TUESDAY 2 NOVEMBER 2004

DEPARTMENT FOR CULTURE, MEDIA AND SPORT

  Q587  Chairman: First of all, Secretary of State, could I offer you our condolences on your bereavement. I would like to welcome yourself, your ministerial colleague and Mr Ramsay for what is the final session in our inquiry into BBC Charter renewal. The old National Heritage Committee which we succeeded recommended, as you will recall, a 10 year Charter funded by a licence. We do not know what conclusions we shall come to this time. We are grateful to you and your associates for coming here this morning.

  Tessa Jowell: Thank you very much indeed.

  Chairman: Michael Fabricant.

  Q588  Michael Fabricant: Good morning. How do you think the BBC should be funded under the new licence?

  Tessa Jowell: This is obviously the meat of Charter review. I have made pretty clear for some time now that I see the licence fee as very much the default option, in other words there has to be a better alternative to the licence fee for the licence fee to be replaced for this Charter. That said, we are certainly looking at alternatives and we have not yet reached any final view. Alongside the consideration as to how the BBC will be funded over the period of its Charter is obviously the role of the BBC in leading digital switchover and in making a substantial contribution to the costs of funding digital switchover. That is my answer to your question. I would rather in reverse, Chairman, like to say two things: first of all, to thank you for your kindness in agreeing to rearrange this session and, secondly, to say what importance we attach to your report as we move to beginning to shape the interim conclusions of Charter review which will form part of a Green Paper to be published in the early part of next year.

  Q589  Michael Fabricant: Your earlier answer sounded quite Churchillian—and there is nothing wrong with that—when he said that democracy is not a particularly good system but it is the best one we have got. What do you think of Ofcom's recommendation that there should be a Public Service Publisher? Are you attracted by that idea?

  Tessa Jowell: I think what is attractive about the idea is maintaining the value of investment in public service broadcasting. I hope that it will not become tedious over the course of the morning if we say this is obviously something that we are looking at. I am deeply committed, as we move to switchover and as we move to more multi-channel choice for viewers, to looking at the robustness of the mechanisms to preserve public service broadcasting. I think this is a very important part of our national identity, without overstating the case. The consultation that we have carried out as part of the Charter review has shown that public service broadcasting is popular with people. I think it is a very interesting proposal. I like the idea of locking in the funding which is currently available to public service broadcasting. Obviously it is a proposal that we will give proper and detailed consideration to.

  Q590  Michael Fabricant: The BBC has gone into a whole series of different areas over the last few years, including BBCi, which I personally think has been quite successful, but where does it end? We have got BBC News 24, BBC3 and BBC4, which got some criticism, although I think to some degree it was unjustifiable, I think BBC3 and BBC4 do a good job, BBCi and all the other services the BBC offer. Do you think the BBC should be restricted in any way or would you say, providing it has got a licence fee and providing the Secretary of State of the day approves it, there is nowhere that the BBC should not be allowed to go?

  Tessa Jowell: No, I do not take that view. My view is closely aligned with the view of the Chairman of the BBC and the Director General. I think this Charter review needs to provide a sharper definition of the BBC's role and purpose and to allow the BBC to flourish within that sharper definition of its role and purpose. I also agree with the conclusions of Mark Thompson's view and Michael Grade's view about some of the diversity of functions the BBC has developed over the last 10 years and it should now come under very close scrutiny. There are two questions to be asked. First of all, is this to be part of the BBC's core purpose or is it a diversion from that core purpose? The second is the impact on the wider commercial market. I do not think that by and large the BBC should be investing licence fee payers' money in those areas that are already very well served by commercial services in all their forms, whether it is magazines or whatever. The BBC's role should be one which is a direct expression of its core purpose and here I would quote the Ofcom report, "as the cornerstone of public service broadcasting". I think it is much more besides in this country.

  Q591  Michael Fabricant: We do not know how long the licence is going to last, there is no clear definition of that, it used to be 15 years but the last one was for 10 years. Let us say it is 10 years and that takes us through to 2016, we do not know what the future of  broadcasting will bring, although many commentators argue that the sort of system that we have at present whereby there are set channels, where programmes are pushed at the viewer, is not going to be a sustainable system. I know John Lewis are now offering a Freeview box which will record, a little bit like Sky+. Instead broadcasters could download the whole week's programming ahead of time and, apart from news and current affairs, you would make up the schedule. Given that particular panorama of broadcasting, how can one define what will be the core function of the BBC 10 years ahead?

  Tessa Jowell: I think we always have to be cautious about the pace of technological development and, more particularly, the pace of public acceptance of new technologies. Even the technologies which are available now I do not think have presented a huge challenge to current viewer behaviour. By and large it is still the terrestrial channels that, whether they are watched on analogue or on digital television, are still the most watched. As you will be aware, there is a very lively debate going on in the industry about the extent to which the whole concept of a broadcasting channel is a looming anachronism and to what extent there is an appetite for people simply to create their own evening's viewing which technology will shortly allow. I think we need to proceed cautiously on this. There are restrictions on the technology which unless they were addressed would be a break on its development. It is important that the technology keeps pace with viewer behaviour and enthusiasm. I think we can be pretty confident that the more apocalyptic predictions about the end of broadcasting as we know it within the next 10 years are likely to be overstated.

  Q592  Michael Fabricant: The type of encryption which Freeview has at the moment, MPEG-3 or MPEG-2, means that, given the frequencies that are available, there are a restricted number of channels available, but it is a big improvement on terrestrial. For example, the launch of ITV3 has meant a re-engineering of ITN's provision and yet the technology now is available using the same frequency as used by Freeview. In fact, you could get three or four times as many channels as there are at present. The only problem is that you would have to take back all the Freeview boxes and upgrade them and you would have to change the whole system. Given that there is a problem of digital switchover from analogue to digital, there may well be a looming problem—I do not know whether the Department has thought about it—in having to have a switchover in the next few years if we are going to exploit digital technology from the current rather basic digital technology to a digital technology which will enable digital terrestrial television to have virtually as many channels using the same spectrum as is available from satellite. Has DCMS given that any thought?

  Lord McIntosh of Haringey: I am sure that in due course you will be having a full inquiry on digital switchover. We are in danger of going over the boundary between Charter review and digital switchover, although they are very properly linked. I think the answer is yes, DCMS has given a great deal of thought to this and the conclusion that we have to come to is that if you are planning for digital switchover you have just got to take the technology at the time that you are planning it and you have got to stick to it otherwise you will never get anything done at all. I have been listening to overseas broadcasters who argue that in France, for example, you should not be touching a switchover with MPEG-2 because MPEG-4 is coming along and when I ask them how long that is going to last they say 10 or 15 years and I do not believe it because if you wait for the next technology and certainly if you wait for convergence you will never make the change at all.

  Q593  Chairman: I would like to follow up what Michael Fabricant has been asking about digital switchover in relation to the Barwise report that you recently received. The assumption in the Barwise report appeared to be that there was never going to be a digital switchover because he was basically recommending that BBC3 and BBC4 be turned into clones of BBC1 and BBC2, in which case we would have four very similar channels. Secretary of State, when you say, rightly in my view, that the BBC should not necessarily go into everything, on the other hand there seems little point in creating new digital channels unless they have some individuality for better, in the case off BBC4, or for worse, BBC3. BBC4 does have individuality. On the other hand, BBC3 does not have much individuality if you compare it to E4 or Sky One and so it is an interesting question of what justification there would be for that. Although Professor Barwise praises the two children's channels, there are huge numbers of children's digital channels already, so you might say that there is no particular justification for the two BBC children's digital channels. To what extent in digital switchover are you looking at the appropriateness of the BBC doing everything, as Mr Dyke appeared to believe that they ought to do, and you still having a power under the Charter to refuse to authorise new channels, which you exercised in the case of BBC3 for a while?

  Tessa Jowell: The question you raise is in relation to Paddy Barwise's report. This report is now with the BBC for their observation so I will not comment extensively on the detail of the report until I have had the opportunity to get their reaction. The question goes right to the heart of the issue, which is the extent to which the future of digital television is a future of the kind of mixed genre channels, as a continuation of an analogue model, or to what extent we will see, and indeed want to see, channels which are more specialist, covering a narrower range of genre and very particularly geared to particular audiences. When I gave approval to BBC4 that was what I had very clearly in mind, that there is an audience which is reportedly unsatisfied. I do this from anecdote rather than anything rather more systematic, but I think among its devotees BBC4 is extraordinarily popular. BBC3 has found it harder to define its identity because in a way its challenge is greater. I thought that Paddy Barwise's observation that channels which are specifically geared at a specific age range will find it difficult to generate a big enough audience or to discharge that ambition successfully is right and that BBC3 ought to broaden its age range appeal both down the age range and also up the age range. I think it is worth remembering that—and I think in time this will become an important way of judging BBC3 and help us to think about this—when Greg Dyke and Christopher Bland put in their proposal for BBC3 it was because they felt that there was a demographic of young people who were not bound in to the understanding of enthusiasm for and commitment to public service broadcasting through the BBC in the same way that older people and young children through the children's channels were and so BBC3 was the answer to that. I think that we have to give BBC3 rather longer to develop. I will be interested to get the BBC's response to the Barwise report. I think BBC3 is a bigger challenge in terms of the contemporary debate about broadcasting than is BBC4. In relation to BBC4, I think the future will see the growth of niche channels rather than the continued growth of mere genre channels.

  Chairman: BBC4 seems to be very imaginative. Let us take the Booker Prize as an example. You would have coverage on BBC2 and then, when that was over, if people wanted more information and more coverage they could go on to BBC4 and that seemed to me a very, very good way of having a spectrum of coverage by the BBC.

  Q594  Mr Hawkins: Secretary of State, it is often said that the Public Accounts Committee is one of the most important and prestigious Parliamentary committees. They were, as you will know, pretty savage in their criticism of the amount of money that in their view, particularly in the view of the former Labour Minister Alan Williams, was wasted on digital channels when in some cases the number of people watching was so low it could not really be measured. How seriously do you take that very strongly expressed view by the PAC?

  Tessa Jowell: I would take any view of the PAC very seriously indeed. One of the facts about digital channels is that we cannot measure their value purely in terms of how many people watch them. In relation to the BBC digital channels, the audiences are developing and the audiences will grow as particularly Freeview continues to be as popular as it is. I am not saying that if you have 3,000 people regularly watching a channel it is necessarily a success and value for money, but we have to get used to the fact that instead of looking at viewing figures in the high 20 millions we are going to be looking at viewing figures in the future for channels which are half or less than half of that. However, I think there is an important consideration here which is what I   would call the disproportionate benefit or disproportionate appreciation test and this would be one of the answers to justify BBC4 and to set alongside the criticisms of low ratings and that is that I believe that one of the BBC's many roles is to service with a high quality of programming offering the interests, enthusiasms, the curiosity of the British people across a very wide range. Your viewing tastes and my viewing tastes may be quite different. If we analysed the viewing tastes of all the people in this room and the things that we would particularly like to see more of I suspect we would see quite a wide range of programming preferences which are not yet being fully met. Digital channels are a way of doing that, they are a way of providing disproportionate benefit, pressure or interest to people who have a particular interest in a particular topic and I do not think that that is a factor which is (a) sufficiently taken into account and (b) which fits with the conventional way of judging the success of channels.

  Q595  Mr Hawkins: In the harsh world of the rest of the media things are measured by audience size, are they not? If any commercial people were here they would be saying the BBC are really being protected by their privileged position of the licence fee and they are able to waste vast amounts of money on producing programmes nobody wants to watch.

  Tessa Jowell: They are protected because that is what the people of this country want and to that degree the public service remit for the BBC is different from the public service remit for the other commercial public service broadcasters. The point you make is an important one and it really does establish the dividing line. The BBC is different from  commercial broadcasters. I think the very interesting ideas that are being developed within the BBC as a way of expressing this distinction are that we make clear that the BBC's protected status is not an accident, it is a democratic choice, but it is a democratic choice which creates for the BBC very clear responsibilities and one of them is to ensure that money is not wasted, so the sustainability of the licence fee relies to a very large degree on public confidence that it is their money that is being properly spent and waste and evidence of waste is one of the surest way of undermining that.

  Q596  Mr Hawkins: I agree with you entirely on your last point because that is what this Committee has to decide, whether there would be a better way of avoiding waste if they did not have a 10 year Charter or they did not have a licence fee. I wanted to ask you about a slightly different but still related point which is to do with the complaints that have been made to us by commercial channels who have established an audience for their own particular digital channel in the world of history or the arts and then have found that the BBC have said they have been successful, we can now come in and compete with them, but with the benefits of what they regard and we might regard, I do not know how my colleagues feel about this, as an improper cross-subsidy and improperly beneficial position because they can use their existing channels to advertise what they are doing in their digital channels. How do you react to that concern?

  Tessa Jowell: I think there are two parts to the answer. First of all, I think we have to be rigorous in judging the impact on the wider market of BBC activity. That is not to say that the BBC should stay out of anything which is commercially attractive or is commercially successful for other providers, but we do need to be vigilant about the impact on the wider market of BBC activity. On the second point, the evidence by and large shows that BBC intervention in the market can create choice for consumers. It does not necessarily lead to the destruction of the competitor channel. It is not the BBC's job simply to act as a commercial predator and to identify what would be, if they were a commercial broadcaster, regarded as profitable gaps in the market or to move into areas of the market which are already overcrowded. You may remember that one of the reasons that I turned down the first submission for BBC3 was that I was not persuaded that it was a distinctive offering in what is a pretty crowded part of the marketplace, the marketplace for 16 to 35 year olds. I think those are the two considerations that need to be borne in mind. I think a sharper definition of the BBC's role and purpose and greater certainty about its scale would quell some of the reasonable fears in other parts of the territory.

  Q597  Mr Hawkins: I am very concerned about the pressure that there seems to be building up for an earlier switchover and you will have seen what Ofcom have said about the need to have a SwitchCo and that kind of thing. One of the things that you and your colleagues have been vaguely suggesting is that if there were to be a switchover at a time when perhaps 30% or thereabouts of the population did not have digital television there might be some protection from the Government in relation to those who were elderly or not in good health or with very low means. If your party were to be in Government at that time—and we are looking a number of years ahead—do you have a firm commitment from the Chancellor of the Exchequer of a specific amount of taxpayers' money that would be available to enable people who were not able otherwise to afford to buy digital television to have that at a time of switchover?

  Lord McIntosh of Haringey: The first thing to be said is that whatever time you have a switchover, and I am not conscious of any particular pressure for an earlier switchover, 27% of the population will not be able to get digital terrestrial television in advance because the transmission simply is not there. The pressure for an earlier switchover is from the people in that 27% who are deprived of it and that is what I am getting from MPs' letters at the moment. In answer to the question about those who are deprived at the time of switchover, this is something which we will be covering in the announcement that we will be making about digital switchover early in the New Year. At that time we will have to cover all of the outstanding issues that need to be resolved in public about the switchover, including all of the issues over the timing region by region, the total timing, the spectrum allocation and indeed any issues over targeted assistance and we will do that having taken into consideration the financial resources available for it.

  Q598  Chairman: Do you know whether in your own Department or in the Treasury there has been any assessment made of the financial implications of the trade off between assisting deprived people to have access to digital television and the income there would be from the sell off of analogue spectrum?

  Lord McIntosh of Haringey: Those are both potential elements in the cost-benefit analysis which has been done both by our Department and the DTI, who are the partners in digital switchover, with the involvement of the Treasury. They are not the only considerations. The revenue from the sale of analogue spectrum is perhaps the least finalised of the amounts of money because decisions have to be taken about what the analogue spectrum will be used for and some of the potential uses are not revenue producing, but certainly it is all part of the analysis, yes.

  Q599  Chris Bryant: That did not sound like a figure, but you seemed to think there was a figure somewhere around.

  Lord McIntosh of Haringey: There is a figure for the benefit in net present value to the United Kingdom of switchover and the figure that we have at the moment is between £1.5 billion and £2 billion, but that will be affected by the timetable, whether there is any slippage or advance in the timetable and by quite a number of factors which are yet to be decided. However, you have to start with having a cost-benefit analysis and we did that and we published it at the time of the Secretary of State's announcement in September last year.