Is the BBC its own worst enemy?

At the end of the first of our two evidence sessions with the BBC bosses during the inquiry into BBC funding by the Select Committee on Culture, Media and Sport, a member of the committee said to me: "Until I heard these witnesses, I supported their plea for extra money for digital TV. Now I don't."

At the end of the first of our two evidence sessions with the BBC bosses during the inquiry into BBC funding by the Select Committee on Culture, Media and Sport, a member of the committee said to me: "Until I heard these witnesses, I supported their plea for extra money for digital TV. Now I don't."

Another select committee colleague muttered: "The BBC are their own worst enemy." I refrained from retorting, in the immortal words of Ernest Bevin: "Not while I'm alive." I am, you see, an admirer of the BBC. Lord Reith created the concept of public service broadcasting that has permeated world communications and set the highest standards first for radio, then for television and now for the Internet.

Why, then, do I agree with the report of the select committee, published yesterday, which says that the BBC's plea for extra money to fund the expansion of its digital TV services should be turned down, whether that extra money takes the form of a supplement to the licence for those receiving digital TV or a smaller addition to all TV licences? My view stems partly from my reluctance to award the BBC any more licence money between now and 2002. The current licence fee arrangement was decided in 1996 by the Tory government; Labour endorsed the formula when it came to office the following year.

That licence settlement was skewed to be higher in its earlier years precisely because of the plans to introduce digital television embodied in the Broadcasting Act 1996. While commercial interests had to bid for air-space, the BBC was guaranteed a platform. That is why Virginia Bottomley, as secretary of state for national heritage, provided for a 13 per cent licence increase in the first three years of the new BBC charter period. The chairman of the BBC said of that licence settlement: "We do now have a financial framework in which we can plan for five years ahead."

So it knew what it was getting, it knew what to plan for and accordingly it went ahead. But did it plan? Do me a favour. When, earlier this year, it told the Gavyn Davies panel, set up to consider BBC digital funding, that it needed another £700m, it could not explain what it planned to do with £400m of that sum.

But then, the BBC does not seem very good at explaining figures that it provides. When we asked it how much it had been spending on promoting digital TV, at first it could not say, then it sent us a memorandum specifying certain sums of money, then, when asked to explain its memorandum, it gave us, after apparent bafflement, an explanation. Then, after thinking the matter over, it gave us an entirely different explanation.

When we asked it how many people were watching one of its new channels, News 24, at first it told us it would have to check up. Then it checked up and gave us such a hotch-potch of statistics that it was almost impossible to work out exactly - or even roughly - how many people were watching the channel. When we did work it out, we found that scarcely anyone was watching BBC News 24 for sustained periods.

So we were dissatisfied with the financial information and viewing figures supplied to us by the BBC. But even if we had been satisfied, we had to take into account two irrefutable facts. The first was that, even if they wanted to watch only the commercial digital services they had voluntarily paid for, customers of the SkyDigital and ONdigital services would also have to pay a fine - the digital licence supplement. That unfair prospect seemed to put paid to such a supplement.

If we swung away from a supplement, towards an addition to all licences, we had to bear in mind that under a general licence increase, TV viewers would have to pay for digital services even if they did not want them at all. Both a supplement and a general licence increase meant unacceptable injustice, quite apart from the total exclusion by Chris Smith, the Secretary of State for Culture, Media and Sport, of a general licence increase above the current five-year formula. Those considerations precluded, in the committee's view, any more money for BBC digital TV. But an even more important question, to which we never did receive a satisfactory answer, related to what the BBC now has as a strategy - if it has a strategy at all.

For 60 years or so the BBC was the trail-blazing pioneer in radio and TV. The licence was introduced not as a method of funding radio services but as a tax on the ownership of a wireless set, analogous to the tax on owning a dog. As the only organisation legally permitted to provide wireless services, the BBC was given the licence revenues. It was, and remains, the only long-lasting example of a hypothecated tax going to a designated recipient.

Before the Second World War the BBC started up a television service and, when the war was over, it resumed and expanded that service. As the only TV provider, it continued to take the licence money. It expanded its TV channels to two. It introduced colour TV. It introduced the 625-line format, which gave better pictures than the outmoded 405-line format. It continued to be the pioneer and it continued to pocket the licence revenues.

When satellite television came along, the BBC's pioneering role came to a halt. It was commercial companies that introduced sports channels and movie channels and round-the-clock news channels. The BBC tagged along behind, with a partnership in the UK Gold satellite channel and material supplied to the Discovery channel.

It was the commercial companies that blazed the trail in subscription digital TV services and that, by September of this year, had signed up 2.25 million subscribers while scarcely anyone had the specific objective of watching BBC digital channels. The BBC, instead of leading the field, was panting along in the rear, trying to find gaps in the market and, according to aggrieved competitors, using licence money to duplicate services that commercial companies were financing out of their own resources.

Should the BBC give up, withdraw to its core TV channels and turn into a British equivalent of the American begging-bowl service PBS? Not in the opinion of our committee. There is one area of audio-visual communications in which the BBC leads the field, providing a top-class service while its commercial opponents are hardly even trying: BBC Online.

The BBC Online service is probably the most popular Internet service in the world; it is certainly the best on news and information. And, while the viewers of BBC digital TV are too few to be counted in any meaningful way, the users of BBC Online can be numbered in their millions. Yet the BBC is spending more than twice as much on just one BBC service, News 24, as on BBC Online.

The BBC can lead the world in Internet services if it changes its priorities. If it took advertising on BBC Online - though there might be problems with EU regulations if it tried to do so at present - instead of consuming licence money, it could earn profits to help fund the rest of its services. That is why our committee recommended incorporating BBC Online into the Beeb's commercial arm, BBC Worldwide. That, too, is why we oppose the Davies recommendation that 49 per cent of BBC Worldwide should be privatised.

Gerald Kaufman MP is chairman of the Select Committee on Culture, Media and Sport