676 of the Official Report, when I accused the chairman and governors of the BBC of failing in their duty to produce political programmes which are impartial, wide ranging and fair and which reflect significant strands of British public thought. I imagine that it is common ground that those duties and the public service remit generally form an important justification for the licence fee and indeed for the BBC itself. The example that I gave your Lordships was of the BBC's biased treatment in favour of the United Kingdom's membership of the European Union, into which the noble Lords, Lord Harris of High Cross and Lord Stoddart of Swindon, and I–through the medium of our Global Britain research unit—had commissioned no fewer than six substantial independent surveys.

I shall not repeat any of that debate now except to recall that the Minister did not accept our case or our principal complaint that those analyses had been given to the BBC's management, who naturally dismissed them, and not to the governors, whose duty it was to consider them. However, the Minister was good enough to reveal that the BBC was addressing what she called the "perception" that the BBC's governors were too close to the BBC's management to regulate it properly.

This initiative was clarified the next day, 12th March, when the BBC's chairman revealed to a major broadcasting conference that he was setting up a new governance and accountability department to provide independent advice to the governors in fulfilling their public service priorities. Of course, by setting up such a new department and by rearranging the responsibilities and reporting lines of the existing Programme Complaints Unit and the existing Governors' Programme Complaints Unit, the chairman was in effect admitting that the governors had not been able to discharge their duties satisfactorily beforehand. That is the point that I had been trying to make; otherwise, why the change?

A few days later, an internal memorandum from the chairman fell into my hands, entitled a "Summary of changes to BBC governance arrangements". which sets out the chairman's proposed changes in greater detail. I do not know if the Minister has seen A., but I shall be happy to give her a copy after the debate and to put a copy in the Library of the House in case any other noble Lord is interested to read it. Nor do I know whether the BBC governors and management have agreed it. However, even if they have, it contains one fatal flaw which means that the changes it proposes, although welcome, will not be radical enough to make the governors sufficiently independent of management to allow them to fulfil their public service remit, at least in the areas of which I and others complain, and thus to justify even the present licence fee let alone the proposed increase.

The problem is that those employed in the new department and in the existing complaint units will merely be existing staff who continue to owe their prospects to the BBC's management. They are therefore most unlikely to be adequately critical of that management although the governors and the public service remit require them to be so. No man can serve two masters, and certainly not when one of there controls his salary, career and pension.

With that problem in mind, I had the temerity to write to the chairman of the BBC and to the Secretary of State on 23rd March with the suggestion that those who work in the new department should be employed by a separate trust funded by the licence fee but with impeccable trustees who would be entirely independent of management, which the governors are not. Such an arrangement would cost little because the salaries of those who are to work in the new department are already paid by the BBC. In the same letters I also suggested that the latest of our commissioned reports into the BBC's coverage of the "European issue" should not be passed yet again by the chairman to the BBC's management for judgment, but to an independent arbiter. I have yet to hear from either the chairman or the Secretary of State as to what they think about those two suggestions and would be grateful to hear any views the Minister might have.

Finally, perhaps I may say a brief word about "dumbing down". I had the misfortune last week to put my back out and so decided to spend a good deal of time watching television on many of the channels which are now available and which I do not usually watch. I found it a deeply depressing experience as so much of the output seems to rely on sex and violence and so little on the nobler aspects of our existence. No doubt many of the new channels which are to become available will continue that regrettable and probably destructive trend. As far as I can see, there was as much of that stuff on the BBC as on any other channel.

If there is to be a BBC at all, and if there is to be a licence fee at all, I really cannot see why the BBC has to compete with that rubbish in the name of "ratings" or any other excuse. Surely the main point of the BBC's licence fee is precisely so that it does not have to peddle such ghastliness, so that it is free to educate and to lift our eyes and minds to higher things.

So, for once I agree with Mr Greg Dyke, the BBC's Director-General, if your Lordships will forgive me for repeating some of his language, that it is time for the BBC to "cut the crap". If it did that, it would not need anything like its present budget of some £2,500 million and would avoid becoming an expensive irrelevance. If it did that, it would also return to its former and rightful place in the affections of the British people.

8.15 p.m.

Lord Gordon of Strathblane

My Lords, apart from expressing gratitude to the noble Baroness, Lady Anelay, for raising the subject, and wishing that we had more time to debate it, as we shall in the not too distant future, I have three brief points to make. First, I endorse the comments of the noble Lord, Lord Hussey, from his vast experience at the BBC. Of the sources of finance available, the licence fee is by far the most preferable for the BBC. A grant by the Government would increase dependence on government and increase the risk of political interference. Advertising would, frankly, reduce the available income to both the BBC and ITV to a point at which neither could do the job properly. I believe that the licence fee is the best solution.

My next point is that the present level being proposed is about right. Like the noble Lord, Lord Lipsey, I was a member of the committee which considered that, so I would say that, wouldn't I? I disagree with my noble friend, as I did at the time, because the alternative was a separate digital licence fee which I felt would have inhibited the growth of digital television. I thought that it was more important to expand the number of people able to take up digital television and so have a licence fee which would be a little higher than it was. However, let us get that into perspective. It is a quarter of what we pay Sky. Let us analyse also the contents. People talk about 200 or 300 channels as though they were all BBC1s, BBC2s or, indeed, ITVs. At least half of those are film channels, which is convenience video broadcasting. Some of the best channels are also re-runs. UK Gold is the BBC as we wish it still was. There is not a great deal of programme origination.

The proposed licence fee is about right. I do not think that it is coming bereft of the need for reform. Some of the reforms were put forward by the Davies committee and have already been adopted. Still others are in train. When the draft Bill on communications is before us I shall continue to argue that it will be much better for the BBC and for broadcasting as a whole if, like every other public service broadcaster, the BBC were regulated by Ofcom. But that issue is for another day.

The issue I want to single out tonight is that of the digital terrestrial platform. The noble Baroness was tragically accurate in her timing for this debate, with the announcement to which she alluded about ITV Digital. I have no sympathy for football clubs that pay their players too much money, or for ITV companies that pay too much money for sporting rights. From what I have heard, I believe that the Government are entirely right to say, "That is your problem. Do not expect us to intervene". However, I am concerned about the future of the digital terrestrial platform. It is important to remember that until about 10 years ago, the BBC and the IBA, the Independent Broadcasting Authority, owned the transmitters because we felt that they were too important to be left in the hands of private individuals, even television companies. Through them co-operating with each other we achieved 99.4 per cent coverage of the UK, including parts of the country which I come from which have beautiful scenery but are an engineering nightmare from the point of view of digital transmission.

Regrettably, in the early days of digital terrestrial, the BBC was not as co-operative as it might have been in helping to build the digital terrestrial network. It is important to recognise that the BBC was allowed to keep the proceeds of the sale by privatisation of its transmission network. It is entirely appropriate, particularly in the current, dare one say, crisis, that the BBC invests that money not in programming but in the platform. It is imperative that we have a digital terrestrial platform in this country. Unless we are careful, we may not.

Lord McNally

My Lords, I realise that by putting so many questions to the Minister, we may well run out of time for the answers and so shall lose some of the sparkling eloquence planned for tonight.

Needless to say, we on these Benches support the broad thrust of the settlement of which the regulations are a part. We thought it was a good idea during a period of change to give the BBC guaranteed adequate funding to carry out its remit both in terms of present channels and of making a proper commitment to the development of digital in this country. Therefore, we think it right that the regulations should pass. We believe that the BBC should be encouraged to continue to explore all levels of technical development, which it is. The noble Baroness, Lady Anelay, asked what we are getting for our money. I believe that we are already seeing that in programme development, and that is sensible.

I want to make two brief points. The crisis in ITV Digital and some of the developments we are seeing in France, Germany, Italy and indeed in this country should make us pause before we think that the wonderful entrepreneurs always get it right. They can make catstrophically wrong decisions. We should not, therefore, put so precious an asset as our public broadcasting, system into pawn just at their say-so. Also, we should be well aware that many of our media owners have massive vested interests in the great gamble that is going on. Therefore, we should be cautious about how cross-media ownership is used. I refer only to the hysterical attacks by the Daily Mail on the BBC as a forewarning over the next few months that we may see many more like that. We should pause to think whether the publishers of certain newspapers also have massive broadcasting interests, which would benefit much by the weakening of the BBC. Apart from that, I look forward to the debates to come.

I share with the noble Baroness, Lady Howe, a suspicion that we should not buy a pig in a poke in putting the BBC fully in the control of a totally untried OFCOM. I welcome the healthy idea of a joint Select Committee to examine many of these issues. I welcome also the fact that the BBC is, as indicated by the noble Lord, Lord Lipsey, bringing efficiency into its own management. I agree with the noble Lord, Lord Gordon, that it is very important that we retain that digital platform, perhaps as a platform for free-to-air services and to spearhead the take up of the free-to-air services.

Today's debate has indicated that the noble Lord, Lord Pearson, will keep all his old prejudices and that there will be a wide variety of views in this House about the future of broadcasting. I hope that I have given the Minister the 10 minutes that are her due.

The Minister of State, Department for Culture, Media and Sport (Baroness Blackstone)

My Lords. I am enormously grateful to the noble Lord, Lord McNally, for cutting short his no doubt incredibly eloquent speech, but I am sure that we shall hear him on many other occasions on the subject. I am also grateful for what he and the noble Baroness, Lady Howe, said about the Government's intended arrangements with respect to the BBC and Ofcom. I share their views. I think that that is the right approach.

In the time available I shall not be able to respond to all the issues raised. I have listened carefully to all that the noble Baroness, Lady Anelay, and other noble Lords said.

The regulations which have prompted the debate are increased television licence fees in line with the funding formula for the years 2001 to 2006–07 which were announced by the Government in February 2000. They also include consequential amendments in relation to the various instalment schemes for payment of the licence fee.

The funding formula was based on the recommendations of the independent review panel on the future funding of the BBC in its report of July 1999. It provides for television licence fee increases of 1.5 per cent above the rate of inflation as measured by the RPI. As the debate has made clear, many people have strong views about the BBC, both because it is our principal public service broadcaster and also because of the way it is funded.

The licence fee understandably raises high expectations among viewers and listeners. Those expectations relate to both the range and quality o r the services that the BBC provides, as well as how it manages its resources. But perhaps I may say to the noble Baroness, Lady Anelay, that I profoundly agree with what my noble friend. Lord Lipsey said. A huge debate took place at the time that the decision was made to increase the licence fee over this period by above the rate of inflation. The BBC's case for extra expenditure was gone into in great detail. As my noble friend said, "It was crawled all over".

I very much accept what the noble Lord. Lord Stoddart, and the noble Baroness, Lady Howe, said, that on the whole we get fairly good value for money in terms of what we have to pay for the licence fee. I accept the view expressed that this increase is not so enormous that most people cannot afford to pay it.

I turn to one or two specific questions. The noble Baroness said that it was intolerable that the Government should be taking so long to decide about BBC3. Any new BBC service should complement and challenge the market but it should not undermine it. My right honourable friend the Secretary of State is concerned about approving a bid to competitors, especially because many commercial companies, as stated in this debate, are feeling the squeeze from the biggest fall in advertising revenue for a decade.

The BBC and the ITC have different views regarding the market impact of BBC3. They are now working together to try to reconcile the position before the Secretary of State reaches her decision. I am afraid that I am not going to be able to tell my noble friend Lord Lipsey what the outcome will be.

My noble friend Lord Lipsey also commented on reducing overheads in the BBC. It is committed to putting more money into programme making. In 1999 the BBC spent 24 per cent of its income on overheads. It has set a target of reducing that to 15 per cent—a very substantial reduction—by 2004.

The noble Lord, Lord Blackwell, thought that the BBC should receive licence fee funding only for public service broadcasting and not where it competes or duplicates the commercial broadcasters. The Government remain committed to a BBC which provides a broad range of programmes catering for all viewers and listeners, as described by the noble Lord, Lord Hussey. The corporation's current broad remit cannot easily be divided without undermining its whole role. Public support for licence fee funding would be unlikely to survive on a much more narrow remit limited to what the commercial sector will not provide.

The noble Baroness, Lady Anelay, asked about providing more information to consumers about digital television. The BBC is making substantial contributions to the provision of information in that area. Indeed, the commitment made by the Government to the BBC's new digital services last year was that it should take steps to promote more understanding of what digital services can provide.

The noble Baroness also asked about the estimated cost to the taxpayer next year of providing free licences to those over 75. The provisional out-turn for 2001–02 was £376 million, including administrative costs. I shall try to write at some later date with the forecast figure for 2002—03.

The noble Lord, Lord Hussey, made an eloquent speech in defence of the licence fee. He was supported by my noble friends Lord Gordon of Strathblane and Lord Lipsey. The noble Lord said that for all its weaknesses and limitations it was the best way for the BBC and its public service commitments to be funded. It protects the BBC's independence. It is a fundamental principle of our approach to broadcasting in this country that the Government do not intervene in detailed issues of programming content or scheduling. The system of funding should also support that.

I am about to run out of time. I want to make a couple more comments to my noble friends Lord Gordon and Lord Lipsey who took different positions on the issue of whether there should be a separate fee for digital services. The Government's position is that a digital licence supplement might well act as a disincentive to the take up of digital services and would certainly add to the cost of administering the licence systems. For that reason we have rejected it.

The noble Lord, Lord Hussey, made some comments about the role of the National Audit Office and the Public Accounts Committee, but the NAO in particular. Perhaps I can drop him a line on that matter and explain the Government's position. We did not accept the review panel's recommendation that the NAO should be given inspection rights to carry out periodic financial audits. But I shall follow that up in a letter.

The noble Lords, Lord Pearson of Rannoch and Lord Stoddart of Swindon, repeated their criticism about the quality of programming on the BBC. I do not accept their wide-ranging criticism—in particular, their allegations about its Europhile or other bias.

I should also like to respond to what the noble Baroness, Lady Howe, said about increased funding for some areas of the BBC that contribute to quality. To take arts and music programming, for example, during the next financial year there will be a substantial increase in funding for those areas, which I am sure that all noble Lords will welcome.

Again, I shall write to the noble Lord, Lord Pearson, about his points on governance. The letter that he sent to my right honourable friend the Secretary of State will of course be answered as soon as possible.

I hope that I have been able to reassure the House that the television licence fee increases introduced by the regulations are justified to ensure that the BBC can continue to provide its full range of services and maintain their quality. I therefore commend the regulations to the House.

Baroness Anelay of St Johns

My Lords, although there is no time limit on this debate, I hope that I managed to keep the blood pressure of the noble Lord, Lord Davies of Oldham, at a reasonable level before the debate began by saying that I would not take the usual opportunity to comment on the fascinating and penetrating comments made by noble Lords during the debate. However, as a courtesy, I thank them for their contribution to what has been an important opening salvo in our debates on the matter. I simply join the noble Baroness, Lady Howe, in saying that the BBC must know by now that we expect results. I beg to withdraw the motion.

Motion, by leave, withdrawn.