Channel 4 Privatisation

John Whittingdale Excerpts

Tuesday 14th June 2022 Commons Chamber

[John Nicolson (Ochil and South Perthshire) (SNP)]

Thank you, Madam Deputy Speaker. I did not expect the Secretary of State to leave quite so quickly.

It is good to see so many unfamiliar faces on the Tory Back Benches—Members with a new-found interest in broadcasting—and also not just the current Conservative Select Committee Chair but two former Chairs. It is like being in one of those “Doctor Who” episodes with three Doctors all in one episode at the same time.

Here we are again. With a grim familiarity, we are once again debating the future of Channel 4 as Opposition Members try to defend one of the country’s best-loved institutions from the culture warriors on the Conservative Front Bench. I do not believe that everybody in the DCMS Front-Bench team falls into that category: some are simply trying to keep their heads down until the chancer in No. 10 gets toppled, taking his fawning political acolytes with him. Channel 4 probably feels much the same.

[Mr John Whittingdale (Maldon) (Con)]

Will the hon. Gentleman give way?

[John Nicolson]

Later—let me make some progress.

Until then, we have little choice but to combat the collection of semi-arguments, half-heard bar-room prejudices, factual errors and outright disinformation that forms the basis of the Government’s case for privatising the channel. There is of course the never-ending irony that a Government pretending commitment to levelling up are making decisions that will jeopardise national and regional businesses in the production sector. Channel 4 spends more on nations and regions production than any other commercially funded broadcaster, and in 2021 dedicated 55% of its total content spend to content produced in the nations and regions. As we have heard, with a headquarters in Leeds and hubs in Glasgow, Bristol and Manchester, Channel 4 is a model levelling-up employer.

So why sell this model levelling-up employer? Is it in financial peril? We know that it is not. Channel 4 currently generates £1 billion of gross value added for the UK economy, working with around 300 production companies a year. To be clear, the UK Government want to sell a healthy, successful company that, because of the way it was established, cannot keep its profits. It must and does reinvest all revenue made back into the business—a dream for the consumer. If only the privatised utilities had been set up on that model, how much better off we would all be.

The Government’s excuse to attack Channel 4, this jewel in the broadcasting crown, is that they want to raise money to reinvest in the independent production sector. That is precisely what Channel 4 does with its profits at the moment. It is entirely nonsensical. All that the Government wheeze will do is put investment and jobs in jeopardy. Do they care? Does the absent Secretary of State have some great insight into the sector that lesser mortals, including those who run the company and oppose her, do not?

We all know the Secretary of State’s history of gaffes and confusions, but on Channel 4 she has surely surpassed herself. Millions of views of her faux pas on YouTube do not make her a broadcasting expert. The House will know that she did not know how Channel 4 was funded when she appeared before the Digital, Culture, Media and Sport Committee, on which I sit. She thought it was publicly funded, rather than funded by advertising. Her confusion was excruciatingly laid bare on camera when a Conservative member of the Committee, the right hon. Member for Ashford (Damian Green), had to explain Channel 4’s funding model to her.

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[Julian Knight (Solihull) (Con)]

I heartily welcome a DCMS debate in this place—three hours, no less! My friend the hon. Member for Ochil and South Perthshire (John Nicolson) said that one current and two former Select Committee Chairs were drawn by this debate; he called us the three Doctors. I hope I was not Sylvester McCoy in that scenario.

[Mr Whittingdale]

Will my hon. Friend give way?

[Julian Knight]

Sylvester McCoy—of course.

[Mr Whittingdale]

I will make the intervention that I was denied by the hon. Member for Ochil and South Perthshire (John Nicolson), who made a good joke about Doctors. I merely wish to point out we have not only the current Chair but three former Chairs of the DCMS Committee in the Chamber.

[Julian Knight]

I thank my right hon. Friend for pointing that out and for the extra time his intervention allows me.

Despite my pleasure that we are debating a DCMS matter, which thanks to the business managers we were not able to do prior to Prorogation—for example, on online safety—I will not be supporting the Opposition’s rather over-long motion. However, I have mixed emotions regarding the decision to privatise Channel 4.

Intrinsically, as a free market Conservative, I recognise that it is a historic anomaly that Channel 4 should still, after 40 years, be in public ownership. I start from a simple position, which is that all things should be in the private sector unless there is an overwhelming case that they should be in public ownership. Public ownership is so often the dead hand on innovation. It implies stasis and has a wider sclerotic implication for the economy. However, being sclerotic and lacking innovation are two things I could never accuse Channel 4 of during its 40 years. For much of its first 40 years, the broadcaster has navigated its hybrid status between commercial and public ably. Other Members will no doubt list its strengths, which are myriad and cannot melt away like an ice sculpture.

I agree that privatisation will allow Channel 4 to capitalise on its achievements and attempt to keep up with the rampant inflation in the production sphere, which is an aspect of the wider inflation in the economy, but is also due to the success of UK film and TV production. In fact, I think the UK economy would have been in technical recession in 2018 and 2019 had it not been for those industries, such is their importance. However, the idea that privatisation will meant that Channel 4 will compete head-on with Prime or Netflix is an odd one.

Channel 4 is much better using its status—privatised or not—to better collaborate with other public service broadcasters. PSBs need to find a way to offer a combined front to the public: a super-BritBox, if you like. Imagine the entire rich back catalogue of British television streamed in one place and given due prominence through legislation. Does privatisation make such a thing more likely? With the right buyer, probably. It is unlikely that any buyer would look to—how can I put it?—Richard Desmond-ise Channel 4, as we saw with Channel 5.

I am not certain that I take the view of the hon. Member for Manchester Central (Lucy Powell) that a buyer will wait out 10 years and drive down the public service broadcasting. The whole point of Channel 4 is that it has unique selling points. It appeals to a young audience, which is extremely attractive for advertisers and marketeers, particularly in the age of streaming online, as well as for data sharing, which has wider implications.

Does the sale make sense from an Exchequer viewpoint? That is really marginal. It will raise enough to service, not pay off, the national debt for a total of 72 hours. Such is the lack of value to be derived that the Treasury has said that it is happy for the Department for Digital, Culture, Media and Sport to pledge the money towards the levelling-up agenda. We will see what comes out in the wash in that respect, but I always await the pleasant surprise of the Treasury following through on such a commitment. However, let us be frank: this is not about raising money. It is probably not about the idea that the channel will be a drain on public resources either; it has never been one in the past. However, it is better off being placed in the private sector to ensure that it can grow and develop.

Then we have the elephant in the room—the Jon Snow at Glasto, if you like. Is this in some way a revenge play? I hope not, because such things are deeply unbecoming. As individuals and collectively, we must always rise above such emotions. Personally, I believe that some of Channel 4’s Brexit coverage was shrill in the extreme and that it did not do itself any favours, but as a political class we have to be bigger than that in all respects. Actually, whenever I have gone on Channel 4 programmes, they have been perfectly fine: I have always been treated with respect and asked very thoughtful questions. We do Channel 4 down, but in many instances it offers unrivalled international coverage, and we would be really lacking without it.

In summary, is the privatisation of Channel 4 the right course of action? Probably, but only marginally. Is it being done for the right reasons? I sincerely hope so, but I would be more convinced if it were part of a genuine suite of measures to deregulate our economy and embrace the private sector, rather than being a one-off. Frankly, what we need in the Conservative party is not pieces of red meat to be tossed, but a genuine and coherent plan to offer the public so that they understand exactly what we are and what we are trying to achieve. That would happen if the word “privatisation” were used much more often, not just in our manifestos but in our public utterances.

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[Mr John Whittingdale (Maldon) (Con)]

There is a lot in the Opposition motion with which I agree, particularly its drawing attention to the success of our creative industries and our broadcasting sector and to the benefits that Channel 4 has brought, but it is because I want to see the continuation of Channel 4’s contribution to the creative sector that I believe the Government’s policy is right and will ensure that Channel 4 can continue to thrive.

As has been pointed out, Channel 4 was created by Margaret Thatcher’s Government. There were two principal objectives. The first was to cater for minority audiences that were not being properly provided for at that time. The second was to act as a catalyst to what was then a barely visible independent production sector. Since that time, the landscape has changed dramatically. If we look at the range of choice now available to viewers, we see huge numbers of channels providing a wide and diverse range of content. We also see the spend by those channels. A lot of them are not British, but they are spending money in Britain. Just to give one example, Apple TV recently came to my constituency of Maldon to make “The Essex Serpent”, which I thoroughly recommend to those who have not yet seen it. Minority audiences are now being catered for, but of course Channel 4 should continue with that remit and continue to meet it.

The independent sector has absolutely taken off since Channel 4 was created and is now making programmes that are enjoyed right across the world. However, it is true, as one or two hon. Members have pointed out, that the spend of Channel 4 has declined. I want to cite quickly the latest Oliver & Ohlbaum UK TV production survey for PACT—the Producers Alliance for Cinema and Television—which is the independent production sector. In 2020, spending on independent producers was £508 million by the BBC, £356 million by ITV, £210 million by Channel 4 and £223 million by the others, including Sky and some of the streamers.

Just in case people say, “Ah, but Channel 4 continues to support the small indies”, I point out that 40% of the BBC’s spend is on independent production companies with a turnover of less £10 million, compared with 27% of ITV’s, 11% of Channel 5’s and just 10% of Channel 4’s. Yes, Channel 4 does make a contribution, but the independent production sector is actually now so successful that it no longer necessarily needs the support it was previously given. Indeed, I think there is a case for tweaking the remit so that Channel 4 is perhaps returned to its original purpose of focusing on growing companies, not just on commissioning from production companies that are already hugely successful.

The reason why it is right to look at the future of Channel 4 now is that the original model set up, as a commissioner and publisher-broadcaster wholly dependent on advertising, is going to come under increasing strain. Yes, Channel 4 did well last year in that it survived the pandemic. It did so because it cut the programme budget by £140 million and its drop in revenue was not quite as big. As a result, it made a larger profit, but it did so only by slashing the programme budget. That was a sensible thing to do, but it should not be interpreted as Channel 4 thriving and not being under huge pressure.

We know that that pressure is going to increase. Advertising is steadily migrating online. Digital advertising is becoming overwhelmingly the major spend by the advertising industry. As the Secretary of State pointed out, those that want to spend on TV advertising have ITV, Channel 4, Channel 5 and Sky to go to at the moment, but the streaming services are also going to open up to advertising. Netflix is talking about taking advertising and Disney is talking about taking advertising, so the competition for advertising is going to get ever greater and the diversion of revenue to digital media is also going to continue.

Channel 4’s revenues are going to come under increasing strain at the same time as the cost of production is rising steadily and there is a shortage of skills. As has been pointed out, there are potential benefits from privatisation, and the hon. Member for Cardiff West (Kevin Brennan) referred to the difficulties that might be encountered in the House of Lords. To quote the last House of Lords report on Channel 4:

“The potential benefits of privatisation to C4C’s sustainability are increased access to investment in programming, content partnerships and technology through access to capital. This would enable C4C to diversify its revenues, enhance its sustainability and be more ambitious internationally.”

I could not have put it better myself.

I want to counter those who suggest that this somehow a vendetta against Channel 4 because some people may not like some programmes. I completely reject that. I remain a fan of Channel 4 News, even though it annoys me intensely on occasions. It is important that we have plurality in our news provision, and Channel 4 News is a professional news provider. This is not just about raising money for the Treasury. The reason behind privatisation is that the Conservative Government whose predecessor created Channel 4 want Channel 4 to go on succeeding, but under the present change in the landscape, it needs a different funding model and the access to capital that the private sector can provide.

[Several hon. Members rose—]