Smith insists on outside inquiry into BBC funding

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Consultants are to scrutinise the BBC's finances after a controversial report said viewers should pay a £24 levy to fund digital television.

Consultants are to scrutinise the BBC's finances after a controversial report said viewers should pay a £24 levy to fund digital television.

Chris Smith, the Secretary of State for Culture and Media, told the Commons yesterday he intended to appoint private consultants to study the BBC's financial projections. This would give ministers an "objective, non-partisan analysis" of whether the BBC's claim for a £650m increase in funding was justified, Mr Smith said.

He said it was important to have detailed figures before reaching conclusions on the recent inquiry, headed by Gavyn Davies, into the BBC's funding. The Davies report provoked controversy by recommending a £24 supplementary licence fee to be paid by digital television viewers.

Mr Smith said the consultants' study would help ministers "reach a view on the appropriate level of funding for the BBC up to the year 2006" and decide whether to accept the digital levy. "If we did go ahead with it [the levy], it would impose quite a lot of extra cost on quite a number of people in this country," he said.

"Now before I can possibly take that sort of decision I need to know that the figures we have been provided with, the sort of prospects that the BBC set out for their future funding needs, are indeed accurate."

Mr Smith said the BBC should be chasing quality, not ratings, in the run-up to the switch-over to digital television.

"As our principal public service broadcaster, the BBC should continue to set a benchmark for the industry as a whole because we don't want the main result of digital abundance to be a trimming of expenditure and quality. We don't want more to mean worse. There must still be a place for the new, the unexpected and the original and the unashamedly educational. It is not so much ratings that the BBC should be chasing, it is quality," he said.

Peter Ainsworth, the Tory spokesman on culture and media, opposed a digital levy. He said: "It's not obvious to me that the BBC is short of money. Much greater effort needs to be made to eliminate waste, and the BBC should be looking at ways of reducing the licence fee, not of increasing it."

Gerald Kaufman, the Labour MP who chairs the Commons Culture, Media and Sport Select Committee, criticised the Davies committee, saying it had suffered from "tunnel vision". He said a digital licence fee supplement would be a "fine on those subscribing to commercial digital services".

A digital levy would seriously affect the take-up rate for digital channels, according to a report commissioned by commercial television companies opposed to the proposal. With no supplement, about 11.5 million homes will have digital television by 2004, the report estimates. A levy would reduce this by 2.6 million, according to the consultants National Economic Research Associates.The BBC had previously claimed that a digital fee would not harm the take up rates significantly.