Channel 4: Privatisation (Communications Committee Report)
(7 years, 2 months ago)
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Lord Best (CB)
My Lords, I rise to introduce this debate as the chairman of your Lordships’ Select Committee on Communications at the time when it produced the report entitled A Privatised Future for Channel 4?. Note the question mark. We completed our work over a year ago and there have been some dramatic developments since then. I will be sharing some thoughts on the current position, as will no doubt a number of your Lordships during this debate. I hope the Minister will bring us right up to date.
First, let me summarise our unambiguous and unanimous recommendation to government: “Don’t privatise Channel 4”. Our view was that Channel 4 played several significant roles within the so-called ecosystem of broadcasting: in providing a different perspective; in promoting greater diversity, with the Rio Paralympics as a brilliant example; in delivering a high-quality news service with Jon Snow at peak times; in supporting film-making through Film4; and in commissioning regional production of important television programmes. We feared that these special roles would be threatened by privatisation, and harsh commercial imperatives would make it hard for Channel 4 to fulfil its special remit as a distinctive and innovative broadcaster.
The Channel 4 corporation—which includes More4, E4, All 4, 4Music and Film4—is currently 100% publicly owned, although it is 100% commercially funded. Its annual revenue is around £l billion. If offered for sale, we saw a strong likelihood of acquisition by a foreign—probably American—buyer. We saw it as inevitable that this would mean a dilution of the ethos of public service broadcasting and we were doubtful that any fine assurances given at the time of purchase would survive. We noted that the broadcasters’ regulator, Ofcom, does not have the power to revoke Channel 4’s licence and we were alarmed at the prospect of new owners simply walking away from their public service broadcasting obligations.
It is true that the committee was not entirely uncritical of Channel 4’s performance. In particular, we were unhappy with Channel 4’s delivery of its special requirement to make programmes specifically for older children, 10 to14 year-olds, and young adults, 14 to 19 year-olds. We recognised that such programmes do not attract lucrative advertising. But, as also noted by Ofcom’s chief executive, Sharon White, when she appeared before the committee, we felt Channel 4’s commitment to this part of its public service compact was inadequate.
Overall, the committee noted that Channel 4 was doing very well. The audience share for its portfolio of channels is the third highest, after the BBC and ITV, although in terms of revenues it is placed fourth after Sky. Its percentage of younger adult audiences—the 16 to 35 age group—is much higher than for its competitors: 15% for its news programmes, for example, compared with 7% for the BBC. Its financial results were very healthy and its spending on content—particularly new, original productions—was growing impressively.
So, why would anyone want to take drastic action to change the basis on which Channel 4 has been operating with such success? First, I think I detected a political or philosophical antipathy from some commentators toward a publicly owned body—even one that deploys no public money and is profitable—based on a belief that public ownership inevitably brings governmental interference, bureaucracy and inefficiency.
Secondly, we noted the very obvious motivation from HM Treasury: privatisation would raise funds from a market sale that could reduce the nation’s debts. We heard different views on how much might be achieved, with a range from about £800 million to something over £2 billion. However, off-setting such one-off gains are, of course, the potential losses, not least of jobs in production companies and exports. A short-term windfall would only be sensible if the sale meant greater long-term gains.
The third argument was that privatisation would bring opportunities for greater financial sustainability, with new investment and increased efficiency. A key question for us, therefore, was: is Channel 4 in a financially vulnerable position from which privatisation could save it? The then Secretary of State for Culture, Media and Sport, John Whittingdale, told us that C4’s future was very uncertain. Given its dependence on advertising revenue, he was worried that—unlike Sky with its subscription revenues and ITV with its own production business—C4C depended on advertising for 90% of its income, putting it in a precarious position in the event of an economic downturn. He felt that a privatised Channel 4 could make savings which could go to programme-making. Another witness, David Elstein, thought privatisation could lead to the cutting of well over half the 800 jobs at C4C, and the savings could go to enhancing the channel’s public service remit.
Your Lordships’ Communications Committee, on reviewing the evidence, did not accept that Channel 4 was in a precarious position. Its revenues were buoyant and it had healthy reserves to see it through any dips in advertising revenue. We also noted it was ahead of the game in shifting its emphasis to advertising online, a strategy which is of particular relevance given its high concentration of younger viewers.
That was then. I now turn to the position facing Channel 4 today, some 18 months after publication of our report. In the intervening period, DCMS continued to look at the options for Channel 4 and Karen Bradley, the new Secretary of State, wrote to me in the spring with the big announcement that the Government will not be pursuing the privatisation route. This decision was very welcome to the committee and I like to think that our report had some modest influence on it. Karen Bradley’s letter added that the Government were keen to see Channel 4 making a greater economic contribution to the nations and regions beyond London and the south-east, where two-thirds of programme producers are currently based. She announced a consultative exercise to look at whether Channel 4 itself should be based outside London and whether more of its programmes—which are all commissioned from independent producers, not made in-house—should be made away from London.
Coming to today, therefore, there seem to be two key questions for the future of Channel 4. First, with the current uncertainties in the UK economy, is the outlook for the channel still as rosy as it was when the “no privatisation” announcement was made? Secondly, could and should Channel 4 move itself and/or more of its spending away from London and the south-east? In considering these two questions, the committee was helped by a special, informal session last month with Channel 4’s chair, Charles Gurassa, and its chief marketing and communications officer, Dan Brooke. On Channel 4’s financial strength, Ofcom noted that a combination of the rise of online video services such as Netflix and Amazon, and post-Brexit weakness in the wider economy, could threaten C4C’s viewing figures and advertising revenues. However, Ofcom added that the TV advertising market is likely to recover. Channel 4, with its quality programmes and investment in the popular All 4 online platform, to which—incredibly—half the population of 16 to 34 year-olds have signed up, and with the cushion of healthy reserves, would appear to be well able to weather all but the most devastating storm. Ofcom’s analysis concluded that,
“within the bounds of the most likely trajectories for TV advertising spend and TV viewing, C4C can remain financially sustainable in its current form throughout its current licence period”—
that is, until 2024.
The second issue is Channel 4’s impact in the nations and regions. Clearly, government is keen to see this publicly owned enterprise playing its part in stimulating the local economies away from the south-east, and the results of Karen Bradley’s consultation suggest that this view is widely held. Certainly, a similar success story to that of the BBC’s move to Salford’s MediaCity would be more than helpful. However, the BBC is close to 25 times the size of Channel 4; and since C4 commissions all its programmes externally and has relatively few staff in London, relocating its HQ would be unlikely to bring together a new hub for creative industries elsewhere. Indeed, a number of the London posts would still need to remain there to handle the advertising sales which require close proximity to that industry in Soho.
Enders Analysis, which consistently furnishes the committee with well-researched reports, also points to the risks of a considerable loss of talent and extra staff costs from redundancy and relocation packages. Enders suggests that the additional spending to achieve a modest regional economic impact could be poor value for money.
To prevent an enforced relocation to Birmingham or elsewhere, Channel 4 needs to succeed in making the case that its commissioning investment in Scotland, Wales, Northern Ireland and the regions furthest from the south-east can and will grow, probably by C4 accepting a formal increase in its current requirement for 35% of its production budget to be spent away from London. If government is not convinced and Channel 4’s HQ must move away from Westminster, to recoup the costs involved, compensation for Channel 4 may need to be found in an extension of its licence beyond 2024.
In conclusion, I stand squarely by your Lordships’ Communications Committee’s core recommendation that Channel 4 should not be privatised. This broadcaster continues to do innovative work, creating much-needed plurality in the broadcasting world, championing diversity in many forms—nearly half the UK population watched the Rio Paralympics—and it seems well able to sustain its strong financial position into the future. I am sure that the Minister will confirm this. I hope that he will update us on the Government’s current thinking on the possible move for the C4 HQ. I know the committee will want to join me in wishing Channel 4’s new chief executive, Alex Mahon, every success.
I thank my successor, the noble Lord, Lord Henley, for arranging the very helpful updating session with Channel 4 last month. I thank the committee’s then clerk and policy analyst respectively, the incredibly diligent Anna Murphy and Helena Peacock; the committee assistant, Rita Logan; our special adviser, Professor Richard Tait; and, of course, my fellow committee members, who all engaged so fully in our inquiry and produced what I hold to be both an insightful and influential report. I beg to move.
Lord Sherbourne of Didsbury (Con)
My Lords, I was a member of the Communications Committee which produced this report in July last year. I begin by paying tribute to the chairmanship of the noble Lord, Lord Best. I was on the committee for the three years when he was chairman, and one could not have wished for a more effective chairman. He always managed to achieve in our reports that often elusive combination of consensus and clarity. He has also achieved something else rather remarkable—namely, the Government have agreed, and acted on, the recommendations of our report. I commend the noble Lord, Lord Best, and the committee for that.
At the heart of this debate is the following question: what is the point of Channel 4? What is its distinctive role in UK broadcasting? The statutes and licensing agreements that govern Channel 4 are set out in our report. There is the Communications Act 2003 in Appendix 4; the Digital Economy Act 2010 in Appendix 5; Channel 4’s licence agreement in Appendix 6; and there are the public service broadcasting obligations set out in the Communications Act 2003 in Appendix 7. If one reads these, one can become very glazed-eyed. But help is at hand, because the chair of Channel 4, in his annual report, has summarised admirably and crisply Channel 4’s obligations as being,
“to innovate, challenge and inspire, to stimulate debate and open the door to opportunities for the stars of tomorrow”.
The issues in my mind, therefore, are as follows. Does Channel 4 have the right business model to achieve its remit? Is it being effectively assessed? To what extent is it meeting its remit, and where could it do better? Finally, should it be privatised?
First, on the business model, last year revenues rose to almost £1 billion, the highest ever. Of course, there must be a question mark over future advertising revenue, but that would be true of any commercial organisation, not just Channel 4, and there has been a strong performance in sales and digital revenues. Channel 4 has a strong balance sheet and reserves. Would privatisation help it to do any better? The evidence given to the committee on this point was mixed, but the view that we came to was that a change of ownership of Channel 4 would put at risk the remit of the channel.
This brings me to the next question: how accountable is Channel 4 and is it being assessed effectively? Some of the obligations—the quantitative ones—are obviously easier to measure. The qualitative ones were seen as inevitably fuzzier. However, Ofcom told the committee that it could,
“live with a degree of fuzziness,”
because, as it said, the quality of broadcasting cannot be easily measured.
The next question is whether Channel 4 is achieving its remit. Our broad view was that, yes, it was. It is worth highlighting as an example of this—as was mentioned by the noble Lord—the wonderful Channel 4 broadcast of Rio’s 2016 Paralympics. This was its largest ever international broadcast, which increased still further the public’s interest in, and support for, these games—and all in Channel 4’s Year of Disability.
Could Channel 4 do better? We received evidence from the then Secretary of State and others that the programming for older children and young adults was unsatisfactory. I hope that that has been taken note of.
Finally, I turn to the central question that we addressed: should Channel 4 be privatised? If it were to be privatised, would it be possible to preserve its remit? Both David Abraham, the chief executive, and the noble Lord, Lord Burns, thought that the pursuit of profit would erode the remit. Another witness—this was interesting and important—did not appear at all confident that Ofcom would always require adherence to the remit. The most interesting point that emerged, however, which, from memory, emerged only after a certain amount of delving, was that Ofcom confirmed that it did not have the power to revoke the Channel 4 licence. That would require a change in legislation. So the view that we took was that, in the case of any change of ownership through privatisation or any change in the remit, Ofcom would not have the power to revoke the licence. For all those reasons, our committee concluded that there were more risks than benefits to privatisation. I therefore welcome the Government’s decision that Channel 4 should remain publicly owned.
Baroness Quin (Lab)
My Lords, I, too, welcome the report produced by the Communications Committee. I am a member of the committee, but I cannot claim any credit at all for this report, because it was agreed shortly before I joined. However, it is an excellent report, and I also very much welcome the Government’s response to it. As an opposition Member of this House, I do not often utter that phrase, but I warmly commend the Government for their positive response to the report and for the decision not to privatise Channel 4.
I also welcome in the Government’s response the focus that they gave to the needs of the regions and nations, and I will focus the majority of my marks on this issue. Over the years, I have been concerned by the reduction in regional activity and in regional budgets of the main television services in this country. It has been very marked—and I now have quite a lot of nostalgia for the old days of Tyne Tees Television and its busy studio in Newcastle, and for the BBC’s equivalent in the west end of Newcastle, in Fenham, which was called the “Pink Palace”, which was also a place of great activity at that time. It is important that we shift the focus back to the regions in this process. However, I am conscious of the fact that we cannot expect Channel 4 to solve the issue on its own. Obviously, the industry as a whole needs to look at it, in conjunction with government.
I also accept the point made by the noble Lord, Lord Best, that the issue cannot be solved simply by Channel 4 moving headquarters, with some of the difficulties that that involves. Noble Lords will please take it as read that, if Channel 4 decided to move to Newcastle and Gateshead, I would be absolutely delighted. However, I recognise that, given the relatively small number of people who are employed and the fact that most of Channel 4’s activity is commissioned, as the noble Lord, Lord Best, said, simply trying to move headquarters would not be an answer to this issue. In fact, when Channel 4 commissions programmes, obviously, it does so from independent companies that already exist. An issue which is important for me is to try to increase the number of those independent companies in areas of the country where they are underrepresented. That is a more important way forward to address some of the regional deficits than simply concentrating on headquarters.
I am aware that Channel 4 does a lot already; it has offices in Glasgow and Manchester, and certainly the briefing I saw from Channel 4 indicates that spending has been increased in a number of areas of the United Kingdom. For example, spending has increased a lot in the West Midlands, and it has doubled year on year in Northern Ireland and in Wales. I applaud that; I am not making a case for the north-east wanting to take money away from elsewhere—which I hope will reassure my noble friend on the Front Bench, Lord Griffiths of Burry Port, whom I welcome wholeheartedly to his new role in the House. I very much look forward to hearing his contribution later on in this debate.
I am also pleased that Channel 4 is committing itself in various ways to look at the regional deficit we have. However, given its current activities, I am slightly worried that an east-west divide might replace a north-south divide. I encourage Channel 4 to look closely at increasing some of its activities east of the Pennines as well as in the western half of the UK. There are many ways in which that can be done. I think that Channel 4 already has an apprenticeship scheme, and it needs to ensure—I think it is endeavouring to do so—that apprentices are found in different parts of the UK.
The Communications Committee recently carried out a study of the theatre industry. One difficulty facing apprentices from areas outside London was simply the cost of accommodation in London and the difficulty of coming to London to undertake those apprenticeships. Again, Channel 4 cannot solve that problem, but I think that the Government and Channel 4, and the Government and the media industry more generally, could, working together, make a difference in ensuring that apprenticeships provided an opportunity for people all around the UK and not just in one area.
I also encourage Channel 4, and indeed other media companies, to co-operate with universities in the regions and with all those who provide training and education in this important sector of the economy. In its report on the theatre industry, the Communications Committee found that there was a very uneven picture across the country regarding careers advice and schoolchildren being alerted to opportunities in the media industries. This is something that the Government, as well as the industries, have to look at in their contacts with the education system.
Finally, Channel 4, as well as other companies, should look at the events that will be happening in our country over the next few years and seek to maximise the opportunities that they will provide. Just to mention one, next year the north-east will host the Great Exhibition of the North, a celebration of the history and heritage of the north, which will also look to the north’s future. It will provide opportunities for many of our media companies, including Channel 4, to highlight some of the activities in that part of the country.
I am out of time. There are many other points that could be made, but I conclude by once again welcoming the report and the response to it by the Government and Channel 4. I look forward to seeing the results of this approach in the very near future.
Lord Razzall (LD)
My Lords, although my time on the Communications Committee had come to an end by the time this report on Channel 4 was produced, I have remained involved in the subsequent deliberations about the channel’s future.
I take this opportunity to thank the noble Lord, Lord Best, not only for this report but, as mentioned by the noble Lord, Lord Sherbourne, for his work as chair of the committee, which overlapped with my membership of it. This is also a moment when I would like to commemorate the work of my friend Lord Hart, who sadly passed away in the summer. I think it was Lord Hart who came up with the brilliant title for one of the committee’s reports on the BBC, Reith not Revolution.
For more than 90 years, the concept of public service broadcasting has been at the heart of the British broadcasting model. Public service broadcasters have been tasked with offering their audiences the best of everything—programmes whose goal has been collective public benefit in the broadest sense, rather than simply courting popularity or revenue. Channel 4 has epitomised this approach with its policy of targeting younger viewers and its specific concentration on, for example, disabilities—hence coverage of the Paralympics, with its concentration on the employment of people with disabilities—and its landmark coverage of Gay Pride on the 60th anniversary of the Sexual Offences Act 1957.
As an aside, although Channel 4 has, as I said, been ground-breaking with its focus on disability issues, and in the appointment of the first female chief executive of a major channel, it is a shame that its copybook was somewhat blotted over ethnic diversity. This is arguably the fault of the Government, who apparently vetoed a well-qualified minority ethnic woman as a non-executive director, causing, as people will remember, uproar in the BAME community. The executive team at Channel 4 is all white.
As the noble Lord, Lord Best, said, when this report was published, the threat of privatisation was in the air. The report is unequivocal: do not privatise. The committee clearly felt that privatisation would have put at risk the very remit of Channel 4, which is a vital part of the creative economy, providing invaluable support for smaller independent production companies and acting as a platform for exciting new programming. The major financial issue with privatisation is that to generate a significant private investment in Channel 4 would be incompatible in value with retaining the remit which makes Channel 4 so special. As shown in evidence given to the committee, with the inevitable focus on profit rather than the channel’s remit, privatisation would have had a detrimental effect on Channel 4’s coverage of news and current affairs, diversity and the plurality of public service broadcasting in general. For example, to privatise Channel 4 would be likely to imperil the great success story that has been referred to, including the pioneering coverage of the Paralympics. On these Benches, we are delighted that the Government have agreed with this report and shelved the idea of privatisation. This is clearly an opportunity for the Government to confirm that the question of privatisation is permanently off the agenda and will not be revisited.
As the noble Lord, Lord Best, has indicated, there are new challenges now faced by Channel 4, in particular the idea announced by Karen Bradley at the end of March—and I think included in the Conservative Party election manifesto—that Channel 4 should be moved out of London. In looking at this suggestion, it must be remembered that Channel 4 makes no programmes of its own, so is a publisher not a programme maker, and employs only 860 people in its London office.
There are two major arguments against a full removal of Channel 4 from London. First, as one noble Lord said, the UK’s advertising industry is primarily based in London, so the 250 or so staff involved in this area would have to remain in London to successfully sell their advertising. Secondly, and this is a point not often recognised, a relocation outside London would be damaging to a number of small regional independent production companies who sell their programmes to Channel 4. A number of these companies are pitching programmes with relatively small budgets and currently can make only one journey to London to sell their product, allowing them to tour all broadcasters in a day. A relocation could be expensive and disruptive to these companies, costing significant extra time and money.
However, that is not the end of the story. At the moment, Channel 4 is reviewing its options, which will obviously mean waiting until the new chief executive is in post at the end of the year. But there are a number of actions that Channel 4 could take to improve its involvement with the nations and regions. First, there is absolutely no reason why the present regional quota of 35% of programme spend should not be increased to 50% or more. Secondly, there is no reason why regional commissioning editors cannot be established outside London, mirroring production hubs such as Manchester. Finally, Channel 4 should seriously consider the suggestion made by PACT that All 4 and the technology team should relocate to, say, Birmingham. This would involve around 200 jobs, and dovetail with the move of half of BBC3’s team to the city and with Birmingham’s role as a trading academy and centre for BBC journalism.
In conclusion, I welcome the decision to kill privatisation. Winning the title of Channel of the Year at the Broadcast Awards in both 2016 and 2017 and the top prize at the 2017 Digital Cinema Media awards is a true testament to the success of this exceptional broadcaster.
Lord Birt (CB)
My Lords, it is most disrespectful to my noble friend Lord Best’s Select Committee to have allowed more than a year to pass before discussion of this insightful and comprehensive report. Indeed, discussion has been delayed so long that, as others have observed, the report has been overtaken by events; albeit in this case a most happy event. Thankfully, the Secretary of State proves to have a mind of her own and has rejected the option of privatising Channel 4, which an unlucky civil servant inadvertently advertised to the world—not the first person to fall foul of the powerful magnifying lens on the very doorstep of No. 10.
The argument against privatising Channel 4 is quite simple. It will apply as long as television channels remain a significant pathway for reaching audiences with television programmes, which will be for quite some time to come. The argument is this: alone in the world, in a century of benevolent and insightful regulation, UK Governments of both main parties have put public service broadcasting at the centre of our national life.
The BBC was born nearly a century ago with fine purposes but it was the regulators of Independent Television that required ITV, where I apprenticed as a lad, to spend its advertising monopoly profits across the gamut of public service genres, and thus spur the BBC to shake off the fusty cobwebs of the 1950s and to reach true heights of creativity and ambition. Channel 4, born without a profit motive, has for decades brought a new and different creative slant to British broadcasting —a more piquant taste: innovative, experimental, risk-taking. As almost all noble Lords have mentioned, its embrace of the Paralympics was simply magnificent—an extraordinary, unimaginable game changer which gave us a new cast of take-your-breath-away heroes for the nation.
Another of the channel’s greatest achievements is as a chronicler. If future generations want to understand the flavour of our times, how social attitudes and mores shift, they will be able to watch “Benefit Street”, “Gogglebox”, “Educating Yorkshire” and even “Naked Attraction”.
Like all institutions, however, Channel 4 has certainly slipped the odd catch. It completely failed over recent decades to appreciate the significance of digital, and it dropped the ball badly in acquiring “The Great British Bake Off”. Channel 4 is there to innovate, to create anew, not to outbid another public broadcaster with precious public funds and, in the process, fatally to wound a deeply loved national institution and, moreover, like “Strictly”, a quintessential BBC programme. The snatch was not even competently done. It was if Channel 4 long ago had bought the Beatles but forgot to contract John and Paul. The “Bake Off” episode was a grievous failure of both the management and governance of Channel 4. It will have new management, if not yet new governance. Let us hope that a new chief executive will put the channel firmly back on track.
We need Channel 4 to stick to its last because public service broadcasting in the UK is not waxing but waning. The competitive environment has changed fundamentally in two decades as advertising shifts to the internet. As a result, ITV, where I spent much of my career, now offers a tiny fraction of the public service programming that it once made. The BBC’s resources, too, have been massively depleted by the two raids on its finances since 2010, with substantial programme cuts still to come. So overall investment in the UK in public service broadcasting is declining substantially. If Channel 4 were to be privatised, the notion that somehow its public service broadcasting remit could be retained is simply sophistry. I have worked extensively in both public and commercial broadcasting and I am absolutely certain from my own direct experience that the imperatives are wholly different and that a privatised Channel 4 would be very different.
Our best and only hope for the foreseeable future is to have two independent public service broadcasters, the BBC and Channel 4, the one complementing the other, providing mutual stimulus, each keeping the other on its toes. We should not want to return to where we were 60 years ago, when I was a teenager, with a single public service broadcaster, with all the risk of stasis and complacency that all monopoly eventually brings.
The Lord Bishop of Chelmsford
My Lords, I, too, am a member of the House of Lords Communications Committee. We normally meet on a Tuesday afternoon, so it is nice to have our meeting through the medium of this debate, in which members past and present can speak to each other. I thank other noble Lords for joining in as well. I also want to pay tribute to the noble Lord, Lord Best, for the wise and winsome way he chaired the committee for three years and, in particular, for helping us to produce this report, which we dare to think has made a bit of a difference.
To put it simply, there is nothing quite like Channel 4. I realise that some people may think that bishops arrive fully formed, like ships in full sail, from a production line over the river at Lambeth, but all of us have other lives both past and present. In my early 20s I worked for several years in the film industry and saw at first hand the huge boost that was made to British film by Channel 4. I remember going to a meeting in 1979 which was held to discuss the very possibility of Channel 4 as a publicly owned public service broadcaster but funded by advertising, and being inspired and excited by the different perspectives that Channel 4 might offer—and so it has. In many areas, Channel 4 has pioneered a broad diversity of views and voices, most recently, as has been said many times in the debate, the Paralympics.
Unlike some other broadcasters, Channel 4 gets the fact that diversity in the UK today cannot just mean regional accents. Here I think I need to say of the latest things coming from the Government that, while of course we need to support the regions, to understand Britain today we need to move beyond regional accents to the other things that shape us culturally and ethically. I would like to see all public service broadcasters do much more in this area. That is because to understand our own national diversity and at the same time create greater coherence and commitment to each other within that diversity, we need to see what it is that creates community and belonging through the variety of narratives that shape a world view and an ethical framework for inhabiting the world. In the past this may have happened through belonging to a town, a county or a nation. It was underpinned by shared values that often had their roots in a common religious tradition. Today, however, it is just as likely to happen through a multiplicity of faiths or through other cultural and subcultural ways of belonging.
If anyone gets this in British broadcasting, it is Channel 4. Its challenging remit to provide diverse and alternative views is therefore significant enough in itself, but the fact that it is a public service broadcaster funded by advertising means that, unlike every other superficially similar broadcaster one could name, its motive is profit not for the good of its shareholders but for the further development of its ambitious and adventurous programming. Therefore, as has been well put by the noble Lords, Lord Best and Lord Sherbourne, to privatise the broadcaster would not only be to compromise it but to be in danger of destroying it. Whatever any potential buyer may promise when it signs the cheque, the need to deliver a profit as the end in itself is bound to erode the diversity of its programmes, especially those which attract less in advertising. Many of the people we interviewed during our inquiry pointed out that it will be the adventurous, diverse and alternative programmes that are likely to suffer most. Similarly, as other noble Lords have emphasised, moving out of London seems unnecessary since all the advertisers are in London. Any financial savings would soon be swallowed up by train fares, travelling back to the very place the organisation had just vacated.
The report speaks for itself and, along with others, I am glad that the Government have responded so positively to it. However, let me emphasise that there are two areas where Channel 4 needs to improve its game. The first is programmes for children, where, in recent years, Channel 4 has not really done anything much at all. The second, where it has particular responsibilities, is programmes for children and young people. Both Sharon White, the chief executive of Ofcom, and the Children’s Media Foundation have challenged Channel 4 on this issue. Sadly, the reason there are fewer programmes for those age groups is probably commercial: children’s programmes just do not attract sufficient advertising. However, if Channel 4 wishes to continue to operate in the way it does—rightly, in my view—it really cannot use that argument, since that is the very argument it employs in defence of its status and funding arrangement. It cannot have it both ways. If Channel 4 is to be a public service broadcaster financed by advertising, it needs to use the more profitable programmes to support those that are less so, such as those for children.
Channel 4 is a hugely innovative and successful broadcaster with a unique place in the hugely creative British broadcasting economy. The Government and our nation need to be proud of what we have achieved in broadcasting in this country and ensure that this intricate, fairly fragile—as the whole world of advertising changes in a digital era—but nevertheless effective media ecosystem is not damaged by unnecessary interference. However, Channel 4 must be held to account, particular on programmes for children and young people, so that it continues to produce a range of broadcasting with an ever-greater diversity of views and voices, and so that we are not just better informed and entertained but better able to understand who we are—and see it reflected on the box.
Lord Holmes of Richmond (Con)
My Lords, it is a particular pleasure to speak in the debate. In doing so, I declare my interests as set out in the register. I also want to salute the noble Lord, Lord Best, for all his work as chair of the Communications Committee, not least on all the reports pertaining to broadcasting.
When I was growing up in the post-industrial, grey West Midlands, the most amazing of bright lights arrived, in the form of a multicoloured figure of four. Even the “4”, on-screen, before 2 November, was exciting for us in believing a new channel was arriving in our town. I was 11. I did not know about ownership models; I did not know that the channel was going to be publicly owned and privately funded; I did not know about the statutory remit; I did not know it was going to be a publisher broadcaster. I did not know any of that, but I knew that the channel, once it started—with the cutting-edge “Dispatches”, “Channel 4 News”, American football, “The Tube” and the monstrous Max Headroom—was mind-blowing television for me. I did not know the word “diversity”, but I knew this was different. It changed my viewing habits and, through that, it changed my view.
Later in life, I learned about the operating model, ownership, the statutory remit and much more but, fundamentally, that point of the purpose of the channel stuck with me from those very first viewing days. What I believe is the golden thread can be simply and essentially expressed: a model that enables profit into programmes. That profit is 20% of the UK television ad market—some £1 billion. It may interest your Lordships to know that the first advert ever to be screened on Channel 4 was for the Vauxhall Cavalier 1600 GLS—a nice car. I am tempted to ask whether the Minister is still driving his. To come right up to date, that ad money is going into content, whether we are talking about TV or new media. Everything about the future is about content and Channel 4 currently puts 64% of its revenues into content.
As noble Lords have mentioned, perhaps the greatest reason for having a Channel 4 was demonstrated by its coverage of the Paralympic Games. I was fortunate to do the deal with Channel 4 for the summer 2012 Paralympic Games in London. What the channel did no other broadcaster could have done. It was innovative, ground-breaking, challenging, attitude-altering and opportunity-creating broadcasting. Right from the moment of signing the contract and through the ad campaign, that jokey, jaunty style of Channel 4 was evident; for example, the trailer featuring Paralympians coming out of the tunnel post-Olympics with the strapline, “Thanks for the warm-up”. “Meet the Superhumans” was one of the greatest pieces of sports marketing ever made to promote the Games, with “The Last Leg” getting into all the issues not just around Paralympic sport but around disability. It used the Games as a driver to get into people’s minds and homes, shaping attitudes, beliefs and understanding in relation not just to disability but the whole world of diversity.
Channel 4 did that not just for 2012; it took it forward to Rio 2016. It increased both the level of coverage and the number of those involved in it, with 75% of talent on-screen and behind the cameras being disabled. It also used 2016, the year of the Rio Paralympics, as the channel’s year of disability. I was delighted to chair the year of disability advisers, not just because we had a great mission on our hands but because, as an acronym, it spelt YODA.
Beyond programming, 50% of Channel 4 apprenticeships and 35% of work experience placements went to disabled people last year—pushing and stretching what is possible more and more. That was 2012 and 2016. How different does the UK feel in the summer of 2017 compared to that golden summer not just of sport but of possibility in 2012? Now we have Brexit, a hung Parliament, the fighting in Raqqa, questions about Russia, terrorism and Trump. If there was a need and purpose for Channel 4, a gap in the market, in 1982, the need is tenfold, a hundredfold, in the summer of 2017.
And that begins in the nations and regions of the United Kingdom. The channel already exceeds its nations and regions target of 35%. Routinely, more than 55% of new starts on the main channel, expressed in terms of cash and hours of coverage, derive from the nations and regions. In 2016, the proportion from Wales and Northern Ireland doubled, with a fivefold increase from the Midlands, supporting SMEs, employing more than 17,000 people and unleashing ideas and talent right across the United Kingdom.
Commissioning spend is the most effective means of driving regional economic growth in the United Kingdom—those are not my words or those of Channel 4, but those of the indies through their umbrella association, PACT. Yes, the channel does a lot, but there is more to do in continually striving to see how we can be bolder as a channel and achieve more in terms of production, enablement and empowerment across the nations and regions.
We are at a turning point for Channel 4. The don that is David Abraham is soon to depart, to be replaced by the marvellous Alex Mahon. Yes, the leadership is changing; yes, the crown is passing, but the mission remains the same. As the right reverend Prelate said, diversity in all its forms is about the nations and regions, but it is about so much more than that if we are to connect with this country and to enable it to feel like a United Kingdom once again. The leadership is changing. The mission remains the same: to stretch, challenge, push and provoke—producers, indies, commissioners and editors, as much as the viewing public. It is in the statute; it is in the staff; it is in the very DNA of the channel. That is the remit; that is the purpose; that is the point of Channel 4.
Lord Gordon of Strathblane (Lab)
My Lords, what a delight it is to follow the noble Lord, Lord Holmes of Richmond. I regret that my enthusiasm for Channel 4 dates from slightly later in my career. I was no longer a teenager, I am afraid, but well into my thirties. Indeed, I recall speaking at a radio and television conference in Monte Carlo, trying to make the argument that Channel 4 was not a threat to radio advertising. But I agree with the noble Lord’s enthusiasm for the report produced by the noble Lord, Lord Best, and his committee. They have done a great and very thorough job. I am also very glad that the Secretary of State, in her letter to the noble Lord, Lord Best, said the Government were convinced that,
“Channel 4’s public service model and remit, which are so vital to the continued strength of the UK’s broadcasting ecology, would not be best served by privatisation”.
For me, it is really quite simple. It has nothing to do with wicked capitalists or anything else. It is a simple statement of fact. If Channel 4 was privatised, you would have to service the capital involved, either by paying dividends or paying interest on bank loans. By definition, that money would come out of the pot that would otherwise be spent on programmes. Therefore, in my view, it is a bad idea. Logically, I cannot exclude the possibility of Channel 4 being acquired by a benevolent philanthropist who wants to lose money on it for the sake of having influence. That, I suggest, is not a particularly desirable solution. We do not want people wanting their influence spread throughout one of our public service broadcasters. It would also leave you with a great problem as regards the succession.
I was impressed by the committee’s observation that it felt that Channel 4’s current model was robust enough to survive to the end of the current licence period. Here I take slight issue with the noble Lord, Lord Birt. Actually, Channel 4 was quite smartly out of the blocks on digital, faster than a lot of other broadcasters. It has an 11% audience share and a 20% share of ad revenue. Quite early on—in fact, I think it was the first to do it—it started to sign up viewers as registered supporters of Channel 4. That number has now grown to 15 million. As the noble Lord, Lord Best, said, the remarkable figure is that one in every two adults aged 15 to 34 has signed up to Channel 4. I fully foresee political parties raiding Channel 4’s staff because this is something that most people would give their eye teeth to achieve.
The idea of moving Channel 4 is pretty ludicrous in terms of moving the entire staff. Most people already concede that you would have to leave the sales force behind, which is roughly a third. You could make quite a credible argument that the people dealing with Parliament should be left in London—either that or Parliament maybe moves to wherever Channel 4 is going—but logically the two should be together if you want an efficient operation. The same is also true of corporate governance. So you end up with very few people actually free to be moved. For that reason, the comparison with the BBC and Salford is pretty misleading. As the noble Lord, Lord Best, pointed out, BBC staffing is 25 times the size of Channel 4’s. The number of BBC staff in Salford alone is four times that of the entire non-sales force staffing of Channel 4. What was a small disruption for the BBC could be cataclysmic for Channel 4.
In this regard I will quote from the Enders Analysis report. I understand that Enders Analysis also advised the committee in quite a lot of its findings. It makes the point that, at best, the cost of the relocation packages for staff would be close to £35 million, and you would have to give Channel 4 the opportunity to recoup that amount by extending the licence to 2030 or 2034. But even if it recouped the amount, there would still be money being spent on relocation costs for staff that could be spent on programming.
The tragedy is that once people are in London, it is very difficult, for very obvious human reasons, to get them to move, because nowadays if people are a couple, both of them are in jobs. The chances of both of them getting a job simultaneously in the same region outside London are, frankly, next to zero. The number of people who refuse to move is really quite surprising. Some 62% of the people the BBC tried to get to move to Salford refused to go; 90% of Office for National Statistics staff refused to move to Newport. These are huge costs. The conclusion of Enders Analysis is, quite simply:
“If the commissioning layer were to be impaired by the exodus of talent, Channel 4 would effectively cease to be”.
It is as serious as that.
I agree with the point made by the noble Lord, Lord Best, that you are dealing with commissioners here—not people who are making programmes but people who are commissioning programmes—and where they are located does not matter a whit. They could be in Land’s End commissioning programmes in John o’Groats, or vice versa. The money, energy and creative talent are generated where the programmes are made, not where they are commissioned.
In conclusion, I would leave Channel 4 pretty well where and as it is. I understand the observations made about children’s television. I point out simply that it is not that children’s television is not attractive to advertising, it is that politicians, including ourselves, have said that they cannot have any. Confectionery manufacturers would gladly advertise to children if we allowed them to. We have not yet squared that circle. We have to find a way of advertising to children that somehow is acceptable, if we want children’s programmes to be financed by advertising; otherwise, we have to find an alternative method of financing it. All in all, Channel 4 has kick-started the revolution in this country that has created such a vast and thriving independent production sector. While it is attractive to media commentators—and, I am afraid, occasionally to politicians—to uproot the plant regularly to see if it is still healthy, there is a lot to be said for leaving things as they are and letting Channel 4 continue to prosper.
Lord Storey (LD)
My Lords, I, too, thank the noble Lord, Lord Best, and his committee for an excellent report. Like other noble Lords, I am delighted that the Government seem to have pushed to one side their plans for the privatisation of Channel 4. I hope they have been shelved indefinitely. It is comforting to see Channel 4 recognised for what it is: a public broadcaster and national asset that deserves to remain as such and not in the hands of some overseas media tycoon.
The obligations of Channel 4, given to it by Parliament and then defined by itself, are:
“Be innovative and distinctive … Stimulate public debate on contemporary issues … Reflect cultural diversity of the UK … Champion alternative points of view … Inspire change in people’s lives … Nurture new and existing talent”.
It has certainly achieved that, with a plethora of ground-breaking programmes, from the early days when Jeremy Isaacs was the first chief executive, setting the channel’s original cultural approach, with opera and foreign language films and programmes as diverse as “The Tube” and “Brookside”—the latter, of course, made in Liverpool—and the establishment of the “Film on Four” strand, which, it is not an exaggeration to say, led to the revival of the British film industry in the 1980s. Of course, Jeremy Isaacs was the chair of the European Capital of Culture panel which awarded it to Liverpool—a good man. Many noble Lords have mentioned its fantastic coverage in recent times of the Paralympics. One should note that we have in our own midst probably Britain’s greatest Paralympian, one who won more gold medals in swimming than any other. It is of course the noble Lord, Lord Holmes of Richmond.
While I do not promise that my speech today will meet any of the criteria that I listed, I aim to illustrate how a move away from London would not force Channel 4 to compromise on any of its obligations and would even allow it to flourish. The opening at midnight last Friday of the largest infrastructure project in the whole of the UK, the second crossing of the River Mersey, was covered on regional news but not mentioned on any national news broadcast. Imagine if similar treatment had been given to an infrastructure project of such size if it happened in London or the south-east. One reason to suggest that Channel 4 might be better relocating—although it is considerably disingenuous—is that the Government could lead by example. Rather than suggesting that Channel 4 should move, perhaps the Government could move, let us say, the Department for Transport to the north-east. Then we would not see 24 times as much spent on infrastructure per resident in London as compared to the north-east.
Channel 4 has loudly protested that it commissions over 40% of its programmes from outside London, but the actual process of commissioning still takes place in London. Only 30 of its 800-strong workforce are based outside central London—less than 4%. An up and coming regional director or writer, or a media company, must still regularly trek to London if they wish to see any chance of their programme being made. It seems that Channel 4 is not perhaps as nurturing of new talent as it could be, for many are unable and unwilling to relocate to London or even to visit regularly in pursuit of a media career.
Despite this, only 3% of our gross TV industry spending goes to Yorkshire—3%. Only 1% goes to the Midlands and even less to the north-east. Do Channel 4 and the TV industry in general believe that these areas have no new talent to nurture, or simply that those born in the regions with a talent for media must move to London? We currently have the opportunity to ensure that Channel 4 is more open to this new, young, regional talent that it seeks to nurture, and it would be foolish of us not to grasp it. That does not mean that we would leave 400 or so members of staff, or however many, to deal with advertising. I was very much taken—we had not cleared this beforehand—with my noble friend Lord Razzall’s suggestion of how we might move certain parts of Channel 4 to different parts of the country. I hope the Government might take that up.
We are constantly reminded exactly how little government, big business and the media understand the attitudes and issues of those living beyond the bounds of the M25, especially in the north and in Scotland, Wales and Northern Ireland. I hope that a greater understanding born of proximity could be created by the relocation of Channel 4, which surely is sorely needed. Perhaps the idea of the referendum result being to leave the European Union would not have been so unthinkable if the news media had been aware of the mood in Bangor, Berwick or Bury St Edmunds, rather than simply the dominant opinions of people in, for example, Battersea. If Channel 4 truly intends to champion alternate points of view, let us allow it to put its money where its mouth is and support it in moving to somewhere it can easily find the alternative viewpoints it seeks to champion.
Huge figures of money are quoted as necessary to the relocation but I urge us to consider the wider financial effects of the move. The West Midlands Combined Authority predicts that Channel 4 relocating within its bounds would improve the local economy by £5 billion over 10 years—a figure which is not to be sniffed at, even when taken with a pinch of salt. This, coupled with the fact that Channel 4’s relocation budget works out at less than half the money agreed to purchase “The Great British Bake Off” in the deal finalised last year, puts the so-called astronomical costs of relocation into perspective.
We have heard Channel 4’s fears that if it relocates it will lose 62% of its managerial staff, as happened with the BBC’s move to Salford. So what? We must examine whether we can accept Channel 4, a publicly owned British institution, being held hostage by its middle managers. We cannot allow Channel 4 to be held back from new opportunities due to the concerns of staff who have the option to move with it or not, as the case may be. Channel 4 has said that it aims to inspire change in people’s lives. It must then accept and embrace such changes itself.
Finally, as I am out of time, I hope that noble Lords will consider that there are other viewpoints about relocating outside London and the south-east. I wish Channel 4 to continue its ground-breaking media presence over the next several decades.
Baroness Kidron (CB)
My Lords, I declare my interests and take this opportunity to thank the late David Rose, who gave me my first opportunity to direct a film when I was not yet 24 years old and there were no women directors around. I also pay tribute to the noble Lord, Lord Best, who is a diplomat of the highest order and an excellent chairman of the committee, and to the Secretary of State for heeding our call in her wonderful decision not to privatise Channel 4.
I thought that I would be providing an alternative view, but it turns out that I rise only to support the noble Lord, Lord Storey, which I am happy to do. I want to draw attention to an influential report, A New Destination for the Arts, which many noble Lords may remember was published in 2015 by GPS Culture. It made a very strong case for the transfer of public arts funding to the regions and nations. The report became the zeitgeist for a couple of years, and was responsible for a huge shift in attitude, with vast sums of public money and some private funds going from London to the regions. The report argued that London had drawn further and further ahead of the rest of England in its dominance of cultural life and that unless decisions on programme design and funding allocations were taken at local level, the privileges and concerns of a metropolitan elite would always prevail, thereby leaving the nations and regions behind in relation to the cultural, economic and social benefits of the creative industries. Crucially, that also leaves them out of the financial support and training of creative talent.
I hear those noble Lords who talk about reallocation and the dearth of talent. There has been a presumption in this debate that all the talent lives in London. I would say that while there is a presumption that most of the talent works in London, it does not necessarily live there, and this is a huge opportunity.
Furthermore, the report gave evidence that the rebalancing would have to be at sufficient scale to reduce the risk of parochialism and ensure the creation of creative communities, which rely on a mix of skills and competencies to make creative collaboration and production sustainable. The same argument pertains here. We have seen what the BBC’s move has meant in Salford; we have seen the “Game of Thrones” effect in Northern Ireland and that of “Doctor Who” in Cardiff. Controversial and expensive as that BBC move to Salford was, it has had a significant economic and cultural impact, with a growth in opportunities for local employment and training. We can see that a more diverse group of decision-makers eventually ends up making our screens more diverse. That includes the vast numbers of UK citizens who live outside London and are currently under-represented, not only on the screen but particularly behind it.
I accept Channel 4’s arguments that moving its production spend and not its headquarters would make the greatest difference, that it is a publisher and not a producer, and that it wishes to stay close to its advertiser clients. But as the report articulates, it is only by creating an entire environment, sufficiently large and powerful that commissioners and production staff live and work, side by side, outside the capital, that we will see cultural change. What we have to decide is what we want to see in cultural change. Equally, I accept that if the Government were to insist on the superficial act of moving the headquarters but leaving the production spend with companies largely based in London, the cultural dominance of decision-makers in London would remain. The more exponential benefit of production spend is a greater contribution, so it is an all-or-nothing picture.
The noble Lord, Lord Best, will laugh if I disagree with Enders, because I often disagree with Enders. However, I think its assumption that the talent is in London and it has to move that way is false. As someone who plays host to at least 30% of the members of the Newcastle acting community who have to leave their families, their houses and their homes to come to London but who cannot afford to live and work away from home unless they B&B with me, I think we have to take this seriously.
I would like to make it clear that Channel 4 exceeds its current remit and that my words, and possibly those of the noble Lord, Lord Storey, are applicable to any major institution in the cultural industries. Whether it is for Channel 4 to fulfil the vision of moving something up north is an open question but, unless it is done by someone in the cultural industries, we are going to have an industry that is perpetually out of balance.
Our public broadcasting is the envy of the world. Its independence is an essential aspect. Channel 4 is an independent statutory organisation that enjoys sole responsibility for delivering undertakings on a 10-year licence, which it is in the middle of, so I do not understand on what basis we are insisting that it does anything—because, until it fails to meet its existing obligations, I do not see a role for government in moving it anywhere. While I personally would be delighted to see Channel 4 do its brilliant work of making distinctive and innovative programmes and challenging and inspiring further from this House than Horseferry Road, that is a decision for the Channel 4 board, not for the Secretary of State.
Lord Griffiths of Burry Port (Lab)
My Lords, it is a pleasure to be here. I am delighted to be speaking to a report introduced so wonderfully by the noble Lord, Lord Best, to whom tribute has been paid from many quarters for the clarity with which he put his view and for the intelligence with which he anticipated so many of the points that I want to make. I was delighted to hear the impassioned speech by the noble Lord, Lord Holmes, which swept us off our feet. He told us of his watching habits at the age of 11. It was a long list. My only disappointment was that it did not highlight a programme on which I appeared more than once: “The Big Breakfast”. I shall never forget the experience of sitting on the studio couch being interviewed by two puppets called Zig and Zag. Some of the committee work in this House has made me aware of that experience and of some of its colour.
The future of Channel 4 must be a matter of concern for all of us. Since it was set up in 1982, it has become part of a brilliantly conceived ecosystem of free-to-air provision for the British public, and we ruin or harm or diminish it at our peril. I, too, regret that this report has taken so long to come to our attention on the Floor of the House. When I was reading it, I found it difficult to understand why the Government had set their heart on privatising Channel 4 at all. There were many financial, regulatory, commercial and professional voices mentioned in the report, even competitors in the field, and the Government’s position seemed so lonely among all the very different advice that was being given. The noble Lord, Lord Best, mentioned that an American might have bought Channel 4 if it had been for sale. We can imagine what such an American might have done with the remit which currently governs Channel 4 programming. It would not have been the same at all. It is not going to produce much money to do all those things, such as stimulate public debate, inspire change and nurture new and existing talent, which is truly radical.
I would add to the programming that has been mentioned the extraordinary film series, “The Promise” and “The State”, which Peter Kosminsky brought to our screens and which, very bravely, took us into the heart of complicated situations in a graphic way, as only the arts can succeed in doing. It was strange for me, a newcomer to this business, to read of the Government’s commitment to privatisation. Possible motives have been alluded to by noble Lords who have taken part in the debate. However, wiser heads prevailed and the project was abandoned. Privatisation went off the table, and we came to the question of nations and regions—and nobody, of course, can be against that.
We have had different advocates. My noble friend Lady Quin made an impassioned plea for the north-east. If I were less bound by my brief, I would go to town on the case for Wales. The barely disguised suggestion is that a significant part of the core business, if not all of it, should up sticks and move to another part of the country, although the noble Lord, Lord Storey, and the noble Baroness, Lady Kidron, have suggested more varied ways in which that might be achieved.
The Secretary of State announced the Government’s U-turn on privatisation from the heart of Media City in Manchester. We have heard about the letter that the noble Lord, Lord Best, received, and we have seen a copy of it. She made a big speech in Media City, in which she turned her attention towards regionalisation. She declared herself,
“unsympathetic towards those who recoil in horror at the very idea of media jobs being based outside the capital”.
Indeed, she offered Manchester as an example of what was being done for the industry by people who had shown themselves prepared to move out into other parts of the land.
We should be careful about facile comparisons. I happened to be working with the BBC in a peripheral way when, during the 1990s, some departments were being decanted from London to Manchester. I became aware of numbers of experienced staff who had roots, mortgages and children at school in London which they simply could not abandon. Others have mentioned the plight of such people. They are real human-need stories. There will always be a human cost to such a plan. It was the existence of already vibrant BBC activity in Manchester, together with the eventual presence of ITV, that allowed those relocated departments the possibility of achieving critical mass as the bold new venture was developed.
There is no similar place beckoning the Channel 4 operation. Indeed, Channel 4 has conducted its own consultation process, which has made it aware of the need to provide greater investment in programme commissioning that favours the nations and regions far more than at present. We can only hope that, when Alex Mahon comes into office as the chief executive officer, she will take those plans forward. It is worth pausing to rejoice at the fact that a woman is to be the chief executive officer, a first for a major broadcasting company in this country, and to talk about the fact that, while mention has been made of the fact that diversity on the board is less than it could be, there has been a terrific commitment to the question of diversity as far as it includes disabled people. You cannot win everything, but I should say that while Channel 4 has struggled with the question of diversity and there are things that it might have done better, there are things that we must rejoice at its having achieved.
There is no familiar place for Channel 4 to relocate to. In my view, everything would have to begin several steps back from what happened in Manchester. Nor should we forget that, at least in those days, the BBC did most of its work in-house. A lot more is put out now to independent companies—then it produced its own programmes. Channel 4, as many have said, does not work that way; it commissions its work from outside bodies. Are we aware that it sets up and employs 3,000 people across the nation and has spent £1.5 million on such programmes, a not inconsiderable amount? Just think of “Location, Location, Location”, whose production team is based in Glasgow and which films throughout the country, or “Hollyoaks”—why has no one mentioned that? It is Channel 4’s largest production and is rooted in the north-west, with 70% of its workforce drawn from the area. Then there is “Ackley Bridge”, a new school drama that is filmed and based in Halifax.
I suspect it would be interesting to look more closely not just at Channel 4 in this regard but at where terrestrial broadcasters as a whole currently commission their programmes, to ensure that independent producers in all areas of our regions and nations get the chance to tell their stories and broadcast their ideas about the world, each from their own perspective. This is not just a Channel 4 issue; ITV and the BBC, which are public service broadcasters too, should be asked, as well as Channel 4, to defend their commissioning policies. A key feature of our terrestrial television system is that it is a complex interrelated ecology where the channels compete on quality and diversity so that audiences receive the best service possible.
We damage Channel 4’s ability to maintain and develop its levels of performance at our peril. Since earlier I heard debates about implementation and transitional arrangements, I note that Channel 4 is awaiting the arrival of a new CEO, so perhaps this is the time to just wait a moment, consult and see how things turn out. Perhaps “Festina lente”—“Make haste slowly”—is the best advice that we could give ourselves.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)
My Lords, I am grateful to the noble Lord, Lord Best, and his committee for all their work on this subject, and to all noble Lords for their interesting contributions today. I welcome the noble Lord, Lord Griffiths, who has just spoken in his first outing on DCMS. I congratulate him on his speech and look forward to many further contributions from him on DCMS subjects in future.
I also thank noble Lords who approve of the Government’s actions on this matter, a somewhat rare and pleasant experience for a member of the Government. Clearly things have moved on somewhat since the committee’s report was published last summer, but the issues raised remain vital in ensuring a successful future for one of the UK’s most important cultural assets. I am therefore very pleased to be here today and to have the opportunity to listen to noble Lords’ views and set out the Government’s position.
Channel 4 is an important part of the UK’s broadcasting landscape, as the noble Lord, Lord Best, laid out clearly at the beginning of the debate. Commercially funded yet publicly owned, and operating as a “publisher-broadcaster”, it has a unique role in providing for audiences and stimulating the wider creative industries. Channel 4’s remit includes requirements to be distinctive, to innovate, to promote alternative views and new perspectives and to appeal to a culturally diverse society. In the 35 years since it was launched, it has made an indelible mark on UK culture and society. The noble Lord, Lord Best, and my noble friends Lord Sherbourne and Lord Holmes mentioned the Paralympics as an example of landmark programming.
Yet the channel faces challenges from what is a very fast-changing broadcasting landscape, particularly given its reliance on advertising revenues, a challenge highlighted by developments in the advertising market over the last year or so. Channel 4 is a public asset. It is therefore entirely sensible for the Government to consider from time to time how best to secure its future, including whether it would be better placed to succeed under private ownership. As noble Lords will be aware, the Government set out earlier this year that Channel 4 will remain publicly owned. I know this was welcomed by members of your Lordships’ Communications Committee, as confirmed today by the noble Lord, Lord Best. I reaffirm today the Government’s commitment to a publicly owned future for Channel 4. I hope that will partially reassure—temporarily, at least—the noble Lord, Lord Birt.
As a publicly owned broadcaster, though, Channel 4 must deliver value for the public who own it. That value can come in different forms, as the noble Baroness, Lady Kidron, pointed out, both on screen and off. Off-screen, Channel 4 has delivered value through its pivotal role in the development of the UK’s independent production sector. The sector is now world-renowned, generating £3 billion of revenue each year. Channel 4 provides on-screen value by delivering the remit prescribed in legislation and in meeting the programming quotas set by Ofcom. My department’s written evidence to the committee’s inquiry set out that:
“The government regards C4C’s ability to deliver against its remit and maximise public value in a sustainable manner as a priority”.
Channel 4 has a strong record in many areas of its remit—as the noble Baroness, Lady Kidron, says, in some areas it exceeds it—but there is room for improvement. The committee concluded, as the right reverend Prelate the Bishop of Chelmsford has reminded us today, that the current programming for older children and young adults is “unsatisfactory”, echoing concerns raised by Ofcom over recent years. We have made it clear that we expect a stronger commitment from Channel 4 in this area. We have also given Ofcom new powers through the Digital Economy Act to impose children’s content quotas if it deems that necessary. The provision of other areas of core public service content, such as arts programming, has also been low. More broadly, the Government have also made it clear that we want Channel 4 to deliver even more of the innovative and challenging public service programming that it was set up to offer. We look forward to seeing how the new chief executive and director of programmes take on this challenge.
Both on and off-screen, we believe Channel 4 must deliver value for the whole country that owns it. This means contributing to balanced economic growth, stimulating creative industries and serving audiences across the UK. I am grateful to the noble Baroness, Lady Quin, for her support—albeit, I have to say, slightly geographically qualified—for this concept. PACT, the TV production trade body, has found that of the £2 billion budget for UK productions in 2016 just 32% was spent outside London. Similarly, only one-third of UK production-sector jobs are based outside London. As has been mentioned, only 3% of Channel 4’s staff are based outside London, and it spends around twice as much on programming made in London as in the rest of the UK combined. Furthermore, earlier this year Ofcom said it had concerns about Channel 4’s representation of people in the nations and regions.
We feel that decisions about Channel 4’s programming should not all be made in the bubble of Westminster. Very importantly, people seeking to work in the media should not feel that they have to move to London. This is a barrier not only to people from different regions but to people of less affluent financial backgrounds. This point was ably made by the noble Lord, Lord Storey.
The transformation of Salford’s MediaCity over the past decade, led by the BBC, is truly impressive. With more than 250 companies employing more than 7,000 people, it has become a world-class cluster. It demonstrates that the television sector in the UK does not have to be all about London, but I accept that the BBC and Channel 4 are not an exact parallel, and I would not claim them to be.
As a result, we launched a consultation earlier this year on how Channel 4 could increase its regional impact, primarily through moving staff and increasing commissioning. We published the results of this consultation last month. The overwhelming majority of respondents stated that Channel 4’s regional impact would be enhanced if more of its people and activities were located outside London. A significant majority further agreed that increasing Channel 4’s commissioning quotas, as mentioned by the noble Lord, Lord Razzall, and my noble friend Lord Holmes, would be an appropriate and effective way to enhance Channel 4’s impact in the nations and regions. Alongside the consultation, we have commissioned external consultants to analyse the potential regional economic benefit and cost of relocation and increasing commissioning in the nations and regions. This will be published imminently, and we will see whether it addresses the points made by the noble Lord, Lord Gordon.
As the Secretary of State set out in her speech at the Royal Television Society last month:
“TV must reflect the real world and the country that we live in”.
Relocation may not mean relocation of the whole business, but the Government are clear that Channel 4 must have a major presence outside London. We are also very interested in the potential for Channel 4 to increase its commissioning in the nations and regions.
We look forward to working with Channel 4’s incoming chief executive, Alex Mahon, who is due to start at the beginning of next month. We await her plans for Channel 4, and will continue to work closely with the channel over the coming months. This will not be an overnight process, I reassure the noble Lord, Lord Griffiths, but we hope to reach agreement with Channel 4 on the direction forward by the end of the year.
A couple of points were raised during the debate. I cannot let the comments of the noble Lord, Lord Razzall, about diversity on the board go unanswered. Last year, the Secretary of State approved the appointment of four individuals who met the job descriptions of the post, which was advertised by Ofcom, out of the five put forward by Ofcom, so it was very much in answer to the specific job descriptions that they were selected. Ofcom is currently undertaking a process to recruit three new non-executives to the Channel 4 board, and I am confident that it will make every effort to ensure a diverse field of candidates.
The noble Baroness, Lady Quin, made the very reasonable point that we cannot expect Channel 4 to solve the regional deficit on its own. We agree, and we do not think that there is a direct comparison with the BBC, but it is true that more than half the BBC’s public service staff are outside London, whereas 97% of Channel 4’s staff are in London. We feel that, as a publicly owned broadcaster, it must do more for the whole country.
In conclusion, Channel 4 is a vital public asset, it is one that we support, and it will remain so. In continuing under public ownership, the Government are clear that Channel 4 must play its part in a country that works for everyone. It should strengthen the creative industries that are such a successful part of our economy and provide a platform for new voices and untold stories from across the UK, celebrating the diversity mentioned by the right reverend Prelate.
I again thank the committee for its work on this important matter, and I look forward to returning to discuss progress on these issues in due course.
Lord Best
My Lords, my deepest thanks to all Members of the House who contributed to the debate, particularly to all those—most of whom serve on my committee—who made very kind remarks, for which I am very grateful.
The unanimous view, I think, from everyone who spoke was that Channel 4 has been doing great things, has fulfilled its remit and should definitely not be privatised. I am grateful to the Minister for reaffirming that decision tonight: privatisation is not going to happen. The Minister also made it clear that the Government are very keen on the idea not just of Channel 4 commissioning more programmes from outside London—although that will be very important to the new settlement that they come to with Channel 4—but that a good part of its headquarters should move away from London; I think I could read between the lines there. Alex Mahon, the new chief executive, may need to make proposals that take that into account. I would only say that the decision needs to be based on the evidence, which needs to be looked at carefully. That will take a little time—nothing too rash, as the noble Lord, Lord Griffiths, urged.
My final comment is that if I were Alex Mahon, going into the job as chief executive officer of Channel 4, I would probably get the speech of the noble Lord, Lord Holmes of Richmond, placed on the walls of my new office, whether they are in London or anywhere else.