COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 20 May 2004

Report of Comptroller and Auditor General on Value for Money Examination of Television Licence Fee Collection.

Mr. J. Purcell(An tArd Reachtaire Cuntas agus Ciste) called and examined.

Mr. B. Tuohy(Secretary General, Department of Communications, Marine and Natural Resources), Mr. T. Waters (Director, Post Office Operations, An Post), and Mr. C. Goan (Director General, RTE) called and examined.

Chairman

Witnesses should be aware that they do not enjoy absolute privilege and should be apprised as follows. Members' and witnesses' attention is drawn to the fact that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These rights include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents, and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee. Persons invited to appear before the committee are made aware of these rights and any person identified in the course of proceedings who is not present may have to be made aware of them and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House, or an official, either by name or in such a way as to make him or her identifiable. They are also reminded of the provision in Standing Order 156 that the committee should refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits of the objectives of such policy or policies.

Will Mr. Tuohy, Secretary General, Department of Communications, Marine and Natural Resources, please, introduce his officials?

Mr. Brendan Tuohy

I am accompanied by Mr. Eamonn Molloy, assistant secretary; Mr. Stephen O'Connor, a member of the secretariat, and Ms Sheila Clifford, assistant principal, broadcasting division.

Chairman

I welcome the official from the Department of Finance.

Mr. Paul Byrne

I am a principal officer in the Department.

Chairman

I welcome the officials from An Post.

Mr. Tony Waters

I am accompanied by Mr. Derek Kickham, commercial director, and Ms Sadie Callan, manager, television licence services.

Chairman

I welcome the officials from RTE.

Mr. Cathal Goan

I am accompanied by Mr. Conor Hayes, chief financial officer, and Mr. Peter Feeney, head of public affairs policy.

Chairman

I now call on the Comptroller and Auditor General to introduce the value for money report.

Mr. John Purcell

The report examines the efficiency and effectiveness of the arrangements for the collection of the television licence fee. The Department of Communications, Marine and Natural Resources has statutory responsibility for the management of the licence fee collection process. It is, therefore, incumbent on it to have systems, procedures and practices in place to ensure the return from licensing is maximised. An Post acts as agent of the Minister, issues licences and collects the fee. Fee revenue, after deduction of collection expenses, funds public service broadcasting and all of which until last year went to RTE. Under the current arrangements, 95% goes to it. Therefore, the organisation has an intense interest in the efficacy of collection and ensuring the level of fee evasion is as low as possible.

In 2003 licence fee revenue totalled €176 million, reflecting significant rises in the cost of a licence in recent years and increased sales of licences. Under the agreed formula, An Post received €10.5 million of this amount to meet collection costs. This represents a 21%-22% reduction in real terms in the average payment to An Post per licence sold in the last six years. An Post is unhappy with the level of recovery of costs and has indicated that it might have to pull out as collection agent. There is no agreement in place as yet between the Department and An Post covering 2004. There is, therefore, uncertainty about future arrangements. As the report suggests, any changeover to another agent would need to be carefully managed to protect the flow of revenue from the licence fee if the UK experience is taken into account.

How well is An Post doing the job? The acid test is the rate of evasion which the Office of the Comptroller and Auditor General estimated at 12.5% at the end of 2002. Using the same methodology, the corresponding figure at the end of 2003 was 11.5%. The rate of evasion in 1998 was 16%. While this represents an appreciable improvement, it still falls short of the estimated evasion rate in the United Kingdom of just under 8%, broadly using the same methodology to estimate the rate. The report suggests a number of areas where changes could bring about further improvement: better management of the database of licensable premises; the possibilities offered by more extensive service supplier notification; a more targeted and performance driven premises inspection regime; the further facilitation, development and marketing of the use of convenient ways of paying the licence fee; and pursuing a more effective prosecution strategy for evaders.

One of the more interesting pieces of data to emerge from the examination was that only 70% of evaders detected as a result of an inspection subsequently purchased a licence. This suggests that the ultimate sanction of a court imposed fine may not be as effective a deterrent as previously thought. Part of the reason for this may be the fact that up to mid-2002 An Post operated a policy of limiting the number of summons applications. While all prosecutable cases result in the issue of a summons, unless the occupier purchases a licence in the interim, we found that over half of the summonses issued in the Dublin area were returned unserved. Those cases that reach court fall into two categories: some buy a licence before appearing in court and, on average, receive a lower fine as a result; while others turn up without a licence, only 4% of whom bought a licence in the three months after conviction.

The report concludes that the lack of enthusiasm in pursuing evaders to the bitter end was influenced by the structure of the agency payment agreement with An Post which provided little incentive to incur the extra cost involved in the pursuit of evaders but that changed in 2003 when a progressive payment structure on sales above a target level was agreed which mirrored the situation in the early 1990s. The performance based scheme improves compliance, although separate arrangements for the pursuit of evaders will have to be made if further significant inroads are to be made into evasion rates. The alternative is to examine the feasibility of introducing a totally different collection system based on tried and tested arrangements in other countries.

As the committee knows, An Post is outside my audit and value for money remit. Nevertheless, it was most co-operative in the conduct of the examination, of which I record my appreciation.

Mr. Tuohy

I thank the committee for inviting me to appear before it to discuss the report on the value for money examination undertaken by the Office of the Comptroller and Auditor General. Before addressing the report, I express my thanks to the officials who conducted this examination, in particular Ms Patricia Sheehan and Mr. Eoin Dormer, for the professional and courteous manner in which it was conducted. I am happy to say the Department of Communications, Marine and Natural Resources co-operated fully with them and was generous, open and candid in dealing with the officials of the Comptroller and Auditor General. Time and facilities were made freely available to them with open and easy access to whatever information was required.

The report considers how the Department evaluates the effectiveness of the television licence fee collection, how the agency relationship between the Department and An Post is organised and the efficiency of the collection procedures used by An Post as agent of the Minister. It identifies deficiencies in the collection process and gives limited recognition to progress made in the past two years.

The key findings in relation to the Department are as follows: the Department should put in place a service level agreement with An Post; the company has not adopted specific or measurable targets to be achieved; it has not routinely produced estimates of the licence fee evasion rate; it should put in place a coherent set of performance targets for sales, maintenance of the database and prosecution of evaders; it should endeavour to acquire information from television dealers and cable and satellite television suppliers; and payment structures with An Post should include incentives.

While I may not necessarily agree with all of the content and the philosophy of some of the conclusions, I welcome the report. It provides a useful analysis that will assist the Department with its ongoing work aimed at improving the efficiency of licence fee collection in co-operation with An Post and RTE. As I will outline, these findings have been and are being addressed by the Department.

I will briefly outline the background to licence fee collection. Under the Postal and Telecommunications Act 1983, An Post was appointed as agent of the Minister to issue television licences on his behalf and collect the fee. The report focuses on the period 1998 to 2002, in which period An Post and RTE agreed a contract which contained a target figure for licence sales each year. This was approved by the Minister of the day.

The Department of Communications, Marine and Natural Resources was established in June 2002 under whose aegis public service broadcasting came. The Forum on Broadcasting had been appointed to consider the future of public service broadcasting with regard to various issues, including its funding, regulation, structure and role. The forum's report, published soon after the formation of the Department in August 2002, was timely and contained recommendations on the licence fee system.

The forum recommended that the dual funding mechanism, comprising the public licence fee and commercial advertising revenue, should be maintained and that the television licence fee system should continue as the basis for the public funding of RTE. It also recommended that the contract for licence fee collection should remain with An Post and that the Minister should set targets for the number of licence fees collected, introduce a scheme of penalties for An Post relating to the rate of collection and adjust the regulations governing the licence fee to enhance the collection rate.

I am happy to report that the Minister acted immediately and the recommendations of the forum were accepted and adopted. Not only that, other initiatives were introduced and acted upon as follows: the Government approved a significant licence fee increase, linked to measures announced by the Minister to improve the efficiency of collection — this was agreed in December 2002 for implementation on 1 January 2003; a detailed contract was agreed with An Post for 2003; special incentive arrangements were introduced to enable An Post to earn increased collection revenue for the achievement of targets in excess of its baseline target; a liaison group was established, with representatives from the Department, An Post and RTE and an external independent adviser, to oversee collection performance; more flexible and efficient licence fee payment systems were introduced, for example, monthly direct debits, credit card payments, Bill Pay, etc.; the television licence fee regulations were amended to extend the period in which a licence must be renewed from six to 12 months and to abolish the black and white television licence; and An Post has introduced new initiatives, for example, the Call Centre, which it will explain to the committee.

The report of the Comptroller and Auditor General touches on all of these measures which were in train before the examination commenced. One point I would make is that not enough recognition is given to the fact that much of what is highlighted in the report has been or is being implemented. The initiatives are working, the impact of which is becoming evident. The report states the evasion rate fell by 4% in the years from 1998 to 2002 and, with continued effort, the Department expects the rate to be reduced further this year and in future years. The number of licences sold in the period 1998 to 2003 increased by 160,643, or almost 16%, and the proposed target for 2004, if reached, will reduce the rate further.

I am not suggesting that everything required has been done. Plans and proposals are in the pipeline which will achieve further improvement. For example, the Department recognises the importance of the An Post database and ongoing work is being done by An Post to enhance and improve the systems operated and the information contained therein. Further changes to legislation are being explored to require operators of cable, satellite and other platforms to provide customer lists for An Post to enable collection authorities verify payments in respect of these customers and introduce penalties for the non-payment and late payment of licence fees.

Agreement has been reached and regulations prepared to introduce a lifetime television licence for those clients of the Department of Social and Family Affairs who qualify for the household benefits package. A working paper has been prepared on the television licence fee payment processes which the Department operates with a view to introducing further efficiencies while an annual service level agreement will be drawn up with An Post.

I emphasise that it is not the intention to try to micro-manage An Post's affairs. The approach taken by the Department in the past two years was underpinned by a clear decision to focus the scarce resources available to it on achieving improvements in performance in the short term. An Post signalled clearly last year that it did not wish to continue as the Minister's agent for licence fee collection, to which the report makes reference. This changed the Department's focus as to how the licence fee should be managed in the medium to long term. The option of putting collection out to tender has not been pursued or finalised, although it is under active consideration by the Minister. His plans for the future of licence fee collection will have regard to the findings of the report being discussed today and the conclusions of this committee.

An Post has received negative publicity in recent times and its core business has been experiencing difficulties which have been widely reported. Amid this publicity, however, the television licence unit has been working to increase sales. I commend the staff of the unit, in particular, Ms Sadie Callan and her team, for their tireless efforts to improve the collection system. While good progress has been made, we still have some way to go to achieve the targets we would like to attain.

In summary, I thank the committee for inviting me here today. I welcome the report of the Comptroller and Auditor General, the recommendations of which we are very willing to implement. As can be seen, we are actively pursuing this.

Chairman

Mr. Tuohy, can we publish your statement?

Mr. Tuohy

Yes.

Chairman

Thank you.

Mr. Derek Kickham

On behalf of An Post, I thank the committee for giving me the opportunity to make some general points about our television licence fee collection contract which An Post has held since its became a commercial State company in 1984. Before that, its precursor, the Department of Posts and Telegraphs, held responsibility for providing the service, collecting the licence fee and pursuing defaulters.

The television licence fee collection contract has always represented an important and significant activity for An Post. Some 88 staff are employed by the company in providing the full turnkey solution involved. This involves An Post managing all aspects of the process, beginning with the issuing of reminder notices, selling licences through our countrywide post office network, maintaining a database of compliant and non-compliant addresses, carrying out house to house inspections, issuing warning notices to non-compliant holders of televisions and initiating and managing the prosecution process.

In 2003, while the company was paid a fee of €10.5 million, costs to the company amounted to €11 million. As a loss making service, it is not a commercially sustainable activity for An Post, given the current level of remuneration. The committee will be aware that An Post reported an operational loss of €43 million. In our strategic recovery plan designed to return the company to profitability by the end of 2005 we have placed heavy emphasis on promoting a sharper focus on our core business. The current perilous financial position of An Post makes it essential that all aspects of our business deliver acceptable levels of performance.

The fact that television licence business, as currently constructed, is loss-making has forced the company to examine all aspects of its operation. We regard the management of the database, the issuing of reminders and the sale of television licences through our post office network as core business activities for An Post, unlike the detection of television licence evaders and their prosecution. This has generated a great deal of criticism of the company, which criticism, much of which is misplaced and misinformed, has been damaging for the An Post brand.

Against this general background, An Post accepts the findings of the Comptroller and Auditor General's report which we regard as fair, balanced and a serious study of the overall challenges involved in television licence fee collection and the elimination of evasion. We have studied the issues raised and are putting in place measures that will address the problems identified.

At times there has been a degree of media attention generated regarding the efficiency of the collection system. The report of the Comptroller and Auditor General shows that revenues from the system virtually doubled between 1998 and 2003. It is fair to conclude that this was the result of both intensified licence fee collection activity and an increase in the cost of a television licence. At the same time An Post has continued every year to meet higher annual sale targets.

It is important to point out that the report of the Comptroller and Auditor General estimates that the evasion rate fell from 16% in 1998 to 12% in 2002. The final figures for 2003 show that it has been further reduced below the 12% level to 11.5%. This level of evasion presents An Post with a serious challenge. Nevertheless, it is important to remember that it has been working against a background of enormous social and demographic change.

Since January 2002, it has sold an additional 120,000 first-time television licences. In the same period the average payment to it per licence sold fell from just over €11 to €9. As the report points out, sales of 1.176 million licences in 2003 earned An Post €10.6 million in payments — an average of €9 per licence. This implies a further reduction of 3.7% in real terms in the average payment per licence sold. The level of award for An Post from its television licence contract has been falling in real terms since 1998. While the payment increased from €9.4 million in 1998 to €10.5 million in 2003, inflation in the period totalled17.7%, resulting in a drop of 6% in real terms in the total annual amount paid to An Post. In addition, licence sales in the same period went up by 15%. This means that the fee paid to An Post per licence sold fell in real terms by almost 22% in the period 1998-2003.

As is clear from the Comptroller and Auditor General's report, the issue of management of the database is critical to the successful operation of the licence fee collection business and one of our core business activities. The deficiencies, gaps and omissions highlighted in the report are being studied and, where necessary, adjustments will be made. It is obvious that development of the database, a basic tool we use in this aspect of our business, has been inhibited by the fact that our contract for television licence fee collection has been subject to annual award. One will agree that the uncertainty inherent in the annual award of a contract of this size is a serious disadvantage in the management of the business and militates against longer-term investment.

In the past few months we have reviewed the television licence business and are anxious to continue to provide this important service. If we are to do so, however, it is important that we are appropriately compensated. An Post is suffering significant losses in its core business and must ensure all activities provide a reasonable return. It has recently made a proposal to the Department of Communications, Marine and Natural Resources on the future operation of the television licence contract. This proposal can provide a basis for discussion of the issues of compensation and contract duration. We are hopeful that in dealing with these issues it will provide a firm foundation for future planning for the television licence business, eliminate losses and facilitate necessary investment to further enhance the cost effectiveness of evasion detection activities.

I thank the Chairman for giving me this opportunity to speak to the committee. If members need further details of the licence fee collection operation, we shall be delighted to assist them.

Chairman

Mr. Kickham, can we publish your statement?

Mr. Kickham

Absolutely.

Mr. Goan

We are happy to be here. In view of the fact that the relationship is directly between An Post and the Department of Communications, Marine and Natural Resources, we felt it was appropriate to make ourselves available to answer questions but not to make a direct statement.

Chairman

Before we continue, I have a question regarding the methodology employed in the Department of Communications, Marine and Natural Resources. Is it correct that before publication of the Comptroller and Auditor General's report, there was no methodology available in the Department to deal with television licence fee evasion and ascertain the number of evaders?

Mr. Tuohy

No. The issue came under the aegis of the Department in 2002. Before publication of the Comptroller and Auditor General's report, we had considered the issues raised in the Forum on Broadcasting report. There was an ongoing relationship between An Post and RTE which, between them, determined the target figures for licence fee payment. Then we got involved by setting up a liaison committee which tried to establish target figures and a model for incentivisation.

There was an ongoing debate about the annual figures for new households and a difficulty in determining the correct number. Previously, the determination of evasion figures was undertaken bilaterally by the Department and RTE but now it is the task of the liaison committee, for which the 2003 contract was set out in 2002. The committee's work involves setting a target for licence fee payment rates and establishing incentives to facilitate over-achievement of this target. The Comptroller and Auditor General's report was helpful in standardising this procedure by way of measures such as international comparisons on evasion rates.

Chairman

Does Mr. Tuohy agree that the information system that was in place — the database and the data available from other service providers — was inefficient, particularly in comparison to the BBC which depends entirely on licence fees for its operation? Central Statistics Office, CSO, figures indicate the creation of approximately 180,000 new households during the period under review in the Comptroller and Auditor General's report, yet the report indicates failings in tracking the number of households coming onstream and the number of prosecutions and points to a disparity between the figures for the 14 regions.

Mr. Tuohy

The CSO data for 2002 indicated a figure of 1.29 million households. Of these, the Comptroller and Auditor General's report indicates a 99% rate for television usage. Therefore, approximately 1.25 million households are television users. These do not include business users, the figures for which are disputed. However, a problem we identified in 2002 centred on getting agreement on precise usage figures. Predictions on household numbers for the coming year were imprecise; the CSO, ESRI, DKM and Davy Stockbrokers, among others, all offered different projections. A second issue was the split between the number of households being constructed and the number of new household formations. This is an important issue as some new houses are intended as second homes or may, for a number of reasons, remain unoccupied. The third factor we identified, also pointed to in the Comptroller and Auditor General's report, was the need to establish data for business users and find ways to incentivise them.

One of the issues we will be considering this year, subsequent to this committee's findings, is the regulation of service providers. We intend that cable, MMDS and, I hope, satellite companies will be obliged to declare their customers. The real issue is not the failings of the database system but the matter of who is providing the television service. There is a difficulty in terms of the free-to-air television service provided by RTE. On business users, we are considering the option that all businesses must declare in their October returns that any televisions used by them are licensed. Minor issues like these can have a huge impact and are the sorts of issues with which we are trying to grapple.

Chairman

I have a final question regarding the compliant licence holder. It appears from the CSO figures that an additional €30 million could be collected if the matter was pursued in a businesslike manner. While the agreement is with An Post to collect the fee, it was disillusioned with the service agreement up to 2002. It was frustrated that it only received €8 or €9 for each licence fee collected and considered that this was not an incentive. The cost of a licence has increased from €88 to €150. Those who are paying are subsidising those who are not. Is that not the case?

Mr. Tuohy

That is a statement of fact. I agree that those who are paying are subsidising those who are not. Part of our job is to decrease the level of evasion by increasing the level of payment, not just in financial terms but the actual numbers of licence holders. There is a balance to be struck. In this business there will never be 100% compliance. It is not like cars on the road. The majority of people are good, they are responsible and pay. When one deals with the issue of those who do not pay — whether on purpose or out of ignorance — one has to knock on doors. Collecting the first batch of money is not as difficult as the last part — enforcement — which is where the real cost lies. There is a cost associated with maintaining the database. Keeping databases up to date is a huge challenge. For instance, there were 70,000 new ESB connections last year.

I agree with the Chairman. When the evasion figures are multiplied by €150, they amount to between €25 million and €28 million. However, there is an issue when one gets to the last batch. Even in Britain which has the best rate of compliance in Europe the figure is 8% — the European average is approximately 10% — and the scheme is highly incentivised. It is clear from the Comptroller and Auditor General's report that the company which took over the Post Office there had problems.

An Post has stated it wants out and is in discussions with us. We are exchanging correspondence. This will be followed by a series of meetings. We have to ensure, if we decide to go to tender — a matter for the Minister on foot of this discussion — there will be an easy transition from the current system. The logistics are huge, extending to updating the database and the more difficult challenge of knocking on doors to ensure enforcement. One does not confiscate TV sets. It is not like the clampers who can remove a car from the street and one has to go and collect it. Certainly, our approach was to incentivise the scheme from 2003. We have to keep challenging and driving down the evasion rate. That is our plan.

Deputy B. O’Keeffe

When I read the report, I concluded that we had got ourselves into a fine mess. It struck me that we had a list of failures, whether on the side of the Department or An Post, on this matter. It appears the necessary integration was not provided for until the findings of the broadcasting review and the Comptroller and Auditor General's report came to hand and that both groups were doing their own thing. There was widespread evasion and, like the bull in the pen, RTE was looking out at the green pastures in terms of what was not being collected, given that it was constrained by a lack of funding. The delegation states things are beginning to get rosy in the garden. How is it that over a period of seven or eight years rank inefficiency was allowed to continue in the collection of the licence fee? The mechanism used to make up the deficit was to lump it on the consumer in the form of a licence fee hike of 17% over a short period to ensure a proper level of funding for RTE for public service broadcasting.

Mr. Tuohy

I was not involved before 2002. The Department only assumed responsibility after the election in that year. The forum report came out a few months later and we responded and took action immediately. We agreed a set of targets for 2003 which included a performance incentive. These points were referred to by the Comptroller and Auditor General in his report.

In December 2002 the Government agreed a licence fee increase for RTE. This was debated on a number of occasions. We tried to enhance the collection procedures and to have agreed targets in implementing them. That is what we have been trying to do with An Post and RTE which has a keen interest in the collection of the licence fee.

I cannot disagree with the Deputy. The evasion gap was very wide in 2002. Since then we have been trying to drive it down. Because of the decision taken by An Post that it wants a change this year — Mr. Kickham has outlined the problems as An Post sees them from the point of view of collection — we are in discussions with it on the way forward. We will look at all of the options, including the idea of going to tender on a new system that would allow us to encapsulate not only what the Comptroller and Auditor General has said but the many other things we want to do. We are trying to change the different mechanisms to drive down the evasion rate and increase revenue streams.

Deputy B. O’Keeffe

I am sure Mr. Kickham would like to comment.

Mr. Kickham

As I said, we accept the statement in the Comptroller and Auditor General's report. The fact is there were inefficiencies. Notwithstanding the fact that much has been achieved, there is more to do. The fact that there has been a decline in real terms of 22% in the cost per licence sold is not significant. Ms Callan and her team diligently pursue the evasion gap with the tools and resources at their disposal to drive it down as quickly as possible.

There are other issues being dealt with. We have moved on some of the points raised in the Comptroller and Auditor General's report and implemented revised procedures. Reinvestment in the database — the fundamental core issue — would add to the overall efficiency of the collection process and allow better targeting which would give a better return overall.

Notwithstanding the fact that comparisons have been made with the United Kingdom, it is the most comparable figure available but even within the United Kingdom there are regional variations. For example, the evasion rate in Scotland is 10%-11%, over 20% in Northern Ireland and approximately 6%-7% in England.

There are social and demographic changes which make the actual detection of evasion more difficult. Given that many more live in apartments, access is an issue. In this respect, security has become an issue for licence inspectors.

We accept there have been inefficiencies which we have targeted. We have driven down the unit cost, in respect of which there is more scope.

Deputy B. O’Keeffe

Mr. Goan, how frustrating has it been for RTE? It is obvious the organisation has been unhappy for a long time with the inefficiency of the collection system. At one stage Mr. Goan indicated it should be allowed to undertake the collection. Can he give us the real picture from its point of view? How frustrating is it to see a large bank of money not going into its coffers and at the same time the organisation having to saddle the consumer with a 17% increase over a three year period?

Mr. Goan

It is fair to say RTE has consistently expressed great concern about licence fee evasion and the efficacy of collection but I am not here to throw brickbats at An Post or the Department. We are where we are and have to find a way forward. We are concerned about the amount of money available to us to invest in programming. Since 2002, when Conor Hayes, our chief financial officer, assumed specific responsibility for our analysis of licence fee collection and liaison with the other groups involved, we have had a positive engagement with both the new Department and An Post. While we continue to be frustrated with the level of evasion and the efficiencies spoken about here, we nonetheless recognise that significant progress has been made, although there is more to do.

If licence fee collection goes to tender, that, of itself, will prove the level of cost associated with it. The key concern of RTE, as mentioned in the Comptroller and Auditor General's report, would be that the transition period should be carefully managed to minimise the potential loss of revenue. That is not to say, however, that if there was a tender process, An Post would not be the successful tenderer. It has identified a number of the key processes and it may be the case that if all of these went to tender, one or all would go to An Post.

RTE's position is that we would like to see a more efficient collection of the licence fee in order to return the revenue to the ones who invest in it, that is, the people, and that we get as much as possible on screen and radio as quickly and effectively as possible.

Deputy B. O’Keeffe

How satisfied is Mr. Goan that circumstances will improve? RTE is talking about a significant increase in the number of licences and a reduction from 16% to 12% in the evasion rate but it strikes me that during the Celtic tiger era we were producing 50,000 houses per year. Over the period we are talking about 200,000 new residential units. One would have thought, therefore, that there would be a significant increase in the number of licences. The Comptroller and Auditor General admitted that the data on which he based the figure of 16% to 12% were suspect. Given the major output of residential units, is there still good reason to believe it is not an accurate figure and that the evasion rate could be as bad as it was because we are not giving due recognition to the number of units which have come on-stream, the rise in population and various other demographic issues?

Mr. Goan

My colleague, Conor Hayes, can expand on that aspect but the Secretary General has mentioned the different sources of information on the size of the population and the total number of houses and what the number of licensable premises might be. We are of the view that it is higher than has been expressed to date but rather than focusing on it as an issue, our key concern is to concentrate on maximising the efficiency of collection and expanding the volume of licence sales. The focus on the licence fee evasion rate is an interesting diversion but what we are interested in is growth in that volume.

Mr. Conor Hayes

On the difficulties of trying to establish the correct evasion rate, there are different methodologies. The methodology we use internally, for example, is different from the methodology the Comptroller and Auditor General uses but this does not make it either valid or invalid. It is, simply, the reality. It is important, however, to have some measure in order that we can check where we are going.

We believe the level of reduction in the evasion rate is overstated for two reasons. First, we believe there is a higher level of non-domestic licensable entities and, second, a particular methodology is used whereby people — I understand there are approximately 50,000 licence records — have not yet renewed. In the calculation of the evasion rate the Comptroller and Auditor General considered them to be people who will renew and, therefore, it did not amount to evasion.

We take the number of licences sold in a particular period and divide it by what we estimate to be the total population. We could get hung up about the particular method to be used. We are talking about a statistical computation. We believe there has been a reduction but it is not as positive as——

Deputy B. O’Keeffe

From his figures would Mr. Hayes say the reduction, as estimated by the Department and An Post, is seriously overstated?

Mr. Hayes

I think it is overstated but the issue is not so much that——

Deputy B. O’Keeffe

Would it be significant in Mr. Hayes's estimation?

Mr. Hayes

I could not say.

Deputy B. O’Keeffe

I would not like to think Mr. Hayes was being coy.

Mr. Hayes

I can explain the reason to the Deputy.

Deputy B. O’Keeffe

Obviously, Mr. Hayes stands over the estimates he has made which he believes are valid.

Mr. Hayes

Can I explain the reason to the Deputy? It is not an easy question to answer and there is not necessarily a straightforward answer. People wish to co-operate in every way possible but we are dealing with a situation where, for example, we would lock into the census of population done in the second quarter — June — of 2002. There are no easy figures on growth rates since. Therefore, when trying to calculate, we have a difficulty. Equally, approximately 300,000 domestic licences are paid for directly by the Department of Social and Family Affairs. Therefore, when we are trying to assess the evasion rate, this amounts to a significant issue. There is no agreed basis for the number of businesses — not because no one has tried to do it. We have put an enormous effort into this, as have the Department and An Post in different ways, but have not been able to find an accurate way to do it. I am aware the Comptroller and Auditor General has also made significant efforts but there is a level of uncertainty. It is an area that is uncertain.

It is important that we find an agreed basis for computing the evasion rate. What we have tried to do is switch the effort in the interim to improve the management of the process as much as possible in the short term because we will not solve the statistical issue within a short time. We have had discussions with various economists, the ESRI, the CSO and the Department of the Environment, Heritage and Local Government. One can get as many answers as one wishes but it is not a question of anybody being coy or not willing to be co-operative.

Deputy B. O’Keeffe

It was a simple question. In Mr. Hayes's estimation, would the figure stand at 16% as against 12%?

Mr. Hayes

Our belief is that the figure for last year was for the full year. The Comptroller and Auditor General did his figures from the middle of the year. For the full year our estimate was just shy of 15%. I clarify that this includes domestic and non-domestic evasion. There is no country in Europe, not even Britain, that measures non-domestic evasion. The figures for Britain relate exclusively to domestic evasion.

Mr. Waters

There has been a lot of discussion of this subject between the Department, RTE and ourselves and it is reasonable to say we used the best available information to come to the figures produced in the report. That was the base we were using, within the liaison group, to identify the evasion level. The Comptroller and Auditor General has looked at these figures. There is no perfect answer to the question but I believe the figures produced are reasonable.

Deputy B. O’Keeffe

Mr. Kickham, negotiating a contract with An Post on an annual basis, with so much money involved, is not the best way forward in having an efficient collection system. I am very interested in all of the positive and welcome points made in Mr. Kickham's report. On the accuracy of the database, I found that his statement indicated serious issues to be raised. As he is aware, the database is absolutely crucial. It was clear from the Comptroller and Auditor General's report that the inefficiency and ineffectiveness of the database raised massive queries in respect of the total operation of the system. Duplication was discovered. If a name was deleted from the database, the record was obliterated, even though the person concerned may have transferred elsewhere. There was, therefore, no record of him or her. Penetration levels also left a lot to be desired, although there is movement on every other issue. There is not a Department which does not tell this committee that it requires a lot of money to improve its IT systems. An Post is now back again on the same subject. What are the realistic chances of the database being brought up to date to meet all of the requirements of a modern economy and ensure information on the level of evasion, the registration of new licences and the transfer of licences will be available in the new system?

Mr. Kickham

The Deputy is correct — it is a fundamental issue. At its core is the management of the evasion rate. This means keeping track of data and people. The database currently in use in the TV licence services area has been in place for some years. Processes and procedures have improved and there is now better information available on the type to be recorded. The system needs redevelopment to put in place the features and facilities required to reduce the evasion rate.

The issue of evasion, like many others, is characterised by diminishing returns. It is exponentially more expensive to reach the next level as one gets better at detecting evasion. Records have to be preserved in the database and there are a number of issues which make it more complicated than it might seem at first glance. It is also not helped by the system of addresses in use in Ireland. There are significant numbers of non-unique addresses. This contributes to duplication and the difficulty in identification.

Ms Callan and her team have put a lot of effort into specifying the requirements of the database. We are working closely on a tripartite basis with our colleagues in the Department to identify how this might best be done to move to another level on the issue of evasion. A better database is required, with more appropriate processing procedures, better centralised control from the 14 distributive locations and better targeting of regional variation levels. We are focusing on these issues but need to be clear on how it will be done.

From the point of view of An Post——

Deputy B. O’ Keeffe

What level of investment does Mr. Kickham believe is required?

Mr. Kickham

I would prefer to answer the Deputy with a more detailed figure. We have estimated that it would cost somewhere in the region of €750,000 to move the database to the next level but this depends on nailing down specific requirements. I am reluctant to give the Deputy any figures over which I cannot stand.

Deputy B. O’Keeffe

It is a fundamental question. We can talk about efficiencies until the cows come home but unless there is proper IT and database equipment in place, there will never be a reduction in the level of evasion. What are the Department's views on a long-term contract? Can it envisage difficulties that may arise for An Post in the negotiation of an annual contract? It will be necessary for An Post or whoever else comes in to have a proper database in place. What term does the Department envisage for any future contract?

Mr. Tuohy

I agree with the Deputy that it cannot be done on an annual basis but legislation would be required to get out of the deal with An Post with which there is a rolling annual contract. It would take approximately five to seven years with checkpoints in between to oversee efficiencies and certain deliverables. There was an agreement in 2002 between RTE, the Department and An Post to co-fund IT systems development and that offer still stands. This will be important, irrespective of what happens in either An Post continuing with the contract or a tender from another provider.

The data must be accurate, a point on which I agree with the Deputy. We have outlined the difficulties in collecting accurate data. Its collection and inputting are very expensive. International comparisons and averages can carry an element of danger. In Italy the evasion rate is 17% but in the Netherlands everybody with a television set has an electricity account. This leads to the issues of data protection and the transfer of knowledge which we are examining. Changes to the legislation would deal with service provision, whether by cable, MMDS or, I hope, satellite. It is not just the purchase of TV sets or their availability; it also has to do with services. Those are the challenges facing us.

I agree with the Deputy on the proposal for a multi-annual contract but it would require some form of checkpoint in the middle of the period to ensure the level of investment was remunerated and the delivery targets were being met. The Department is prepared to co-fund the capital investment in IT systems.

I reiterate that collecting data is both very expensive and difficult. Ireland is unique when it comes to the level of new houses which stands at between 65,000 and 70,000, never mind businesses. Of this figure, 34,000 are new households.

Deputy B. O’ Keeffe

I have a final question relating to prosecutions. I was amazed that 50% of those prosecuted and fined still did not purchase a licence. What are the Department's views on the levels of fine which may be imposed? Should there be a change as they are not acting as a proper deterrent?

Mr. Tuohy

That is ultimately a matter for the Legislature. The Department will need to bring proposals for change. The fines are not much more than the licence fee. The Department acknowledges that in the real world there will never be 100% compliance.

Deputy B. O’ Keeffe

Local authorities are achieving collection rates of 86% or 87% for service charges and in some cases up to 90%.

Mr. Tuohy

I take the Deputy's point. There must be incentives. The Department is examining the legislation. The issue of fines will be dealt with by legislative changes. In the case, for instance, of car clampers and how they choose cars to clamp, there is always the hard case. There is a cost associated with prosecutions in terms of time and money. The revenue goes to the Exchequer, not to An Post. The incentive arising from prosecutions, other than using them as an exemplar to drive people to change behaviour, is more general in terms of legislation. Whatever agency collects the money will not subsequently benefit from so doing. There is a balance involved which must be borne in mind when implementing draconian measures such as putting people in prison but, ultimately, it is a political decision.

Chairman

I wish to ask Mr. Kickham about the cost of €15 awarded to An Post by the courts. What is the real cost of taking such cases?

Mr. Kickham

Mr. Waters will deal with that matter.

Mr. Waters

The real cost of a prosecution is approximately €65 to €70.

Chairman

However, An Post only receives costs of €15. Therefore, it loses €50 on each case it takes.

Mr. Waters

It depends on how far we bring the case. If we pursue a prosecution from start to finish, the cost involved is between €65 and €70, depending on the point at which the person was caught. That is an average figure across the board.

Chairman

If €50, on average, is being lost on each case, there really is no incentive to go to court.

Mr. Waters

Our objective is to sell licences. Unfortunately, however, some people have to be brought to court in order for the licence to be sold. We do not really set out to prosecute people and have to be very careful in not doing so. It might seem easy to catch people but it is important to realise that modern apartment blocks all have secure front doors. Each floor within a block is also secure. It can be difficult, therefore, to remain within the law while gaining access and detecting evaders before proceeding to prosecute them. There are many methods and inspectors have a variety of ways in which to operate. It is not a simple process. In many instances, people are sent a number of letters requesting that they purchase a licence. However, if they do not wish to pay for a licence, we have to physically meet them on their doorstep before we can prosecute them.

Deputy Connaughton

The longer this meeting goes on the more I think that those who did not want to pay had less reason to do so. The lack of co-ordination which has emerged is much worse than I had thought it to be. I will return to this matter later.

Would it be possible for the various stakeholders present to bell the cat? Am I correct in stating there are 150,000 people who do not have a television licence? Is it also correct that if most of them paid for their licence which costs €152, the overall cost of the licence would decrease by €25? Are any of our guests in a position to refute this suggestion?

Mr. Tuohy

I do not believe anybody present would argue with the figure of 150,000, as an average. If one multiplies this by the cost of the licence, €152, one will arrive at the figure to which the Deputy referred.

Deputy Connaughton

That is a ball park figure.

Mr. Tuohy

That is on the presumption that everybody——

Deputy Connaughton

I understand that. People should pay but we know that they will not. There is always a public outcry, rightly so, when RTE decides to increase the cost of the licence. This meeting is not about what should be the cost of a licence. There are approximately four million different views on that issue. People have not been apprehended for the plethora of reasons with which we have been presented today. If there was an increase of €25 in the morning, there would be hell to pay. Due to the fact that our guests, RTE, An Post and the Department, have not been able to get their act together, we are seeing an example of rip-off Ireland. This committee is concerned with ensuring value for money. As a result of somebody not doing his or her job, television licence holders are being fleeced to the tune of €25 per year. Do any of our guests disagree with this?

Mr. Tuohy

The Deputy referred to there being a massive outcry. After the most recent licence fee increase, there was no such outcry. We put in place an agreement with RTE, involving the statement of commitment, under which — the director general will outline this if the Deputy wishes — there has been an increase in the volume of Irish material being broadcast, different genres of programming have been introduced and there has been a rise in regional outputs. What we wanted to do was not unlike what the Comptroller and Auditor General said about setting service level agreements. Attaching to such agreements are the statement of commitment and the new RTE charter, publication of which is pending. We were trying to streamline matters in order that people would know what they were getting in return for their licence fee. I accept that if everybody paid, be they private individuals or businesses, there would be more money available. Everybody on this side of the table would like to see that happen. As a society, we believe in public service broadcasting.

Deputy Connaughton

We all accept that. However, if I read the Comptroller and Auditor General's report properly, it did not appear that there was any co-ordination or cohesion between the three stakeholders until a few years ago. What was the position prior to that? Did they form a social club and have a coffee together once a year? As long as the money was coming in and people were prepared to pay the licence fee demanded by RTE, it appears nobody on the other side of the table was unhappy.

Mr. Tuohy

I can only speak for what has happened since 2002.

Deputy Connaughton

I accept that. However, this problem has obtained for many years.

Mr. Tuohy

To be fair to my predecessors and former Ministers, there were agreements in place. Since 2002, we have begun to set targets and pursue a more focused approach. This issue relates to the entire public service in which there is now a much greater focus on outputs rather than inputs. We are all learning as we move forward. I would not accept that people sat around drinking tea or coffee.

Deputy Connaughton

What were they doing three or four years ago?

Mr. Tuohy

They were delivering. As a result of the economic boom in recent years, there has been a massive increase in the number of new premises coming on stream. In terms of technology, it is only in recent years that we have seen the greater development of effective databases. The linking of such databases to locations has always been a major issue. In the past two years we established a liaison committee, chaired by my colleague, Eamonn Molloy, on which the different groups are represented. They are keen on doing what the Deputy and the Comptroller and Auditor General have suggested, namely, delivering reductions in evasion rates and increasing incoming revenue and, subsequently, passing this on to RTE. As the Deputy is aware, since last year 5% of the revenue will go to the Broadcasting Commission of Ireland.

Deputy Connaughton

It appears that An Post lost money on this contract last year. It lost a great deal of money on every other contract also but we are not concerned with that today. I could not gather from Mr. Kickham's opening contribution whether An Post wanted this contract or whether it was satisfied with it. The only matter about which he appears to be terribly unhappy is that people will have to be brought to court. If the organisation gets stuck in to a new tender, surely that will be part of it. I am reminded of the unwanted child in that nobody will want to lay a hand on it. If that is the case, does An Post have the backbone to do the job? That is the litmus test.

Mr. Kickham

We have the backbone to do the job. We are facing up to a great many issues right across An Post in a firm, resolute and determined way. This is an issue which requires a firm and determined position to be taken. We are, as aggressively, firmly and commercially as we can, driving the evasion rate down and have incurred some losses on this activity. We lost approximately €500,000 last year. We lost money in previous years on television licence fee collection which is characterised by diminishing returns. The cost of getting the additional licences sold increases every year. In some respects, the better one gets at collecting licence fees, the more difficult it becomes to get the next few.

We examined this issue in our strategic recovery plan for An Post last year and have examined it in detail in recent months. We are anxious to continue to provide the service because it is valuable. We have provided a good service while accepting that it is not as good as it could or should be. We have delivered a 22% reduction and further efficiencies can be driven. The elements of the business close to our core are the management of the database, the lists, the reminders and the payment services available throughout the country through the network of post offices.

Deputy Connaughton

But that cannot be divorced from the end.

Mr. Kickham

Indeed, it is difficult to do that. When a service activity is loss-making and the losses are driven out of non-core business activities, one must stand back and examine the reason one is engaged in it. If we can manage to get to a position where we have a commercially viable proposition which delivers a reasonable return and compensates An Post appropriately for the activity and it can deliver a quality service, we can do it. We are working closely with our colleagues in the Department to work out these issues.

Deputy Connaughton

Is An Post strategically making a case before the committee? I read newspaper reports earlier that it was trying to up the ante to get more money out of this system.

Mr. Kickham

As a commercial service, we are entitled and expect to get — people would expect us to get — appropriate compensation at a commercial level.

Deputy Connaughton

My next question is to Mr. Goan. Given that RTE has more to gain out of this than any other body, could it do a better job than An Post?

Mr. Goan

RTE's core business is the creation of content on radio, television and on-line. We are not organised in a way that we could do this. RTE contended at one stage that it could do this but we would not want do it at the moment. That is not to say that if in the future we set our minds to it in the tender process, we would not give it our best shot but we could not address this issue as we are currently positioned.

Deputy Connaughton

Even if the Government decides to put this out to tender, there might not be many takers.

Mr. Tuohy

There is nothing like the market to test that if we have to do it. We will await the outcome of today's meeting. We have some ideas. We will go back to the Minister and the Government, as necessary.

With regard to incentivisation, An Post generates significant revenue when beating the stretching targets. It can go over €50. What one is trying to do is incentivise people to get to a certain level and beyond. There are then real benefits. However, I accept Mr. Kickham's comment that getting up to this can be difficult. We are trying to balance the two, to drive and incentivise people to do it with a good return at the end. We are all winners in that scenario. That is the balance we are trying to strike. We have been doing this progressively over the past three years. There is a need for us to continue to drive down the evasion rate. The way to do this, as I outlined, is incentivisation, legislative changes and so on.

Deputy Connaughton

I fail to understand the reason retailers are not obliged to inform RTE, An Post or the Department when they sell televisions to individuals. I could not care less where the television goes and assume, since individuals have paid for them, they do not throw them in the river. This is a minor, technical matter but why has it not been done?

Mr. Tuohy

The legislation currently provides for this. However, there are issues relating to the bureaucracy involved and the accuracy of the information provided. Wrong or inaccurate information is worse than a lack of information. As a result, one is left with a phenomenal amount of information that could be totally spurious. Should people then be asked to produce a passport as evidence of who they are when they buy a television? There are major issues——

Deputy Connaughton

Duplicates and triplicates of various documents are available nowadays. One extra document should be supplied and added to the database which outlines that a television set was sold to a particular person at a particular address. Is that asking too much? The information would not solve everything. Could it be used to better effect? For example, it could be given to An Post inspectors. An inspector could approach an individual and point out that he or she bought a television on a given date and ask where it was.

Mr. Tuohy

We use service provision in the sense of who provides the service. This is not provided for in legislation currently but will be included in the Telecommunications (Miscellaneous Provisions) Bill.

Deputy Connaughton

Could this involve up to 500,000 people?

Mr. Tuohy

On the presumption that they are not licensed. I do not accept that——

Deputy Connaughton

I am referring to the potential pool.

Mr. Tuohy

There are approximately 300,000 using satellite services, 600,000 using cable services and 100,000 using MMDS services. This is another verification method for which the provision is in place. If in some way there was a collation, probably between the electricity side——

Deputy Connaughton

Several times a year the ESB meter at my house is read. While meters are generally located outside houses, inspectors call. Does the ESB have a place in this?

Mr. Tuohy

That is an issue because, if we go to tender, the ESB may be interested but I do not wish to pre-empt anything. Everybody who has a television must have an electricity supply. Therefore, that is an issue.

The second issue about which we must be careful is that of databases. Under the Data Protection Act, information cannot be exchanged between organisations, about which An Post is strict, as is every organisation. Data can only be collected and used for a specific purpose. These issues will be examined as part of the legislation which will come before the Oireachtas when there will be an opportunity to debate them. Ultimately, it will be a political decision by the Oireachtas.

Deputy Connaughton

While this should go to tender, I sincerely hope that whatever happens there will be value for money and that RTE will not be in a position ultimately to drive up the cost of a licence because something else did not work. That is the last thing the country needs. That should not happen, whatever way the tender is organised.

Chairman

I wish to ask the delegation from RTE one other question. There is innovative advertising as part of the media campaign on TV licence renewal. The urgency attached to renewing a licence could be underlined. Is the campaign financed by RTE?

Mr. Hayes

As far as the liaison group is concerned, we agree an advertising programme, which is rolled out continuously, with An Post and the Department. I attended a meeting yesterday at which a further five advertisements which will run over the summer were agreed. I agree that more could be done in this area, to which significant attention will continue to be paid, even though there is a limit to its effectiveness.

Chairman

Properly focused advertising should be effective and contributes to public service broadcasting. There should be an advertisement which focuses on evasion. RTE is available to every house in the country as opposed to mail shot letters. Could a lot more be done by it in that regard?

Mr. Hayes

We are in discussions with An Post in which we have not arrived at a conclusion. For example, if An Post targets a particular area such as, for argument's sake, County Clare for an intensive examination, RTE could focus its advertising relevant to the campaign. Such an approach provides more bang for one's buck as there is only so much attention paid to the overall level of advertising which over a period of time is regarded as wallpaper. In this context, advertising must be targeted and advertisements changed frequently. RTE is making significant efforts to do this.

Chairman

The Department had an agreement. Up until now the level of incentive was minimal. There are three important players and the Department has been unable to negotiate an incentive led deal. The committee is obliged not to examine policy but there is a database with one million entries. In this context, data protection is very important as there are vested interests in the trade such as retailers and service providers. It seems extraordinary but with unprecedented growth in the economy in both the business and domestic worlds, there seems to have been a massive breakdown in communication. The number of prosecutions has not been a deterrent in any sense.

Mr. Tuohy

I cannot disagree with the Chairman. The Department will be making proposals to be included in the legislation on the issue of service providers. While the correlation of databases is important, it is an issue that goes beyond the Department's remit into the area of data protection and one to be debated and discussed across the system. However, I cannot give the committee any commitments on this.

Chairman

If the Department offers a contract in the future, it will be a critical component. The Department is setting the goal posts on the empowerment to be offered to whoever will be awarded the contract. It should incorporate the critical mass of RTE's involvement with regard to promotion, the empowerment to be offered to the appointed agents and the data to which they will have access.

I am astonished. I come from a business background and imagine this contract which covers nearly 1.4 million subscribers — about 10% are defaulters — offers the prospect of a very profitable service for An Post if it was structured in such a way that it knew exactly where it stood.

Mr. Tuohy

I agree with the Chairman. One of the points I have made is that the top level must be incentivised. There are marginal levels above the targets and stretching targets. At that level there is an incentive — on average, over €50. The first target is to reach that level. As one gets the people concerned into the system, one must be in a position to maintain this. This will have to be included in any contract into which we enter.

The legislative issues have been raised by Deputy Connaughton. Fines represent the other side and will require examination but that is a decision for the Oireachtas, not the Minister. On foot of this meeting we will report back to the Minister with proposals. If he decides to go to tender, it will not be in place by January next year; to be fair, it will probably be in place in 2006 to allow for a transition to be made. I emphasise that even if An Post was not successful — I am not saying it would not be — the post office network could well form part of any new structure, in other words, people would continue to buy their TV licence at a post office and we would continue to be innovative in the way we do this.

The other elements such as service levels and the electricity side are ones with which the Department is dealing to determine whether a full package could be provided which would include not just a contract but delivery mechanisms also.

Chairman

It seems extraordinary but the social welfare scheme accounts for 300,000 licences. I look at this from a business point of view. The Comptroller and Auditor General's report indicates the startling inefficiencies. Those 300,000 licences could be issued to cover a five year licensing period. An Post would then only need to deliver to those paying for a licence. This would not require legislation and would free up post offices to focus on commercial premises and private houses. It is extraordinary that such a system has not been introduced before now.

Mr. Tuohy

The Chairman is absolutely correct. The Department is now taking social welfare television licences en bloc. A pensioner should not have to apply for a licence every year but be given a lifelong licence. This issue is being dealt with. The Department must collate the databases with the Department of Social and Family Affairs and ensure they are updated as people die or move house. I agree with the Chairman that these licences should be taken out of the loop. They should be included in the overall package but without the need for an annual transaction.

Chairman

Does the Secretary General agree that responsibility lies in the main with the Department? I am astonished that it would go to contract in the light of the deficiencies indicated because of the legislative deficit. Does it not require more legislative powers to set the terms of the contract?

Mr. Tuohy

The Department does not require legislative powers other than to move away from An Post, as stipulated in the regulations. It will be a normal procurement process. The emphasis will be on designing the contract. We have discussed all of the issues involved such as balancing incentivisation. The balance must be right in order to avoid being too heavy-handed. That will ultimately be a political decision, even though the Department will implement it. It must be made by the Houses of the Oireachtas. The Department's job is to provide the right mechanisms and incentives and agree the contract, the issue it is debating with An Post. An Post prosecutes, not the Department.

Chairman

It is disappointing that people are paying service providers hundreds of euro a year for additional services, yet they are not paying their television licence fee. They have contracted for the supply of satellite and MMDS services for which they pay high charges, yet they may not have a licence.

Mr. Tuohy

That is a reflection on certain elements in society who are sitting on the backs of others who are paying the licence fee. As Deputy Connaughton said, if everybody paid the licence fee, there would be more money available for public service broadcasting.

From the point of view of the Department, there have been dramatic changes at RTE, as will be evident when the accounts are published soon. There has been a 2% increase in its audience share in the last few months which runs counter to what is happening elsewhere in Europe. In other words, public service broadcasters generally are losing out. The point that needs to be made is that if one invests in public service broadcasting with quality material and the proper genre of programming, one will get results.

Chairman

There was no follow-up in respect of court summonses termed "unopened".

Mr. Tuohy

That is an issue for An Post. There will be policy issues around prosecutions which will form part of the contract. In regard to fines, the issues are almost the same.

Deputy Boyle

As there is a vote in the Chamber, we have approximately six minutes left. Rather than coming back afterwards, I will ask questions now and try to obtain the required responses.

I am interested in comparisons with television licence fee collection in other countries and use of the revenue raised to fund state broadcasters and the bodies charged with collecting the fee. How does the system work elsewhere within the European Union? The only comparison in the value for money report is with collection rates in Britain. How many countries operate a television licence fee system for the benefit of the state broadcaster and those responsible for its collection?

Mr. Tuohy

The director general would be more knowledgeable on this question. There is a forum for the different companies involved and variety across Europe. The British are probably unique in the sense that there is 100% funding of the BBC by the Government. We have reached half way but are not different from some of the others. Other service providers such as BSkyB which are not public service broadcasters are fully funded by their subscribers.

As I said, there are different methods of collection. In Italy there is an evasion rate of more than 16% while in the Netherlands it is closer to zero because the system is linked to the ESB's equivalent. I can provide the relevant information if the Deputy so wishes.

Deputy Boyle

That would be useful. The economics involved in this type of system must be examined, perhaps in another report. Are statistics available for the percentage of households with more than one licence?

Mr. Goan

In western Europe 11 countries apply a licence fee. The Secretary General is correct in saying the BBC is the only national broadcaster which relies solely on licence fee revenue. Others rely on various percentages of licence fee revenue and commercial revenue. Having said that, I would like to emphasise the fact that, given the significant increase in the licence fee that RTE received in December 2002, it is still just around the average price across Europe. While not minimising the desire of Deputies to achieve value for money, the licence fee represents a reasonable levy for the kind of service RTE provides for the public. Obviously, if there was the level of improvement we are seeking, our contention is that it would translate into improved services for the public.

Deputy Boyle

That leads me to my second point which is that the television licence fee amounts to a household levy. The presumption is that most households have one television but changes in technology have resulted in this being slightly superfluous.

Mr. Goan

There is one licence per household. A hotel requires just one licence regardless of how many televisions it has.

Deputy Boyle

I was making a point about changing technology and how technology is likely to improve with the Internet, stream video, live television and computer consoles for which one would not require a television licence. RTE does some live broadcasts and has a huge archive of material. The line between what is a television set and a different piece of hardware is becoming more blurred.

Mr. Hayes

At this point maximum capacity for live streaming is 500 at any given time. It will be a number of years before these issues are likely to have an impact. The technology is not available to broadcast in this way across the Internet.

Deputy Boyle

They were the two questions I wanted to ask. I apologise but I have just two minutes to get to the Chamber.

Chairman

I propose that we dispose of the report.

Mr. Purcell

The report was not intended to be negative but to be an input into the changes that must be and are being implemented. It was written with this in mind. If one wants to be negative, one could go back to the years between 1998 and 2002 in respect of which I could have been very hard on the passive approach adopted by the Department in its arrangements with An Post for the collection of the licence fee. Prior to 1998, there was an incentive scheme in force but for five years after that there was a flat rate arrangement. We did not need the Forum on Broadcasting to tell us this was not a good idea. It was probably indicative of the passivity of the Department at the time, not the current Department. There was a suggestion that I was unfair in my opening comments and in the report, in that we did not recognise what had been done since then but, I believe we did so. I tried to put what is happening in context and outline some of the historical background to the issue. In 1991 we drew up a report on the collection of licence fee income. Some of the comments made at the time are still relevant today.

To turn to RTE and the point Mr. Hayes made about the BBC not including businesses — in preparing the report we spoke to the BBC and the National Audit Office which compiled a similar report in 2001 on the collection of licence fee income — our information is that it does. Up until 2001 it believed businesses and other non-main residential elements were not included to the extent that they should have been. In reaching the figure of 8% — it stood at 7.8%, as in March 2001 — there was an upward adjustment to take account of greater penetration in the case of businesses, second homes and so on.

We should not get hung up on particular evasion rates and whether the level of improvement is as great as it should be. We used the best methodology we could find. This ties in with what has been done with a revised model in the United Kingdom. I will not discuss RTE's system in which it would be very easy to find blips, as it would in what we do ourselves. The real problem is the television penetration rate in businesses. We reached a figure of 29%, calculated on the basis of work carried out by An Post. There are real difficulties.

On second homes, there is a huge difference between the statistics of the Department of the Environment, Heritage and Local Government for house completions and those of the CSO on households. Much of this may be due to second homes such as holiday homes and so on. As I understand it, the difficulty with having a holiday home, if one is lucky enough to have one, is that if one brings a television set from one's main residence to the holiday home while spending a weekend or holiday there, a separate licence fee does not have to be paid. If, however, one leaves the television set in the holiday home, a fee must be paid. I have a lot of sympathy for inspectors visiting holiday homes and trying to do their work on this basis. I am not suggesting in the report that this is easy. It is very difficult. It is the sort of issue which must be addressed along the way.

Representatives of An Post made a point regarding evasion rates in particular regions of the United Kingdom. Adjusting the figures we have, the situation in Northern Ireland in that regard is not seen to be as bad as it was. In 2001 the relevant figure fell to 19% or 20%. To put it as delicately as possible, we are aware that enforcement activity was difficult in the environment that pertained in Northern Ireland at the time. The situation in Scotland is calculated as being marginally better than in this State. Because of Scotland's separate legal system, the BBC does not have the same power that it has in other parts of the United Kingdom to decide, without reference to other authorities, whether to prosecute evaders who are caught. That is an element to be considered.

The Chairman made a point regarding the Department of Social and Family Affairs. As Mr. Tuohy noted, the advent of greater computerisation has lent a great deal of support to the sort of approach that will be taken. It is important that PPS numbers are recorded and so on but one of the benefits of the current system is that since the television licence must be renewed annually, it proves one is alive and that licences are not being issued to dead people. Under the medical card system, we have had ghost medical card holders. I am not suggesting in the report that we have had ghost television licence holders. Assuming data protection arrangements can be complied with, I imagine that the computerisation of the GRO, the Government register of births, deaths, marriages and so on, will be a large boon in moving to such a system. It makes eminent sense to move in that direction.

Mr. Tuohy

I thank the team from the Comptroller and Auditor General's office, including Patricia Sheehan and Eoin Dormer, for the work it has done which has been very helpful to us. I also acknowledge the work done by the relevant unit in An Post. The challenge is not easy but we continue to work with that unit and RTE on the liaison committee which is an important mechanism. We will report to the Oireachtas regarding legislation. With regard to today's discussion, we will brief the Minister and bring forward policy proposals. To be fair to the committee, we did not want to do this in advance of today's meeting.

Chairman

The Comptroller and Auditor General made a point regarding the GRO.

Mr. Tuohy

The issue he raised is one we will take up with the Department of Social and Family Affairs. The key issue where data are being exchanged is data protection, in respect of which there is a balance to be struck but that is the business of the Data Protection Commissioner and the Department of Justice, Equality and Law Reform, on which discussions have to take place. There is always a very thin line between the Government possessing all information about a person and at the same time giving that person access to services. Ultimately, that will be a political call by the Oireachtas.

Chairman

I thank everyone for attending. I also thank the Comptroller and Auditor General for his excellent report which the committee has noted. However, it reserves the right to review the issues raised in the coming months. There are great possibilities in respect of good business practices being introduced which would greatly benefit the national broadcaster which should not be seen as a soft touch in terms of licence fee evasion. A clear message must be sent via RTE, the Department and the current licence fee collector, An Post, that the collection process is efficient. It would be very disappointing if the recommendations of the report were not efficiently implemented. We hope that when the matter is reviewed in a few months' time, we will see clear evidence of implementation.

Next week we will consider the 2002 report of the Comptroller and Auditor General and Appropriation Accounts: chapter 3.1, provision of accommodation for the probation and welfare service; chapter 3.2, use of limited liability companies, Vote 10 — Office of Public Works, and Vote 44 — flood relief.

The witnesses withdrew.

The committee adjourned at 1.15 p.m. until11 a.m. on Thursday, 27 May 2004.