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The BBC, the licence fee and the future of UK PSB

Speech by Sir Michael Lyons, Chairman of the BBC Trust, to the Royal Society of Arts, London

13 May 2008

Please check against delivery

It's a great pleasure to be here at the RSA. Matthew Taylor was just telling me about his plans to put live video of these events on the RSA website – thereby turning the RSA into a broadcaster – and an impeccably public service broadcaster at that. As if the BBC doesn't have enough competition…

There's a serious point here.

Not so long ago you needed deep pockets to be a broadcaster – the cost of TV studios and transmitters saw to that. But with the digital revolution anyone can be a global media player.

A pretty average mobile phone lets you capture sound and vision and send them anywhere in the world. Add an internet connection, and your video can reach an audience of millions. All for less than the cost of lunch-for-one at Grouchos. And you don't have to spend a second worrying about regulators, regional production quotas or the compulsion to deliver a particular demographic. For some television producers this will sound like Heaven.

Traditional broadcasters are still coming to terms with what all this means. What's clear is that the new world we're entering offers a brand new set of opportunities for broadcasters such as the BBC which are always seeking new ways to give audiences new delights, better value and more choice.

Opportunities – and risks too, of course. The current debate about the future of public service broadcasting has tended to dwell on the risks. But we need to explore the opportunities as well to ensure a properly rounded debate.

The big questions at the heart of the PSB debate

The questions at the heart of the PSB debate are these:

Let's keep the PSB debate open, wide-ranging, and focused on the interests of audiences, not broadcasters or regulators


Back in January, I made a speech at the Oxford Media Convention outlining how the Trust was approaching its contribution to this debate.

I said that the interests of audiences would best be served by an open and wide-ranging debate, focused on the interests of audiences, not broadcasters or regulators. Audiences have nothing to gain from allowing the debate to be captured by those wanting quick fixes for short-term problems, or seeking tactical advantage for particular interests.

But I have to say I see signs that the debate is developing in just this way. So tonight I want to raise some of the issues I think are being overlooked.

Next month we will be making our formal response to the recent Ofcom PSB Phase One review, currently open for consultation. So, nothing I say today should be seen as pre-empting that response. The Ofcom document is lengthy and explores some important issues. Its analysis is powerful and thought-provoking and we will give it the consideration it deserves before publishing our considered judgment in June.

However there are some issues surfacing in the debate that I'd like to respond to right now.

The myth of the "excess" licence fee

The first is this. A curious new phrase has begun to enter the language in which this debate is being conducted. The phrase is "excess licence fee".

The phrase didn't exist until a few weeks ago, but suddenly it keeps popping up, like one of those targets in a fairground shooting gallery. You see it out of the corner of your eye, but when you try to get it properly in your sights, it's gone.

The sad truth about the "excess" licence fee is that it doesn't exist.

Some observers have spotted the BBC's fund to help elderly and disabled people get the benefits of digital switchover and come up with the bright idea that, once switchover is complete, this fund can be used for other purposes.

What they don't seem to have noticed is that the fund will have been spent by the time the current licence fee settlement expires, and who knows what will happen to the licence fee after that?

And of course if we ever did discover that the mythical excess licence was a reality, then our first duty would be to ask those to whom it belongs – the licence fee payers – what they would like us to do with it.

And we shouldn't rule out the possibility that they might just want us to give it back to them rather than find some new purpose for it.

Let's be absolutely clear why some people are searching so hard for a source of spare broadcasting cash is because they are worried about the financial future of Channel 4 after digital switchover. They see Channel 4 as the key public service competitor for the BBC, and mount the case that it must be kept healthy post-switchover – perhaps by an injection of public funds.

I think there are some problems with this analysis and, since, rightly or wrongly, the Channel 4 question seems to have become so central to this debate, these problems need to be aired.

So here goes…

Who gains by turning C4 into BBC5?

Let me begin by saying that Channel 4 has played a unique role in enriching the PSB ecology to the benefit of audiences. Some might argue that its contribution is not as radical or original as once it was, but the thought of British television without Channel 4 is unthinkable.

Whether or not the threat hanging over the channel is really as serious as that is debatable. There is a question about whether Channel 4 really does face a financial crisis, and if it does, of its true scale. But I don't intend to go into that tonight. Let's take it, for the sake of argument, that the financial problem is real.

After that, my concerns are twofold. First, that a public funding remedy could actually weaken rather than cure the patient – which certainly wouldn't be in the interests of its audiences. And, second, that audiences may identify other worthy candidates in public service broadcasting aside from Channel 4 for any new public funding that comes available – and they will want a proper debate about priorities before deciding which candidate to back.

On the first point – let's assume the decision has been taken to give Channel 4 some public funding. Certain things flow from that.

Firstly there would have to be much tighter scrutiny of the financial arrangements of the channel.

The public, who would have to stump up the new funding would want assurance that Channel 4 is delivering value for money – that it is, for example, meeting self-help efficiency targets at least as stringent as other public bodies. That new monies won't simply leak into higher salaries for on-screen talent – and, indeed, for off-screen executives - with knock-on effects across the industry.

The public would also want assurance that the channel's governance arrangements are robust enough to provide the degree of transparency and accountability that any large-scale public funding rightly brings.

But there is a danger here.

Channel 4 is the way it is, in part because of the way it is funded and governed. Change the mechanisms of funding and governance and you change the channel.

Have those urging public funding for Channel 4 taken fully into account that a publicly-funded Channel 4 would inevitably be different from a commercially-funded Channel 4?

Has Channel 4's audience been properly consulted about the risks such an arrangement might entail?

Put bluntly, the question is this: Who gains if the effect of well-meaning regulatory intervention is to turn Channel 4 into BBC 5?

The debate about PSB should be broad and about opportunities

The debate about the future of public service broadcasting in the UK must be about much broader issues than the future of Channel 4.

I and my fellow Trustees spend a lot of our time listening to audiences all round the country and it's clear they have a lengthy PSB wish-list, which goes well beyond shoring up any particular weaknesses among current PSB providers.

The first is much-improved access to existing PSB content and services. It's all very well talking about protecting plurality – a topic which requires a seminar of its own, never mind a speech - but audiences rightly ask why people who pay the same licence fee as everyone else can't yet receive the full range of existing content and services, let alone the developing riches of the digital universe. The launch of Freesat the other day will help here – but there is much more to do to satisfy audience demand.

There's a real audience demand, for example, to give every radio listener in Britain the high quality reception city-dwellers take for granted – but which is not currently available in parts of England, most of the Highlands of Scotland, as well as areas of Wales and Northern Ireland.

There is real audience demand to enable everyone in the UK to have access to high-speed broadband and to abolish, once and for all, the digital divide.

And there is a real audience demand for better local services; and for more plural commissioning to represent voices in the Nations and Regions, in the countryside, in towns, and in cities.

And that's before I start to tell you what audiences say to me about a wider choice of sport on our screens….! But I shall stop. In broadcasting, as in life, there will always be needs unsatisfied and aspirations unmet.

My point is that we must focus on the potential for exciting opportunities and benefits for the UK public of the future. And once identified let's have a proper national debate to establish priorities and – if the public's money is required to cover the cost – ensure the public have a say in how much and on what. This simply cannot be left in the gift of civil servants, industry big-wigs or regulators.

The licence fee is not a back-pocket for government or regulators

Let me address specifically the question of using the licence fee for other purposes.

Let us never forget that the licence fee belongs to licence fee payers.

The licence fee is not a back-pocket for government or regulators or anyone else for that matter. It is not a spare pot of cash, a contingency fund, to be raided every time there is a cause, however worthy, with a hole in its balance sheet and a media flag attached.

The public pay it – sometimes at some sacrifice – because they have to. But they know what it buys them. It buys them the BBC – their BBC.

That direct link between the BBC and the people who pay for it and own it creates a unique relationship that underpins a great deal of what has made the BBC such a valued British institution for the last 80 years.

The system is designed to give licence fee payers what they want – high quality public service content across a wide range of programme genres and platforms, plus accountability and complete transparency in the way the licence fee is spent.

It is intended to provide a solid foundation for the editorial independence of the BBC – something we know the public holds very dear.

And it can also generate public value for Britain as a whole – including a valuable contribution to its global reputation.

The BBC Trust, the governing body of the BBC, exists to make this process work. We represent licence fee payers and make sure that the BBC is run in their interests, not those of its managers. We guard the editorial independence of the BBC and make sure it is beholden to no outside interest, whether political or commercial.

That is not to suggest for a moment the BBC is perfect. The BBC has changed a lot in the last couple of years – becoming more efficient and more responsive to the public's expectations. But there is more to be done and the Trust will ensure the BBC never becomes complacent. I'll speak more about this later.

However, the point is that the value of the BBC and the infrastructure which delivers it is not something we should put lightly at risk. And one of the proposals currently being discussed could put this at risk.

The Trust has no desire to become 'Of-PSB'

This is the proposal to introduce a degree of so-called contestability into PSB funding via the licence fee. There are serious issues to be debated about the theory of contestability, but tonight let me just explore the practical consequences.

One big question about contestable PSB funding is this: who judges the contest? Who decides how the cash should be divvied up among those competing for it?

Various solutions have been floated, including an "Arts Council of the Air" – no-one seems much to like that one – and a "Public Service Publisher" or PSP. They're all interesting suggestions – although it's hard to escape the suspicion that they're all driven by the desire to remove funding from the BBC as a policy object in itself.

Another of the acronyms floating in broadcasting's alphabet soup is an "Of-PSB" to take on the job of judging which lucky public service producer would be funded to supply particular streams of public service content.

One recent suggestion is that the governing body of the BBC should take this on. A dangerously attractive proposition, don't you think, handing the Trustees of the BBC the power of life or death over other public service providers? I can see that we might quite enjoy that…

But of course it wouldn't be quite like that. The Trust, which now has a clearly defined role as the governing body of the BBC empowered to make key decisions on behalf of licence fee payers, would have to morph into an entirely different kind of body, floating magisterially above the fray, dispensing funds entirely impartially according to criteria yet to be formulated. Dangerously divorced from contact with those who make and commission programmes and other services.

But then who would represent the interests of those who pay for the BBC? Presumably a new body – superficially not unlike the BBC Trust, only significantly weakened by the removal of its current clear line of accountability to licence fee payers and, even more so, by the need to impress and obey its new paymaster.

What contestability introduces in other words is an entirely new layer of regulation and bureaucracy into public service broadcasting. As far as the BBC is concerned there'd be something a bit like the Trust, but less effective; and then there'd be this new funding agency with its thumb firmly on the BBC's financial windpipe and accountable to – well to whom? That's not at all clear.

Does this sound like a recipe for a BBC clearly accountable to those who own and pay for it, and with the editorial and financial independence to take creative risks?

I think not.

To those who offer the Trust the prospect of translating itself into Of-PSB, we say: thanks, but no thanks.

The stress on "plurality" as a key issue in the PSB debate may be misplaced

There's always a danger of debates about PSB turning into debates about institutional arrangements. But let's not forget that what audiences are interested in is what they see on their TV screens and hear on their radios and access online.

A great deal of energy in this debate is going into the question of plurality – in other words the desire to guarantee the existence of a well-funded public service competitor to the BBC.

The key issue is maximising the reach impact and diversity of high quality public service content

The BBC welcomes competition. But it may be that the stress on plurality is misplaced. It may be that what we should really be thinking about is how to maximise the reach, impact and diversity of high quality public service content in an era of fragmenting audiences.

So more focus on how output meets public needs. And more focus on how broadcasters can work together to achieve value for audiences in the round.

This is what the BBC has begun to think about as it changes to ensure that it remains fit for purpose in the digital universe.

The BBC can and must do more

The course that we in the Trust have set for the BBC is based on the waymarks of quality, innovation and distinctiveness. And all of this to be achieved in the most efficient ways. This is what we know the BBC's many audiences look to it to provide.

The diversity of those audiences is something the BBC needs to do more to respond to. Especially those who feel the BBC is not for them, but who still have to pay the licence fee.

This requires the BBC to reach out to new audiences without jeopardising the support of its existing loyal audiences. Indeed, demonstrating clearly to those loyal audiences that the BBC will protect that which they already value. There are a number of ways the BBC can do this.

Let me take as an example how the BBC can improve on its record of reaching ethnic minority audiences.

It has the scale and scope to be able to offer targeted channels such as the Asian Network, or BBC 1Xtra, the digital station for young black urban audiences. But the need to reach everyone should not be an excuse to go on creating more services. The BBC must also find ways to bring those audiences into mainstream output. That's a real challenge, but it can be done.

There was an outstanding example on BBC One recently in the Number 1 Ladies Detective Agency, a wonderfully warm-hearted piece, set in Botswana, demonstrating all the hallmarks of high quality: good writing, great acting, strong production-values and so on.

Nearly 7 million people watched – well above the average for the Sunday night slot. And they loved what they saw - the appreciation index was significantly higher than the average for drama. But what was really interesting was that it drew a large black audience – much higher than the average for BBC One.

So it is possible to bring diverse audiences together to share a common BBC experience – if the BBC is prepared to take the necessary risks – in this case showcasing at primetime on the flagship channel an entirely black cast with Botswanan accents in an African setting.

There was another example of risk-taking that paid off when Radio Five Live and Newsnight got together one Friday last year to debate immigration.

Gavin Esler had panels of politicians and experts in his television studio, while, in his radio studio, Richard Bacon had members of the public queuing up to air their thoughts and debate their experiences on the phone, or by text or by email.

The collision of the two worlds – Newsnight's high-table of theory and analysis and Five Live's rich seam of first hand knowledge viewed through the lens of jobs, schools, and GP surgeries – the collision was eye opening and instructive to everyone involved. The debate is still available on the Newsnight website if you missed it.

But of course diversity is about more than just ethnicity or social class. Geography matters greatly too. We have challenged the BBC to respond to the fact that audiences feel much less warmly about the BBC the farther away they live from London. The move of staff and airtime from London to Salford will help here. But there is more to do.

We're currently reviewing the arrangements for the BBC's production bases outside London to supply output for the network. And we also have a review under way examining the persistent complaints from the nations and regions about network news coverage of the issues that matter to non-metropolitan audiences. These are things the BBC has to get right.

In a complex and rapidly changing world the UK needs to co-operate as well as compete

One final thing the BBC has to get right – its relationship with the rest of the media industry.

The scale of the BBC and the nature of its funding impose particular responsibilities. The BBC has to tread a sometimes difficult path between the desire to compete all-out on the field of quality, while at the same time exercising a degree of restraint in the intensity of its competition in the commercial arena.

The new governance arrangements for the BBC do ensure that its activities are more rigorously tested against the market than once they were and the Trust takes this responsibility very seriously. But we are also looking to the Executive to demonstrate self-restraint. For example, we are about to publish our first major review of a BBC service – bbc.co.uk – and one of our conclusions and requirements of the management team will be that they put in place stronger internal controls to demonstrate their awareness of their strength and the risks of adverse impact on the commercial market.

Beyond the strict controls to prevent negative market impact, there are ways the BBC can create a positive impact for the rest of the sector. In recent years the BBC has actively sought ways to co-operate with other broadcasters. For example, in developing Freeview, Freesat, and HDTV.

In an uncertain and complex world there is great public value to be gained from collaboration and co-operation. Sometimes the BBC should lead. Sometimes it should support. But finding ways to work together across the media sector should be the hallmark of the BBC's stance and public service contribution.

As the PSB debate develops this simply has to be a bigger theme. A stronger emphasis on co-operation as well as competition. A fuller exploration of how the BBC might use its expertise, talent and economic strength to ensure a healthy and sustainable media industry in the United Kingdom.

That would of course require a strong and confident BBC, but one that is ready and able to work in partnership with others.

The public must be at the heart of our debate and decisions

So the BBC must itself change to meet the fast changing circumstances of the digital revolution and learn to respond more effectively to the high public expectations of the Corporation.

It has to offer something of real value to everyone in the UK. It has to operate in a way that patently demonstrates value for money. Above all it has to offer output of high quality which is distinctive from what else is on offer to continue to justify its privileged position as the recipient of the licence fee.

Ends

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