Funding debate fuels Charter challenge

The UK's two advertising trade bodies have united in opposition to the BBC's request for what they claim is an "excessive" licence fee increase which could damage the commercial media sector. Mark Banham reports.

The Institute of Practitioners in Advertising (IPA) and Incorporated Society of British Advertisers (Isba) last week aired their criticisms of the Government's imminent White Paper and proposals for the BBC's next Charter period.

This includes the request for an inflationary tariff on the licence fee that levies an increase of 2.3% on top of Retail Price Index inflation.

They challenge the increased funding the BBC is set to receive after Charter renewal in 2007 and note the damage this could do to the commercial sector. They quote an investigation by the House of Lords which predicts a licence fee rise to £180 in eight years' time - which would raise more than £4.25bn a year.

The Lords said the BBC licence fee had now been classified as a tax by the Office of National Statistics and should therefore come under scrutiny from the National Audit Office. Both the IPA and Isba are keen for this to happen.

Bob Wooton, director of media and advertising at Isba, claims there is evidence that the existing 2000 settlement has already had the effect of over-funding the corporation and adds that any suggestion of a further rise will not only challenge commercial broadcasting, but will be unjust.

He adds: "We're calling to get the BBC back in some kind of sensible box that reflects its real job for the public, makes sure that its governance reviews it, make sure that its funding is adequate, but not just gangbusters."

Wider debate

The funding debate is a part of the wider debate on Charter review, which must be completed by the end of the year, when the current Charter expires. A White Paper is expected soon from the Department of Culture, Media and Sport (DCMS), setting out the Government's proposals for the next Charter.

The BBC is predictably defensive in its response to these objections.

A spokesman for the corporation says it is already finding more than 70% of its future funding through its own cuts and not from additional monies. The corporation has already proposed £355m in annual savings - it currently receives £2.94bn a year.

These include cutting up to 5,000 jobs, but savings will be reinvested into programming. The spokesman said: "The BBC's licence fee bid is very clear in its objective to deliver value to licence payers.

"The licence fee itself is still declining steadily as a proportion of disposable income and will continue to do so, even with the settlement the BBC has requested. We have tested our proposals and their costs with licence fee payers and are clear that they have public support."

However, Ian McCulloch, commercial director of ITV, says the proposed increase will distort the market. "Such a huge rise in BBC funding would so far outstrip commercial broadcasters, it would be difficult to competed on programme investment. talent and devleoping new services."

The BBC's power within the UK broadcasting market may make any lobbying approach to the Government a toothless affair, as Jim Marshall, chairman of the IPA Futures Group and chairman of Starcom MediaVest UK, observes.

"Historically, the Government has paid little heed or had little interest in the views of advertisers and ad agencies and I never hold out too much hope of them taking into account our point of view," he says.

He adds: "This is not just a question of us opposing (the increase in the licence fee), although RPI plus 2.3% seems pretty bloody generous frankly, it just sounds very rich. To be honest, it looks high."

The IPA and Isba indicate that the DCMS should concentrate on four key areas when addressing the White Paper, all of which would put considerable pressure on the broadcaster to curtail activities that challenge the private sector.

These considerations include examining the BBC remit "to ensure the BBC was brought back to serving its core public service role and competing less directly with the commercial sector".

The Government is proposing to replace the corporation's Board of Governors with a BBC Trust. There is speculation the trust would include a "competition champion", whose role would be to assess the BBC's impact on commercial rivals.

Tighter regulation

Isba's Wooton says the BBC seems to be on a longer leash than the commercial sector.

"We've argued that the BBC should be regulated comparably to the commercial sector, because we have this paradox where the commercial sector is actually more tightly regulated in the UK than the publicly funded public service sector."

All this promises just to be the start of the scrutiny the proposals for the BBC will come under from the commercial sector


The IPA and Isba challenge to the BBC:

- IPA and Isba recognise the BBC's strong contribution to British society and to its world-leading broadcasting industry. To continue to deliver this, we believe it needs to be properly resourced and funded.

- We are mindful that an "over-funded" BBC, which is capable of out-spending all its competitors on broadcast and on new media platforms - and, in consequence, of "unfairly" stealing their audiences - could seriously damage the commercial media sector.

- There is clear evidence that the existing 2000 settlement has already had the effect of over-funding the Corporation - and all indications are that the proposed future formula could worsen this situation still further.

- IPA and Isba consider that the figures put forward to justify its bid by the BBC are excessive - and that insufficient attention has been paid to using cost savings to meet the objectives laid down in the Green Paper on Charter Renewal.

- We believe the BBC's proposed settlement formula of 2.3% is excessive. We believe that an overall settlement of Retail Price Index minus is a more appropriate target and would certainly urge for the setting of a ceiling of no more than RPI.

- The corporation should be encouraged as vigorously as possible to fund future activities via continued cost savings.

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