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Electronic Communications

My hon. Friend does a very good job of developing my argument for me. I shall continue if I may, but he is absolutely right and his point is important one, because the 2007 settlement was based on some key assumptions about the broadcasting market. The first was about the rate of inflation. That year, RPI inflation was 4.3 per cent., and as hon. Members may recall, that was the year in which the Governor of the Bank of England had to send a letter to the Chancellor, apologising for the fact that he had overshot his target. It was also the year in which there was an assumption that, as the commercial broadcasting market grew, the BBC would need to keep up. Both assumptions must be radically re-examined. Yesterday, RPI inflation fell to minus 1.2 per cent., the steepest fall since 1948. That means that programme inflation, the cost of buying and commissioning programmes, is also falling, and with Channel 4's revenues down 18 per cent. and ITV's revenues down 19 per cent. in the first part of this year, there is less competition to buy and commission programmes. The traditional parity between licence fee revenue and the revenue that goes to commercial broadcasters funded by advertising has been lost. Last year, there was a broad equivalence between the two sums of money, but this year it is expected that licence fee revenue will amount to £500 million more than the entire sum received by all the commercial broadcasters funded by advertising put together.