STV

John Penrose Excerpts

Thursday 3rd February 2011 Commons Chamber

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)]

Let me begin by apologising for the absence of the handsome and talented Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage (Mr Vaizey), who is responsible for culture, communications and creative industries, whose portfolio is relevant to the debate, and whom Members may have expected to see this evening. Many Members will be delighted to learn that the reason for his absence is the fact that he is in Scotland as we speak. He has been in Edinburgh to discuss broadband, and then in Dundee to discuss the video games industry. However, I welcome the opportunity to debate this issue with the hon. Member for Glasgow Central (Anas Sarwar) in his stead.

[Anas Sarwar]

Will the Minister give way?

[John Penrose]

I will, although I have hardly got started.

[Anas Sarwar]

Given that the other Minister is currently in Scotland, he might like to extend his visit to Glasgow. I am sure that I could hastily organise a visit to STV Productions tomorrow, or even late this evening, if he so wishes.

[John Penrose]

I am sure that that is a kind and heartfelt invitation, but I suspect that it may have come rather late in the day, given the state of the Minister’s diary. None the less, I will make sure that he is aware that the offer was made. In addition, an earlier intervention claimed that nobody was on the Government Benches, but given that I was sitting there large as life feeling like chopped liver as I was stared through by the hon. Member for Edinburgh South (Ian Murray), may I put on the record the fact that there were people here listening very intently to the comments that the hon. Member for Glasgow Central (Anas Sarwar) was making?

One of the key strengths of UK broadcasting comes from having a TV production base spread out across the nations and regions of the UK. That ensures that a more diverse collection of views and voices are reflected back at all aspects of the audience through their TV screens. As well as the considerable cultural and social benefits to the population, the arrangement enhances national, regional and local economies. The Government recognise that much of the country’s best television comes from the nations and regions, and we welcome the contribution that STV, in particular, makes towards public service broadcasting in the UK. STV’s local news, in particular, is extremely strong and we welcome STV’s recent announcement of a pilot to deliver more local TV news for the west and east of Scotland. That builds on the launch of its STV Local sites and shows a real commitment to serving audience demand for more localised and relevant content.

On a related note, hon. Members will be aware that the Government published their local media action plan in January. I wish to reiterate that the Government are keen to hear the views of industry and the public on our proposals, and to receive expressions of interest from organisations interested in running a new network channel to support local television services. Local media is a vital part of local democracy and I encourage everyone with an interest to respond to the public consultation.

I now return to the meat of today’s debate. STV is important but of course so too are the independent producers in Scotland. As the hon. Member for Glasgow Central mentioned, the Secretary of State considered thoroughly last year the matter of the potential reclassification of production companies owned by Channel 3 licence holders. That consideration took into account the responses from 29 organisations, including the Producers Alliance for Cinema and Television, Ofcom, the Scottish Government, STV, Channel 4 and several Scottish independent television producers. The responses covered a variety of viewpoints, but the voice of the existing Scottish independent sector was loud and clear in opposing the reclassification of STV’s production companies as independent producers.

The consultation closed on 2 February 2010 and the Department for Culture, Media and Sport announced the Secretary of State’s decision on 10 November 2010. I believe that the hon. Gentleman understands that the delay occurred because once the Secretary of State took office in May 2010 he wanted to look afresh at the proposal in the “Digital Britain” White Paper and the responses to the public consultation. It is important to make it clear that this decision was not taken in isolation and was not taken lightly. As we have seen in today’s debate, there are genuine and valid opinions on both sides of the argument. The Secretary of State concluded that, on balance, the potential benefits of implementing the proposal did not outweigh the likely negative effects, particularly on the existing Scottish independent production sector.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

I realise that this is not the Minister’s direct brief, but does he appreciate that the point made by PACT in response to the consultation misses the fact that if STV does not have this status, there is not the scale for the large-scale independent production to take place in Scotland? STV getting this status would actually help the other independents, rather than hinder them.

--- Later in debate ---

[John Penrose]

I plan to deal with some of the remarks made by PACT later in my speech. I am sure that the hon. Gentleman is right about part of its remarks, but we have to take into account not only its remarks in their totality, but all the other remarks and consultation submissions made in response to the Government’s request.

The Secretary of State believed it inappropriate to consider this matter in isolation, given the wider and more comprehensive review of public sector broadcasting and regulation that the Government are undertaking over the term of this Parliament. On that basis, he concluded that the proposal should not be taken forward. The Government appreciate that this decision will not be welcomed by everybody. Implementation of the proposal was not, however, in the interests of the Scottish economy as a whole, nor was it likely to promote competition or diversity of production in the long run.

The responses to the public consultation are published on my Department’s website, but I wish to highlight some of the specific points raised by the existing independent production sector. They perhaps deal with some of the interventions that have been made, and they highlight the concerns raised and give some background to the decision.

Many respondents were concerned about the displacement of commissions from the existing Scottish independent production companies to STV. PACT said:

“There is significant risk that the proposed change in the definition would potentially severely damage the Scottish production sector by displacing commissions from other Scottish producers”.

Its contribution expanded on this by saying that

“our main concern, though, is that STV will displace commissions not from London companies but from other, typically smaller Scottish independents, with the resulting damage to the Scottish production sector. The last five years have seen the growth of larger, typically London-based independent companies. However, with a few exceptions, Scotland remains characterised by small companies specialising in one or two genres. A 2008 report, for example, indicated that average turnover for an independent company in Scotland was just £1.33m per year.”

[Ian Murray]

On PACT’s point about the sector in Scotland being characterised by small production companies, the issue for Channel 4 in trying to commission more programmes from Scotland to try to get its percentages up—everyone in Scotland is keen that that should happen—is that there is not sufficient critical mass up there to produce something that Channel 4 could do on a returning basis to achieve that. The only organisations that could do that are the BBC, which cannot do it for licensing reasons, and STV Productions, which cannot do it because it does not have independent producer status, so there is a bit of circular argument on this issue.

[John Penrose]

I appreciate the hon. Gentleman’s logic, but the burden of what PACT has said is that the danger of giving STV independent production status is that it would cannibalise existing Scottish independents and we would end up with a much smaller number of larger producers, with STV massively in the lead. That is a possible outcome, but clearly the Secretary of State, in balancing what he was asked to consider, did not view it as strongly as some of the alternative outcomes.

[Anas Sarwar]

In our discussions with Channel 4, we found that it has set a target of increasing its spending on the independent sector in Scotland from 3% to 9%, but it has emphasised that it feels that only STV is currently able to provide the required quality of programming and expertise. Does the Minister recognise that it is a bit of a myth that STV would be the largest independent production company in Scotland if it were to get independent status, given that there are independent companies in Scotland that were previously owned by Warner Bros. and are now owned by Endemol—an independent-sector producer that is even larger than Channel 4?

[John Penrose]

The hon. Gentleman advances the argument that only STV has the scale to achieve the kind of programming status and quality that everybody wants, but surely, the existence of other very large independents must undermine the logic of that position in the first place.

Let me make some more progress on other comments in the consultation. La Belle Allée Productions considered that there would be

“a real and significant danger of STV displacing commissions from other Scottish companies”.

IWC Media believed that there is a “significant risk” that the proposal

“would damage the Scottish production sector, by removing work from the companies that need it most”.

Matchlight said that the proposal would

“substantially harm other, smaller Scottish producers by displacing jobs and network productions from them in favour of STV and the overall effect will be a zero sum game for Scotland—no new jobs created, no new work attracted”.

Tattiemoon also disputed that the reclassification would create any jobs. Its response said:

“To believe the claims that this change in status would result in the creation of more jobs for our industry would be a terrific mistake and one that we cannot afford to make. STV are aiming to adjust their position in order that they can have more control of our industry and compete in an incredibly unfair manner with other programme makers”.

Doubt was also expressed about the overall cultural benefit to Scotland. Tattiemoon said:

“Here we have STV as a broadcaster breaking all the rules to become an independent for fiscal gains and not for the overall cultural well being of the nation”.

Turmeric Media focused on funding, training and development opportunities and asserted that STV would

“exploit many of the excellent funding, training and business development opportunities that exist in Scotland that help small indies survive, again to the detriment of the small indie”.

Many independent producers made general comments about the potential negative impact on the industry generally. Bees Nees believes that

“The granting of independent status to STV...would be to the detriment of the independent production sector in Scotland.”

Matchlight believes that the proposal

“seems more likely to frustrate the Government’s stated objective of protecting Scotland’s sustainable production base than to promote it.”

I will add one more quote, if I may, Mr. Deputy Speaker. Mike Bolland, a former chair of PACT, told us the proposal

“would upset the delicate ecology of television production in Scotland”.

[Anas Sarwar]

The Minister is rightly quoting those who participated in the consultation process, but is he willing to quote also what Ofcom said in its response—it agreed with the proposal for independent status for STV—or what the Scottish Government said about STV Productions having a role to play in the Scottish economy?

[John Penrose]

I do not deny that there were consultation submissions in favour—that is absolutely correct. What I am trying to illustrate is the strong tide of opinion against the proposal. Clearly, the Secretary of State had to take all sides of the argument into account. It is because the hon. Gentleman and his two colleagues strongly put the case in favour of the proposal that I am trying to ensure that we have a balance in the debate. It is important to remember that there are two valid sides to the argument—the decision was a difficult one that required a degree of care on the part of the Secretary of State—and I hope that I have managed to illustrate that, given that the hon. Gentleman made the other side of the case so strongly in his speech.

PACT in particular raised some further interesting points. It considers that STV is already well placed to take advantage of the predicted growth in the Scottish production sector—the hon. Gentleman mentioned that—even without qualifying as an independent. Furthermore, PACT noted that STV Productions and STV’s wholly owned subsidiary Ginger Productions are already winning commissions from the full range of network commissioning broadcasters, including all public service broadcasters.

It was also pointed out by respondents that the benefits accruing to STV, which STV itself provided to the Department for the purposes of the consultation, were minimal. As was noted in the published impact assessment, STV estimated that if its production arms were reclassified as independent under the proposal, it would experience an increase in production revenues of £400,000, to £1 million per annum. That represents an increase of just 15 hours of production and, STV estimated, would create five full-time jobs.

Those were not the only viewpoints. Other contributors to the consultation were in favour of the proposal, as the hon. Gentleman mentioned and as I acknowledged in our last exchange. STV was, of course, strongly supportive of the proposal. The Government carefully considered the arguments put forward by STV for the benefits that would accrue both to STV and to the industry. STV believes that there would be a benefit to the Scottish economy arising from a greater dispersion of production throughout the UK. In particular, we noted STV’s view that it was currently prevented from competing on a level playing field due to its minority role within the ITV network. STV told us it has no influence over commissioning decisions, is disadvantaged by its regulatory status and cannot compete for the independent quota.

Ofcom, as the hon. Gentleman said, provided a valuable contribution and set out its reasons for broadly supporting the proposal. It did so on the basis that reclassification would encourage greater access to network commissioning by external producers, with potential associated benefits for the development of the production sector in the nations. We also noted Ofcom’s reference to the conclusion of its advisory committee for Scotland, which suggested that the benefit to existing Scottish independents, in the form of a larger number of commissioned co-productions between STV and other producers, is unproven.

I hope that I have provided a useful and, in the light of my last couple of points, at least reasonably balanced summary of some of the contributions to the consultation. I encourage hon. Members to read the full responses on my Department’s website, although I think it is clear that the hon. Gentleman and his colleagues have conducted a fairly extensive trawl of the submissions and are already possessed of a high degree of familiarity with them. For the record, however, and for anyone else who is interested, I just wanted to point out that the responses are there for anybody who wishes to see them.

Some hon. Members may be aware of the recent evidence provided by STV in the Biggar report, which indicates a rather larger financial benefit than was originally projected in the impact assessment. We have seen that report, but it was received six weeks after the decision had been announced and 10 months after the consultation closed. The point remains that the voice of the existing independent sector is loud and clear: it does not want this to happen. As I have mentioned, in making his decision the Secretary of State also concluded that it is inappropriate to consider the matter in isolation. He announced in January that we are embarking on a major review of the communications sector. It will be a wide and comprehensive review leading to a new communications Act before the end of this Parliament.

I should make it clear that we do not intend to review again the specific issue of the potential re-classification of production companies owned by Channel 3 licence holders, but the review will include an assessment of public service broadcasting and regulation, and the broader issues of independent production are almost certain to be part of that.

Question put and agreed to.