Television Licence Fee (Hansard, 18 December 1996)

The Government have decided that changes in the licence fee for the five years commencing 1 April 1997 should be:

Year one (1997–98): RPI
Year two (1998–99): RPI plus 3 per cent.
Year three (1999–2000): RPI plus 0.5 per cent.
Year four (2000–01): RPI minus 1 per cent.
Year five (2001–02): RPI minus 2.5 per cent.

This equates to a change in the level of the licence fee over the five-year period of retail prices index minus 0.08 per cent. The non-uniform pattern of annual changes reflects the need for expenditure on new digital services in the earlier years. This will be offset in 1997–98 by receipts from the sale of the BBC's transmission system, and in later years by increased efficiency savings and commercial income.

The annual licence fee increase takes effect from each April. It is calculated on the basis of the annual increase in RPI in the 12 months to the preceding September. The RPI figure for September 1996 was 2.1 per cent., and this implies new fees from 1 April 1997 of £91.50 for a colour licence and £30.50 for a black and white licence. The necessary regulations will be laid before the House as part of new consolidated television licence fee regulations.

Changes in the level of the television licence fee have been linked to movements in RPI since April 1988. Changes have been set at RPI for each year since then, except in 1991 when the settlement was held at RPI minus 3 per cent.

On 12 August this year, I announced the appointment of independent consultants, Braxton Associates, to undertake a further review of the BBC's progress in achieving greater efficiency, reducing television licence fee evasion and exploiting additional sources of revenue, and to advise me on the level of the TV licence fee for the five years commencing 1 April 1997.

Braxton Associates reported to me on 16 October, and a management summary of the report is being published tomorrow. A copy will be placed in the Library of the House.

The consultants concluded that, while the BBC had made significant strides in improving efficiency in the last few years, there was nevertheless scope for further efficiency savings in the next five years. Their analysis of various assumptions about future developments suggested a range for the cumulative five-year settlement from RPI minus 1.9 per cent. to RPI plus 1.4 per cent. All their illustrative models showed a profile of real increases in years two and three, and real decreases in years four and five. This profile is reflected in the Government's decision.

The BBC will now be able to pursue its plans for digital broadcasting and enhance its programme services. Television licence fee payers will be able to benefit from the BBC's planned services, but their licence fee increases over the next five years as a whole will be held just below inflation.