Raymond Snoddy on media: Auntie's maths needs some attention

In early spring the government will have to decide what to do about the BBC licence fee. We all enjoyed last week's predictable huffing and puffing from the Daily Mail and The Times about the 拢180 licence arriving sometime in 2013 or 2014.

With the BBC asking for more - lots more - it was obviously a chance to have another pop at BBC chairman Michael Grade for allegedly trying to sack John Humphrys - something Grade denies. If Grade did what a loosely sourced story in the New Statesman claimed, he should be fired.

It is very unlikely Grade would have been so stupid.

There was also the pleasure of wondering how the BBC's financial position should be characterised if the begging bowl comes back full. After all, it was director-general Mark Thompson who denounced the BBC's 'Jacuzzi' of cash during his brief sojourn at Channel 4.

To add spice, a row over the settlement is likely between Tessa Jowell's Department of Culture, Media & Sport and the Treasury, although someone has to pay for the switch to digital TV.

As the dust settles, a number of serious questions remain. The most obvious is whether a deal has already been done with the government, with or without the compliance of the Treasury.

In the old days the BBC would ask for more than it really needed in the expectation that it would be knocked back. There would be whingeing about cuts as executives continued to pour the gin-and-tonics.

Maybe the rules of the game have changed. The rather confident-sounding Beeb has taken at face value what the government says it wants, stirred in the aspirations of the audience and costed the entire package.

After all, what is an additional 拢5.5bn among friends when a mere 拢1.6bn of it would come from a licence fee rise?

It almost amounts to a mathematical formula: X+Y+Z = RPI+2.3% which, thanks to the joys of compound interest, turns into trebles all round.

As the BBC's costings have been independently assessed by PA Consulting, the danger for the government is that it has little room for manoeuvre if it is weak-minded enough to accept all the basic premises.

But is it right, as Thompson claimed, that a consensus has emerged among the BBC, the government and licence payers? Even if this is right, not many of the BBC's rivals in everything from online media to regional newspapers would sign up to such a consensus.

Why is it axiomatic, as Thompson insisted, that the BBC should 'not just be dragged along in the rear of the digital revolution, but leading it'? Who says so?

Luckily, there are a few obvious ways of trimming the BBC's spending aspirations. The hostility to high-quality repeats is crazy.

As the BBC made clear last week, a BBC One repeat costs about 拢13,000, while an original drama comes in at an average of 拢534,000 an hour. In a multi-channel world, in which no one can see more than a tiny fraction of the top-quality programmes produced, there should be more repeats, not less.

The move to Manchester is a fine aspiration, but is it really worth 拢500m or so? Instead of multiplying costs by uprooting people and services, why not go for a more gradual location of new services outside London - complete with the hiring of local staff?

It's the small things that give the BBC away. The Corporation provided its costings in current prices because of uncertainty about future rates of inflation. Obviously, it believes Treasury forecasts are not up to snuff.

Yet the BBC felt sufficiently secure in using forecasts of UK economic growth to proclaim that the licence fee would continue to fall as a proportion of household disposable income.

Nice one!

30 SECONDS ON ... BBC LICENCE FEE

- When the licence fee was introduced in 1922 it cost 10 shillings (拢17.68 in today's money). For this amount the licence-fee payer could listen to one radio channel.

- The first settlement under Margaret Thatcher's Conservative government in 1979 took the licence fee to 拢34 (拢112.01 in today's prices).

- If the BBC's proposals are accepted, the licence fee will increase by 拢3.14 a year up to 2013, excluding inflation.

- The BBC claims it will need an additional 拢5.5bn between now and 2013, primarily to fund original programming (拢1.6bn), increased basic costs (拢1.4bn) and the switch to digital TV (拢1.2bn).

- Creating original content is about 40 times more costly than showing a repeat.

- Culture secretary Tessa Jowell hopes Britain will complete the switch to digital TV by 2012.