New Year, new woes for BBC as budget looms

License fee increase being held up

LONDON — Any New Year’s Eve parties at the BBC are certain to be subdued as toppers contemplate an anxious start to 2007.

The cash they’ve waited for all year, in the form of an increased license fee — paid by all U.K. homes that have a TV — is being held up.

The fee generates more than £13 billion ($24.7 billion) and the present agreement is pegged to inflation plus 1.5%.

To make matters worse, the man who should have delivered the increase, Michael Grade, resigned last month and is about to start working for the opposition, ITV, as the executive chairman.

“Grade left at the worst possible time for the BBC,” says Mathew Horsman, founder of research outfit Mediatique.

Adds ex-BBC Broadcast chief executive Will Wyatt: “It is a bloody awful time to be without a chairman.”

Leaderless, the burden of finalizing the license fee increase is falling increasingly on director general Mark Thompson and his executive team.

Until a decision is announced — February looks the most likely date — Thompson and his colleagues must work in operational limbo as they try to plan budgets for the financial year that begins April 1.

“This is potentially devastating for a creative organization like the BBC,” Horsman adds.

“They need to know what they can spend well in advance of any commissioning decisions. The longer this goes on, the more the BBC is endangered.”

In fact, had all gone according to plan, the new funding would have been disclosed during the summer.

But the pubcaster’s original bid, announced in October 2005, for a license fee increase of the rate of inflation plus 2.3%, and the figures supplied to justify it, were not only challenged by the government but drew allegations that the BBC was cooking the books.

“The BBC’s request for RPI (Retail Price Index) plus 2.3% looked audacious and was regarded, predictably, as merely an opening bid,” says media commentator Steve Hewlett.

“But the publication of a report by accountancy firm PKF — hired by the Dept. of Culture, Media & Sport — to check out the BBC bid started the rot.

“Too many of the BBC’s figures either didn’t add up or were based on questionable assumptions, and thus began a lengthy series of detailed negotiations with the government.”

Even so, the betting inside the BBC was that an announcement on the license fee — currently £131.50 ($250) a year — would be made by the end of 2006.

Instead, there have been leaks, believed to come from the Treasury, headed by Chancellor Gordon Brown, that the BBC will have to settle for an increase below the rate of inflation, currently at 2.7%.

“I find this hard to believe,” counters Horsman. “At worst I think it will be

inflation-neutral. The BBC is highly regarded in the U.K. and people don’t want it to be hamstrung.”

Yet there is a feeling, even among staunch BBC supporters, that it not only scored a spectacular same-side goal by getting its figures wrong, but then damaged its case still further.

This occurred when it emerged during a key point in negotiations that the BBC had signed a deal with star presenter Jonathan Ross for an unprecedented $34.2 million a year for a three-year contract.

Politicians accused the BBC of hiking up talent costs for the entire U.K. TV sector — a spat not even the silver-tongued Grade could defuse.

With Grade gone from a job that is, effectively, a government appointment, the BBC appears vulnerable.

“It leaves the BBC looking slightly exposed,” says Peter Bennett-Jones, chairman of Tiger Aspect, one of the U.K.’s top independent producers.

Candidates for the chairmanship, a part-time non-executive role, include film producer David Puttnam, an experienced TV player who is deputy chair of Channel 4.

“He would be a very good, high-profile advocate for the BBC,” Wyatt reckons.

But a chairman is not expected to be in place until April, after the license fee deal is settled.

“Ultimately the BBC is bigger than one person,” Bennett-Jones says. “But it is a great shame that Michael Grade couldn’t have seen the negotiations through to the end.”

This is especially true since Grade could have played one ace in the event that the government awarded the BBC a derisory amount of coin.

He could have resigned.

That is not a realistic option for Thompson and his colleagues.