CONFIDENTIAL
Clearly this is an uncertain area which we shall need to watch very carefully. At this stage I think we can only do our best to see that the legislative framework provides no impediments to commercial viability (beyond the necessary constraints to ensure that our objectives on quality and programme balance are met), and that you are in a position to prevent the IBA from incurring expenditure on the Fourth Channel beyond a level the programme contractors are prepared to support, or indeed to wind up the Channel altogether if it proves continuously unviable. I should be glad to have your assurance on this point.
My second concern is that you propose no change in the levy system, at present related to profits. The argument that a profits-based levy does nothing to check waste and inefficiency on the part of the TV companies is a familiar one. After paying levy at its present rate, and corporation tax, a company only retains 17 per cent of any marginal surplus of revenue over expenditure. This is particularly relevant to increases in pay, and their impact on the BBC. The new Bill provides an opportunity to look at this again and take action if we choose to do so. I can appreciate the arguments against making a further change, which may be unpopular with the companies. But I should like H Committee to have an opportunity for a collective discussion of this subject, when your further proposals are put before them. One way of arranging this would be for me to circulate a paper.
I should also like to register one other point about the legislative proposals, which in my view should be considered collectively in H Committee. The PAC asked the Government to consider whether final statutory authority for levy assessments should continue to rest with the IBA alone, or whether this should be changed in the new legislation - which could require the Authority to consult the Home Office and the Treasury. Given that the levy is a form of tax payable to the Consolidated Fund, I think there is a strong case for making this change; and I hope you will agree to include a discussion of the merits in your H Committee paper.
I am sending copies of this letter to the other members of H Committee and Sir Robert Armstrong.
JOHN BIFFEN
