Broadcasting (Independent Productions) (Amendment) Order 2014

Lord Gardiner of Kimble Excerpts

Monday 17th November 2014 Grand Committee

Moved by

[Lord Gardiner of Kimble]

That the Grand Committee do consider the Broadcasting (Independent Productions) (Amendment) Order 2014.

Relevant document: 8th Report from the Joint Committee on Statutory Instruments

[Lord Gardiner of Kimble (Con)]

My Lords, the order aims to ensure that the definition of independent producer for the purposes of commissioning television programmes excludes only those production companies that are UK-broadcaster owned from being considered “independent”. The order does not extend the definition of qualified independent producers to producers owned by UK broadcasters that do not qualify at present. The order merely seeks to reaffirm what has been the agreed policy over the last 10 years, which is that a producer which is owned by a non-UK broadcaster, or is part of the same group of companies as a non-UK broadcaster, should not be prevented from being classified as an independent producer if they meet the qualifying criteria.

The Communications Act 2003 requires the public service broadcasters—the BBC, the Channel 3 companies, Channel 4, Channel 5 and S4C—to ensure that in each year not less than 25% of the total amount of time they allocate to the broadcasting of qualifying programmes is allocated to the broadcasting of a range and diversity of independent productions. The Communications Act 2003 also applies a similar “10% independent productions” requirement to all digital service broadcasters that are not public service broadcasters. The aim of the independent productions quota is threefold: to promote cultural diversity and to open up the production system to new energies and voices; to stimulate the growth of small and medium-sized enterprises, promoting creativity and fostering new talent; and to tackle vertical integration within the UK programme supply market. It is widely considered that the independent productions quota has been working well over a number of years, providing competition and a stimulus to originality that has benefited programme supply in the UK.

However, a few issues with the legislation as currently drafted have been identified and the amendments made through this order are designed to deal with them. Perhaps I may explain a little more. The Communications Act requires that the terms “independent productions” and “qualifying programmes” are defined by order. Article 3(4) of the Broadcasting (Independent Productions) Order 1991 defines an independent producer as a producer who is not employed by a broadcaster, who does not have a shareholding greater than 25% in a broadcaster, and in which any one UK broadcaster has a shareholding greater than 25% or any two or more UK broadcasters have an aggregate shareholding greater than 50%. This definition must also be read in accordance with Article 3(5) of the order, which stipulates that “any person connected” to a producer—that is, in the same ownership chain—must also not be employed by a broadcaster, own more than 25% of a broadcaster, or be more than 25%-owned by one UK broadcaster for the producer to be considered as independent. The meaning of the terms was first specified in the 1991 order, which was subsequently amended in 1995 and in 2003. It is the last of those amendments, to the 2003 order, which failed to reflect fully the policy in relation to ownership of a UK production company that Parliament agreed to. That policy was, in essence, to allow a producer to be treated as an independent producer even if it was owned by a foreign broadcaster so long as the foreign broadcaster’s services did not target the UK.

So, while the 2003 amendment amended certain elements of the definition of independent producers, including introducing the qualification that ownership of the producer by a UK broadcaster was a disqualification, it did not amend Article 3(5) in relation to “any person connected” to that broadcaster or producer. This means that if a person connected to the producer fails any of the tests in Article 3(4) which define “independent producers”, the producer cannot be considered “independent”. That connected person could be, for example, part of a group of companies which include not only a UK broadcaster but any broadcaster anywhere in the world. The net result is that the current definition still excludes some producers that the Government and, crucially, the industry itself believed were within the definition. Ofcom has told us that these production companies include such high-profile ones as Zodiak Media, the maker of programmes such as “Wallander” and “Being Human” for the BBC, and FremantleMedia, which produces the likes of “Take Me Out” and “Through the Keyhole” for ITV. Both companies are owned by broadcasters that predominately operate in other parts of the world. So although a public service broadcaster could commission programmes from these producers according to the strict letter of the legislation as it currently stands, that public service broadcaster could not count those programmes towards its 25% independent productions quota.

It is essential that we clarify this anomaly for broadcasters and producers, as well as for Ofcom, whose regulatory role is to ensure that broadcasters comply with the independent production quota set out in their licences. This order rectifies the situation by redefining the term “broadcaster” to ensure that it refers only to UK broadcasters or broadcasters whose transmissions are primarily aimed at the UK consistently in Article 3. The amendments preserve independent status for producers who are connected to a person who owns or is owned by a broadcaster that does not aim its services primarily at the UK. The order does this by removing the references to “producer” in Article 3(5) so that only the producer has to meet the tests—not the producer and any person connected with the producer. Any producer owned by a UK broadcaster will still be excluded from the definition of an independent producer, continuing to prevent vertical integration in the UK supply market. Whoever holds the licence for a public service broadcaster, whether it is a British or foreign company, has to comply with the public service obligation set out in the broadcasting licence. These obligations are enshrined in legislation and include quotas for UK-originated content and content made in the regions and nations of the UK.

These changes are being made with the support of the industry. The DCMS wrote to all broadcasters last summer to notify them of our intention to correct the legislation. We received no comments opposing the move and, just prior to laying the order before your Lordships’ House, we gave broadcasters the opportunity to comment on the draft. I can confirm that all were supportive of the changes being made. We also worked with Ofcom and PACT, the member body for the UK independent production sector, on this order to ensure that it is fit for purpose. To date, the industry has been applying the definition set out in the policy rather than what is contained in the legislation. These amendments will ensure the policy intent and the legislation are fully aligned.

This is an important clarification for the industry—the public service broadcasters and all other commercial digital channel operators in the UK that rely on the definition to identify whom they commission from to fulfil their quotas for independent production—and will enable Ofcom to undertake its regulatory duties more effectively. This legislation is therefore needed and proportionate, and I commend the order to the Committee.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for a very clear exposition. I very much agree that the connected person issue needed to be addressed, and has been very adequately addressed in the order.

However, this is an opportunity to make a slight diversion in terms of independent production. I noticed that the Minister went back to the original 1990 Broadcasting Act and talked about the three limbs and the reasons for the independent production quotas that were set out in that Act: promoting cultural diversity; stimulating the growth of small and medium-sized enterprises; and tackling vertical integration. It is worth while reminding ourselves of those. I noticed that when the committee met in the Commons, everybody vied to talk about their favourite programme and which independent production companies made “The Great British Bake Off”, “Sherlock”, “Rev.” and the like.

However, the fact is that independent does not necessarily mean small—some of these independent companies are very large and it is a very contestable market out there between some of the independent production companies. In that context, it is very interesting that the noble Lord, Lord Hall, in a speech in July, talked about opening up the BBC further to independent production. That then leads on to the BBC charter review and the review by Ofcom of PSB, which I think will be complete next year. PACT has some very interesting ideas about how the BBC might, in its words, become much more of a “publisher broadcaster” over time. All these are very interesting ideas that do not flow directly from this order but certainly form part of a general thinking—a rethinking, if you like—about the role of independent producers.

Since 1990, we have had a particular regime. Is it time, now we have such a robust independent production sector, to move further? Should we be encouraging the BBC—not only with the actions of the noble Lord, Lord Hall, but through the charter review—to engage more in independent commissioning? I notice that the noble Lord, Lord Hall, has plans effectively to make the BBC’s in-house production part of a market in which it will be competing, in a sense, against the independent producers. Again, that is a very interesting idea, and it is very forward-thinking of him. I assume it is to make sure that that production is seen as being as efficient as it can be and is not characterised as bloated or whatever, as it has been in the past by certain commentators. That sounds a very defensible action. It will be interesting to hear the Minister’s comments on whether DCMS was thinking in that direction and on what thoughts it had on the subject generally. I support the order.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I, too, support the order which at its heart is simply a correction of an earlier infelicitous piece of drafting. Although it has taken a very long time to come through, it is an important step in the right way. Having said that, I slightly wonder why, given that we have been waiting for this, in some senses, since 1990, the Minister feels that it is necessary for it to come into force on the day on which it is made, which I presume will be tomorrow, rather than on one of the common commencement dates, 1 October or 6 April, for the good reason that that would give the industry time to plan and to think through the issues. The Minister will be aware that I have spoken about this in respect of other draft orders laid before Parliament. It is important that if the Government are going to depart from common commencement dates, they should have a very good reason for doing so. Advice to officials is quite clear on that. Certain steps have to be taken, certain requirements have to be met and approvals have to be sought from a central committee, and I do not think that that has happened in this case.

Like the noble Lord, Lord Clement-Jones, I was struck by the way in which the Explanatory Memorandum and the Minister’s introduction to the order—which he did very well—centre around the original three limbs of cultural diversity, the growth of small and medium-sized businesses and tackling vertical integration. It is interesting that the argument used throughout the Explanatory Memorandum veers towards the last of those, rather than the first two, in trying to come up with answers for why this regulation is in place at all, let alone why it needs to be corrected. My point on this is slightly different from that of the noble Lord, Lord Clement-Jones. It is that although they are admirable in every way as aspirations for a system, they are, as he said, possibly a bit otiose in terms of what we now see when we look out to that area, not that we should not be constantly on our guard to make sure that there is a vibrant independent production sector. Will the Minister tell us when it is intended to have a look at them? Are they still the main drivers for these regulatory structures? If they are, and the Government are happy with them, when were they last reviewed? If it was not reasonably recently, when might they be reviewed? I say this in particular because the Government announced in the Secretary of State’s speech to the RTS conference in September 2014 that they were going to redo this order, although information had been circulating for some time about the need for it, particularly Ofcom’s letter of the previous December. In stressing that the Government have been clear that the order before us today does not reflect an intention to amend the rationale for the intervention that has been made, nor to amend the qualification criteria—in other words, the three limbs we were talking about earlier—the Secretary of State left an impression that some form of review was taking place on this. He went on to say that the Government will consider these issues,

“once Ofcom has published its PSB review next summer”.

What will be included in that review announced by the Secretary of State? It is just the three limbs, as previously talked about, or it is some other variation on this matter? I would be grateful for any clarification the Minister can give on that.

Finally, the wording we are faced with in this order, although absolutely correct in terms of the original drafting in 1990 and 2003, speaks to a form of distribution of television that is changing rather fast. While we probably still have independent producers and, to some extent, broadcasters, the consumption patterns of programmes no longer fit the standard definitions that were once the very bedrock on which these regulatory structures were put up. If, as my children do, people consume television entirely through an internet connection on iPads and even iPods and do not subscribe to the idea of having a regulated channel system, whereby broadcasters take programmes and send them round to people to receive through aerials and satellite dishes into their homes, what will it mean in terms of these definitions? I understand that the point here is to catch up with how the industry has defined itself over the past 10 years—that is a good thing—but I wonder whether the order is future-proofed in any way. Perhaps the Minister could reflect on that because, although there is no immediate need for a change here, I signal the fact that this set of definitions will not survive for very much longer.

[Lord Gardiner of Kimble]

My Lords, I thank your Lordships for their comments. As my noble friend Lord Clement-Jones has said, we are going through a time when the general landscape is being considered and reviewed. Obviously, the comments of PACT and the recent observations by the noble Lord, Lord Hall of Birkenhead, also mean that this whole area is under considerable scrutiny and consideration. My own view is that this is about the quality and the ability of the productions.

The noble Lord, Lord Stevenson, referred to the three limbs. Looking at them again, I think that they are still as relevant, and some of these principles may remain relevant for a very long period of time, because the promotion of small and medium-sized enterprises, diversity and a whole range of issues are important. Certainly, the whole reason why we all wish to review, now or in the future, is because we wish to ensure that we have a vibrant sector. In British television, compared with many other parts of the world, we have not only a vibrant but in many respects high-quality sector.

I will look at Hansard and, if there are some points of timing on which I can help the noble Lord, Lord Stevenson, I shall write further. As for the changes in the market and terms of trade between indies and broadcasters, that is clearly an issue that has provoked much recent debate among public service broadcasters. The terms of trade have been a key reason why the UK independent sector is such a success story both here and abroad. Of course, this Government want to see that sector grow from strength to strength. The time to consider whether any policy changes are required to ensure that that success can continue and be built on further is after Ofcom has published its PSB review next summer, given that the independent production sector is a key theme of the review.

On the question asked by the noble Lord, Lord Stevenson, about why we cannot have a common commencement date, if any apologies are due, I of course give them. However, I understand that Ofcom set guidance for this year’s quota of reporting requirements in October, and the legislation had to be updated to confirm that guidance as soon as possible. As I say, if any further apology is due, I give it now.

It has been very helpful to discuss these points, and I shall want to reflect and speak to colleagues about timings of any further work. In the mean time, I commend the order to your Lordships.

Motion agreed.