115. Our principal conclusions and recommendations are as follows:

(i)      The public benefits of universal digital services and the welcome policy announcements by the Secretary of State for Culture, Media and Sport on analogue switch-off provide an essential part of the context for consideration of proposals by the Davies Panel (paragraph 13).

(ii)      A useful definition of the BBC's distinctive role was provided by Mr Chris Smith when he told this Committee: "I do not necessarily believe that the BBC should do everything. What I do believe is that the BBC should be seeking to reach everyone." The role of the BBC has to be determined not by reference to the vague and elusive concept of public service broadcasting, but through specific consideration of its place as a public sector broadcaster (paragraph 17).

(iii)      This Committee admires the launching of BBC Online and the quality of the services provided. BBC Online is the start of services which the BBC will increasingly be required to provide in future, but we consider that it will be stultified if it remains on its current basis. We recommend that BBC Online should be transferred to BBC Worldwide to enable it to expand its scope and service and take advantage of the commercial opportunities thereby created (paragraph 37).

(iv)      It should be obligatory for the BBC, when introducing new services, to determine whether they are cost-effective bearing in mind the cost and the outcome. Judged against this criterion, we find it difficult to discern the justification for News 24 in view of its huge cost and small audience. The BBC has failed totally to explain why the costs of News 24 are so high in the context either of other news broadcasters or in the context of its total news budget. The case for News 24 has not been established by the BBC (paragraph 45).

(v)      While it is neither for this Committee nor for Parliament to make judgements about BBC programming, it is our responsibility to comment on general BBC expenditure. We are bewildered and bemused by the BBC's figures for expenditure on digital promotion: on how it is composed; what exactly it has been spent on; and on how it is justified even though the ex post facto justification is that the BBC is funding "a national success story" which consists almost entirely of subscribers who fund SkyDigital and Ondigital. This seems to be an obscure use of public money (paragraph 47).

(vi)      The BBC has been a follower rather than a leader in the provision of digital channels. There are no grounds for accepting that this position will be reversed in future. The BBC has shown a disinclination to view its budget as a guide to the scope of its digital provision, preferring instead to advance an enormously ambitious vision. The BBC's claims for additional expenditure on new services are sketchy at best. The BBC has, in our view, singularly failed to make the case for a much expanded role in the digital era and consequently for additional external funding (paragraph 52).

(vii)      Should the independent study of BBC projections which the Secretary of State for Culture, Media and Sport has now commissioned find that any BBC targets for efficiency savings are under-estimates, we recommend that any differential should be taken into account when assessing BBC claims of a funding shortfall, rather than being left for the BBC to spend on such unspecified services as it thinks fit (paragraph 58).

(viii)    We reject the Davies Panel recommendation for a 49 per cent private sector share in BBC Worldwide at holding company level. We do, however, continue to believe that the BBC must prove its capacity for much greater increases in net cash flow from BBC Worldwide to the BBC in coming years under the current organisational arrangements (paragraph 62).

(ix)      We recommend that the Secretary of State for Culture, Media and Sport rejects the recommendation of the Davies Panel that the bulk of BBC Resources be privatised (paragraph 68).

(x)      The digital licence supplement would slow take-up of digital television and delay analogue switch-off. It would hamper the possibility of marginally free digital television being available to consumers and would accordingly bear most heavily on the most disadvantaged in society. In short, it would run directly counter to the objectives of public policy. Regardless of any decision on the funding requirements of the BBC, we recommend that the proposal of the Davies Review for a digital licence supplement should be rejected (paragraph 83).

(xi)      The BBC has known the profile of its external income from 1997 to 2002 for several years: significant rises initially, followed by a relative decline. It was the duty of the BBC to cut its coat according to the cloth. The Secretary of State reaffirmed his commitment to the five year funding formula and explicitly excluded the matter from consideration by the Davies Panel earlier this year. We see no possible justification for the Secretary of State to resile from that position. We recommend that the level of the licence fee in 2000-01 and 2001-02 should be set in accordance with the settlement announced in 1996 by the previous Government and endorsed by the present Government (paragraph 89).

(xii)      In an inquiry into the BBC and its funding we do not propose to comment on the merits of a social security measure concerned in part with the alleviation of poverty. We consider, however, that the new scheme for those aged 75 and over should be introduced in a way as well-suited as possible to the needs of broadcasting finance. In our view, the scheme would work best as a voucher system in which all persons aged 75 and over would be issued, as part of their old age pension, with a voucher for the full cost of a colour television licence, currently £101. This system has several advantages: first, it clarifies the obligation to obtain a television licence (at its face value) and thus greatly reduces the problems of collection and enforcement; second, it would switch the burden of determining eligibility from an organisation which has no business in knowing people's ages—the BBC—to one which does—the Department of Social Security; third, it provides those aged 75 or over who feel on financial or other grounds that they wish to pay the full licence fee with an opportunity to do so, thus saving the taxpayer money; and, finally, it will remove a financial disincentive from having a colour television for those old age pensioners aged 75 or over who either do not currently possess a television or who have a black and white television, thus potentially improving their quality of life (paragraph 94).

(xiii)    We wholeheartedly endorse the recommendation of the Davies Panel that a 50 per cent concession on the cost of the full colour licence fee should be available for registered blind people and congratulate the Panel and the Royal National Institute for the Blind for identifying the insulting inadequacy of the previous concession (paragraph 95).

(xiv)    It is wrong that the BBC actively solicits licence fee payers to switch to a payment system which requires them to pay £106 for a £101 licence fee. We recommend that the additional charge for payment by direct debit be discontinued with effect from 1 April 2000 (paragraph 97).

(xv)      We recommend that the Lord Chancellor's Department and the Department for Culture, Media and Sport commission a report for publication during the first half of the year 2000 on the implications both of removing the sanction of custodial sentences for non-payment of fines for licence evasion and of de-criminalising failure to possess a licence altogether (paragraph 100).

(xvi)    We recommend that the target of 100 per cent sub-titling of programmes of BBC digital services should be set for 2009 or the date of analogue switch-off, whichever is the earlier (paragraph 104).

(xvii)    We do not believe that now is the right time to determine the BBC's funding beyond 2002. Change in broadcasting is accelerating and the BBC's capacity to account for its own role has not kept pace with this change. The questions referred to earlier about the BBC's impact on the commercial market are become increasingly pressing. The present arrangements for the accountability and regulation of the BBC are not sustainable to 2006. Funding decisions for the period from 2002 to 2006 should only follow after a fundamental reconsideration of the BBC's role and remit (paragraph 105).

(xviii)  We strongly support the proposals of the Davies Review concerning the National Audit Office and consider that they should all be implemented with immediate effect (paragraph 109).

(xix)    We welcome the Secretary of State's remark that alternative means of governing and regulating the BBC might be examined as part of the consultation on broadcasting over the next year. The BBC's role and governance in coming years are highly contentious and inseparable from other broadcasting regulatory matters. They should be integral to the forthcoming review of broadcasting regulation. We recommend that the Secretary of State for Culture, Media and Sport should make an explicit statement that the BBC's future is a central subject matter of consultation prior to legislation early in the next Parliament and will not be hived off into a separate Charter Review in 2003-04 (paragraph 111).

(xx)      The BBC's self-regulatory position separate from the rest of broadcasting is no longer sustainable. The case for a single regulator of the market as a whole which we made last year has been reinforced by the rapid development of the market. We reiterate our recommendation that regulation of the broadcast content and commercial activities of the BBC should be the duty of a Communications Regulation Commission (paragraph 113).

(xxi)    The proposal to grant to a politician a general power of review of individual BBC services seems to us to jeopardise the independence of the BBC and to tend towards direct Ministerial control of broadcasting. Consultation on new and existing services should be the responsibility of the independent regulator (paragraph 114).