Select Committee on Business and Enterprise Minutes of Evidence


Examination of Witnesses (Questions 60-79)

LORD CURRIE OF MARYLEBONE AND MR ED RICHARDS

22 APRIL 2008

  Q60  Chairman: Having drawn that balance it would be fair to say that you would not be happy if on Friday further measures were brought in which would tip the balance in one direction.

  Lord Currie of Marylebone: The judgment of the Ofcom Board is that the balance we struck was the right one. Clearly it is possible for reasonable people to take a different reasonable judgment on that question. It would not be one that the Ofcom Board would have supported.

  Mr Richards: We are due to review this and the effect of our changes in July. The idea that the problem in children's television has been caused by those changes is complete nonsense. The reductions in children's television, in commercial provision, began seven years ago—they have declined every year since—prior to when the prohibitions came in. You simply cannot equate the two things together; it is disingenuous in the extreme. Our changes will make a £20 million to £25 million impact. The significance of the pre-9 pm watershed is that we estimated the impact on programming generally would be somewhere in excess of £200 million and that was one of the reasons we drew the line where we did. There is a very, very substantial difference.

  Q61  Philip Davies: You are doing a review in July but we are debating this on Friday in Parliament. It is a bit late in the day to be having a review in July if something has already passed in Parliament beforehand. In terms of your perspective, your view is that on Friday people should be very reluctant to go further down the line of increasing restrictions. Is that what you are saying?

  Lord Currie of Marylebone: It is very much a matter for Parliament to make its decision but I would hope that parliamentarians would read the very substantial body of evidence we have produced.

  Q62  Philip Davies: Do you not think that this whole episode has done a lot of damage to Ofcom's reputation? In your annual report you make a big play that you will operate with a bias against intervention, that you will seek the least intrusive regulatory methods, that you will strive to ensure that your interventions are evidence based. In the earlier session with DBERR you were talking about how independent you are, but the whole episode of the introduction of this ban—which has no evidence behind it whatsoever, it was, as you were indicating, because some people were banging on about doing nothing and some people were banging on about doing lots of things so you found a cosy compromise—all it has really done is to show that Ofcom are quite weak and cave in under a bit of pressure and on the whole are a bit of a government patsy and just do what government wants to do. Do you not think that this has undermined the whole of Ofcom's basis for existence?

  Lord Currie of Marylebone: That is a complete misrepresentation. We engaged in a very considerable body of original research commissioned in order to get to the heart of these sensitive issues. We then struck a balance. You quote our regulatory principles; we do have a bias against intervention but the second part of that principle says that where necessary we will intervene decisively and this intervention was one where we judged it was appropriate to intervene.

  Mr Richards: I do not think we have ever done a more evidence based piece of policy, to be honest with you. The research and analysis that went into that was absolutely extensive and I think the independent judgment that we made where we were uniquely placed to make that independent judgment—it is well known there are MPs of all parties who disagree with what we have done from different perspectives—which is illustrated by the fact that we were not willing to support a pre-9 pm watershed ban and the reason we were not was because, even though we could recognise the impact that this commercial advertising was having on a broader concern for society (in other words childhood obesity), we also had to bear in mind our duties in relation to quality programming, including children's programming. That is why we took the judgment that an impact of £200 million would not be acceptable but a much more limited impact, which would reduce the exposure of children to that advertising, would be a proportionate measure. Indeed, the provisional data that we have already had prior to the full review in July demonstrates that it has had a very real effect. I think the reduction in exposure of children to HFSS advertising in, for example, dedicated children's channels is 49% and there are other examples of reductions as well.

  Q63  Philip Davies: By how much has obesity reduced?

  Mr Richards: That is clearly, as we said right the way through, not an outcome which we can conceivably be held responsible for. When we embarked upon the work in this area, at the start, the middle and the finish, we made it very clear that all we could do was take a responsible judgment in light of our duties and our responsibilities, but the wider issue of obesity is clearly going to be influenced by many, many, many different factors, the vast majority of which are outside of our control. We were very clear about that right the way through the process.

  Q64  Philip Davies: In your annual report you very helpfully produce a graph of all the activities that children do whilst they are watching television: 30% are using a mobile phone; 27% are playing computer games; 26% are talking on the phone; 22% are on the Internet; 20% are listening to music; 8% are listening to a radio station. Surely it is blindingly obvious that if they are doing all of these things they cannot possibly be taking note of adverts going on at the same time, so how on earth can you possibly claim to be evidence based when your evidence is completely at odds with what you have been trying to do.

  Lord Currie of Marylebone: If that were the case I think the commercial advertisers would not be advertising on those stations.

  Q65  Adam Price: S4C has led the way in prioritising children's programmes through the creation of its new dedicated children's channel. You mentioned in the review the possibility of an expanded role for S4C in producing children's programming for the whole of the UK. Could you say a little bit more about that and have you discussed this idea with S4C?

  Mr Richards: We have provisionally and I think there are two aspects to it. The first is that we ask ourselves where could we go to try to address this challenge in relation to children's programming and actually S4C are a substantial commissioner of children's programming. I think they are possibly the second biggest in the UK after the BBC; way behind the BBC but second biggest. The question we asked ourselves was: is there anything in relation to that investment that could enable it to be used more widely for English speaking children as well? I think that is an open question. In some cases I think it will be very difficult; in other cases, particularly programming for younger children again where it could easily be co-produced or reversioned in English, that has to be an opportunity. What we would absolutely not want to see is that idea convert itself into an idea which in any way undermined or diluted S4C's central purpose. S4C can only be successful and will only do what it is there to do if it has a clear focus on providing a content television service to Welsh speakers. It has to start there and then we have to ask ourselves the secondary question: is there anything else we can do to generate broader benefit as well? We pose the question in that spirit really.

  Q66  Adam Price: In order to make it attractive for independent producers to co-produce or to do reversion, would there need to be any change in the contractual relationship, the ownership of the resale rights for instance for wider markets?

  Mr Richards: There could be and that is where you could see benefit to S4C in terms of the cost of commissioning. There is a scenario there in which it is a co-production with an independent or another broadcaster, the costs therefore are shared and you ensure that the core programme is what S4C want for their channels but also it is enabled to be reversioned and reused in English as well. I think that is potentially quite an exciting area of exploration. As I say, we do not agree with those who would see that as a way of trying to siphon off money that is for S4C into something else. There is a great danger, in my view, of confusing organisations in terms of their purposes. If you try to get organisations like S4C to do other things as well they will just flounder because they will not be able to focus on what they are there to do. Let us keep S4C doing what it does well, providing the service that it should provide for an important community in the UK. If there are any other secondary opportunities, let us explore them.

  Q67  Mr Hoyle: Still on children's television, programmes where there are game shows on where you try to encourage the public to come on that programme, actually the public do not get on, they are actually only taking children from acting schools and it is a big con. Have you heard about this?

  Mr Richards: No, that is the honest answer to that. We have not heard about it. We have not had any complaints about it.

  Q68  Mr Hoyle: Will you look into it?

  Mr Richards: Yes, we will look into it.

  Q69  Mr Hoyle: Somebody came back to me and said he could not believe that CBeebies have been asking for children to go on but everyone was from acting school except one child from my constituency.

  Mr Richards: We would be very happy to look into it; we have not come across it. We are planning a second seminar session with the broadcasters on the whole issue of trust in broadcasting and that will actually provide a very good opportunity for us to raise it very directly.[1]

  Q70  Philip Davies: How important is it for ITV to maintain its sub-regional news bulletins?

  Mr Richards: That is something we are going to consult on in the autumn, in the second part of our public service broadcasting review. We are aware that ITV wants to make changes and clearly we have set out the challenge for commercial public service broadcasting. What we have found in our research on this so far is that viewers value regional news very highly and if we were to prioritise or be clear about what the relative priorities of public service broadcasting from the commercial sector are in the future I think our view is that regional news would be very, very high up the list. We would enter the consultation on their proposals with that spirit.

  Q71  Philip Davies: What factors would influence your decision?

  Mr Richards: The value that we identify that audiences place upon it, the costs associated with the provision (which is very important) and the opportunity costs in relation to the provision as well (in other words, what would the value of that slot be if it was not regional news). The central question that we will ask ourselves when we look at it in the round will be: which components of public service broadcasting do we think the viewers most value? Which are the most important in relation to the duties we have been given by Parliament? What is their cost? Which ones can we credibly expect ITV to deliver in the future? As I say, I think regional news is very high up the list indeed.

  Q72  Rosemary McKenna: On the question of support in terms of Scotland and the public service broadcasting requirement where you are saying there is a real possibility that the costs will not cover the benefits that are there at the moment, you say that as soon as two years from now it will be in some difficulty. How should the public service content be maintained? It is very crucial in terms of the devolved settlement that there is a plurality of provision. It is quite clear also at the moment that STV are working extremely hard and are improving their content. In two years' time are they going to be in such difficulty that they are not going to be able to maintain that? How can we deal with that?

  Mr Richards: It is a very difficult issue. We do think the challenge here will come in the next two or, at best, three years. We have a two-fold approach to it. We will look at the possibility of an evolved model, so how much value is there in the licences? What can we expect the ITV companies—or STV in your case—to deliver? What can we credibly impose on them through licence obligations? Alongside that we will ask ourselves if there is an alternative approach which we also need to consider because of how stretched that model is. I think that is where we get into the broader range of questions that we have opened up in the PSB review where we ask ourselves about the model of public service broadcasting that we want in the future. Is it the evolved model that we have just described? Is it a BBC only model which would mean that you would potentially lose plurality in those areas? Or is there another model which might involve BBC and Channel 4 with a strengthened PSB remit and some broad, competitive funding, so some other funding which would be potentially available for national, regional news or programming of other kinds. That is the big debate that we are now entering. The reason we brought the PSB review forward two years was because we saw this problem coming and I think we—I am using the "we" very collectively now, Parliament and government as well as ourselves—do have to understand how we are going to answer those questions in the next two or three years.

  Lord Currie of Marylebone: Ultimately it is a matter for government because the funding stream is something that government will have to arrive at. We can help the debate and identify options.

  Q73  Rosemary McKenna: Surely in terms of a purely commercial operation it is up to them to ensure that they provide the requirement that is put on them.

  Lord Currie of Marylebone: There is a great deal of self-help they can do in terms of enhancing the economics of their business, but ultimately if we are putting regulatory burdens on them that they cannot sustain they will walk away and that is the dilemma.

  Q74  Mr Weir: I agree with Rosemary about the need for plurality. I represent the northeast which was covered by Grampian Television and became part of STV, but what STV now do—I agree with Rosemary they are trying very hard—is that they do a regional news programme that is broken up with opt outs for both Dundee and Aberdeen covering the former Grampian area. That is something the BBC does not do; we get one programme reporting Scotland which is very much central Glasgow based. I would be extremely worried if you were suggesting that STV would no longer have to produce regional news programmes in that way because that would seriously impact upon the plurality and the news outside the central areas of Scotland.

  Lord Currie of Marylebone: We fully understand that. What we are saying is that there is a dilemma here. It may well be that without an additional funding source that is the position we will arrive at. We are not saying that that is a desirable situation at all.

  Q75  Mr Weir: What is the pressure that is driving this?

  Mr Richards: It is really important to understand that we do not have infinite powers just to make them do these things. This is the crucial change. In the past that has been the case but that has gone. We have to now exercise a judgment about what is economically possible to put in the licence obligation. The question that we are just going to let them off or something of that kind is not going to happen. We recognise this as a very, very important issue, but the value of the licences that they hold is declining, will decline further and has been in decline for many, many years now. There comes a point, which we estimate to be somewhere between 2009-2012, when, if we are loading them up with obligations that involve costs or which require them to show programmes and exclude another programme which would raise far more money, they will simply hand the licence back and say, "Get someone else to do it".

  Q76  Mr Weir: You are not seriously suggesting that a company being told they have to produce a half hour news programme from 6 to 6.30 is going to hand the licence back because it cannot fit another Australian soap opera in.

  Mr Richards: Regional news is, by some distance, the biggest cost to the ITV network of any PSB obligation there is. It is very costly to produce; it secures significantly lower audiences than they could secure with whatever soap opera. It is a very serious question.

  Lord Currie of Marylebone: I think it is absolutely essential to make sure we grasp this point. We see the value of regional news but we do have to understand that its production is under huge pressure and we have to find a solution to that if we want it to continue.

  Mr Richards: Our view about the centrality and importance of news is very clear and we have said it on so many occasions I do not think we need say it again. The research we have done supports our own view on the centrality of news and we have argued very strongly for the plurality of news. Do not misunderstand where we are coming from in terms of desirability; we absolutely want to secure it, we absolutely want to make sure it is delivered for many, many years to come. It remains an open question about whether we can actually do that. What we want to make sure is understood is that over the next few years we may have to look at another way of doing it. That is what we are doing at the moment. I hope that we will be able to say that this is a central part of their obligations and actually, when you look at it in the round, there is enough value in these licences for them to do that and we can retain that model. However, I cannot sit here in front of you today and guarantee that that would be the case; that would be completely irresponsible of us.

  Q77  Adam Price: You have estimated that by around 2010 the costs of public service broadcaster status will exceed the benefits in Scotland. Do you have similar outline dates in mind for Wales, Northern Ireland and some of the English regions as well?

  Mr Richards: It is very similar in Wales. Northern Ireland is slightly better placed because the audiences tend to be higher and therefore the opportunity costs associated with it are not as great. It varies slightly, but broadly speaking the same challenge is going to be there in Wales as well. Clearly, just as in Scotland, it is a very, very big issue in Wales. Imagine Wales without regional news from ITV as an alternative to the BBC, that is quite a significant issue.

  Q78  Adam Price: Would you say that because of the weakness of the print media in Wales that actually the plurality issue is even starker?

  Lord Currie of Marylebone: We are certainly very aware of that. That is an important factor that gives extra salience to this issue.

  Q79  Adam Price: You identified the possible need for additional funding and you have outlined four potential options in broad terms. I think the Culture, Media and Sport Committee in its Report also identified two of those options which are the possibility of top slicing the licence fee and general taxation. Of the two additional options that you have set out, using regulatory mechanisms is one option but also introducing industry levies of different kinds, are they realistic options or are you merely adding to the list to give the impression that you have not already made your mind up?

  Mr Richards: They are actually credible in the sense that regulatory assets exist. Free spectrum will remain a possible choice. We can apply pricing spectrum or we can waive it. If we waive it that is clearly a value and we could consider that. There is an issue around the decisions we make on advertising levels which has its own problems as we know, but that is another form of regulatory asset which we could consider. There are genuine decisions and genuine options in that area. On the industry levy front, it is entirely credible in the sense that some other countries use it. It is used in Canada, it is used in Finland; President Sarkozy has very visibly floated it as his preferred approach to funding public service broadcasting in France. I think it is there, it is in play and I think it would have been quite wrong of us not to have included it. Indeed, industry levy is of course how Ofcom is funded so it is not that these mechanisms do not exist or cannot exist; they do. The question is what is the best approach to the nature of the problem or the challenge that we have here? In other words, what is the best approach for delivering public service broadcasting? Just to reiterate here what David said earlier, the decision on that is very much one that the Government will end up having to take. I think we see our role as genuinely laying out the range of options—these are the options and these are the pros and cons of them—and then we will have to hand that set of options over to government and Parliament and you will all have to debate it and decide the answer.


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