The BBC and the Scottish referendum

Lord Birt suggests a yes vote in Scotland would be a threat to the BBC. It needn't be.

David Elstein
22 August 2014

With less than a month to the vote on independence, it seems an odd moment for the BBC’s former Director-General, Lord Birt, to address an issue I raised a year ago at the Royal Society of Edinburgh’s public debate on culture and broadcasting, and wrote about for openDemocracy.

Birt is concerned that a “yes” vote would deprive the BBC of some £320 million pounds of licence fee income, so further reducing its ability to deliver its current range of services, but that if a Scottish government collected that money itself, it would be unable to supply content equivalent in quality to that which would be lost. So Scottish viewers and rotUK (rest of the UK) viewers would both be worse off; and Scottish viewers might also either lose access to the best of the (reduced) BBC service, or have to pay handsomely to retain it.

It is a standard assumption that marginal costs – content – are much easier to reduce than fixed costs, such as staff costs, rents and other overheads: so programming is especially vulnerable when such large reductions in income occur, and the dangers to the BBC of such an extensive loss of revenue are indisputable.

It is notable that Birt does not address the issue of decriminalisation of licence fee evasion: a prospect that has only recently emerged, and may well itself reduce the BBC’s income (by its own estimation) by some £200 million a year. If evasion is decriminalised, there must be a question as to whether an independent Scottish government would pursue licence fee evaders through the civil courts with the same vigour as the BBC itself can be expected to do in rotUK.

Leaving that issue aside, it is not clear that Birt has thought through all the issues that would arise for the BBC in the event of a “yes” vote. It is not just that the BBC would lose some 9% of its current licence fee income. It would also potentially be left with heavy (and purposeless) costs in the shape of staff, buildings and transmitters, which the Scottish government would be under no obligation to assume: with 1,250 staff and hundreds of transmitters – and a headquarters at Pacific Quay that cost £188 million to build less than a decade ago – the annual bill could well be another £100 million, with little to show for it. The option of mass redundancies would be very expensive, and would still not eliminate the other fixed costs.

The Scottish Government has said it is willing to take over all those assets – or partially re-assign them to the BBC – in order to provide a base for a new Scottish public broadcaster. But it is pretty clear that such an arrangement would depend upon the BBC continuing to supply its output to Scottish viewers (thereby at least making use of the transmitters) for a fee proportionate to what the BBC charges in other neighbouring territories, such as for cable systems in Holland and Eire. There is no reason to be beastly to the Scots because they have seceded more recently than the Irish from the British state.

The notion that Scotland would continue to pay hundreds of millions of pounds for services which are overwhelmingly made in and for England is fanciful. So is Birt’s idea that Scottish commercial broadcasters would bid up the price: the only possible contender would be STV, but as they are fully stretched in paying their share of the ITV network budget (which could not be recoverable if they ducked out of certain shows in order to make room for “Sherlock”, “Strictly” and “EastEnders”) and a wide range of local Scottish output (a key Ofcom licence requirement), adding fancy prices for BBC jewels (but only a fraction of all BBC output) is unimaginable. In any case, the BBC would have to pay all the talent unions extra fees for sales of such programmes to an independent Scotland (as only BBC network transmission would have been covered by the original fee structure).

The best outcome available for the BBC would be continuity of employment for most of its staff, proper use of its premises and transmission assets, and continuing provision of its network content to the Scottish audience, whilst being allowed to continue collecting revenue from Scottish households who want access to its content.

That can be achieved by funding a dedicated provider of Scottish-originated content (a version of the oft-proposed Scottish Broadcasting Service) out of licence fee revenues raised in Scotland, at an estimated annual cost of £75-100 million. In return, the BBC would no longer need to create specifically Scottish content (which costs some £100 million a year), and could spin off its Scottish production arm as an independent producer, supplying the rotUK market as well as the Scottish market.

Logically, the best way to do that would be for the BBC to encrypt its channels, and simply charge for access (just as Sky would do after a “yes” vote, in line with its provision of content to Irish subscribers). Otherwise, newly-independent Scotland would need to ensure that its laws allowed the BBC to collect a household tax, with or without criminal penalties. Encryption would eliminate the wrinkles of Scottish households finding ways of receiving BBC signals without payment (as some Irish households do by pointing aerials towards the most accessible UK transmitters).

So the double nightmare posed by Birt is an outcome that only a perverse BBC would engineer (though I do not put it entirely past them to do so). Indeed, an independent Scotland would surely ask whether it needs to spend nearly as much on retaining the BBC’s network output as is implied by the underlying mathematics (£320 million minus £75-100 million leaves £220-245 million going to a rotUK organisation with no particular obligations to Scottish viewers). A real negotiation would almost certainly require the BBC to assign a much larger share of its Scottish revenue to dedicated Scottish content (which might well include programmes of significant appeal to non-Scottish audiences, just as the likes of Denmark, Sweden and Eire create drama which attracts healthy overseas sales).

Probably the neatest solution would be for the BBC to charge something like £6 a month to Scottish households to decrypt its suite of channels. That would leave the Scottish government room to charge a reduced licence fee – again, say £6 a month – that would be sufficient to fund all its Scottish content ambitions. No-one would be worse off. Scotland would at last have its own publicly-owned public service broadcaster. The BBC would avoid some potentially horrendous outcomes, and end up with near break-even financially, in that it would shed heavy fixed costs and considerable content costs, whilst losing only half its current income from Scotland. It is hard to see why the Birtist gloom should prevail.

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