Oral Statement on Licence Fee by the Secretary of State
18 January 2007
With permission, Mr Speaker, I would like to make a statement on the BBC licence fee.
Over the last three years, the public, industry and Parliament contributed to a national debate about the BBC, its future shape and funding
This has been an unprecedented exercise in public involvement.
I am now in a position to announce what the funding settlement will be over the first part of the new ten year Charter period.
The settlement will be for six years, with annual increases in the licence fee of 3% for the first two years and 2% in years three, four and five.
There will be an increase in the sixth year (2012-13) of up to 2%, depending on a further review nearer the time.
I have written to the BBC Trust today setting this out.
These are cash increases. The price of a colour TV licence will rise from its current level of £131.50 to £135.50 from 1 April this year, reaching £151.50 in 2012.
Based on the Treasury forecast of the Consumer Price Index – the Bank of England’s inflation measure – this will be either above or in line with inflation for each year of the settlement.
This, Mr Speaker, will enable the BBC to deliver its new public purposes which we have set out in the new Charter.
And as digital technology transforms the media world, it will enable the BBC to take a leading role in making the most of it.
Investment in high quality content, the driver of creative industry and what audiences value most of all, will remain high.
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This settlement will enable the BBC to do that.
It will also allow the BBC to move key departments – including Children’s, Sport, New Media and Learning – to Salford in the North West of England.
I also welcome the Trust’s confirmation, due later today, that this will happen.
This is a vital opportunity for the BBC to widen its geographical spread and relevance and make better use of the creativity and talent that exists right across the UK, bringing huge benefits for the regional economy – estimated at £1.5 billion and 15,500 jobs.
Through greater efficiency this settlement will allow the BBC to maintain all of its current services and provide up to £1.2bn of investment in new activities.
Mr Speaker,
The people of the UK spend more of their money on the BBC than any other country in the world spends on public service broadcasting, bar Germany.
The new BBC Trust must ensure that licence fee payers get the best possible value for that investment.
So we expect the Trust to ensure efficiency in the BBC.
Based on independent evidence from our consultants PKF and others, we believe that the BBC can realise up to 3% cash-releasing savings annually from 2008.
A separate report – published today – by the National Audit Office confirms that our judgement is based on an adequate evidence base.
It will be the Trust’s responsibility to set specific targets and hold the management of the BBC responsible for meeting them.
Mr Speaker in relation to digital switchover the BBC has been given a leading role in the delivery of switchover to digital television.
In particular the licence fee settlement will fund the £600m scheme we are putting in place to help elderly and disabled people make the switch and as part of our comittment to the universal broadcasting ensure that no-one is left behind.
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The Government’s expectation is that the BBC will lead the delivery of the scheme. I respect the independent state of the Trust and details of the implementation are still to be discussed. The Government will retain responsibility for the policy, including helping with procurement and deciding how eligibility is determined.
The BBC will also pay for the £200m public communications campaign being run by Digital UK to ensure people are prepared properly and informed properly for switchover
These sums will be ring fenced within the settlement and will not form part of the BBC’s baseline at the end of this settlement. We have also made clear that carrying out these responsibilities will not impact on the BBC’s core budgets and services.
We are giving the BBC a 12.5% increase in its borrowing capacity to help deliver this commitment.
We will ensure the BBC’s services are protected from any cost increases in the help scheme, above our existing estimates.
Mr Speaker,
In last year’s White Paper on the BBC, we also noted that Channel 4 was likely to face major financial challenges with digital switchover in the future.
We said at the time we would consider potential forms of help, including asking the BBC to help towards meeting its capital switchover costs, and also possible access for Channel 4 to some of the BBC’s digital TV capacity.
Ofcom’s review of the Channel is looking in detail at its financial prospects and is expected to report towards the summer.
I am therefore keeping open, within this licence fee settlement, the possibility that we may require the BBC to contribute to the first six years of Channel 4’s switchover costs – this will be no more that £14 million in total.
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I also welcome the BBC’s conclusion that, in principle, it can make available some spare digital terrestrial capacity – amounting to a TV slot in England and 3 radio slots – at switchover.
Under the BBC Agreement, I can direct the BBC to make capacity available to another Public Service Broadcaster, where it is in the interests of public service broadcasting in the UK.
I shall decide whether and how to use that power in the light of Ofcom’s review.
Mr Speaker,
The settlement I have set out for the BBC provides stability and certainty over the next crucial period of digital switchover.
The sixth year will, in effect, also form the first year of the following settlement.
It will allow us to undertake a further review of the licence fee level in the run-up to the mid-Charter point, taking account of the wider review of public service broadcasting that is consistent with our commitment in the White Paper
A strong, independent BBC.
Secure and accountable to its licence payers, its paymasters.
And providing the highest public value.
That has been our fundamental goal throughout this long process.
It is now complete, and the BBC along with all the other broadcasters can plan and prepare for digital switchover, the next great revolution in television, ensuring the most vulnerable are protected and the founding principle of public service broadcasting in this country, universal access for all, is secured.
I commend this settlement to the House.