Television Licence Fee

HC Deb 14 January 1991 vol 183 cc377-8W

Sir John Wheeler

To ask the Secretary of State for the Home Department whether he will announce the findings of the independent consultancy on the level of the television licence fee; and if he will make a statement.

Mr. Kenneth Baker

Following a recommendation of the Peacock committee in 1986 (Cmnd. 9824), for the three years April 1988 to April 1990 the television licence fee was increased annually in line with changes in the retail prices index. My right hon. Friend, Lord Waddington announced on 11 October 1990 that he had appointed Price Waterhouse as independent consultants to help set the level of the fee from April 1991 onwards. They were asked to assess how future increases in the fee could be set below the level of inflation measured by the RPI, and the consequences of a range of formulas for such increases, while maintaining the BBC's "cornerstone" role in British broadcasting.

Price Waterhouse reported to me in mid December, and the management summary of its report is being published today by HMSO. The remainder will not be released since it contains commercially sensitive material.

The consultants concluded that, while maintaining the present level of service, the BBC would be able to make financial improvements totalling £203 million over the five years from 1991 to 1996. These comprise £72 million in extra revenue and £131 million in savings. In addition, the BBC is required to make savings of £180 million to finance its expected future deficit. The Price Waterhouse report has been discussed with the consultants and the BBC and I am satisfied that improvements of this order are achievable. I therefore believe that, in the interests of licence fee payers, who require a licence if they wish to watch a public television service, the fee should now be held below the level of the RPI increase.

Price Waterhouse suggested two ways of doing this, both with the same net effect over five years. I have decided that its proposal to set the April 1991 increase at 3 per cent. below RPI, with annual increases at RPI over the subsequent four years is the better of the two methods. I intend, however, to reassess the position in three years' time, taking the opportunity to review the BBC's progress in achieving efficiency gains and further developing alternative sources of revenue. Price Waterhouse has also made some further suggestions to me about the operation of the licence fee, and I will also consider within the same time scale whether they should be implemented. The longer-term future of the licence fee as the principal means of financing the BBC will be considered as part of the review of the present charter which will be necessary before its expiry in December 1996.

The licence fee increase each April has been calculated on the basis of the annual increase in RPI in the 12 months up to the preceding September, in the same way as increases in pensions and other state benefits. The RPI figure for September 1990 was 10.9 per cent., and applying an RPI-3 per cent. factor of 7.9 per cent. to the unrounded 1990 figures leads to new fees from 1 April 1991 of £77 for a colour licence and £25.50 for a monochrome licence. The necessary regulations will be laid before the House in due course.