Leading Article: The BBC needs a better way to fund its ambitious plans

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WE WOULDN'T be at all surprised to learn that Gerald Kaufman, the formidable Chairman of the Commons Select Committee on Culture, Media and Sport, has been crossed off the BBC's Christmas card list this year.

But the BBC should learn to love Gerald. For the report published by his committee yesterday represents extremely good value for money for the Corporation, which is used to paying obscene fees to management consultants to produce advice far less sound or clear.

The most important part of Mr Kaufman's report, and the most unwelcome to the BBC, is its rejection of the special digital licence fee, proposed by an independent Committee chaired by Gavyn Davies.

Mr Kaufman's committee feels that the new fee is "counter to the objectives of public policy" and "bears most heavily on the disadvantaged in society". This may be so, but we can think of an even better reason for rejecting it - that it is inadequate to fund the BBC's ambitions for the future.

Digital broadcasting has arrived and the BBC is right to embrace it. The BBC is also right to want to keep up with developments in the new technologies - as its excellent BBC Online news service shows. And it must ensure that it can cope with the way that mobile telephony, Internet and television technologies are converging.

But however this pans out, and even if what we now recognise as broadcasting dies out, we can be sure that the future will be very expensive. There has never been any reason why an additional licence fee set at a level that is acceptable to the public and politicians should necessarily yield a sum sufficient to fund investment. The Davies Committee's pounds 24 top-up fee will bring in about pounds 250m per year. But the BBC itself thought that pounds 650m per year was necessary.

Consolidation is now taking place on a continental if not a global scale. The BBC should be free (as should the Post Office, the London Undergound and other peculiarly placed state enterprises) to raise money in the capital markets, and to provide investors with a cash flow based on advertising and subscriptions. We used to say that the licence fee was needed to save the BBC; but it is increasingly anachronistic. The licence fee may be one dinosaur that the BBC will have to walk a little less with.