Philip Booth: The BBC should be owned by subscribers

29 Aug

Philip Booth is Professor of Finance, Public Policy and Ethics at St Mary’s University, Twickenham, and Senior Academic Fellow at the Institute of Economic Affairs.

The BBC has come under severe criticism recently for the way in which it seems to be ditching the nation’s history, apparently because many of the party pieces at the Last Night of the Proms are anachronistic.

As many people who understand the origin of the words of “Rule, Britannia!” and similar songs have pointed out, the BBC seems to be totally misguided. However, there is a deeper irony here. The BBC itself is a living, walking, talking anachronism.

The BBC has been financed by a hypothecated tax levied on television sets since 1946. The link between television sets and watching mainstream television no longer has any meaning.

In the UK, 18-34-year-olds watch seven times as much Netflix and YouTube as BBC1 content, and spend more time watching Netflix and YouTube than all other public service channels put together. The average time spent by all adults watching Netflix and YouTube is greater than the amount of time spent watching BBC1. Interestingly, most non-broadcast content is now watched on a television set.

The idea of linking the funding of a television channel to the ownership of a television set does not belong in the 21st century. Collecting licence fees in relation to the use of other devices is unenforceable.

The BBC tells us that compulsory licence fee funding is appropriate because the channel brings the nation together. But, not only are young people not sitting in front of the fire with their parents watching The Generation Game any more, they are enjoying their own ‘shared experiences’, without the BBC. Amongst young people, the proportion of shared viewing of content is increasing dramatically, and the length of viewing sessions is increasing.

The economic case for licence fee funding and compulsory funding of the BBC has evaporated, and the BBC no longer makes such a case. The case it makes is basically cultural. But broadcasting has become like publishing became in the 18th and 19th century, and nobody argues that a state-owned publisher, funded by a tax on books, would add to culture.

Around 200 years ago, in the publishing industry, technology improved, raw material costs fell in real terms and real incomes rose. As a result, publishing blossomed.

A similar phenomenon is happening in relation to broadcasting and content provision today.

In both broadcasting and streaming, there is a huge variety of genres, delivered in different ways through different platforms and responding to different tastes and by different organisations. This is similar to how bookshops, libraries, pamphlets, novels and newspapers all proliferated in the nineteenth century: in 1898 there were around 400 publishers in Britain and Ireland alone. The growth in publishing both encouraged and was encouraged by a growth in literacy. Good quality literature was read and literature from the period is still read today. We did not need a state-funded publisher to produce great books.

The parallels between publishing and broadcasting continue almost down to fine details. In publishing, as well as a variety of formats (magazine, newspapers, serialisations, books and pamphlets) there was also a variety of payment mechanisms (subscriptions to series or serials, pay-per-chapter, pay-per-book and subscription to lending libraries, which would allow readers to read as much as they wished in return for the subscription).

Surely the BBC should be funded by subscription by those who wish to avail themselves of its services. There is no justification in the modern world for requiring people to pay for television services they do not wish to watch. But this leads to the question of the ownership of the BBC. If it remains a state-owned corporation it will surely become an irrelevance.

Even if politicians thought a commercial sale of the BBC desirable, surely that is not on the table (though this should be pursued for Channel 4). Perhaps we should consider something else. In a thriving free economy we see a wide variety of ownership arrangements. And, in the field of culture and education, mutual, co-operative and similar forms of ownership are very common.

There is a strong case for turning BBC subscribers into owner-members so that the BBC would become a subscriber-owned mutual. In fact, this was the Peacock review’s preferred model. It would be very difficult for a subscriber-owned mutual BBC to be captured by closely connected political and commercial interests as its ownership would be dispersed. But it would be possible for it to expand into the 95 per cent of the English-speaking world that lives outside our shores through joint ventures and wholly-owned subsidiaries.

We should not pretend that a subscriber-owned BBC will not remain a participant in the left-dominated culture wars. The executives will not necessarily reflect the views of the members (as we have seen with the National Trust). However, we should be able to choose whether we support the BBC with our wallets.

Whatever the economic and cultural arguments for compulsory licence fee funding (and they are very weak), there is no moral case for requiring people to finance the BBC if they have no interest in its services.

Neil O’Brien: No, more economic prosperity doesn’t depend on more social liberalism

13 Jul

Neil O’Brien is MP for Harborough.

Danny Finkelstein took issue with Boris Johnson’s idea of “levelling up” in the Times the other day. He reviewed the work of Richard Florida, a thinker dubbed the “patron saint of avocado toast” for highlighting the role of bohemian urbanites in driving economic regeneration.

Danny concludes from his work that, “Social liberalism and economic prosperity go together.” He argues that: “in order to match the success and power of metropolitan areas, non-metropolitan places need to become more… metropolitan.  The problem with the metropolitan “elite” isn’t that there is too much of it. It’s that there aren’t enough members of it, drawn from a wide enough background and living in enough places.”

I hesitate to disagree with one of the smartest columnists on the planet. But economic growth and social liberalism don’t always go together.

What about the Victorians, combining breakneck growth with a religious revival and tightened public morals? What about Japan during their postwar decades of blistering growth and conservative “salaryman” culture? Over the last 70 years, Britain has become more socially liberal as our growth rate has slowed.

Even in Britain today, it’s highly questionable. London is the richest and fastest growing part of the UK.  But where is opposition to homosexuality and pre-marital sex strongest? London. Where is support for censoring offensive speech highest? London.  The capital mixes liberal metropolitan graduates with religious immigrants. Its success is shaped by both.

Danny’s other argument has more important implications. Is it really the case other places must emulate London to succeed? Like other capital cities across Europe, London has grown faster than the rest of the country since the 1980s. The shift to an economy based on “office jobs” over has favoured the centres of larger cities.

But we shouldn’t get too carried away by the idea that hipster-powered megacities are sweeping all before them. For starters, there are successes elsewhere. Cheshire has high tech in a rural setting, with productivity and wages above the national average.  Milton Keynes likewise, because it’s easy to build there. Productivity in Preston has grown faster than average because it’s a transport hub with advanced manufacturing.

On the surface, large cities outside London have done well.  Since 1997, our 16 largest cities grew their GDP faster than their surrounding areas: Leeds grew faster than West Yorkshire, Manchester faster than Greater Manchester, and so on.

But on average, those cities saw also slower growth in income per head than their surrounding areas. In other words, people became more likely to work in city centres, but that growth was fuelled by people commuting in from smaller places around them. Their growth has been powered more by smalltown commuters than flat-cap wearing uber-boheminans.

It’s right that there are cities outside London that have things in common with it, and might benefit from similar investments. Lawyers in London will soon get Crossrail. So why have lawyers in Leeds waited 20 years for a tram?

But too often Richard Florida’s work leads politicians to focus on shiny cultural facilities. A cool art gallery in West Brom.  A national museum of pop music in Sheffield. It’s not just that these projects flop and close. It’s that they distract from two bigger issues.

First, most people aren’t graduates – so we need a plan to raise their productivity and wages too.

Second, places outside urban centres are perfectly capable of attracting high-skill, high income people – with the right policies.

Britain’s economy is unusually unbalanced compared to other countries.  Pre-tax incomes in Greater London are nearly 60 per cent higher than the national average, but more than 20 per cent below average in Yorkshire, the North East, Wales and Northern Ireland.  These imbalances mean our economy is overheating in some places and freezing cold in others, slowing growth overall. There are no major economies that are richer per head than Britain which have a more unbalanced economy.

But these imbalances don’t represent pure free market outcomes. It’s true that low-skill, low wages places can get stuck in a vicious circle. True that some places on the periphery have very deep problems. Nonetheless, the British state doesn’t do much to stop that – in fact it does a lot to unbalance growth.

Consider how we spend money. Capital spending on transport infrastructure in London is nearly three times the national average. Research funding per head is nearly twice the national average. Nearly half the core R&D budget is spent in Oxford, Cambridge and London. Spending on housing and culture per head in London is five times the national average. We’re “levelling up” the richest places.

We’ve rehearsed these problems for years, but not fixed them. Instead of chasing flat white drinkers, we need to find a cool £4 billion a year to level up R&D spending in other places to the levels London enjoys. Fancy coffee can come later.

Consider our tax system. Overall, the tax rate on business in the UK is about average.  But we combine the lowest headline rate in the G20 with the lowest capital allowances. The combined effect of this is a huge bias against capital intensive sectors, particularly manufacturing.

That in turn has a regional impact, hurting places more dependent on making things: manufacturing accounted for only five per cent of London’s productivity growth since 1997, but nearly 50 per cent in the north west. A hostile tax system is one reason Britain has deindustrialised more than any other G20 country since 1990, and why manufacturing’s share of the economy is half that in Germany or Japan.

Manufacturing should be a key part of levelling up outside cities: it needs space, not city centre locations. In English regions outside London, wages in manufacturing are about nine per cent higher than in services, and manufacturing productivity grows faster than the economy as a whole.  But Britain’s excessive focus on professional services makes it harder to grow high-wage employment in non city-centre locations.

Consider where we put our key institutions. In Germany the political capital was Bonn, and is now Berlin. The financial capital is Frankfurt. The Supreme Court is in Karlsruhe. The richest place is Wolfsburg, home of Volkswagen. There are major corporate HQs spread across the country. TV production is dispersed because central government is banned from running it.

In Britain, all these things happen in just one city. We’ve talked about this for years, but made little progress.  In recent years, we managed to move one chunk of Channel 4 to Leeds, and a bit of the BBC to Manchester. But that’s about it. Whitehall only wants to move low-end jobs.

The debate on levelling up is frustrating, because we know some things work, but we don’t do them. “Regional Selective Assistance” boosted investment in poor places with tax breaks and subsidies.  Thanks to evidence from natural experiments, we know it boosted growth. Yet it was allowed to wither.

I don’t want us to be just another government promising the world, then not delivering. Politically, it’s vital we deliver. Lots of people who haven’t voted Conservative before put their trust in us last year. It’s telling that the centre point of the seats we won is just outside Sheffield.

We won on a manifesto combining centrist economics, (50,000 more nurses) mild social conservatism, (ending auto early release) and national self-confidence (Getting Brexit Done).  Levelling up is central to all this. We promised voters steak and chips.  We could serve up avocado toast instead, but we shouldn’t be surprised if the voters don’t thank us.