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Panel one: the role of the licence-funded BBC and the significance of the Strategy Review

David Elstein gives a blow-by-blow account of the first panel of the recent symposium of the Public Service Broadcasting forum
1 July 2010

Introduction by Anthony Barnett (Founder, openDemocracy)

Anthony Barnett, editor of OurKingdom, welcomed the attendees on behalf of openDemocracy and City University.  OurKingdom addresses the issues of power and liberty.  There are competing perceptions of the BBC: as representing the people and as being part of the power structure.  And today there is a wider question in relation to public service broadcasting: the future of pluralistic supply of high quality content is at issue.  AB thanked Frank Field MP for originally proposing the PSB Forum, and David Elstein and Daniel Macarthur-Seal of openDemocracy for leading its implementation.  He handed the symposium over to chairman Steve Hewlett.

Steve Hewlett asked Frank Field to explain why he had taken up the issue of PSB.  FF explained his strong belief in the importance of public ideology, which in our country had started as a Christian ideology and had subsequently been secularised, some 150 years ago.  That sense of English idealism he believed represented our “best selves”, providing a map and compass of how to behave in the public domain.  Now he felt we no longer had a common hymn sheet and ideology, though PSB was one of its last remnants, helping explain why we as individuals and collectively are here and what our journey is about.  Increasingly, the BBC’s ability to preserve and nurture PSB is mightily crippled by the need to deliver all kinds of content to offset the obligatory element in the licence fee, with that tendency only mitigated when seeking licence fee or charter renewal from Parliament or government.  This explained his call for a wide-ranging debate on the BBC, the licence fee and PSB: we should not merely react to what others had put on the agenda.

SH asked whether the new government, in its search for public spending cuts, would increase pressure for a cut in the licence fee.  FF replied that he believed there would be more pressure, rightly: too many of his constituents ended up in court every year.  If only the organisation responsible for pursuing licence fee non-payers had run the CSA, more single mothers – and some fathers – would have received proper incomes.  He felt that severe cuts in public expenditure would put the licence fee’s level in question.  In his view, a smaller licence fee could be justified if most of it it funded a body committed solely to PSB, delivered by more than one supplier.  The BBC should not be providing content that could easily be provided as well or better by the private sector.

SH asked whether isolating the PSB function in that way might endanger the BBC’s integrity and ability to fulfil its journalistic function.  FF replied that he understood the danger, but the PSB body would recognize this issue along with the benefits of the BBC culture, and also the BBC’s key role in training and shaping the culture of our society.  That said, he did not think the status quo was sustainable, and did not recommend a policy of “sit and wait”.  But we should try to preserve the best of what he have in the new world.

Session 1  The role of the licence-funded BBC and the significance of the Strategy Review

Panel Caroline Thomson (Chief Operating Officer, BBC), Professor Richard Collins (Open University), Professor Steven Barnett (University of Westminster), Mark Oliver (Oliver and Ohlbaum, consultants)

SH asked Caroline Thomson why there had been a Strategic Review, and why now.  CT replied that such reviews were periodic, and tended to be in response to changes in circumstance: in technology, or markets, or the audience or the political landscape.  The big idea previously had been to respond to the challenge of digital.  This time the big idea was content: what should the BBC be doing.

SH noted that many commentators had found the Review too platitudinous – were programmes currently made that lacked ambition and quality?  Wasn’t quality always put first?  CT replied that the Review recognized past errors – for instance, Celebrity Sleepover, if only for its title.  If we were not as good as we should be, why not say so?  And not enough notice had been taken of the 5 content priorities and the road map they represented.  The idea was to emphasize that if costs were to be cut, programme budgets were the last area to look.  The BBC’s editorial priorities were spelled out, with the clear implication that sport, acquisitions and entertainment were not at the top of the list.  25% of online expenditure, and half of domains, would be cut.

SH noted that previous thinking aloud by the BBC had imagined lots of niche channels, rather than many generalist ones alongside niche channels.  The result was that the BBC always looked too big.  Yet the cuts being made were two radio channels that were niche, and some on-line content.  CT replied that the cuts were simply a function of curtailing choice in some respects ahead of analogue switch-off in 2012, allowing the BBC to focus on its most distinctive PSB content, and get back to its PSB knitting – the best journalism, knowledge, children’s.

Tessa Jowell, as an attendee, apologized for intervening early, but had a packed schedule for the day and could only attend part of this session.  She said she had spent six years as Secretary of State, negotiating a licence fee settlement, BBC Charter renewal and the details of analogue switch-off.  The Charter review had involved constant and deliberate public participation, and the placing of entertainment as one of the core purposes (which had not originally included entertainment) had been a function of that public response: it was what the public most wanted from the BBC.  There appeared to be something qualitatively different about BBC entertainment.

TJ warned that the BBC faced the fight of its life.  In cabinet, she had been the only advocate of the BBC and a generous licence fee settlement.  Even more so today, the BBC culture is out of time: wanting the benefits of the private sector but none of the risks.  Also, the BBC Trust had backed off from providing the desired real accountability.  It was meant to put the licence fee payer in charge, but had failed. The BBC could become the UK’s biggest mutual, with the requisite drive and love of the public realm – it could become strong again, but instead the public were bystanders at a discussion between government and the BBC, despite their support for the licence fee.  The BBC had a once in twenty years chance to understand the public mood.

SH asked about the statement from David Cameron that he was the best friend the BBC could have as a Tory prime minister.  TJ replied that the threat was really from other commercial pressures on government – the Murdochs and so forth – and from perceptions of lack of impartiality.  Cameron’s commitment was elastic.  We could end up with a smaller and narrower BBC, which seems not to understand the level of hostility at Westminster and beyond – but it is tangible!  It was time to build alliances, and one problem was that politicians who got regularly beaten up by BBC journalists do not feel grateful.  Public support was strong but that was not grounds for complacency.  The role of the BBC Trust was still not right.

SH asked whether the decision to give the National Audit Office greater access to the BBC was a threat.  TJ replied that this might cause short-term and acute pain, but it could not be resisted, given the state of public opinion and the pressure on public sector salaries and benefits.  If you want the licence fee, this goes with it.  It was a finely balanced issue, where the Public Accounts Committee probably had the better intellectual case.  I had nonetheless taken the BBC’s side, but it was harder to do so now.  So NAO access should not be resisted if the BBC was to successfully rebuild its relationship with the public.

SH asked about the principle of contestable PSB funding – after all, it was she who had coined the phrase about the licence fee being venture capital for the creative industries.  TJ replied that in setting up the Trust she had tried to straddle the status quo and the Burns Committee recommendation for a PSB commissioning body.  But this was a dynamic and moving process.  Only the uncertainty about digital switchover held her back at the time.  She certainly felt that the DSO surplus within the licence fee could be used for non-BBC PSB, perhaps administered by the Trust, and in due course the BBC Trust could evolve into a PSB Commission, as envisaged by Burns.

CT acknowledged that TJ had been the BBC’s best critical friend, and that she had discussed the issue of salaries with her in the past.  SH reminded her of the jibe that the main job of the Controller of BBC North had been to keep his salary “north” of £400,000.  CT said she hated sounding defensive, but “we are where we are”, and the fact was that senior salaries had been frozen, meaning a real terms cut of 16% over three years; that public support for the BBC and the licence fee (according to a Guardian poll) was growing; and that the BBC’s key problem was alignment with a broad stakeholder community, which we had not managed as well as we might.

Richard Collins did not agree entirely with TJ.  The accountability aspect of the BBC Trust had been clumsy and bureaucratic, but nonetheless positive.  Many issues had been forced into the open that previously might not have been.  However, the Strategy Review is on the wrong scale and in the wrong place. All public service broadcasters are under threat, but threats imply opportunities, and openDemocracy is right to have intervened in search of a wider inquiry, which acknowledges the need for new entrants and diversified institutions.  It was inconceivable that the BBC would not a have a major role in the future, but we needed to examine the case for other entrants in the PSB funding world, such as the Scottish Broadcasting Council.  There were lots of small initiatives lacking funding, amongst galleries and libraries for instance, and what we needed was the equivalent of an old Royal Commission rather than a BBC Strategic Review, which was really just the first step in a courtship dance before negotiation of a new licence fee.

RC accepted that it was right to emphasize distinctiveness of programmes, efficiency, value for money and partnerships, but the outcomes envisaged were small margins: “putting quality first” meant £10m pa for children’s programming, and £25m pa for BBC2, within a turnover of £4bn.  It was like making a modest bid to Ofcom.  The BBC talked about open access, but was planning to introduce DRM for its Freeview HD services, contrary to a pledge made by Michael Grade and a specific BBC Trust requirement.  Overall, the Strategy Review was underwhelming, and – in Frank Field’s terms – lacking in vision.  Reith said public service was to be found in the BBC’s values and substance, not its administrative form.  Yet what we see is the suits enduring whilst production is casualised, such that me-too programming was no surprise.

SH asked where plural PSB supply, contestability and the licence fee fitted into this analysis.  RC replied that plural supply was important but was inhibited by the BBC’s size.  The BBC needed to go through a long process of rebuilding the institution and embedding key values.  As for contestability, this needed to be balanced with institutional stability.  In academia, that balance worked, helping to keep institutions honest and change manageable.  As for the licence fee, there was no public process, as there was in Germany – it was all in the hands of the government.  What we were observing was a bid for institutional survival.

Steven Barnett felt that Frank Field was fundamentally wrong, and that, contrary to TJ’s view, the BBC had been in the “fight of its life” for 25 years, ever since the Peacock Report was commissioned.  The Strategic Review had become an excuse for laying into the BBC, even though – as Jeremy Hunt had said – it was the “envy of the world”, much loved, increasingly trusted and perceived by the vast majority of people as providing value for money.  Frank Filed was confusing PSB issues with licence fee issues.  The regressive aspects of the licence fee had been countered by providing free licences to the over 75s, and – as he understood it – to some of those on income support.  So why kick the BBC up the arse?  Accountability is pretty good.  Withdrawing money from the BBC will progressively marginalize it, turning it into an unloved PBS-lookalike: so why do we need to change?

SB argued that, by his calculations, the BBC spent about £1.5 billion per annum on original UK production, whereas Sky, despite its £6 billion income, spent little more than £100 million, if fees to sports rights holders were excluded.  There was little evidence of private sector suppression as a result of the size of the BBC’s income.  When protests from the commercial education sector led to the closure of BBC Jam, that sector subsequently did not replace what had been lost.  The cuts narrative had been driven by commercial rivals, especially newspapers who had not found a way of monetizing their online content to make up for lost circulation.  There is heavy lobbying from the private sector, but most people don’t want to “do something” about the BBC.

SB thought that after 2012 (and digital switchover) there might be a case for re-configuring, and it was clear that senior salaries were out of touch – which was probably Greg Dyke’s responsibility, having wanted to attract people from outside the BBC and raise morale.  SH suggested that John Birt was also part of this, and the Governors let it through, but we were speaking with 20:20 hindsight.  SB said perhaps the BBC should have looked beyond the boom years in the commercial sector; but we have now reached a very different place.  The Trust has to re-think.

SH asked about contestability and division of the licence fee.  SB replied that contestability was an appalling prospect that would destroy the BBC, and perhaps also the licence fee, in that other recipients might cause offence which undermined it.  If you look at New Zealand or Ireland or Canada, the contestable amount may have started at 5%, but it would inevitably go to 10%, 20% even 40%.  Control would be lost to politicians.  Using the digital switchover money (which he had originally opposed) for broadband roll-out was acceptable, though: it’s another infrastructure project.

Helen Shaw (Athena Productions) said that she was an experienced PSB provider, both from within the BBC and RTE, and from her close experience of the Irish fund, administered by a new authority, RTE (the Irish equivalent of the BBC) had benefited greatly from the initial 5% allocation from the licence fee, winning a majority of commissions. A modest increase to 7% was currently out to public consultation,

Mark Oliver said that during his time as a BBC strategist he had conducted strategic reviews and also sat between the BBC and the NAO.  His own 80-page review was available on the openDemocracy website, so he would not go over all its points, which covered various aspects of PSB, including contestability.  He thought there had been a ridiculous game of ping pong between Ofcom’s PSB review and arguments over the licence fee.  He thought the current BBC Strategy Review, although it dealt with the public space, had no vision.  In the 1990s, strategy reviews started with a programme review – what was the output the BBC wished to offer?  That was missing this time: hence his agreement with FF’s analysis.  There is no evidence of a culture of public service: that needs to be put back in.  The BBC can re-invigorate the public realm by showing us what each channel would offer.  This is not a question of reach, and it doesn’t make sense for the BBC to run a whole channel – BBC3 – targeted at reaching young people: it might as well just make programmes for E4, which naturally reaches just that audience.  The BBC’s approach to PSB was simply wrong – public value had to come ahead of reach.  Prioritizing reach was regressive: like the flat-rate licence fee itself.

MO said he preferred a 2-part licence fee, with the basic part targeted at PSB, and everything beyond that available on subscription.  This is not an outcome that BBC management can deliver – it has to come from the BBC Trust, Ofcom and the government.  The Strategic Review belies an absence of belief in what the BBC is doing.  What Frank Field talked about has become lost in the BBC’s pursuit of the macro.  Value for money and reach have become prioritized over public value.  Perhaps a lesson is: don’t recruit from the commercial sector.  Managers had lacked the strength over 20 years to make the right case for public value, ahead of reach and share.  Now politicians are reverting to it.  He would like to see a BBC1 Controller who did not come from ITV – perhaps from a public institution.  After all, the BBC is the biggest cultural institution in the UK.  We don’t need someone whose vision is a 40% share.

Sylvia Harvey (University of Leeds) thanked openDemocracy for creating the Forum, but felt the terms of the debate had been wrongly framed.  The proposition appeared to be that PSB and the BBC should be “ready to retreat”.  Speaking of mutuals, would John Lewis be asked to divert revenues to its competitors?  Is the licence fee a tax?  If so, it makes the BBC accountable to government and Parliament.  Accordingly, accountability to licence fee payers is deficient.  Key facts have been missed in this session – notably, the reduction in spending on original production of £500m in recent years, according to Ofcom.

Nina Howe (BSkyB) thought SB’s analysis had been faulty.  Sky was all about outputs, not inputs: there was a wide range of investments, not all in traditional areas of production, from the whole multi-channel sector.  Sky is investing more in origination, in line with subscriber preferences.

John Dickson agreed that the debate was mis-framed.  What is public space?  The public information space is global.  The BBC archive records our public history: the BBC’s role is to distribute that globally.

Julian Petley (Brunel) asked why the BBC was not going on the offensive.  Why was there no Media Show on television?  In the past, the BBC had defended itself more overtly – as with a Panorama on Berlusconi.

David Elstein (openDemocracy) amplified Nina Howe’s point.  Sky’s £6 billion of revenue had to fund hundreds of channel suppliers and rights holders.  It was not logical to discount Sky payments to rights holders – sports rights, movie rights – but not discount talent costs in BBC programmes.  SB was comparing oranges and apples.  There was no point in Sky competing directly in content areas where there was huge public subsidy.  This explains the investment in Sky Arts, where a gap was being filled.  Of course, this was minor compared with Sky’s billion pound annual marketing spend: but that reflected the nature of a subscription-funded business.  As for the “missing £500m spend on origination”, this figure (actually, £300m-£400m) came from Ofcom’s study of spending by the five terrestrial channels, 2004-8: and Ofcom found that the biggest reduction – 13% – came in the amount of origination from BBC1 and BBC2.

Eddie Morgan (BBC) noted that key categories of BBC programming were supplied by independent producers and contractors.  Arguably, that represented internal contestability.  Niche services tended to be produced in-house; likewise, journalism.  But elsewhere independents produced 42% of BBC output.  Did that change the BBC’s ethos and values?  Had the BBC got the mix right?

Blair Jenkins, responding to SB and SH, thought that the new big idea was “to make space for others” – the Labour Party was not alone in concluding that the limits of expansion had been reached.

Adam Singer (British Screen Advisory Council) suggested we look at the example of HBO, which was widely acknowledged as having produced some of the very best of drama and comedy in recent years.  Yet 20 years ago, its spending and scope were no greater than Sky’s today: movies and sport, little “origination”.  Perhaps in 20 years time we will have a very different view of Sky.

David Levy (Reuters Institute, Oxford) wanted to get back to FF’s idea about public ideology.  How do you retain it?  He agreed broadly with CT and SB, but had doubts about BBC accountability.  The perception of overpaid executives and talent was a sign of weak governance.  The BBC Trust had failed to engage, especially with the public.  You had the paradox of the public liking the programmes that MPs tended to resent – improved governance might solve that problem.

David Graham (Attentional) doubted whether a compulsory licence fee was compatible with universal broadband, whereby anyone could obtain available content on their computer.  What most people felt they were paying for was entertainment, which explains why the pursuit of reach had been prioritized over PSB.  In the end, the conflicts in the system could not be reconciled.

Jocelyn Hay (Voice of the Listener and Viewer) felt that what the BBC missed was a champion.  The Trust could not fulfil that role.  TJ had identified hostility to the BBC, and it was clear that public engagement was being lost.  When she attended the theatre performance of “Yes, Minister” at Chichester, she heard the loudest applause at the line: “the fat cats of the BBC”.

SH put the audience contributions to CT.  She felt it was difficult to reconcile conflicting views, but acknowledged that many very good points had been made.  FF wanted to preserve BBC culture, but that culture used to be very closed.  Before her own arrival at the BBC, no previous transferees from Channel 4 had survived more than 3 years.  Better pay was part of the process of opening up the BBC and improving management.  She agreed that the introduction of independents had transformed BBC programme culture: was that interchangeable feature responsible for “me too-ism”?  BBC senior manager pay had been frozen: and salaries were anyway benchmarked against the commercial sector at a discount ranging from 25% to 60%.  Would it really make that much difference if Mark Thompson’s pay was cut?  That would be a gesture – and this debate is more profound than that.  Are we really in the business of pleasing politicians rather than the public?  BBC entertainment is more than Strictly Come Dancing.  The public trusts the BBC – that is why 11.5 million tuned in to BBC1 to watch David Cameron stuck in traffic on the way back from the Palace to Downing Street.

End of session one. Read and watch session two and session three

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To: Matt Hancock, Secretary of State for Health and Social Care

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