§ Mr. Brooke
Following a recommendation of the Peacock committee in 1986, the television licence fee was increased annually in line with retail prices index for the three years, April 1988 to April 1990. In 1990, independent consultants, Price Waterhouse, identified potential savings of £203 million which they believed could be achieved by the BBC over the five-year period, 1991 to 1996, without any reduction in service.
In the light of the consultants' report, the Government adopted a five-year licence fee strategy. This involved an increase of 3 per cent. below RPI in April 1991, followed by annual increases at RPI over the next four years, but with a commitment to reassess the position before the fee increase due in April 1994.
On 21 June this year, I announced the appointment of independent consultants, Touche Ross, to advise me on the BBC's progress in achieving the efficiency and revenue gains identified by Price Waterhouse in 1990; on the scope for further, additional savings; and, on whether the RPI linkage continued to be appropriate for the next three years.
Touche Ross reported to me at the end of August, and a management summary of its report is being published today by HMSO. A copy has been placed in the Library of the House. The full report will not be published because it contains material which is commercially sensitive to the BBC.
The good news for licence payers is that the consultants concluded that the BBC had done well to manage its financial position during a time of considerable change. The consultants found that the BBC has pursued opportunities to make savings and efficiency improvements in a rigorous and effective manner, and I congratulate the BBC on the progress it has made.
Touche Ross put forward a range of options for setting the level of the licence fee over the next three years, including setting the fee below RPI in two of the next three years. Its report welcomed the introduction of the "Producer Choice" initiative on 1 April this year, but noted the need for caution in setting the licence fee, because the full impact of the initiative on the BBC's costs was riot yet known.
The Government have decided, in the light of the report, that for the next three years changes in the licence fee should continue to be set at the level of RPI changes. This will enable the BBC to channel savings into programmes and, over the next three years, allow the BBC steadily to reduce and largely eliminate its annual borrowing.
The licence payer will benefit directly from the additional and better programmes which this settlement will allow, and the BBC will benefit from being able to plan on a sound base before the expiry of the present. Royal 310W charter at the end of 1996. We are considering how the BBC should be financed in the longer term, as part of our review of the corporation's future.
In recent years, the April licence fee increase has been based on the RPI figures published in the preceding September. This means that the television licence fee will rise by 1.8 per cent. from 1 April 1994. The colour licence will therefore increase from £83 to £84.50, and a black and white licence will now cost £28, a rise of 50p. The necessary regulations giving effect to the increase will be laid before the House in due course.