Dawn Airey on Broadcasting

Come on, BBC: you've got a nerve asking for that kind of money on and you know you are

Just imagine if you ran a business with £3bn guaranteed revenues, with no competition for them, and with very limited scrutiny of how you spend them. Nice work if you can get it. But then imagine how stressed you would get if that business only had one customer, and that that customer decided every few years whether to go on paying you, and how much. You would look after that customer pretty well, and put quite a lot of effort into convincing it to renew its subscription.

That's what Mark Thompson feels like while he's managing the UK's biggest lobbying programme - about the decision on the licence-fee level. The BBC's not so subtle strategy, and this happens with every licence-fee settlement, is to ask for a jaw-dropping increase in funding, in the hope of compromising for just an extraordinary rise. It's amazing that the Treasury and the Department for Culture, Media, and Sport even bother to read the corporation's first proposal - they might as well just send it back with "reduce by 50 per cent" scrawled on the cover.

The BBC's initial bid would mean that it increased its expenditure by £6bn over seven years, or about twice the revenues of the entire commercial-radio sector in the period. It plans to fund this increase with £3.9bn of "self help" and a £2.1bn increase in the licence fee.

Does the BBC need this sort of increase to cope with ever-increasing demand for its product? No, actually. The licence fee (which even the BBC has admitted is really a tax) has increased by 46 per cent from its March 1996 level of £86.50, at a time when average consumption of BBC television services has declined by 20 per cent. More than a third of adults now watch less than five hours a week of BBC television and, in an average week, one in six of us watches less than 15 consecutive minutes of any BBC channel. So it is hardly surprising that support for the fee has been slipping.

The BBC makes some great programmes. So it should, on that kind of money. But my advice to the BBC bosses is to be careful what you wish for. By shooting for a licence fee of around £190 when people are using the corporation's output less and less, I think there is a real danger that the BBC is putting at risk the general goodwill the British public still feels towards it, not to mention the danger that the sheer scale of the BBC will stifle investment and innovation from a commercial sector that doesn't enjoy the luxury of guaranteed income.

There have been only the sketchiest details of what it would actually use this extra money for, and the few examples we hear about have hardly helped explain things. Support for the corporation is strained when it first announces that the settlement must pay for its £600m move to Manchester and then says that this will actually only cost £400m. Then there's the £3.9bn of licence-fee-payers' money the BBC has discovered that it's already wasting, even though it argued vehemently last time around that this same pile of cash was vital to its remit. This might just be a small taster of what it could really save if it tried.

And the Government should be extremely wary of committing to a long-term settlement. My favourite two quotes from the BBC White Paper are these: "Broadcasting in 2016 will bear little relation to today's media world" (p5), and "The television licence fee remains the best way to fund the BBC and will remain its main funding mechanism throughout the next 10 years" (p8). It seems odd to accept that broadcasting is changing beyond recognition yet blindly to sign up to the status quo for 10 years.

The BBC says that it needs a long settlement - it's angling for around seven years - to allow it to plan. Well I'm sure we'd all like to have seven years of absolute certainty in our income, but there are plenty of companies, and plenty of public-sector bodies, who manage to take major strategic decisions and fulfil a clear remit without having anything like that. The Government should start being a more demanding customer on everyone's behalf.

Dawn Airey is Managing Director, Channels and Services, BSKyB.