The Pin Factory Blog

The news that the BBC may be planning to radically shrink the output of its local radio stations, merging them into the output of Radio Five Live, should not surprise us.

The ASI has been saying for some years that the BBC – as a free-to-air tax-funded institution – is fatally flawed. Our view has also been that it will die of a thousand cuts like this week's news, as it fails to cope with multiple global media organisations that can price their services for customers.

Crucially, those competitors learn from those customers and can innovate to capture new revenues. If it were priced, some local BBC stations might well find their feet as a voice for a subscribing local community audience. They would use low powered cheap transmitters, small studios with modern small scale equipment and a lot of volunteer staff. Of all electronic media radio it might be the one to survive like this, although my bet is that it would be on the internet more than the airwaves.

Instead, BBC local radio carries all the overheads of cushioned personnel, over-sized buildings, globally capable equipment, and the electronic networking capabilities of the worldwide BBC News agency, acting as a journalistic "stringer" to the very expensive core news operation.

The BBC cannot go on like this. It has to face the real world, grow into new challenges and compete with new media. It does not need to retain its local arms at high cost to the taxpayer. Shrinking their airtime to become a small element buried inside Radio Five Live which is the present proposal is a good start. My guess is that this is the beginning of the end for the network of local stations.

As politicians are discovering, when fairness becomes their goal they become the arbitrator of everything that involves a transfer payment. Since they control half of the economy, that’s a BIG job. Political debate ends up revolving around “who ought to get what”.

This government-centric view is futile for achieving any agreeable outcomes, and in fact it actually damages any chance of resolving “unfairness”.

“Fairness” should really be called justice. Justice has a meaning and, crucially, can be tightly defined in terms of general rules based in the common law. Common law holds that takings of private property (which includes ideas and opinions) without due process are unjust. Equally, common law has established that coercive or harmful behaviour is unlawful. These two rules are nearly enough to govern relations between individuals. It’s not fair if they are broken.

Today, however, the term “social justice” is almost entirely related to the distribution of resources (income support payments) or positively constructed privileges (free TV licence fees) to those who are not productive enough to obtain them for themselves. These distributions are based on legally sanctioned takings – taxes – that pay for them. A democratic parliament can do this – as long as it has the consent of the people.

However, when such taxes become large, a new aspect of “fairness” – a genuine injustice, emerges. The takings themselves become harmful. And more, the attempt to design fairness today has a huge effect on fairness tomorrow.

Re-distributions destroy incentives. Tax the rich today and there will be less economic success to pay for the poor tomorrow. Spend on the poor today and there will be more poor children tomorrow who know how to work. Tax the middle today, and other middlers will step in and capture the beneficence of their fellow middlers in a mad merry go round of transfer payments. None of this is just. Whether they are perceived as “fair” depends on the eye of the beholder. None of them are any way to make a more properous tomorrow.

The Conservative Party should stop prattling on about creating “fairness” today. It’s time for them to talk about creating improvement tomorrow.

News that BBC Worldwide - the corporation's commercial arm - has been put on a list of public assets that could be for sale as part of a government "operational efficiency programme", and that this is now backed by the House of Lords Select Committee on Communications is welcome, but not for reasons of operational efficiency.

The committee has it right when it says that a privatised company "would be capable of becoming a major global brand for distributing UK content". This begs the real question - why isn't the BBC that now? Why is it a localised brand that does not distribute well across the globe?

One of the reasons I have always favoured privatising the BBC is that I believe its total reliance on public funding damages British media. It creates a quaint organisation, with its peculiar "Auntie Beeb" culture; arrogant, statist, often inward-looking, prone to artisitic cliques, and always struggling with rationed resources. Letting the Beeb go free would make it go fully global, levering its huge competitive advantage - the English language - and able to take on the world through its creative genius and anarchic energy.

Yes, get BBC Worldwide out there in the global media marketplace, not just to make money today, but so that it's executives can come back to the broadcasting priesthood in White City and explain to them where tomorrow's money can be made from new audiences - by a commercialised BBC.

A new bandwagon is being loaded up by a familiar cohort of rent-seekers – this time on behalf of the rural communities without access to broadband internet. Climbing aboard after an initial rousing by the Prince of Wales are the Commission on Rural Communities, the Telegraph newspaper and other worthies from the shires.

Their claim is odd. The internet has become so important to doing business in rural areas, especially for farmers, they say, that not having it is seriously disadvantaging them. The first oddity is that if any service really is of critical importance, businesses usually pay over the odds for it to make sure they get it delivered. The second oddity is that farming is a controlled, essentially nationalised, industry in which the need for the internet is being imposed by government regulations. The disadvantage is not a competitive one, it’s a bureaucratic one. Having created more regulating bureaucrats to monitor farming practices than there are farmers, an unanticipated consequence is that these clerks need to communicate with their clients. On-line methods are cheaper than driving a post van with mail to them, so government is enforcing on-line methods of servicing the industry. It’s their very own version of “any colour as long as it’s black". (Note to HMG – Ford’s now come in all shapes and colours.)

Mission creep for the bandwagon is already happening; “rural traders" are also affected, and rurally based specialist on-line food businesses. Well, just a minute, if you are a specialist on-line food business shouldn’t you have thought about your on-line access before you started? And isn’t there a way around the problem, Britain is not a big country; a decent internet connection can’t be more than twenty miles away almost everywhere. These businesses are not sending their cheeses through the wires of the web, they’re taking orders that way and I doubt next day delivery is absolutely essential. Putting your administration where there is a connection and your production in the hills can’t be that complicated. Get real, you’re deep in the country, you’re in business, adapt.

[CLICK HERE TO READ ON]

It's a strange time for the BBC. As its Annual Report comes out, it faces attack on all sides; sometimes for editorial reasons, often for reasons of quality and decency, and endlessly for being so damn big and intrusive.

But if a dinosaur stands up and says over and over again that it's the biggest and best player in the steamy swamp what else should it expect?

The oddity about the Beeb is that it always plays with one very old bat - that as the incumbent at the wicket of British culture it has a mission to reflect our culture across its entire diversity and that without it, we would all be worse off. The trouble is that, like politicians, it has been found out. By being part of the establishment, ossified in its position, it has adopted the stance of a typical nationalised entity, with highly paid executives, multiple layers of administration and a self-opinionated belief in its own value.

Seen from outside by viewers who are discovering the delights of many new ways of taking in information, entertainment and education from other source channels, the BBC is in serious risk of becoming - er - quaint. Where a howling vibrant kick-ass BBC would be out there creating waves in drama and documentary, stirring up stupid politicians, and pushing back new frontiers of content delivery, it has become more self-conscious about its position as owner of half our broadcast industry and much more besides. It knows it has to look inward to protect itself against waves of anger by viewers and listeners measuring its offerings against their licence tax. Is that any way to run a vibrant business? Whimpering about good value, compliance standards and splendid achievements does not move it forward.

The BBC desperately needs to be privatised, to move us further towards a universal subscription model, to allow consumers decide what they want from its considerable creative talent. Only then will we get the real diversity we want, the incisive journalism we want, and the ferment in new media that will emerge with true competition between creative players. The Dinosaur can then take its place among other scary raptors, novel mammals and yet stranger fish. Plurality will out, and we can enjoy the tussle for our attention.

A council cleaner in Buxton earning £14,000 a year - officially below the poverty line - pays her income tax and then gets an extra bill from the BBC for a licence tax. She pays that to a wealthy TV executive driving into London who claims on his expenses for a congestion tax paid to a government quango.

The taxes are used to fund a taxpayer maintained MP's flat-screen television so that the MP, eating food paid for by the taxpayer can watch the Prime Minister on television talk about a "fair and equal" society and how he is determined to make the economy grow.

That's mad as hell, and so are we, and we are NOT going to take it any more.

The dispersed interest of taxpayers is gradually being allowed transparency of the grand corporate culture that emerges when big institutions get grand ideas.

Those cultures have to change. Three hundred pound hotel rooms, expensive meals after an "extended working day of 12 hours" do not go down well with the small businessman tucked in his Travelodge bed with the late evening hamburger half-eaten at the bedside after 16 hours on the road trying to avoid trading losses. They go down worse with the cleaner from Buxton hearing about six hundred pound restaurant meetings for Controllers when she's stuck in a janitorial cupboard being told by her supervisor that her supplementary hours are being cut due to shortage of cash.

It's time the BBC executives "got it" as well as MP's.

The government has announced "plans to help secure Britain's place at the head of a new media age". We should be cautious whenever we see governments combining future visions with the word "plan".

Not surprisingly, the headline measures involve the use of force to construct a "transformation" - in Gordon Browns words - of the distribution of digital broadband, comparing it with what he calls "essential services such as electricity, gas and water".

This is an upside-down policy approach. Technology, delivery methods and service product innovations are changing rapidly under private initiative, individual traders are juggling for profitable commercial position and the industry is moving on fast. Now leviathan wants in on the act to re-invent a commanding height in the economy that they control. That's mad.

If ever there was the case for getting out of the way, this is it. The dangers of larger players getting into bed with government using new legislation as an excuse are huge. Producers and service providers are bound to follow market incentives and the government appears about to create incentives to cartelise the industry in the name of equality for old ladies and slow-witted shopkeepers who do not have broadband, and an unknown method of curtailing individuals engaging in file-sharing.

We should not forget that it is possible to get your granny on the internet for essentially zero cost if she can cope with a computer, and as the part owner of a specialist jazz download site I happen to know that it is within the scope of even small companies to develop fullproof watermarking of music. These innovations will strengthen through market incentives through time.

The tangle web the government is weaving is made complicated by their interest in what happens in digitalised television, now under threat from broadband internet. But the threat is a chimera, created by the ossified structures of a quasi-nationalised television industry. We are likely to see a carve up of bandwidth use rights decided on by government which guarantees various incumbent players a secure channel to broadcast audiences. But this horsetrading negates what the market actually does; i.e. fine tune audience preferences through the creative innovation which the internet makes happen. It is time that some old things failed so that new things can take their place. For example, why should local news always be delivered on television? Would it not do local internet services some good it it migrated to the internet? Hey, they could even compete with the tax subsidised BBC online service.

Over the next few weeks, we are going to have a feast of purported details about the "plan" to develop "digital Britain". Listen, but keep looking at the wider picture, these are dinosaurs stumbling around in Jurassic Park, digitally focussed mammals have been through the fence and out in the new world for a long time and are creating new ways of doing things that governments haven't even thought about yet.

The cultural politics of the BBC's so-called "Sachsgate" scandal are fascinating. I discern a sea change. Under attack for its "standards" not being worthy of the licence fee, the debate has opened up many cracks in the status quo. Those who see the Beeb as a dinosaur have in the past had to make the attack on disbanding it, but now the BBC is forced to mount a defence its position.

And for me at least that position is indefensible. Can the Beeb claim that it offers a shared cultural experience? Not when a large part of its audience is howling in dissent about the lowbrow antics of the Sachsgate players. Can the Beeb claim that it has to provide a seamless robe of programming? Well, it can – but the split among licence payers shows that many don't want to pay for what others want. Can it be proud of its dedication to public service programming? Yes, but what about the dross from Ross and Co?

And sniping from the sides are those who see the lumbering dinosaur poaching markets on-line, in digital and from your local press. 

At last the BBC's incumbency of access to the public purse is being seriously questioned. The micro-politics of change in such a cultural icon is ever so slow – our politicians are too entwined in the Whitehall media village to want to act on any principle – but I think we have reached a point of no return. The BBC's fee-protected bigness is now being seen as a problem not an answer, audiences are fragmented and paying for what they want more and more.

I still believe the BBC will end up dying slowly, cut by cut it will lose out on other media channels that grow up around it. What a pity that the politicians cannot just get to grips with privatizing it and letting it win or lose in its markets. My bet is that there is enough talent in its corridors that it would end up even larger than it is now, but serving subscription paying customers in a competitive marketplace that brought out the best of its genius.

An interview in the Daily Telegraph with Tourism Minister Barbara Follett prompted me to check out the new "Tourism Strategy" recently published by the Department of Culture Media and Sport.

The strategy is almost entirely devoted to making the Olympics a booster for tourism. More importantly, it shows just how true the old adage is about any pot of taxpayers' money being like honey for the busy bees of the public purse.

In her remarks about her plans, the minister revealed some unintentional truths about government support for tourism. Eight government departments have responsibilities relating to tourism, but she also pointed to five other publicly funded organisations and four QUANGO-managed initiatives chewing on the public purse to "promote" tourism.

Unravelling QUANGO budgets is as always nigh on impossible, but if we take an average of 50 staff members in each entity or initiative paid at the average wage of £25,000pa involved in the above that's £11.25 million in wages alone on this industry "support". If you double that for the cost of interference by the eight government departments you get a public-expense equal to almost exactly a quarter of the entire £85 million turnover of the industry.

How about disbanding them all. Taking that expense off National Insurance taxes in a staff intensive industry and you' could have a 20% price reduction on all UK holidays – which 95% of people say are overpriced.

Governments love to govern, but they so often achieve outcomes that are the opposite of their intentions.

Politicians complain that politics is being devalued, with the populace disenchanted with the political process. One could retort that this cultural shift is to be expected in a free society where the affluent can largely look after themselves, but perhaps the politicians need to look at their own culture a little more closely.

Where government is limited, politicians can restrict themselves to matters of principle, to the standards and constraints that govern the actions of the people. When government becomes a vast social work department, all the paradoxes and imponderables of constructing the public "good" come into play. In particular, politicians become slaves to a mismatch between idealised objectives and their own interests.

The debacle over the ten percent income tax rate highlights the contrast. Technically, a single rate of income tax is a good idea, it smoothes out marginal tax rates and helps remove the high barriers to escaping welfare. But the headline interest of politicians is not to be seen to be punishing the less well off. Retaining a 10 percent rate "for the poor" is a simpler message than removing a 70 percent marginal rate as the poor try to get less poor. Equally, the obvious route of cutting income tax to 10 percent for everyone is seen to be "helping the rich".

Politicians, in concert with the media, regress in these complex circumstances to a slanging match about whose incompetence was it that led to the mix-up in the first place. The Whitehall Village bellows to itself in its glass box thinking it is addressing the policy issue; while the public see weird people indulging in weird antics to protect their interests. Is it any wonder that so many of us respond by saying "frankly, my dears, we don't care a damn".