The committee, chaired by Gerald Kaufman, said yesterday the BBC had failed to make a case for expanding its role in digital broadcasting and for a pounds 24-a-year levy to pay for it. It was also critical of BBC News 24, saying the corporation had "failed totally to explain why the costs of News 24 are so high".
The committee took a wide-ranging look at the BBC after this year's report by the Davies Panel, which suggested an initial levy of pounds 2 a month to finance digital services. Chris Smith, Secretary of State for Culture, Media and Sport, is expected to make a decision next month.
The select committee concluded that, when introducing new services, the BBC should bear in mind whether they are cost-effective. "Judged against this criterion, we find it difficult to discern the justification for News 24 in view of its huge cost and small audience," the report said. The budget for News 24 is pounds 53.9m, which the committee noted would not even be covered if the digital levy were introduced to the 2.2 million digital subscribers in one year. "The case for News 24 has not been established by the BBC."
The report was also critical of BBC spending on promoting digital services. "We are bewildered and bemused by the BBC's figures for expenditure on digital promotion: on how it is composed; what exactly it has been spent on; and on how it is justified, even though the ex post facto justification is that the BBC is funding `a national success story' which consists almost entirely of subscribers who fund Sky Digital and ONdigital. This seems to be an obscure use of public money."
The committee pointed out that the BBC had followed other broadcasters into digital, rather than leading. "The notion that the BBC is uniquely positioned to attract a new mass audience to digital television is a hunch and a hunch which flies in the face of the evidence of the development of the digital market so far," the report said.
"The BBC's claims for additional expenditure on news services are sketchy at best. The BBC has, in our view, singularly failed to make the case for a much-expanded role in the digital era and consequently for additional external funding."
The committee also criticised the corporation for encouraging people paying the licence fee to switch to a direct-debit system that cost them an extra pounds 5 on top of the pounds 101 fee.
And the report said the BBC's self-regulatory position, which is separate from all other broadcasters, was "no longer sustainable". It suggested regulation of BBC broadcast content and that the commercial activities should be the duty of a communications regulation commission.
There was one dissenting voice on the select committee, John Maxton, the Labour MP for Glasgow Cathcart, who published a minority report.
The BBC's director of corporate affairs, Colin Browne, said: "We are disappointed that the main report from the committee fails to engage with the vision for public-service broadcasting in the digital age put forward by the BBC. This is very different from the market-driven approach, which seems to guide the thinking of the majority of the committee.
"We wish the committee had looked in more depth at how the interests of viewers and listeners in the United Kingdom can best be served in a future likely to be dominated by pay television from global operators, and how the UK can build on its strengths in this area."
Speaking on behalf of an alliance of commercial companies, Steve Morrison, chief executive of Granada Media Group, said: "The committee members come from across the political divide and they've been in the unique position of being able to sift through all the oral and written evidence ... After an extensive examination of all the evidence, they've concluded that the digital licence fee should be rejected. We now call on Chris Smith to heed the conclusions of the select committee and throw out the idea of a digital licence fee."
ITV also welcomed the MPs' conclusions. The chief executive, Richard Eyre, said: "The BBC has an annual income from the licence fee alone of pounds 2.2bn and has not begun to persuade the public of a case for extra funding."
Leading article, Review, page 3; Gerald Kaufman, Review, page 10