Local Newspapers

Rehman Chishti Excerpts

Thursday 19th March 2015 Westminster Hall

[John McDonnell]

That is one of the issues that I want to raise later. If there is to be Government intervention and support, it has to be done in a way that maximises the public interest; it must not simply get swallowed up as a reduction in business rates and then be given out to shareholders or—as we have unfortunately seen happen in recent years—go towards the salaries of some chief executives, which are exorbitant to say the least, and which many of us have criticised.

I want to reinforce the point that hon. Members have made about the importance of local newspapers to democracy overall. The reporting of the activities of local politicians, local councils, local Members of Parliament, NHS bodies, the police and others in the local community is important to hold them to account. It is critical to have a local newspaper that will shed light on their activities.

Let me briefly explain what has been happening in recent years. The NUJ has published a chronology of closures and job losses in local newspapers over the past nine months. It is a shocking roll-call of cuts on a significant and worrying scale. I will not go through it in detail now, but I will place in the Library, for Members’ information, the short report that the NUJ has provided. It illustrates the range of titles that have gone in the past nine months, and the scale of cutbacks of journalists, sub-editors and photographers. It is worrying that the trend that we discussed in this Chamber only two and a half years ago has continued at such a pace.

I will draw in the key elements of the briefing that the NUJ has provided to Members. Between 2005 and the start of 2012, 242 local papers were shut. The NUJ’s detailed roll-call from the past nine months confirms that that trend has continued with the loss of further newspapers. Whole areas of the country are local news-free zones. There are hon. Members from Wales here; Port Talbot, which has a population of 50,000, has had no local newspaper since 2009.

[Rehman Chishti (Gillingham and Rainham) (Con)]

The hon. Gentleman is talking about the closure of newspapers; I want to give an example from my area. Before the Medway News closed, there was talk of merging it with the Kent Messenger, which is a brilliant paper. However, the burdensome regulations surrounding the merger prevented that from happening. The Office of Fair Trading stated that the Kent Messenger would have an unfair advantage on advertising, which is complete nonsense because people can get advertisements online as well. As a result, the merger did not go ahead. Medway News closed and jobs went, and people were left without a brilliant local newspaper. The situation could have been different if the regulations had been designed properly. Does the hon. Gentleman agree that that needs to be looked at?

[John McDonnell]

There is a whole range of such anomalies, which we need to inquire into. That is one of the reasons why the NUJ is promoting the idea of a proper inquiry—it does not have to be a long-winded one—into some of the details of regulation. That might assist in protecting titles and protecting jobs and services.

As I said, some areas of the country have become local news-free zones. The staff cuts have been staggering, and the NUJ’s survey concerning Trinity Mirror and Newsquest revealed that the lack of staff meant that basic services were not being provided. Council meetings and court cases were not being covered. Local businesses were not being held to account.

Some Members may recall that some time ago, we expressed our disappointment about the decision by the Press Association to scrap its “Lobby Extra” package, which provided a House of Commons service for 15 regional titles. Many of us thought that that service was vital, because it covered regional newspapers such as the Liverpool Echo, the Manchester Evening News and the Express & Star, many of which no longer employ staff Lobby correspondents. If newspapers are unable to report on our activities, they will not be able to hold us to account and our democratic links with constituents will be undermined.

The number of job cuts in some areas has been extremely worrying. Johnston Press annual reports from 2007 to 2012 revealed that the number of full-time journalists fell by 44% from 2,774 to 1,558, and the trend has continued this morning. The Daily Mail and General Trust has admitted that half its 4,200 staff in the Northcliffe Media regional newspaper division have been cut since 2008. As we have heard in our discussions elsewhere, local and district offices are being closed, so reporters are working much further from their local communities. That issue was raised at our cross-sectoral seminar with the Minister some time ago.

We also find that papers are being edited in hubs. I agree wholeheartedly with Michelle Stanistreet, the NUJ general secretary, who has said:

“Readers are not stupid. They can tell when their newspaper is being produced from a different county—and in some cases country. They can tell when they are served up rehashed, reconstituted fare. They feel robbed when they can no longer speak to the local reporter on their patch and when their voices go unheard.”

We should be concerned about the fact that that has become a common phenomenon. We should also be concerned about the fact that regional newspaper group publishers have significant local monopolies. The resulting lack of competition may undermine standards and the quality of journalism.

As we have discussed, the decline in the sector has been blamed on the transition to the internet, with a lot of content being made free. Another problem is the drop in advertising revenue, which has been caused by the recession and falling circulation. As many of us have argued for some time, it is not as simple as that. There is a depth of anguish about what has happened to local newspapers over the past 20 years.

Throughout the ’90s and until about 2005, local newspaper profit margins ranged from approximately 20% to 35%. Between the start of 2003 and the end of 2007—I am sorry to pick on Wales all the time—the profit margin of Media Wales averaged 34%, and it peaked at 38% at the end of 2005. In a normal business, profits on that scale would be reinvested in the industry long term. As the hon. Member for Mid Derbyshire (Pauline Latham) said, such reinvestment would fund the transition to the new model. That did not happen, unfortunately. I hate to say it, but some of the company results make it clear that instead of being reinvested, those profits were creamed off and used for sizeable shareholder dividend pay-outs. In addition, the pay of newspaper executives was enormous, and I will give some examples later.

Another issue that has affected the sector over the past 10 years is the rapid closure of local presses. Johnston Press in the north has closed presses in Halifax and Leeds. As a result of such closures, any new entrant to the regional newspaper market is forced to choose between bearing the virtually prohibitive expense of a new press, entering into contract arrangements with potential competitors, or printing outside the UK and building import costs into their overheads from the outset. That is a dangerous pattern. That all happened while profits were at a high level. In any other sector with profits of more than 30%, it would be almost unthinkable not to plough that money back into the industry. I do not want to use phrases such as fixing the roof when the sun shines, or having a long-term economic plan, but we would expect someone somewhere in the sector to wake up to the need for such things.

Some of the examples have been absolutely staggering. My hon. Friend the Member for Great Grimsby (Austin Mitchell) and I have waged something of a crusade with regard to Trinity Mirror over the past 10 years, and I have looked back at some of the interventions we made in Adjournment debates and so on. Trinity Mirror covers a whole range of titles from the Liverpool Echo to the Oldham Advertiser and the Rossendale Free Press. What did Trinity Mirror do with its profits during the good times? It appointed Sly Bailey as chief executive in 2003. In 2005, if I remember rightly, we raised concerns about her management skills. When she left last year, she was given a £900,000 payoff. She pocketed more than £14 million during her time at the company, despite the fact that the work force was cut in half and the share price plummeted by 90% during her tenure. That is absolutely extraordinary. To quote Michelle Stanistreet, general secretary of the NUJ:

“Trinity Mirror owns some of the best-known and respected newspaper titles in the UK. In 2003, when Sly Bailey took over as chief executive, it was a FTSE 250 company worth more than £1 billion and with a share price of 380p. Now, less than ten years later, the same CEO presides over a company that is a shadow of its former self—with a share price of 30p.”

Despite that, Sly Bailey received the £900,000 payoff on leaving. That is simply payment for failure. We can see why journalists on the front line who are losing their jobs are so angry about what happened during that period. Half the jobs have gone, and the company has been driven into the sand. Her successor has just had to announce £10 million-worth of cuts. The company is currently losing another 92 jobs. Fifty-three new jobs have been created in its national and regional titles, but the company is moving towards a shared content model of producing material that is not local, which will start to undermine the quality of the press.

It just goes on. Newsquest publishes 200 newspapers, and audit figures show that its circulation dropped by 10% in the last round. Roy Greenslade, the expert commentator on the press industry, argues that that drop is partly due to short-term thinking. Newsquest has increased the price of its papers, and the result has been an immediate sales plunge. There is a real management issue in this sector. Newsquest is owned by an American company called Gannett. In February 2014, Gannett issued one of the biggest shareholder payouts that we have seen. Gannett’s chief executive said:

“We remain on track to return approximately $1.3 billion to shareholders through dividends and share repurchases by 2015.”

Yet staff on the company’s papers have had a pay freeze for four of the past five years. A typical Newsquest journalist earns about £21,000 a year, but Newsquest’s outgoing chief executive, Paul Davidson, was paid £0.5 million in 2012 and his fellow directors took a performance-related payment of nearly £300,000. Understandably, there is phenomenal anger among staff. The company has cut 5% in the past year, which includes compulsory redundancies. That cut was driven through by abysmal management. Newsquest has also moved paper production from the north down to Newport. The Northern Echo will now be edited 270 miles from where it is distributed. It just goes on and on, and I worry about what is happening generally.

Johnston Press is an example of catastrophically bad management. The company publishes 200 titles, and its chief executive has announced a new project to produce a paper with 75% of its content provided by readers, not journalists. Chris Oakley, a former editor of the Liverpool Echo, says:

“In the boom years, the Stock Market valued Johnston Press at more than £1 billion and investors and analysts applauded as the company ran up nearly half a billion in debt.”

Johnston Press, relatively speaking, is now more indebted than Greece. Between 2005 and 2007, the company spent £1 billion on acquisitions, including £250 million for 11 paid weeklies and 10 free sheets in rural Ireland. Two years later, after spending all that money, the best offer when it tried to sell those titles was £40 million. That is a scandalous waste of resources that almost destroyed the company overnight.

Last year, Johnston Press made an operating profit of £57 million, but its debt is now £360 million. That debt is owed, among others, to RBS and Lloyds, which are charging a 13% interest rate compared with the Bank of England rate of 0.5%. The company could be destroyed purely and simply because of the punitive interest rates charged by those publicly owned banks. The NUJ has been campaigning for the banks to renegotiate the terms, otherwise the company will fail and everyone will lose out—not only the journalists who will lose their jobs but the banks that will have to try to retrieve the money they paid out.

The next member of the big four is Local World, which was created in November 2012 by the merger of Northcliffe regional newspaper group and Iliffe News and Media. Northcliffe’s owner, the Daily Mail and General Trust, was paid £52 million and took a 38.7% stake in Local World. Iliffe’s owner, the Yattendon Group, has a 21.3% stake in the business. Trinity Mirror paid £14.2 million for a 20% share. Local World has no presses and no pension fund liabilities, but it has 110 newspapers. It is the new kid on the block, but its founder, David Montgomery, is an old hand who has been around a long while—he was previously at Trinity Mirror. He is reinventing the model so that it is virtually without journalists. He has already got rid of sub-editors. Barry Fitzpatrick, the NUJ deputy secretary who negotiates on behalf of the workers, says:

“This is a very dangerous vision. What he appears to be suggesting is that the police, schools, Tesco and other organisations can put their press releases directly into the local paper, without verification or comment.”

That undermines the very product that Local World is trying to sell, which is extraordinary.

[John McDonnell]

Individual newspapers and managements attended the meeting that the Minister convened with different sectors of the industry. The meeting demonstrated that, with good management, it can be done. An element of creativity and community engagement is needed, but the core of success is always quality journalism. If a company undermines the quality of its product, the whole operation will eventually be brought into crisis, which is what has happened as a result of short-term profiteering by poor management. Greedy executives have walked away with packages of hundreds of thousands of pounds while their workers on the front line have been sacked.

The hon. Lady makes a good point that quality journalism has exposed local scandals. We spoke to Shaun Lintern, the journalist who broke the Mid Staffs hospital story. He basically said that such a story could not be broken with the resources available now because there are not enough staff on the ground.

I have demonstrated what has happened in recent years. Wages on local papers are now extremely low. Newsquest has had a pay freeze for four of the past five years. Typically, a journalist now earns £21,000 a year, but trainee journalists in Yorkshire are earning 7p above the minimum wage. Journalists in Cheshire and Merseyside earn as little as £14,500. Traineeships are one way in which people get into journalism, but trainees who have worked at one newspaper group in London for years earn some £16,000. That is in the capital, and it is just above the London living wage at best. Those trainees do not receive London weighting. Another high-profile paper in the capital now pays journalists £18,000, which is a scandal. It undermines the quality of the job, professionalism and the workers themselves if they are not paid properly.

[Rehman Chishti]

The hon. Gentleman is highlighting the brilliant work of local journalists such as those on the Medway Messenger. The chairman of the Kent Messenger Group, Geraldine Allinson, told me that where local journalists have done a brilliant job and their story has been used by, say, the BBC or other nationals, they have not been credited. When the BBC’s charter comes up for renewal, it might say, “Yes, we’ll do it,” but when charter renewal goes away, there has not been such collaboration with local newspapers to ensure that journalists get the credit they deserve.

[John McDonnell]

The BBC has entered into relationships with the local press in some areas, and the dissemination of information in that way has been fairly constructive. The NUJ is calling for a short, sharp inquiry on the future of local newspapers because we want to look at the whole architecture in which local media operate.

I repeat the statement in the NUJ briefing, which was sent to all of us. It believes that journalists should be at the heart of local communities, speaking and listening to readers. It believes that there is a strong future for local papers that enjoy high levels of trust among their readers, but the sector is in a precarious position. That is why year-on-year cuts, pay freezes and increased work loads are creating low morale among journalists at local papers and undermining the product that companies are seeking to sell. Professional journalism, community journalism and investigative journalism could be casualties in the coming years if we do not act soon.

The NUJ has been running a country-wide campaign with Co-operatives UK and the Carnegie Trust to consider how good journalism could be funded. An issue that has come up, including at our seminar, is that the NUJ believes that this Government’s Localism Act 2011, which we supported, should be amended to give local newspapers protected status as community assets to prevent newspaper titles from closing overnight and allow new owners—including, as my hon. Friend the Member for Islington North (Jeremy Corbyn) said, co-operatives and other community initiatives—time to put together bids for the paper. Newspaper groups should not be allowed to close a paper and lock away a title that has resonance in the local community. Legislation is also needed to prevent newspaper owners from refusing to offer titles for sale before closing them. They should at least be offered to others who might want to make them a going concern.

The NUJ asks the Government to open an inquiry into the future of local papers to explore how Government could support new models of ownership, such as co-operatives and community ownership by readers, and investigate how Government subsidies and tax advantages could work for local newspapers. I welcome yesterday’s statement, but tax concessions and reductions in business rates should not be allowed to go towards featherbedding companies with increased shareholder dividends or into high salaries for executives.

We should consider how local papers could be funded or part-funded, as others are, on a public service model. If local papers receive public subsidies through tax concessions or otherwise, there should be a public benefit test. Do they report council meetings? Do they report what is happening with local statutory agencies, and hold them to account? We have also been proposing for a while that the use of industrial levies should be investigated: for example, a 1% levy on pay TV operators such as Sky and Virgin Media would bring in about £80 million a year to fund the development and transitional costs of the local newspaper sector. A 1% levy on the five big mobile phone operators could generate £208 million a year. On boardroom greed, one proposal that has been debated is to link chief executives’ and executives’ pay not just to performance but to their employees’ pay, and to ensure trade union and proper representation on remuneration committees, so that there is more transparency and openness.

As we have seen today, despite all the travails of the local newspaper sector, the recognition of its importance is prompting Government and all parties to consider seriously how we can intervene to support it in this period of transition into the new digital age. It will survive and thrive only on the basis of preserving and promoting quality journalism. Without that, a local paper is undermined as a product and will wither on the vine. I urge whoever is in government next to seize the NUJ proposal of an open and engaging inquiry involving all stakeholders into delivering a way forward to enable an essential public service to flourish once again.