House of COMMONS









Tuesday 27 October 2009



Evidence heard in Public Questions 161 - 301





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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 27 October 2009

Members present

Mr John Whittingdale, in the Chair

Mr Peter Ainsworth

Janet Anderson

Rosemary McKenna

Mr Adrian Sanders

Mr Tom Watson



Examination of Witnesses

Witnesses: Ms Sharon Taylor, Local Government Association and Stevenage Borough Council, Councillor Gerald Vernon-Jackson, Portsmouth City Council, and Councillor Mark Loveday, Hammersmith and Fulham Borough Council, gave evidence.

Q161 Chairman: Good morning. This is the third session of the committee's inquiry into the future for local and regional media, and in the first half this morning we are concentrating on local authority publications. Can I welcome Sharon Taylor of the LGA and Stevenage Borough Council, Gerald Vernon-Jackson of Portsmouth City Council and Mark Loveday from Hammersmith and Fulham Borough Council. We do not usually have long opening statements, but I understand, Councillor Loveday, you wanted to say a couple of words.

Councillor Loveday: I was not prepared to say anything orally, but I suspect the reason our local authority is here is that we have a slightly different model from most local authorities in terms of newspapers, as you have seen, which is practically break even in terms of funding through external and internal advertising. We probably have the largest proportion of external advertising of any local authority newspaper in the country and it is all driven very much by the value for money agenda. That is, I think, encapsulating just the introductory remarks.

Q162 Chairman: Very good. Undoubtedly, we will wish to come on to ask you about that shortly. The LGA have said that they are encouraging local authorities to improve their communications with residents, and one of the core actions suggested is the publication of a council newspaper. Can you say why it is the view that councils should publish newspapers and why the functions of those cannot be fulfilled by commercial publications?

Ms Taylor: I would like to start by saying that both points of media are necessary. We need both our local newspapers to be challenging of us and to pick up stories that we may not pick up in our local authority newspapers, but as to the reason that communicating from the councils does something unique from what local newspapers can do, I looked at a number of different areas, first of all, supporting the community and voluntary sector. If you look at my newsletters, which have been passed around, you see that quite a lot of space is taken in giving information about our community and voluntary sector activity, and that is something that they would not be able to afford to produce in commercial newspapers. We provide information on council services, and you will find examples both of performance information and information about what we have spent people's council tax on, and I think that is an absolutely vital part of what we do in communicating with the public (to tell them what we have spent their money on and how we are delivering services) and to give them information on council services is absolutely vital, as far as I am concerned, and also our duty to promote democracy. You will see a whole page on electoral registration in one of my council's newsletters, and this duty to engage people and involve them in the democratic process is something I do not think local newspapers would take on so strongly. It is not particularly newsworthy in the sense of a weekly newspaper going out, but it is a very important part of the democratic process. I have got a number of other points. I could go on, but I will not. Lastly, in terms of community cohesion, you will also see in one of my newsletters we started a series of communications for people that had come to the area from another country and we published an article both in their language and in English, so that they were able to communicate with other residents in the town, get in touch with them, talk about their experience of living in our community. That has been very successful, both with the English-speaking community and communities from outside of the area, in generating interest and promoting community cohesion and that is something our local newspaper would not have done. On the other side of this, our relationship with our local newspaper is extremely good. We have run, recently, a very effective joint campaign with our local newspaper called "Buy local, live local, go local", and that came from the editor of our local newspaper, who wanted to do a joint campaign, which we have done. We also spend vast amounts in advertising in our local newspapers. Gerald can give you an actual quantified example of that. I think there is a very good rationale for both councils communicating with the public in their own way and local newspapers doing their job in their own way.

Q163 Chairman: You mentioned the importance of publishing information about how council tax is spent, about electoral registration. Why can you not just take a two-page version to the local newspaper, which will support the local newspaper, rather than publish your own which undermines it?

Ms Taylor: I think we do spend large sums of money on advertising. Can I ask Gerald to give you his example?

Councillor Vernon-Jackson: I am Gerald Vernon-Jackson; I am leader of Portsmouth City Council. Just to give you an idea, we do five or six flagships a year, which costs £45,000 of public money; we spend £970,000 a year advertising in our local paper (so £970,000 of public support for a private newspaper in Portsmouth), but it still only gets to 30,000 houses out of the 85,000 people who live in Portsmouth. There are some things that they do very well, and we work extremely closely with them, but sometimes we need different forms where we are guaranteed of getting it through everybody's letter-box, which not all papers are able to do.

Q164 Chairman: You are saying, just to be clear, £970,000 on one newspaper?

Councillor Vernon-Jackson: That is what we spend by advertising in our one local newspaper each year. So that is state support for a private newspaper.

Ms Taylor: I think we would have common experiences of that. The amounts of money will differ, but we all spend a lot of money advertising as well as writing a lot of copy for newspapers, because a lot of the copy that is in our local newspaper comes from news releases which we have written, and that provides them with copy. I think there is a large amount of support, but I agree with Gerald. Our local newspaper in Stevenage, in my district, only goes through about 10,000 doors now, at most, and we do on occasion need to communicate with all the residents of the borough. We have about an 85% readership of our local magazine, and we only produce it six times a year, so it is not in competition with our local weekly newspaper.

Councillor Loveday: Perhaps I can answer this using some figures. In our part of London there is a media void when it comes to the local newspapers. Obviously, we have a plethora of national media in our part of London. I have attached to my written submissions a table (at the end) which details the audited circulation figures for our two paid-for local newspapers, which shows that over the last ten years their circulation has declined from about 4,000 to approximately 1,500, and when we come to communicate with residents (and local authorities have a need to communicate with residents, not only for statutory notices, but also for many of the demands that are put on us by central government, we need to communicate with 180,000 odd residents in our borough), it is simply not an option for us to rely entirely on the paid-for local newspapers to provide that communication. I have given an example of some of the costs that are involved. A typical statutory public notice in the Hammersmith and Fulham Chronicle, which is the higher circulation of the two local newspapers, costs approximately £650. That works out, from our point of view, with a subsidy of 52 pence per copy just using one advert. So we put a considerable amount of subsidy in for a very low circulation. It is far, far cheaper for us to channel our communications into an in-house produced publication which has a penetration in the order of 80% and you can see the costs per delivery point working out at a fraction of that cost, and I have given the figures in my written submissions.

Q165 Rosemary McKenna: You said that you were only covered by national newspapers, and then you said there was a Hammersmith and Fulham Chronicle.

Councillor Loveday: No. In terms of national newspapers, we do have national newspapers. The highest circulation regional or local publication in our borough is the Metro newspaper. We have these matters tested by----

Q166 Rosemary McKenna: Is there a paper called the Hammersmith and Fulham Chronicle?

Councillor Loveday: There is a Hammersmith Chronicle and a Fulham Chronicle, which are part of the Chronicle series, and there is, equally, a Hammersmith Gazette and a Fulham Gazette. They are all part of Trinity Mirror and, in fact, latterly, I think, all of the editions in the borough have carried the same copy with a different strapline, but, in any event, they are paid-for local newspapers, yes. They are the figures that you have got in the written submissions for circulation.

Q167 Chairman: In your submissions and your evidence you talk about the numbers of copies distributed. These are, presumably, free copies that you pay somebody to go and put through letter-boxes.

Ms Taylor: Yes.

Q168 Chairman: What surveys have you done as to how many are actually read or are not put straight in the bin?

Ms Taylor: We test this every year in our annual survey. We have about an 85% readership. It is a very, very high level of coverage in the borough. In fact, it is quite noticeable when the magazine has gone out that people will actually approach you and talk to you about things that are in it, and we survey that every year. That is why I think it is very important that we keep this distinction between what we are doing and what the newspaper is doing. They are very different functions and, as far as I am concerned, they are complementary to each other, they are not acting against each other. In fact, our local newspaper editor - we did a series of "I love Stevenage because", and he actually had one in our magazine, so he is very understanding of the fact that these are different functions and, as I said, we work with them as well when they are running campaigns in their newspaper.

Q169 Chairman: The editor of your local newspaper is entirely happy with the local council publication.

Ms Taylor: As far as I know, he is entirely happy with it, because we are not competing with him at all and we provide him with a lot of advertising and a lot of copy for his newspaper and we work very well together.

Q170 Chairman: But you do not take advertising in your newspaper.

Ms Taylor: We do not take advertising in ours, no.

Q171 Chairman: Mark, your newspaper takes a lot of advertising. What contact do you have with the editor of the Hammersmith and Fulham Chronicle?

Councillor Loveday: Given that his ultimate boss, I think, has given evidence before this committee already, I would be surprised if he would take a forthright position supporting us, but that is one thing. In terms of our circulation, because we are fortnightly, we are ABC audited, so our figures are audited independently, but of the local authorities - there are various studies done in respect of local authority readership - we have a score of something in the order of 80% readership on various scores. You can look at it over six months, or a month, or two weeks, or whatever, but we are one of the highest in terms of penetration certainly.

Ms Taylor: Can I just clarify the point on advertising? I said we do not take advertising, there is no commercial advertising in our publications, but we do promote our voluntary and community sector, and I think that is an important distinction. They would not be able to advertise in the local press. So although we are not taking commercial advertising, we do use the publication to inform people about what our VCS sector is doing.

Councillor Vernon-Jackson: We take advertising from the Health Service, from the Fire Service, from the Police Service, because they want to guarantee that they are getting things through everybody's letter-boxes across the city, which they cannot do using the local paper.

Q172 Mr Sanders: I think there are some clear distinctions here, are there not? There is the magazine type thing that does not take advertising, there is the one in the middle, which is Gerald's, that takes some advertising from some other public bodies, and then we have got the communist council that believes in the state ownership of newspapers and is putting the private sector out of business. Certainly all the representations we have had from newspapers are about their fears about councils taking away from them things that used to go in the local newspapers, in particular official notices, planning notices and that sort of thing. That is not something that you do, is it, in Stevenage and Portsmouth? You do not use your magazine for official notices, planning applications, that sort of advertising.

Councillor Vernon-Jackson: No, but Adrian, I am terribly sorry, we spend £40,000 a year doing our public notices for planning and, as far as I can see, that is a complete and utter waste of public money. I do not know anybody who scans page 49 of the Portsmouth Evening News to look for the planning applications. When we drop letters to everybody in the local area to tell them there is a planning application, we put a sign up outside the property to tell people there is a planning application. All that money is money out of council tax payers' pockets to subsidise a private newspaper. It is, in my view, a waste of money. Unfortunately, the Government tells us we have to waste that money.

Q173 Mr Sanders: It is a statutory duty, is it not?

Councillor Vernon-Jackson: It is a statutory duty, yes, but actually, if we put it up on the website and did things properly in terms of telling local people, then you could actually give a much better service for a lot less money.

Q174 Mr Sanders: Are you still advertising whatever the Portsmouth newspaper is?

Councillor Vernon-Jackson: Yes, because we have to.

Q175 Mr Sanders: In Stevenage do you still do that?

Ms Taylor: Yes, we still publish our planning notices, but, as far as the LGA is concerned, on the district council's network we have been asking for a long time not to have to publish those statutory notices in newspapers. We have very stretched budgets in district councils now and it is a huge strain on our budget, newspaper advertising of statutory notices. We would much prefer to publish them online. I would not publish them in my council magazine because it does not come out frequently enough.

Q176 Mr Sanders: At the moment you still pay---

Ms Taylor: At the moment we are still paying newspapers, yes.

Q177 Mr Sanders: What happens in Hammersmith?

Councillor Loveday: First of all, I welcome your comment about communism. It is a rare day when Hammersmith and Fulham are outflanked on the right! We actually consider ourselves pragmatic about this. There is a point. Is it really proper for us to be subsidising the shareholders of Trinity Mirror to the extent that we have been, or are we doing better to go out there and grab as much help to alleviate the burden on local taxpayers that we can? We have taken the second route. I have worked for the newspaper industry for very many years myself, I am married to a journalist, my father-in-law was a distinguished newspaper editor and I have a lot of time for the industry. Nevertheless, at the end of the day, there is no evidence at all that local authorities taking newspaper advertising is hitting the paid-for commercial sector.

Q178 Mr Sanders: That is an answer, but it was not actually the answer to the question. The question was: where do you place your statutory duty planning advertising? Do you do it with the existing newspapers or do you do it through your own publications?

Councillor Loveday: We place the bulk of it with our in-house newspaper. The reason for that is that there are technical reasons on the lead-in time that you can have with planning notices and licensing notices which mean that it is almost impossible to place them with an in-house newspaper unless it is fortnightly or weekly. If it is a monthly publication, it is simply impossible to comply with the statutory requirements.

Q179 Mr Sanders: This is monthly.

Councillor Loveday: This is fortnightly.

Q180 Mr Sanders: If I look through there, will I see the planning notices?

Councillor Loveday: Yes, you will see there is a page on planning notices.

Q181 Mr Sanders: It is interesting; you have got letters to the editor. Obviously, you are going to say the reason there are no critical letters at the council is because there are no problems which people have with the services, but if I was to be objective about this, I would suggest that it would be rare for you to want to have criticism of your council in your own letters page.

Councillor Loveday: The local authority newspapers and publicity as a whole are governed by a strict statutory code which was actually passed by Parliament, I think, early this year or the last part of last year. It is a far more restrictive code than the Press Complaints Commission code. It is written into the contracts of the journalists who work for the paper.

Q182 Mr Sanders: Yes, but this is the public writing letters. It is about editorial, not about what you write.

Councillor Loveday: Yes. We do cover critical letters; they do appear in the letters page. One thing I would say, though, I was just glancing through The Chronicle today, and I can hand up a copy. I turn to the letter page, and I think there are six letters, all of which were written by councillors, parliamentary candidates, and so on. I do not think that letter writing in local newspapers is necessarily something that grabs the public imagination in my borough. I can hand that up for you to have a look at.

Q183 Mr Sanders: So your case is that you are not taking any money. Well, it is not your case, because you must be taking money away from existing publications. Your case is that you should do that in order to subsidise the taxpayer?

Councillor Loveday: The particular model that we have in our borough for the commercial paid-for sector is that they are essentially wrap-arounds of other newspapers - they are four or five pages wrapped around editions of an Ealing newspaper and a Westminster newspaper - and, as a result, they have always found it very difficult to attract local advertising and, in particular, property advertising, which is the big earner, as I understand it, adverts for house and flat sales. They have never attracted that market and we have been able to grab that, and you will see there are plenty of pages of local property advertising. They were not getting that market anyway, and we have gone after it. It is very difficult to show cause and effect as to whether we do affect them at all. The circulation figures suggest that they were declining well before we came on the scene.

Q184 Mr Ainsworth: If I understand you rightly, we have been talking about the statutory notices that you have to publish going into paid-for local newspapers.

Ms Taylor: Yes.

Q185 Mr Ainsworth: Why do you not use local free sheets? If the problem is distribution, if the problem that you have cited is getting things through people's letter-boxes, then free newspapers are delivered through people's letter-boxes and you could advertise in them, could you not?

Ms Taylor: Our free sheet is not delivered town-wide. The newspaper I have circulated, which is The Comet, is a free sheet to those properties where it is delivered, but it is only delivered to about 10,000 out of our 38,000 properties in the borough. So they do not deliver town-wide, but we do publish our statutory notices in there because we feel it is right. We cannot do it in our local magazine because we only publish it six times a year; it would not meet the requirements of it. So we cannot publish in The Chronicle: it is not published frequently enough.

Q186 Mr Ainsworth: Your situation, with respect, if this is the only publication that Stevenage regularly put through people's doors and, therefore,---

Ms Taylor: No, that is the council magazine that is put through six times a year. The local newspaper, which is around somewhere (it is called The Comet), is a weekly free sheet to those properties where it is delivered, but it is not delivered borough-wide now. About six months ago they took a decision not to deliver it on a borough-wide basis, and the statutory notices are in there.

Q187 Mr Ainsworth: I am sorry; I had not seen it.

Councillor Vernon-Jackson: The issue we have got is that in lots of different parts of the country there are very different coverages. Particularly in rural areas it is very difficult to get coverage through free sheets who do not deliver and, particularly in places like London, in lots of places there are really no local newspapers, because you either have The Standard, which covers the whole of London and is actually almost a national paper, and so Mark has a particular problem that he has addressed.

Councillor Loveday: You will find that both the statutory requirements on licensing and on planning adverts is that they have to be published in a newspaper circulating in the locality, I think is the word. We have a free newspaper which circulates to 14,000 households in the south of Fulham, which will not be the locality for Hammersmith, Shepherds Bush or the northern part of Fulham, and, as has been said by the other witnesses, it is horses for courses, there are different patterns around the different parts of the country. We have responded to our particular need in our particular way.

Q188 Mr Ainsworth: We have had evidence from Trinity Mirror, who say that some of these newspapers are publishing advertising rate cards which aggressively set out to undermine the market advertising rates as a competitive move on the part of the local council. Is that how you managed, in your words, to grab the property sector for news?

Councillor Loveday: One of the oddities of all of this is we have a number of statutory limits on what local authorities are able to do, and one of those, for example, is that we cannot make a profit out of a newspaper. The moment you get to break even, that is the end.

Q189 Mr Ainsworth: No-one else is making a profit. The argument from the industry's point of view is that you will make it even harder for them to make a profit.

Councillor Loveday: If that is the case, is it the function of local government to provide that subsidy, in our case to the tune of, broadly speaking, £400,000 a year. I doubt that this committee is going to make recommendations to central government to provide that funding to subsidise the local press. I am afraid it is a matter of money from our point of view. We do this in the most cost-effective way possible.

Q190 Mr Ainsworth: I must say, I had no idea, Chairman, of the nature of the sort of newspapers that have been circulating here this morning, the way that they look, feel and have every appearance of being commercial publications. Are you satisfied that it is easy enough for people in Hammersmith and Fulham, or, indeed, in Stevenage, to realise that what they are reading is a public sector publication?

Ms Taylor: I think we are talking about slightly different beasts here. The examples that you have got in front of you are very different. From our perspective, it is very clear, I think, from our magazine, that it is a council publication. When the newspaper which you have just been looking at comes through the door, you will know that is not a council publication. So they are very different beasts. I cannot answer for Hammersmith and Fulham. Theirs is obviously a different approach to ours.

Councillor Loveday: The Portsmouth one says on the top of it, "From Portsmouth City Council", so we are very clear.

Q191 Mr Ainsworth: But the Hammersmith and Fulham does not.

Councillor Vernon-Jackson: But we choose to give a huge subsidy, almost a million pounds a year, to our local paper out of the taxpayers' pockets. It may be that the Hammersmith and Fulham option is a better case for saving public taxpayers' money by not doing that. Personally, I think I will keep doing what we are doing in Portsmouth at the moment, but it is clearly cheaper for taxpayers to do what Mark is doing in Hammersmith and Fulham and not subsidising the private papers to the huge extent that the public sector is at the moment.

Q192 Mr Ainsworth: You are absolutely certain that, by placing your job adverts, for example, in your own publications and online, you are reaching more people than you would if you had been putting it through the local newspaper?

Ms Taylor: We place our job adverts in the local newspaper.

Councillor Vernon-Jackson: As do we.

Ms Taylor: That is what we spend money on.

Councillor Vernon-Jackson: But now, increasingly, head-hunters will say, you just need to have teasers in and you direct everybody to your website, because that is the better place to get people.

Ms Taylor: We ought to talk about using different forms. We have got a new post which has just been created which we have advertised on Facebook and Twitter. There has been an advert in the local press as well (I think it is actually in that newspaper you have got), but we decided that for this particular role we would like to use some of the new methods of communication as well. I think, as I say, that is complementary to the advert in the local newspaper. Most people in Stevenage, if you are looking for a job, will go to the local newspaper first.

Q193 Mr Ainsworth: Does it worry you that the commercial sector are saying that publications like the ones we have got in front of us today are putting them out of business, or is that not a problem for you?

Councillor Loveday: Can I pick up on the point you made before? Our private advertising from external sources is currently running at the rate of £286,000 a year. Internal advertising from the council is running at about half that, £143,000 odd a year. We run an internal market, however. We do not direct our departments and departmental directors to place their adverts with the in-house publication, but the cost-benefits are pretty clear and they do largely place them there. In terms of job adverts, the difficulty, again, is we are not dealing with a frozen market; the reality is across the board job advertising is fleeing to the Internet - when somebody goes to look for a job as a rat catcher in Doncaster, or something, they are not these days looking in a local paper to see that; they are going on the Internet to look for that job - and to place the blame for local authorities withdrawing advertising from national and local newspapers, I think, singles them out for unfair criticism, because everybody is doing it.

Councillor Vernon-Jackson: W4np is a classic example where we get people to work in politics. You get a much better return rate from w4np on the Internet than you do placing an advert in a local paper.

Q194 Mr Ainsworth: Can I come back to my previous question? Do you accept there is a conflict of interest between your desire to look after your council tax payers and deliver value for money and the interests of commercial newspapers that are struggling in a very difficult market and having property ads taken away and published by yourselves? Is there a conflict of interest?

Ms Taylor: I do not think it is the fault of councils that newspapers are struggling.

Q195 Mr Ainsworth: But is there a conflict of interest about this particular question?

Councillor Vernon-Jackson: In most council areas there is a huge subsidy in the private paper by the local council. We are keeping them afloat while their advertising for property has gone down because people are not moving house, their advertising from cars has disappeared because people are not buying cars, their advertising for jobs has disappeared because people are not recruiting. We in local authorities in the public sector in many ways are keeping those newspapers afloat, because we keep advertising and we keep pumping money into these papers, hundreds of thousands of pounds every year.

Ms Taylor: Can I give you a very specific example of that? Our arms' length leisure organisation has recently done a wrap-round, which is quite an expensive thing to do, because we felt that in the recession we wanted to promote the leisure activities we were able to offer, and it might counteract some of the problems that were being experienced with job adverts dropping and housing adverts dropping, but I think there is a big point here about the public sector subsidising the commercial newspapers. Our first priority has to be value for money for our council tax payers. We have got to think about that; it is very important to us. There has got to be a balance here between the relationship with the commercial sector and the amount of money we actually spend on it. As Gerald said, we are a very small authority but we spend a lot of money on advertising and statutory notices, so the relationship is still there.

Councillor Vernon-Jackson: Just to put it in context, 79% of councils do a magazine up to six times a year. Mark is not typical of the vast majority of councils. Sending a magazine out six times a year can in no way be considered to be a conflict with a daily or a weekly newspaper.

Ms Taylor: Also, there are a number of authorities who improve the revenue stream of their local newspapers by, for example, having them print their in-house newspaper, so they are supporting the sector in that way as well, and they also sponsor environmental initiatives in their newspapers and things like that. So there is a lot of joint working between the commercial sector. I do not think it is as black and white as wicked council newspapers taking all the revenue from the commercial sector.

Q196 Mr Ainsworth: On the other hand, it is interesting that Councillor Vernon-Jackson says we are pumping money into the commercial sector on the one hand, as if you are some kind of hero that is keeping the whole commercial sector going single-handed, and on the other hand you are arguing for an end to the statutory obligation which requires you to put public notices into those newspapers. I do not think you can have it both ways.

Ms Taylor: I think that is a very specific thing. As to those statutory notices, if you wanted to turn to the back pages of that Comet newspaper, I think there are two issues here. There is the amount of money it costs the taxpayer to publish those and the fact that, because they are in the back pages, they are in tiny print, is that really the best way of telling people what you are doing in their local area? Probably not. So I think there are different ways of doing that that would be a more effective way of communicating with the public, and I think we have got to think about that. They do cost thousands of pounds a year to publish, but there is a lot of other advertising. There is the copy that we provide in terms of new releases and there are the campaigns that we run jointly. So there is lots of activity that goes on between newspapers and the councils.

Councillor Loveday: Can I just, finally, say on that point, if we were to go down that route, we would be subsidising 1,500 copies of the two newspapers in the borough, but we would still then have to go out and spend a lot of money communicating with the other 170, whatever it is, eight and a half thousand odd residents in the borough, because we would not be achieving the objective by placing advertising in our local paper; we would have to do it again.

Ms Taylor: There is another example of a council newspaper that is actually distributed by the local newspaper; so in distribution as well there is a revenue opportunity for the commercial sector.

Q197 Philip Davies: I do not know what your motivation is for wanting to expand these council publications. It may well be that you want to save your council tax payers' money (although when I see many of the jobs advertised in local papers, politically correct jobs, I wonder how serious some councils are about saving taxpayers' money, but that is a different issue), but I do not know whether it is because you want to get your own propaganda out. The bigger picture here, surely, is about democracy. Surely it is essential in a successful democracy for people in authority to be held to account. Who would you think is best placed to hold the local council to account: an independent local newspaper or the local council publication?

Councillor Vernon-Jackson: I am sorry, it is not a question that arises. We very strongly support working with our local paper and work extremely closely with them and all our local radio stations, and we are lucky in comparison with Mark. We are a defined city and so we have got a strong local paper, we have got two city radio stations and we work very closely with them to try to make sure that they have information and that they are able to challenge us, as they regularly do, but there are things that they will not carry. One of the things that was circulated was a "credit crunch special" to tell people places where they can go for advice if they are having problems with their mortgage, how they can get advice about jobs, 20 things they can do with their families for free in Portsmouth so they do not have to spend a lot of money. Those are the sort of things that the local paper will not carry and do not carry. So I think we are complementary between what we do and what the local paper does and what the local radio station does, and we are not in way fettering their ability to criticise us, as they regularly do, even when we spend large amounts of money with them.

Q198 Philip Davies: What they will not carry is your propaganda. That is what you find so nauseating. You have got your positive spin on everything that you do that you want to get out there and the council do not always want to do it. So rather than accept that, you have decided to trump them with your own publication.

Councillor Vernon-Jackson: I think that is different. MPs have a communications allowance, which many MPs use, to report back on what you do to your local constituents, and you will carry photographs of yourselves and things. Our rules say that councillors will not appear in any of our publications. There are no quotes from me in any of it, no quotes from any other councillor, our leader of the council, and in some ways I think that is something we should maybe change, because by refusing to have the publicity that was available, we are not maybe allowing ourselves to be as accountable as we could be, but we take a political decision that we choose not to have councillors' photographs, not to have us quoted in our publications.

Ms Taylor: We do not have councillors' photos either. We have a readers' column in our newspaper which is in there every time. Our local newspaper has no problem in challenging what the council is doing, but there are areas where there are no local newspapers and I do not know how you square the circle if you need to inform your residents. If you have not got a local newspaper, I do not see how you would do that. We are fortunate enough to have a very good local newspaper.

Q199 Philip Davies: Is it not amazing how you only communicate with your residents all the good things that the council is doing. Surely, if you were so bothered about making sure that your local residents were so aware of everything that was going on in the local area, you would think, would you not, that a fair proportion, therefore, of that space would be taken up with all the things the council has got wrong over the last few months or where the council has been criticised by people, where there is a scandal in the local authority? Is it not amazing how you are so keen to communicate to all of your residents about what the council is doing, but only when it is good? If you are so bothered that everybody knows what is going on in your local area, why do you not put in there all the things that your council is getting wrong?

Ms Taylor: I am very happy to go on the radio and be interviewed by our local paper when people think we have got things wrong. We do that very frequently.

Q200 Philip Davies: Exactly. So now we are getting somewhere. Are you happy to concede now that you are not interested really in your local residents knowing everything? Remember, your local paper hardly goes to any local residents. That is why you need to do your stuff. If you are worried that your local media does not go to many households and not many people listen to the radio stations, that is why you need to do your council publication. Surely all the more reason to start putting some of the negative stuff in there, so all of your local residents know what the council is setting wrong?

Councillor Loveday: Mr Davies, I think the difficulty is that the starting point is that we are not there to set up a newspaper; the purpose of the newspaper is as a vehicle to communicate with residents and, necessarily, we are going to communicate the messages that we need to communicate.

Q201 Philip Davies: That you want to communicate or need to?

Councillor Loveday: That we need to communicate, because if we did not communicate with them, then when it comes to changes in library opening times or the decline in a particular tertiary retail frontage which requires some support from residents by advertising it, then that would not get done. It is a communications driven operation rather than us setting out to produce a democratic document. That is the first thing. The second thing is that local newspapers may be an important democratic tool in many parts of the country, but the model in West London is that they have failed to do that. We have now the highest broadband penetration of any local authority area in the country and things have moved on. When people want to hold us to account they do so in other ways, they do not do it these days by buying and writing in to local newspapers. As to the suggestion that we are not held to account when those of you who were at the Labour Party Conference will have seen trenchant criticisms being made of our local authority from the platform, if you do a Google search of our council you will find that there is a very vibrant market out there for criticising our local authority and we welcome the debate, but I am afraid the debate these days does not take place in local newspapers in our part of the country. Maybe in other parts of the country, but not with us.

Q202 Philip Davies: It certainly does not take place in this newspaper, that is for sure, because this is just positive spin. I am just going to take you all in turn, but we will start off with Hammersmith and Fulham. This is, let us face it, council propaganda masquerading as an independent newspaper. There is nothing here to the casual reader that would indicate that this had anything to do with a council publication. This is masquerading as an independent newspaper. If you are so proud of your publication, let us have it plastered all over it that this is a council publication so that everybody who reads it knows exactly where they stand when they read it. Why are you not upfront about what this is?

Councillor Loveday: I can bowl for Britain on the subject of propaganda, and Sefton Delmer and the radio stations that were set up in this country during the war, and the distinctions between black propaganda and other propaganda, and so on, but in terms of residents knowing that this is a council newspaper, my simple answer is that we do test this, and the latest survey showed that 80% of residents said it was clearly a council newspaper. People are aware of that. I suspect that 80% is a pretty good score by any means.

Q203 Philip Davies: I will give you a better score, which is 100%. I guarantee to you that, if you were to put on the front of your paper (and plaster it quite prominently) that this is the newspaper delivered to you by Hammersmith and Fulham Council, you would be able to improve on your 80%, you would probably be able to get to 100%. We would all know where we were and also you would not need to spend any money testing out whether or not people knew; you would be able to know straight away that people knew. I know you are obsessed with saving money at Hammersmith and Fulham Council. I have given you a perfect money saving idea, so can I now expect you to save money on testing it out and plaster over it that this is council propaganda so that your residents know exactly what it is they are reading?

Councillor Loveday: Can I ask you a question?

Q204 Philip Davies: No, I am asking you a question.

Councillor Loveday: Will you give us the £400,000 to put it through our paid-for local media, because that is not going to happen.

Q205 Philip Davies: I am asking you, on here, to make it abundantly clear to your residents that this is a council publication, right on the front page. You are saying how good it is. Why are you ashamed of it? Surely you should want to be proud of the fact that the local authority is putting out this kind of propaganda. Let everybody know why you are hiding your light under a bushel.

Councillor Loveday: The majority of copies, I think, certainly did have a strapline reference.

Q206 Philip Davies: I am just unlucky, am I?

Councillor Loveday: No, I have not followed the details of the straplines on the various editions. The front cover, of course, is a slip advert, or a wrap-around advert.

Q207 Philip Davies: Yes, inside is even worse.

Councillor Loveday: Inside this, obviously, the front page---

Q208 Philip Davies: Yes, I know exactly what you are doing: you are putting out propaganda and masquerading it as independent news.

Councillor Loveday: Propaganda is a loaded word.

Q209 Philip Davies: It is indeed. Can I move on quickly. I want to quickly take up Portsmouth and Stevenage as well. You did say that there were no pictures of any local councillors on yours.

Councillor Vernon-Jackson: Yes.

Q210 Philip Davies: But I have just seen three.

Councillor Vernon-Jackson: Absolutely, but there is nothing with any editorial from any of them. We tell people who their councillors are, and so the copy of that was signed off by all three parties and their spokespeople to make sure it was clear it was not in any way party political.

Q211 Philip Davies: Nobody is saying it is party political. This is, again, Stevenage here. No indication. It says, "The magazine for Stevenage people", not "The magazine for Stevenage Council". It would be more honest if you put it was the magazine for Stevenage Council on the front.

Ms Taylor: It does have a back page with all the councillors listed in it, so I think it is fairly obvious that it is a council publication.

Q212 Philip Davies: Do you think then that local newspapers would do more for community cohesion if they printed half the paper in Nigerian, as you seem to have done in your publication? Will that help with community cohesion?

Ms Taylor: That was a specific project which we did. We did a number of different articles about people that had come into the town, giving their impressions of the town in both their own language and in English, and that was specifically designed to both draw together the Nigerian community, the Filipino community (because we did one in Filipino) and to let some of the people who were not minority ethnic communities know what the impressions are of the town when you come into the town, and it has been very successful in the town. People have really enjoyed those to articles.

Q213 Philip Davies: Is Nigerian the only other language spoken in Stevenage?

Ms Taylor: No, that was series of articles. There was a Filipino one; there were a number in different languages. There was a French one, and Italian one and a Chinese one.

Q214 Philip Davies: If it was demonstrated to you that what you were doing was actually putting your local newspapers out of business, if that could be demonstrated to you, would you still carry on with your propaganda or would you ease off and think, "Hold on a minute, keeping a local independent newspaper is actually in the bigger picture important and we do not want to be doing anything that might put them out of business"?

Ms Taylor: There is no evidence to suggest that we are.

Q215 Philip Davies: But if it was.

Ms Taylor: No, we would not stop, because we have a duty to inform our residents of what is going on.

Q216 Philip Davies: The good news.

Ms Taylor: No, of what we spend their council tax money on. We have a duty to support our voluntary and community sector in promoting what they are doing in the town and when you go through periods like the recession, Vernon talked about his leaflet, we have a similar one that we produce for our residents, giving them contact details and vital information of agencies that could help them through the recession period. It is mainly focused on information, and I think the dividing line between information and propaganda, obviously there is PhD thesis in that that you could write, but we do have a duty to provide information, we have a duty to involve our community in what we are doing and we try and use our publication to do that as far as possible.

Q217 Philip Davies: Your case will be strengthened if you ever put anything that was critical of the council in it, but the fact that you do not, I am afraid, undermines your case.

Councillor Vernon-Jackson: But we actually in Portsmouth spent £970,000 a year of taxpayers' money supporting the local paper.

Q218 Philip Davies: Supporting the local community, putting in adverts and things.

Councillor Vernon-Jackson: Actually some of it, at least, is wasted money, public money, that has little or no effect, but we do it because we are told we have to do it by statute.

Councillor Loveday: Can I answer the last question simply because ultimately, as I understand it, the main concern of the committee is to deal with the effect of local authorities on the commercial side of local and regional media. Mr Davies asked the question, if it were proved or if it were established that our activities on our newspapers would have an adverse impact on the local papers, would we still do it? That is ultimately a question of political priorities. Local authorities do many things which potentially impact on the commercial sector, and a good example would be providing and supporting business start-up units for small and medium sized businesses. There are people out there in the market who provide those and, potentially, by helping provide and support small and medium sized enterprises by providing those units, we impact on the private sector, and we would have to take a view as to whether it was better to spend large sums of public money in supporting the media locally or spending it on other things, and I am in no doubt that some local authorities would go in one direction and some local authorities would go in the other direction.

Chairman: Let us move on to slightly calmer waters, maybe different waters.

Q219 Mr Watson: Can I ask you about your advertising policies. Presumably you have got guidelines about what advertising you would take and you would not take in the newspaper?

Ms Taylor: We take no advertising in ours, so it is not really a question for us.

Councillor Loveday: We have not got any formal advertising guidelines, as I understand it, but, again, we are still governed by the Local Government Act in terms of party political matters.

Q220 Mr Watson: If I could take you to page eight of the edition you have given us.

Councillor Loveday: I do not have a copy of the paper.

Q221 Mr Watson: It is an advertisement for Guta Ra Mwari's book who lectures us about his 12 lessons and 52 chapters of God's work. It is some form of religious advertising. If you have not got any guidelines, presumably you are happy with religious advertising.

Councillor Loveday: Yes, I did see that earlier. I know nothing about this particular advertising.

Q222 Mr Watson: You have not got a problem with religious advertising.

Councillor Loveday: I am sure that there will be---

Q223 Mr Watson: Would you take adverts from the Church of Scientology?

Councillor Loveday: I do not think that has ever arisen as an issue.

Q224 Mr Watson: Clearly newspapers have to work out their guidelines on this. You have not got any guidelines.

Councillor Loveday: I am not sure they publish guidelines either of their advertising policies, and, of course, do not forget, our local newspapers do accept quite a lot of advertising for personal services, which I am sure would not be appropriate for most.

Q225 Mr Watson: So you would not take personal services but you would take religious advertising?

Councillor Loveday: One of the people who works on the paper works as an advertising manager, and I have no doubt that that would not be appropriate.

Q226 Mr Watson: Really, it is down to the arbitrary decision of the person who takes the advertising; is that right?

Councillor Loveday: Obviously, the statutory code contains quite a lot of restrictions on various matters.

Q227 Mr Watson: Can I take you to the next page? There is a rather attractive deal for an XL pizza, garlic bread and a can of drink for £11 from Perfect Pizza, which, had it been in Westminster, I might have availed myself of it.

Councillor Loveday: No doubt after today you will get a special delivery!

Q228 Mr Watson: How much would that piece of advertising cost?

Councillor Loveday: It is about £700.

Q229 Mr Watson: How much does Hammersmith and Fulham spend health promotion and healthy eating, would you know?

Councillor Loveday: As a local authority or including the PCT?

Q230 Mr Watson: As a local authority?

Councillor Loveday: I cannot put a figure on it, I am sorry.

Q231 Mr Watson: You would not see a super carbohydrate, calorific feast like that as being in conflict with some other policies that other sections of the council might be promoting?

Councillor Loveday: I am not aware that we have had any complaints about that at all, Mr Watson.

Q232 Mr Watson: Gerald, I see you have Councillor Mike Hancock as one of the three councillors here. He is also an MP, is he not?

Councillor Vernon-Jackson: He is indeed.

Q233 Mr Watson: Has he ever purchased advertising news in his communications budget in this publication?

Councillor Vernon-Jackson: No. It would not be appropriate. We do not go out for private adverts; we will work with our partners in the PCT, the police, the fire services, colleges, et cetera, but that is it.

Q234 Mr Watson: Do you ever give equal prominence to Portsmouth's other MP?

Councillor Vernon-Jackson: If she was a councillor and she was appearing in her role as councillor, then she would get exactly the same treatment as any other councillor.

Q235 Mr Watson: You do not see this as some kind of political conflict of interest?

Councillor Vernon-Jackson: No. We only have two Labour councillors left in Portsmouth now and, as you can see there, they get an undue prominence because they are treated as equal with everybody else.

Q236 Mr Watson: I cannot quite remember my stats but is it fair to say that the constituency represented by Councillor Mike Hancock in his role as a Member of Parliament would be seen as a Liberal Democrat marginal seat?

Councillor Vernon-Jackson: No; a Lib Dem safe seat would be a correct assumption.

Q237 Mr Watson: I am sure Mr Loveday might have a different view on that.

Councillor Vernon-Jackson: As Conservative councillors keep defecting to us and not delivering leaflets in most of the patch, I think the Conservative Party is in turmoil there and we have not had Labour councillors for many years.

Q238 Mr Watson: Mr Loveday, I must apologise for giving the Liberal Democrat propagandist an unfair advantage.

Councillor Loveday: Mr Watson, can I just mention one point? The political constraints, which are perfectly proper, do result in some very odd consequences. I will give you an example. I think we have already referred to it. It is in our newspaper at page 2. One can see there that a by-election took place. One can see the result of the by-election. The position that was taken by the editorial staff was that to go any further than simply reporting the bare numbers and the statutory declaration there would probably have gone beyond party political constraints. It is a very odd concept.

Q239 Mr Watson: I think Mr Davies has probably covered this but, as you have tempted me, if you were arrested by the police for having a horse's head in your bed, do you think it might make the front page of the H&F News?

Councillor Loveday: I am a lawyer. I would prefer to think of myself as Tom Hagen rather than the gentleman in the bed.

Q240 Mr Watson: If you were arrested for corruption, for money laundering of Mafia cash, would the editorial team think it a newsworthy event that a local councillor had found himself in an unfortunate position like that?

Councillor Loveday: I do not know because it has not arisen yet.

Q241 Mr Watson: I think Mr Davies probably answered that one, did he not? I want to get on to the internet point. I do not think it is your job to save the British newspaper industry and I do not think you are responsible for its ills. I think Craigslist and Google probably would be ahead of you in the queue on that. You mentioned that you have broadband connectivity. Do you see yourselves as moving into other forms of media, like lifestreaming, radio, Kent TV was an example, or are you going to email and social networking?

Councillor Loveday: I think we would like to, simply because it is a cheaper and more effective way of communicating with residents. We have a very mobile population. In some wards we have a 30% to 40% turnover in population each year. Obviously it connects with those people, transient people, much more than with the settled population. We do put a lot of work into testing how people interact with the council, whether face-to-face or internet, and, where possible, we provide that connectivity through the internet. Paying bills and all of that sort of thing we are doing as fast as we possibly can but in other areas it has proved quite difficult. We do twitter, I gather - I do not personally but we do twitter. I am not a great fan of the idea of webcasting council meetings. I think in many cases you would get a very odd person who would consider their time would be best spent by looking at that.

Q242 Mr Watson: May I remind you that it was Mrs Thatcher's Private Members' Bill that opened council meetings up to public scrutiny.

Councillor Loveday: The reality is that we would spend a vast amount of money and the indication is, even from those local authorities that do it, that it would not result in a huge expansion in the number of people watching.

Ms Taylor: Can I answer your question about young people? Contacting some of our younger residents is quite difficult through the local news media. My daughter is 20 and I do not think she has ever picked up our local newspaper. She might look at the front cover but she would never read it. We have to contact them in the way that they contact each other, and that is why we were quite early into social networking. It is all a very strange world to me but I am experimenting with it and looking at it. Facebook and Twitter are the way that young people communicate with each other. We have just started a service where if you sign on for the Stevenage Borough Council Facebook reports, you will receive notices of what is going on in the town. It is an information feed; it is certainly not propaganda. It is about what is going on in the town. If there is something coming on at our local theatre, you will get it on your Facebook if you are registered. It is optional; you can choose it. I see this as about giving as much choice to people as possible in the way that we communicate with them. That is really important, particularly for some groups of residents that we could not reach in other ways. We would not reach the under-20s by putting out another news sheet or a different news sheet. There are some quite artificial things done about making it look a bit jazzier or a bit more funky, some of which work or have some success. The best way to contact them is the way that they contact each other and that has got to be through these new media - social networking and all the rest of it. I think most councils now are taking a very hard look at their websites to make sure that the websites are not only giving out the information but that they are interactive. Mr Davies made the point about criticising the council. If you can get on your council's website and say what you think about how they have swept your street or picked up your litter, or whatever other service they are delivering, that is a very good and quick way of getting that through to both the council, the councillors and the officers in your council. I am all for that. I think that is a much more interactive way of communicating with the public.

Q243 Mr Watson: Do you know if any local authorities on-line services take advertising?

Ms Taylor: Ours does not.

Councillor Vernon-Jackson: Ours certainly does not.

Q244 Mr Watson: Can I challenge your business assumptions? This might be for Mark. We may have reached the nirvana where the kind of soft subsidy to the newspaper industry through your obligation to buy advertising for statutory notices stands at probably about £40-£50 million a year nationally. If we were to release you from that obligation so that you could put that on a website and therefore do it at next to nothing or at no cost, and we get to the position where Early Day Motion 2130 is supported where every public sector job is available in an on-line, open standards format, would that affect your business assumptions with your own print media in that you are no longer essentially saving yourselves money through subsidising your own paper? Would that enhance your transition to an on-line platform?

Councillor Loveday: I think it is inevitable. You mention in terms of statutory notices. I pick up on what Mr Vernon-Jackson said earlier that he does not actually believe that many people search planning applications by looking through local newspapers. What actually happens is that in many cases many local authorities have the facility for you to be emailed in the event of a planning application coming up in the vicinity of your property anyway, so there is an active sense. I think that is the way forward. Certainly, there is a general migration of everything to the internet because it is cheaper and more effective.

Councillor Vernon-Jackson: In terms of money, we spend £40,000 a year doing statutory notice planning out of a budget of £970 that we put into our local paper, so it is a pretty small amount of money but it is a useful amount of money.

Q245 Mr Watson: Where does the £940,000 come from?

Councillor Vernon-Jackson: It is mainly advertising for jobs and things like that because we want to have them on much more prominent pages as opposed to the statutory notices which the newspaper chooses to hide at the back.

Q246 Mr Watson: You are not statutorily obliged to spend that money?

Councillor Vernon-Jackson: No, but we will do because we want to attract really good people from the local area.

Q247 Mr Watson: If you do not have a great reach through the local paper, why are you making that spend?

Councillor Vernon-Jackson: Because it does not just cover our local authority; it covers three others. It gets us to a wider job pool, and that is a better deal for us. It covers half a million people but with only 30,000 to 40,000 sales. If people are looking for a job, they may well go and buy that, or they may go on to the council's website. At the moment our choice is to do both.

Q248 Mr Watson: Could you see a point in the future where you just switch to save the £940,000 and put it on your website?

Councillor Vernon-Jackson: I do not think I could ever expect to do all of it there by any means. I think there is always a need from our point of view to advertise in the local paper. I do not know at what level and the size of advert. We used to do great adverts listing all the personal specifications, et cetera. Now increasingly people are just putting in adverts directing people to websites so that they can get the large content on other website.

Q249 Mr Watson: You can get a broadband connection for £6 a month now. It would probably be cheaper for you to give the unemployed a free broadband connection than take out advertising?

Councillor Vernon-Jackson: Possibly.

Q250 Mr Watson: In the Digital Britain Report, the Local Government Association was asked to do a review of council newspapers. Are you involved in that at all or do you know where the LGA are at with that?

Ms Taylor: None of us have been particularly involved with it but I know that the LGA has been looking at what the future is in terms of us communicating through digital means rather than through the paper means. We are looking at that. I think we are at a transition stage here. Councils are still looking at paper communication, but we feel the power of communicating in digital ways. I think we have to be very careful about the possibility of exclusion here. Although you rightly say that broadband connections become cheaper virtually by the week, and I certainly get a leaflet from Virgin at least once or twice a month about how much cheaper it is getting, there is a danger that people will be excluded not only because of cost but because of their skills. Some people do not have the skills to use digital media. We always have to be conscious of that and aware that we do not want to exclude people from our communications. For the time being, we will always have to use a wide range of media to communicate with the public. We have not mentioned it here today but there is also actually talking to people and having local public forums and things like that where those people who do not want to read things and do not want to go on the internet can actually come along and speak to us and that is just as important. We are very nervous about not excluding anybody. You need a very good coverage in libraries and places where people can access the internet free to try to make sure that you are not excluding anyone from this process.

Councillor Loveday: We have done similar work trying to assess that. What the consultants, the in-house people who produce these reports, always describe as face-to-face facilities and offices have been identified as still being necessary, particularly in areas of deprivation, of which we have significant numbers in our part of London.

Ms Taylor: One of the big benefits it has in areas of deprivation of course is that you can produce very local information for people. If you can find a point of access and you are certain that they have access to it, you can produce very locally based information, which is very helpful in some cases.

Q251 Rosemary McKenna: I think we are in a time of great change in information exchange and there is a big difference between the kind of newspaper or magazine that you produce and going on-line and this kind of pretend newspaper because basically that is what it is. That is exactly what Digital Britain was talking about when it said that we need to examine carefully if the Government should be able to make any recommendations based on Digital Britain to look at those authorities that are over-stepping the mark in terms of what they are producing. If you look at page 5 of your newspaper, there is a clear attack on the Government. It is not an impartial article. It is about business rates. It is about the views of Councillor Loveday. People looking at that are assuming that that has been written by a local editor taking an objective stand, but it is anything but. It is your council newspaper. I think that is what Digital Britain and the Newspaper Society are concerned about. I do think local newspapers are going to have to look very carefully at what they do. I think they should be doing a lot more. I wonder, as someone who was involved in local government in the Eighties and Nineties, if this did not all start because local authorities thought they were getting a raw deal from the local press that they did not like, the kind of exposť that a newspaper is there to do.

Councillor Loveday: The answer to that is "no". The motivation is not to get back at newspapers. I have cited the figures. Our paid-for local media does not reach residents.

Q252 Rosemary McKenna: Maybe it is because you have taken away all the stuff that they would normally do.

Councillor Loveday: It was declining well before we accepted advertising in any shape or form. It was way in decline before that. I can produce copies of the earlier versions of the magazine H&F News and so on.

Q253 Rosemary McKenna: There is a difference between what Hammersmith and Fulham are doing and what Portsmouth and Stevenage are doing. There is quite a distinct difference there. That is the argument or the debate. It was the Office of Fair Trading that said there were real concerns about this. I think that is the debate that will be had.

Councillor Loveday: As I understand it, the OFT and the Audit Commission are both not proceeding with inquires into this area.

Q254 Rosemary McKenna: That is a pity.

Councillor Loveday: Obviously, madam, it is a matter for you, but the figures are there. I have shown the figures. Our local media was in a parlous state well before we took this initiative in response to not being able to use them to communicate properly.

Ms Taylor: I think we are in a transition phase, and you are right to point that out. Maybe some of the pain that is being felt by newspaper editors is to do with local councils but I think it is more to do with the digital media and how that is taking over many of the areas that traditionally have been their territory. Gerald has already pointed to job vacancies. As for property advertising, I have a daughter who currently is in the stages of buying a house. She has looked on-line; she has not used local newspapers at all for that. That is painful for local newspapers and they have to address it. Local newspapers are also taking part in this digital process. Many of them have very effective websites. Our local newspaper has withdrawn some of their circulation of paper copy because they have found that they reach some parts of our community better through their web-based approach. They send you an email alert when the new web edition is ready. They are certainly moving in that direction. This transition phase is painful for them and I think that is more the reason for the problems than because of things the council is doing. There may be the odd council that is taking some advertising from them - I do not know about Hammersmith and Fulham - but for the most part this is to do with the interference of digital media taking over, not councils taking over.

Councillor Vernon-Jackson: Last night for instance I met a friend who is the editor of a magazine and they just publish on-line now. They do not do any physical copies any more because that is the way in which the media has moved.

Q255 Mr Watson: Rosemary has brought this article to my attention. There is a quote from you on page 5, Mr Loveday, on business rates.

Councillor Loveday: I am sure there is.

Q256 Mr Watson: It says: "Small businesses are the lifeblood of the economy and forcing some of them to pay higher business rates, just as they are struggling to stay afloat, is madness. There is no doubt in my mind that this business rates rise will unnecessarily force some small businesses to close and we are urging the Chancellor to have an urgent rethink." It goes on a little further. In this article there does not appear to be a countervailing viewpoint put by your opponents. Do you think that is a badly written piece? Is that characteristic of this paper?

Councillor Loveday: Again, one of the oddities of all of this is that I would be surprised if you find a quote from any politician other than a member of the cabinet of the council. The reason for that is that that is the advice that has been given historically to political parties of both persuasions when producing these publications. I have a copy here of HFM magazine, which was produced under the previous administration. You will see it has photographs of various individuals in it. You will not have found, during all of the years that they controlled the council, a single photograph of one of our side. That is the advice that we are given, that the quotes come from members of the cabinet and that is it.

Q257 Mr Watson: So the only quotes in this newspaper are from Conservative Party councillors?

Councillor Loveday: I have not been through it but that has always been my understanding that it is members of the cabinet. Indeed, we have many complaints from backbenchers on our side who say, "I have been involved in something. I would like to have my picture in the H&F News" and we say, "I am very sorry, it has got to be on our side".

Q258 Mr Watson: What you have is a very effective business model. It is not losing money. By the sounds of it, it could make money. You have to jiggle the figures a bit to make it break even. I am told we are entering the post-bureaucratic age. Why do you not privatise it?

Councillor Loveday: Interestingly, I gather we have had an approach to purchase the paper, which in this current media environment, I would imagine is almost unheard of.

Q259 Mr Watson: Presumably you would consider selling it if it would allow you to concentrate on core services?

Councillor Loveday: It would be very complicated to do but certainly if somebody is going to pay our council taxpayers a substantial sum of money to do this, then we would be silly not to accept it. We will consider offers.

Chairman: I pioneering council like Hammersmith and Fulham could perhaps blaze a trail in this area. I think we have spent enough time this morning. Thank you very much for your evidence.


Examination of Witnesses

Witnesses: Mr Andrew Harrison, Chief Executive, RadioCentre, Mr Travis Baxter, Managing Director, Bauer Radio, and Mr Steve Fountain, Head of Radio, KM Group, gave evidence.

Q260 Chairman: We now move to the second part of this morning's session. We turn our attention to the commercial radio sector. I welcome Andrew Harrison, the Chief Executive of RadioCentre; Travis Baxter, the Managing Director of Bauer Radio; and Steve Fountain, Head of Radio at KM Group. The committee has already received evidence about the bleak prospects facing the local and regional newspaper industry. We have also had it suggested that if anything the prospects for commercial radio are even more poor. Can you give us your rough take on the current state of the commercial radio sector and the future prospects?

Mr Harrison: Chairman, the revenues for 2009 are projected to be down 11%; 2008 was down 8%; and indeed we have had six successive quarters of decline since quarter 2 2008. That is the state of play at the moment. In terms of our share of the overall advertising market, with our revenues projected to be down 11%, that probably means our share of the overall market is holding up quite well, given that the overall market is probably declining to an even greater extent than that with some of the pressures facing, for example, the regional and national press. Nevertheless, the crucial financial difficulty for the small commercial radio sector is that we are a small sector and the overall turnover of the sector is only £500 million spread over 300 local commercial stations, and so on average most local stations are turning over only £1-£2 million. This is a succession of small businesses. So it is a very fragile infrastructure; it is also a sector with very high fixed costs, partly as a result of some of the regulatory environment in which we operate. Commercial radio is very much fighting for financial survival. The Myers report, which was recently commissioned as part of Lord Carter's Digital Britain Report into local radio identified that seven local radio stations have gone bust so far this year and identified potentially a further 50 were vulnerable. Indeed, Ofcom in its current consultation on the state of local radio has also emphasised that the radio sector is probably facing its most critical financial challenges in its existence.

Q261 Chairman: There has been quite a significant growth in the last few years of the number of radio stations. Is it possible that there are simply too many for the market to sustain?

Mr Harrison: Yes, I think there is no doubt that the truth is that the radio sector's share of advertising revenue grew from around 2% at the start of the 1990s through to about 6% through the end of the 1990s. That was partly as a result of new programming, partly as a result of new stations, and so on. Nevertheless, given that the size of the advertising cake for commercial radio is about the same as it was in 2000, the reality is that we are now spreading our revenues across a very broad station base. One of the things that we need to get clarity on as a sector with Ofcom and with Government, partly as referenced in the Digital Britain Report is how we shape the future for an industry that has three tiers of commercial radio, large national stations which are on digital, the larger local and metropolitan stations that are also on digital, and a tier of smaller local stations on FM, each of which are commercially viable as opposed to the current uncertainty and regulatory burden where there is an enormous number of stations fighting for a smaller slice of the advertising pie.

Q262 Chairman: Do you have an idea about minimum size of area or population which is required to make a radio station viable?

Mr Harrison: The evidence from the John Myers' report was that over 60% of commercial radio stations serving an area of less than 250,000 were on the borderline of profitability. There is clear evidence from the Myers' report that the broader the target area that each station serves, clearly the more audience they have the opportunity to secure their commercial viability. We absolutely recognise that we want to have stations serving smaller local communities, but it would seem to be the case that any station with a TSA, a potential audience, of under about 500,000 is always going to find it very difficult to get to any critical mass to have long-term sustainable viability. My colleagues may have direct operating experience.

Mr Fountain: We operate seven, small-scale, local radio stations, all of which run at a loss. The largest we have is about 250,000 to 260,000, which is in the Medway towns. Thereafter, they go down to well below 100,000 and the smallest is about 70,000, which is Ashford in Kent. It is particularly tough; it has been tough in the three and a half to four years I have been there, but it clearly has become tougher in the last 12 to 18 months. Had we not been protected to a great degree by a larger parent company, then we almost certainly would have gone out of business.

Q263 Chairman: How long is your large parent company going to be willing to go on?

Mr Fountain: We are part of the KP Group. So far as they are telling me, at any rate, they are completely committed to the future of the radio stations.

Q264 Chairman: Do they think that they can be made profitable?

Mr Fountain: Yes.

Mr Baxter: There is only one comment I would make on the point about population size as current: it does self-evidently depend to a degree on the nature of the economy that those radio stations serve. We have amongst our nearly 45 radio stations a radio station called Northsound in Aberdeen which is a population centre from a medium perspective of around 200,000, but it is self-evidently a very prosperous economic centre and is a very profitable business for us. So there is some difference between the markets that any particular population size relates to based on the economic dynamics of the market.

Q265 Chairman: The Government and Ofcom are keen to encourage the growth of community radio stations. Is that chipping away at the revenue base at the same time as the nationals?

Mr Harrison: I think under the current regulation in terms of how community radio is funded the smaller commercial radio stations and the community sector can quite happy co-exist. The reality is, though, Chairman, that there are two tensions that are yet to play out. One is that there are an awful lot of community radio stations that have been licensed but are not yet actually operational, so we wait to see whether there will be an impact cumulatively over time. However, amongst the community radio stations that have been licensed, perhaps understandably from that sector, there is already pressure on relaxation in terms of how they are funded. Of course our concern would be that if you end up with effectively another sub-tier of commercial radio, which would be advertised and funded community radio, alongside advertised and funded commercial radio, you will inevitably get a squeeze. To be fair, that has not happened quite yet but it is certainly something on which we are keeping a watching brief.

Q266 Chairman: We were given evidence for instance that up to half of the 1300 local and regional newspaper titles could close in the next five years. Do you have a general view as to how many commercial radio stations there will be in five years' time as compared to today?

Mr Harrison: The evidence that we submitted to the Myers' review for Digital Britain we support, which is that we estimate up to 50 of what is just over 300 commercial radio stations could go bust in the next year or two without significant regulatory change or intervention. That would be of the order of magnitude of one-sixth or one-seventh of the universe, I guess.

Q267 Chairman: Did you say 350?

Mr Harrison: About 340 in total.

Q268 Chairman: Of those, how many are making a profit at the moment?

Mr Harrison: Less than 20%.

Q269 Rosemary McKenna: The commercial value has dropped dramatically of the radio stations. I am thinking about what happened to SMG when it purchased Virgin Radio. They lost a huge amount of money.

Mr Harrison: In that particular deal, from recollection, SMG paid order of magnitude £20 million in 2000 or so for Virgin Radio. It was acquired recently by Times of India Group for order of magnitude £50 million. So in the course of seven or eight years, the transaction value at least declined four fold.

Q270 Rosemary McKenna: Would that be typical of the current situation or was that an unusual situation?

Mr Baxter: I think it was slightly unusual and possibly unusual to the UK market. Some of the radio assets that were traded at he back end of the Nineties were on high profits but there were huge multiples of those profits that were generating the capital value of the assets, and to a degree there may have been bubble being created there through both enthusiasm around the media but also a trend through the Nineties, which was probably a more positive one for commercial radio overall.

Q271 Rosemary McKenna: Can we move on to another issue and that is the impact of the decline in advertising revenues on the quality of local commercial radio output, in particular the provision of news. Do you feel there has been a decline because of the loss of revenue?

Mr Harrison: I guess there are two things in tension there. The first is that we would not accept there has been any decline in the provision of news. All of our stations are absolutely committed to local news provision; it is a critical part of our format and our licensing. All the evidence that we have from RadioCentre from all the surveys we have run of our members is that commitment to local news, traffic, travel and information is often what sets us apart from both rival commercial stations but of course from the BBC as well. Ultimately, all stations can play music from the vast music repertoires that are out there. We recognise that local content as critical. The flip side to your question is clearly one of the reasons why we are here giving evidence, which is that we are a small sector and revenues are under pressure and we do have a high fixed cost base. Inevitably, therefore, if you have a high fixed cost base, the pressure is on to make sure that your variable costs are under control. As I mentioned in my introductory response, we have seen about an 11% decline in revenues this year. Broadly speaking, if we take as a simple straight line for the purpose of this exercise that the profit margins of the sector were 11%, that means the sector broadly is trading overall at a loss and we think the whole sector is trading at a loss. Inevitably, to your question, it puts an awful lot of pressure on the creativity and ingenuity of the stations to ensure that the programming costs are as well spent as they can be. However, to be fair, the commitment to news remains one of the cornerstones of our offer.

Mr Baxter: May I make a brief comment on that? I picked up some data on our business before I left the office yesterday. We produce about 646 bulletins on any given weekday with between eight and 40 local stories being created for each station a given day. That reaches a total of about 4.5 million people a day listening to our bulletins on Bauer Radio radio stations. It is a fundamental part of what we do but, as Andrew said, the commercial challenges of doing that as efficiently as possible are key to us and capturing every possible opportunity to operate using new technological advances to the maximum so that we can retain that quality. Our business won 20 Sony awards for news in the last three years. You know that is the industry standard. That is competing against the BBC. We think we are hitting the quality threshold but when I started in broadcasting 30 years ago, we used reel-to-reel machines; we had to go out, bring them back, edit them with a razor blade. Now it is all electronic. That whole systemic efficiency is to a degree not reflected in the regulatory environment we have to live with, and we would like to change that so that we can capture those efficiencies and keep the front-of-house quality.

Mr Fountain: Our news requirement comes from a news hub. We simply would not be able to afford to run seven local news services, so we have a team of journalists running out of one hub that supplies news to our seven radio stations. Geographically we are unique; all of our seven radio stations are in east and west Kent, so everything is in the same county. Frankly, if a big story breaks in one part of the county, it is just as important in another part of the county quite often. We are able just to run the one news service on which we run 12 local bulletins a day Monday to Friday and then six on Saturdays and Sundays. We have not suffered, as far as we can tell, looking at our audience numbers, from going down that path.

Q272 Rosemary McKenna: What about the investment in journalism? Are you still on local radio stations able to invest in bringing in young journalists and training, et cetera?

Mr Fountain: It is where we begin. In sporting terms, in football terms, we are very much conference league or perhaps third division. Part of our role, as I see it, is that it is our job to bring new talent into the industry, whether it is news or programming talent of another format, and to develop that talent so that they can go on to work for the kinds of stations that Travis mentioned.

Mr Baxter: We share that view totally. An individual station with us might have between six and nine local journalists based in the radio station, maybe a bit more if we are covering sport with live commentary, which we do for a number of the stations, including our station in Liverpool. We generally take a view that as well as keeping some very experienced editorial skills on the team so that there is good editorial judgment taking place, we want to bring youngsters through, probably people who, being realistic, are not going to spend the majority of their journalistic career within commercial radio, but we give them the great opportunity to work across a broad range of activity very quickly.

Q273 Rosemary McKenna: You also get their enthusiasm and their freshness?

Mr Baxter: Absolutely, their creative ideas about both how they deal with content from a creative perspective but also how they deal and migrate it on line and so on. We accept that after a period of time they may well pursue their careers into other avenues, but we capture that and cultivate it and train it while it is with us.

Q274 Mr Watson: If you do not mind me saying, Travis and Steve, you have the best radio names I have ever seen.

Mr Baxter: The truth of it is that we were both on the air as well.

Q275 Mr Watson: Can I ask you about Digital Britain and the Digital Britain Report? Do you think the report gave a good way forward for the commercial sector to journey out of its current troubles?

Mr Baxter: Perhaps I could ask Andrew to give an overview on that and then maybe we can give our respective views?

Mr Harrison: To give an overview, I think the short answer to that is "yes". One of the fundamental issues the sector faces right now is the appalling cost of dual transmission. Ultimately, right now, this is a small sector and very many of our stations are simultaneously paying for the cost of analogue and digital transmission. That clearly does not make any financial sense. What we advocated for in Digital Britain was a pathway for all stations to end up with a very clear plan of what is the single transmission platform for them. That led, as I said in my opening remarks, to three very complementary tiers of the commercial radio offer. The first tier is a strong national offer on digital to compete with the BBC, and that is critical for the sector because the truth is that the FM spectrum is full. I am sure all of you will know from some of the other conversations we have had before that the BBC dominates the gift of analogue spectrum. It has four national FM stations; we only have one with Classic FM. For the sector to compete and capture its share of national advertising revenue, the ability to have a national digital platform I think is critical. As we then had the conversations with Digital Britain, I think it became very clear to all of us that you cannot just migrate national stations to digital and leave all of the large metropolitan local stations, like City in Liverpool for example or Metro in Newcastle, all the BBC's local stations, as analogue only. The listeners to those stations will want the functionality, experience and benefits that come with digital. It is then very important that we have a second tier of the large local and regional stations which also migrate to digital. Critically, however, that nevertheless leaves an important third tier, which are the smaller or the rural stations for which either DAB coverage is currently not present - there is just not the transmitter build-out in some of the rural areas - or for which it is likely to be prohibitively expensive going forward. That sector equally needs clarity and that sector being able to stay on FM alongside community radio we feel gives a very balanced ecology where the sector has the most opportunity to compete and the lowest cost base because each station can ultimately choose whether it is on one transmission methodology, i.e. digital, or another, analogue. At the moment, we are in limbo where stations are paying for both but the profitability of the sector is fragile and there is not a plan. So we absolutely welcome the beginnings of that plan, which we recognise is the start of what is going to be a long and difficult journey as stations migrate and decide if their future is on digital only or their future is on analogue. The quicker we can move the industry there, clearly the better for the fragile economics of the sector.

Mr Baxter: Perhaps I can encapsulate some of the things we sent in to the Carter Review. Our business view generally is that the future is digital. There is hardly the need for me to make that clear to you. Our view has been for the last ten years that we will look at all platforms as we develop our business. We have successful radio stations, primarily operating for example off the audio channels on the freeview digital television system. However, within that we think it is of real value for radio to have a bespoke platform and the one that is available to us that is a bespoke broadcast platform is DAB. It has, however, taken 12 to 13 years of very slow development for that platform to get to its current state. Therefore, our proposition to Carter's Review was: let us get on this horse or get off it. We think we should get on it and put every possible energy we can over the next view years into getting consensus, direction and pace into the whole process of take-up, like there has not been during the last 12 years. If that can be achieved, it will produce a new resonance for commercial radio as a whole, indeed for the whole of radio. It will help position radio more effectively in the fragmenting media landscape we all have to deal with and give us an opportunity, as Andrew said, of clarifying our investment levels around platforms where currently we are having to pay for two when, in a future where either one is successful, we would only have to pay for one, thereby allowing resource to be put into developing content and other things around our business.

Mr Fountain: KM Group does have a digital platform. It is currently costing us over £100,000 a year and we get absolutely nothing back from it. I think the company at the time, six years ago, took the view that they wanted to be a part of the future. Circumstances since have not really helped them to be able to develop that particular medium. I think we too take the view that we would want to be part of a digital platform going forward, but there are a number of issues that would need to be overcome, not least of all the cost of entry and also in our particular case our DAB coverage and the coverage of our FM stations is not mirrored. We have better coverage right now on our IrFM platforms than we do on our one single DAB coverage. The problem around the coast, if you take that from Medway right the way round perhaps as far down as Rye, around the Kent coast and just touching into Sussex, is such that DAB does not actually reach into large parts of that coastal area.

Q276 Mr Watson: Would DAB plus?

Mr Fountain: I could not answer that because I do not actually know.

Mr Harrison: No, there is no difference in terms of the coverage for DAB or DAB plus. DAB plus is just a different method of compressing the signal so you can actually get more signal down the pipe, if you like; you tend to get more stations, but it does not actually affect the coverage.

Mr Fountain: You can see that in order for us to extend the coverage of DAB, there is clearly a cost involved, and there is also a conversation to be had between Ofcom and the French communication authorities as well.

Q277 Mr Watson: Presumably you are all relatively happy with what is quite a demanding timetable outlined in Digital Britain if your view is that we should just get on with it and do it?

Mr Harrison: I think you have expressed it exactly right. The timetable is demanding. I think it is set deliberately as being demanding. Digital Britain does not set a date for switchover. What it sets are two criteria that it says are axiomatic to be hit before switchover can be contemplated: one on listener levels and one on coverage, both of which we support. The aspiration in Digital Britain is to try and hit those two gates, if you like, by the end of 2013. On what Travis was saying earlier on, we think that is absolutely right, that the industry now works terrifically hard together, alongside the BBC and alongside the Government and the regulator to do our very best to hit those criteria. Once we then hit the criteria, the Digital Britain report identifies that it will probably take a couple of years from the criteria being hit before we could actually contemplate switchover. That is aggressive but we think it is appropriately aggressive against the context of an industry that is clearly struggling financially now, and the vast majority of my members are highlighting the cost of dual transmission as the single biggest cost issue that they face and self-evidently one that could be eliminated the quicker we can get to a decision one way or the other.

Q278 Mr Watson: May I ask you a bit of a left field question? You are quite confident that we should move to digital radio quite quickly. How confident are you that consumers will want to make that journey and that they will not migrate to internet, radio or choose to listen to livestreaming sites like Spotify?

Mr Harrison: There are two different points there. We are quite confident, as you say, about the movement to digital, but purely because what the Digital Britain Report sets up are consumer-led criteria to drive that change. The criteria are absolutely that we will not move until coverage is built out to match FM. It would be absolutely suicidal for the industry to switch people off who currently listen and enjoy radio services, so it is axiomatic that we have to build coverage out. Secondly, the criterion is that listenership to digital has to be that the majority of all listening has to be to digital before you would contemplate switchover. We are not going to rush into this without being led by the consumer. What we are trying to do, as Travis said earlier, is inject some pace, momentum and energy into the process. If we wait for the natural replacement of sets and the natural progression of DAB - it has taken a long time to get to the listener levels we have right now, we still have all of the BBC's services for example available on analogue - it is going to be very difficult to kick start the progression. We are very comfortable but we are comfortable because it is led by the consumer. The second part of your question is: are we worried about competing services? We are absolutely. I think there is a whole generation of new entrants into the market - Spotify, Last.fm, Pandora - available on-line, all of which are unregulated and against which we are competing for listeners and for advertising revenue. When you have a small, heavily regulated, constrained local radio sector competing with an unregulated world-wide series of music offerings, that is one of the challenges we have to face. We are, however, absolutely committed to the importance of a broadcast transmission methodology for digital. That is not to say that the internet will not be an important complement to that but our business model is based on a broadcast signal of one signal to a wider audience. There is very little evidence so far that on-line music offerings are in themselves profitable business models. For UK citizens and consumers, for our listeners, we think it is absolutely critical that radio remains free at the point of delivery. That has been one of its great strengths ever since the BBC was founded in the 1920s. Of course at the moment, although as I heard this morning the cost of broadband is potentially down to £6 a month, nevertheless, to access any internet-delivered service, you have to pay an ISP connection. That may change but I suspect we are a long way away from that.

Q279 Mr Watson: It has been said that pirate radio in Britain was killed off by statutory licensing of the commercial sector. Would you feel threatened by a statutory licensing regime for on-line music streaming?

Mr Harrison: No. I think we have always advocated, whether it is competing with on-line media or competing with the BBC, that what we want is a level playing field in which to be able to compete. While we have never had any discussion about how that might work in practice, we are more than happy to compete and fight for audience share against all offerings, but we do want the playing field to be level as we do so.

Mr Baxter: About Spotify and other things, so far the evidence we are collecting seems to suggest that people who are consuming those sorts of music streaming channels are consuming them in addition to what is their traditional amount of total radio listening. I am not suggesting that we should not be conscious that things may change over the next few years but I think that gives some indication of the strength and the value of us investing in content. Therefore, from a commercial perspective, that is something we will choose to do, be it news, quality presentation, entertainment, all of those things that radio is about that makes it close to you and makes it your friend. It is a personality not a utility. Those things drive our commercial agenda. We do not need a regulator to make that happen. My second point is around the bespoke platform. As Andrew has said, we think a bespoke digital platform for radio, DAB is the one, is a good thing for us. If you just took car listening as an example, even with the internet protocols and the various distribution channels that are available to get streamed, live content through those channels to a car listener, which makes up a lot of radio listening, that is still a very hard thing to do. Again, some of radio's benefits are that it is your friend and it is live; it lives the day with you.

Q280 Mr Watson: Do you think the car industry is sufficiently prepared for the digital revolution?

Mr Baxter: I think we have had some very encouraging conversations with the motor industry over the last six months. The response to Carter's work during the beginning of this year has helped galvanise interest in that area quite significantly, so I think there is a very different aura around those discussions than there was 12 months ago.

Q281 Chairman: Just on the cost of the digital upgrade, what is your best estimate of how much it is going to cost?

Mr Harrison: I was on the working party, the Digital Radio Working Group, that was the forerunner for Digital Britain. That working group identified the cost of build-out, the one-off capital cost, as between £100 million and £150 million. That is quite a spread. The reason for the spread ultimately depends on what degree of coverage build-out you get to from equalling FM to universality and at what signal strength. Of course, you get real diminishing returns as you go to the very rural areas. That is the reason for the spread. There has been a lot of debate about that number. In reality, the way we have tended to look at it is that if you take that spread of £100-£150 million over the 12 year period of a licence, which is typically when a radio station is licensed or a multiplex is licensed, and if you said for round figures it is £120 million, that is £10 million a year for the licence period. I think it was £10 million a year that the Secretary of State quoted for example last week. Funding that we have always felt is actually absolutely critical to the build-out and conversation to Digital Britain. The commercial sector is absolutely happy to pay its way to the extent that the build-out is commercially viable but, after that, there is a clear public policy imperative. If the Government and Parliament decide that it is important to have a dedicated transmission structure for radio, that will be a public policy decision and it will need funding. That said, we believe that funding is very affordable. If you take that £100 million number, we believe that, for example, the BBC would save much more than that over the period of the 12-year licence just on what it will save on FM transmission alone, so there is a straightforward business proposition. Another way to think about the £100 million over a 12-year licence with the current licence fee settlement for the BBC at around about £3.5-£3.6 billion a year is that over 12 years that is £43 billion. The £100 million infrastructure cost for DAB radio is less than a quarter of one per cent of what the BBC's income will likely be over the next 12 years. So it is eminently affordable if there is a public policy decision that it is important to do that build-out.

Q282 Chairman: Those two arguments suggest that you are looking for the BBC to pay for this.

Mr Harrison: We have said very clearly and very fairly that we are absolutely happy to pay our fair share in our way to what is commercially viable.

Q283 Chairman: What does that mean?

Mr Harrison: That means that we have already put our hands in our pockets substantially to build out coverage on a local and a national basis as far as we judge is affordable. I think realistically, given the state of the sector, the vast majority of the cost going forward, which is primarily designed to meet the BBC's obligations of universality rather than the commercial sector's obligations of viability, should rest with the BBC.

Q284 Chairman: So whilst RadioCentre is keen to move ahead with the digital upgrade, the economics of your sector at the moment means that you cannot really afford to put any more money into it?

Mr Harrison: We believe that transmission coverage build-out is axiomatic; it is one of the criteria to effect switchover. We cannot afford it but we absolutely believe the BBC can.

Q285 Philip Davies: Andrew, on this part can I ask you about how representative your view is of the industry as a whole? It was over this issue it seems more than any other that UTV Radio quit the RadioCentre and said that it felt that it was no longer representing the interests of the wider industry and gave too much power to its biggest member.

Mr Harrison: Yes, UTV did say that. Scott Taunton, the UTV Radio managing director, actually represented the commercial radio industry with me on the Digital Radio Working Group through all the per-work that was done for Digital Britain, and so they have been intimately involved. To be fair to UTV's position, they have a particular reservation over the date and the timing for digital, but to be fair to the Digital Britain Report, and indeed we await the clauses of any potential Bill because it is not yet written, there has never been a formal switchover date actually agreed. Although, for example, I think Scott in his Guardian article yesterday talked about a 2015 date being farcical, that date has never been set. What have been set are two consumer-led criteria that have to be hit and then a transition period after that before we all migrate. As Travis said earlier, the majority of opinion across the sector, and certainly across my members and representing my board, is that we need now to put our foot on the gas and work hard to deliver the criteria. Inevitably, there is going to be a spectrum of views with different businesses in different places in terms of their own business models as to the urgency or not they see behind that. UTV are absolutely right to have their own position. They are more at the tail end of the timing.

Q286 Philip Davies: UTV did not just say that they had a different position to you. They said something a bit more fundamental than that that they felt that you were no longer representing the interests of the wider industry. It was not just as if they had a disagreement. They were indicating that there were others in the sector who shared their view. Do you accept that there are many others or some others in the sector that would share their view?

Mr Harrison: I would absolutely accept that we are abroad church and there is a breadth of opinion. I represent large and small stations, local and national, rural and metropolitan, so there is a breadth of opinion. To give you an example of that, our other major national station member that is on AM is Absolute Radio and they believe that the timing for digital should be sooner rather than later. They already have over 50% of their listening on digital platforms, one way or another, so they would move sooner. I have a number of digital-only stations in membership, stations like Jazz and Planet Rock, which clearly are already digital only and would like to be in the vanguard. Inevitably, there is a spectrum of opinion and we try our best to reflect the overall views. The truth is that it is very unfortunate that UTV have left membership but we continue to represent the vast majority of the sector and its stations and will continue to try to steer a path, helping Government and helping the regulator through this tension.

Q287 Philip Davies: My final question on this is: do you anticipate anybody else leaving?

Mr Harrison: We will wait to see what happens and what the clauses in the Bill are and then inevitably people will decide whether or not to support it. I would hope that would not be the case and that when we see the Bill, we will continue to represent the vast majority of stations.

Q288 Chairman: Can I turn quickly to the local ownership rules? There are obviously proposals which Ofcom has been consulting on. Can you say how important it is to you that changes should be made to those rules?

Mr Harrison: Changes to the local ownership rules mean another very important deregulation for the sector. The truth is, as we have submitted on many occasions, that we have a number of regulations around how we operate. One of the additional constraints has been around our ability to own either a collection of radio stations in an area or to share ownership with newspaper groups or other media outlets. As we compete more and more with deregulated media competitors and the BBC locally has the ability to cross-promote across television and radio and on-one, it is more and more important in the current environment that we have the opportunity to partner, to merge or joint with other media where that is appropriate. Do I think there will be a real rush to do that? In the current economic environment, probably not, but over time, having that flexibility to operate rather than it being constrained by primary legislation would be an important step forward for the sector and ultimately I would hope would be one of the possible triggers for extra investment into the sector.

Q289 Chairman: Are you aware of any potential mergers or takeovers which currently are not allowed under the ownership rules but which might be triggered if they were to change?

Mr Harrison: No. To be fair, we felt over the last couple of years that the deals that took place in the sector, for example with Bauer Media buying Emap or with Global Radio buying the Chrysalis GCap businesses, that those deals took place under the current ownership rules, but the truth is that we will never know whether there was a major cross-media player out there that never even considered bidding because the current legislation precluded them from doing so. We would certainly like to think that what we offer in terms of audience scale, breadth of advertisers and our news and local coverage would be pretty attractive to some of the other players who are also in that space, be it newspaper groups, television groups and so on. We would like that opportunity over time to compete with other sectors of the economy where there is more freedom to operate.

Q290 Mr Sanders: What are your views on the three-tier structure that Ofcom has proposed?

Mr Harrison: The three tiers for national stations, regional and the smaller ones?

Q291 Mr Sanders: Co-location, regional stations sharing multiplexes and development of community radio.

Mr Fountain: The conversations that the KM Group have had with Ofcom over the last two years have enabled us to carry out a significant amount of co-location. If we had been geographically placed in another part of the country, perhaps they would not have been quite as forthcoming as they have been. Because we are basically broadcasting to one county geographically, they did not see any particular issues with us co-locating. In most cases the stations were quite close, within 15 or 20 miles geographically as well. We put three stations into one building and three stations into another building in Ashford and we have one out on a limb on the Isle of Thanet. We do not really have any particular plan to move them. However, when I did suggest that we may like to consider that, I was told that that it is probably not a good thing to go forward with that on the agenda at the moment because it is some distance away from where we would want to locate it. That idea was then put to bed, but it was still in the same county, nonetheless. To be fair, Ofcom have been very helpful as far as the KM Groups is concerned but I do think it is because of our geographical location much more than the fact they just happen to like me or like our group. It is just the fact that all of our stations are very close together; they are broadcasting to one country; and we do not have county boundaries.

Q292 Mr Sanders: Your experience is untypical. I am wondering how realistic it is in other parts of the country.

Mr Fountain: Evidence suggests that it is much tougher, there is no doubt about that.

Mr Baxter: I can talk to you briefly about our position on co-location, which is that so far we have not really taken much advantage of it. I think technically we could join together our radio stations Key 103 in Manchester and Radio City in Liverpool with Warrington but we have chosen not to do so. They are still based in Manchester and Radio City is up the 1960s tower in Liverpool. So far, we have taken a view that having a presence in these large metropolitan markets, which are a little different from the ones that have just been outlined, works to our commercial benefit because we are, after all, a business operating in the community as well as an entertainment and information provider in the community. I do think that some of the regulations that we have to work with are a bit anachronistic. We are required to do a whole range of things which we could probably do more efficiently. Just as an example, if I chose to say that we were going to have an improved news-gathering operation across our network of stations and we were going to place in hubs some of the news production and presentation, we start to fall into all sorts of areas of regulatory issues that we need to address. If, for example, I want to find a fantastic broadcasting talent from the north-west who I might think fits across three of our stations in the north-west, I may hit a boundary in terms of regulation. Fundamentally, as I have said, our business is local. We need to reflect those areas and be part of the business community, but where there is an opportunity which still has a relevance and a resonance to a region, it would be nice to be able to move and take that opportunity, without having always to go back to the regulator and have a conversation. I think one of the issues in that is that it affects how we approach our business from a cultural perspective. Sometimes, if it is sluggish as a result, and we are always cross-checking with the regulator, then there is the opportunity of another business entirely to come across on the outside of us and snatch some of the opportunity we are trying to capture. You talked about community radio.

Q293 Mr Sanders: Yes, that is the third point of the three-tier structure. My fear here, and you may be able to answer, is that this idea of switching over from analogue to digital will leave a large number of community radio stations still on analogue. If there is then no funding for the upkeep of the analogue transmitter network, what happens to the community radio stations that are being invested in and starting up at the moment?

Mr Baxter: The analogue transmission network consists of a transmitter and a pole in the ground, and away you go. It can be relatively straightforward. There a lot of the community stations that are not perhaps as committed. Again talking about Manchester where we are, we have a huge transmitter up a giant TV pole in Manchester. It costs us more to broadcast on FM in Manchester than it does to broadcast on DAB. For a smaller community station, the inverse can be the case, so a small transmitter that is based on a high-ish building with a very cheap antenna on the roof can do the job for the sorts of areas that they serve. From an infrastructure perspective, from the operator side, that can be resolved. All the evidence to date is that as these new receivers are brought in to the market, they actually are going to be multi-platform. We have seen DAB and FM combined in just about everything and increasingly you see these WiFi access points provided within the set. It is a bit like mobile phones; the proprietary platform, which is the radio set, also has a number of different access points built into it. So I do not, at this stage, see the stations that remain on FM being disenfranchised, but your point is well made because if they are going to stay there, we need to make sure that there is a means by which people can receive their stations.

Mr Harrison: Just building on the answer that Travis gave, and I think it is a very helpful question, the cost of maintaining the FM infrastructure, which is also we estimate about the same as the cost of conversion to digital, is primarily the cost of building out that national infrastructure. If, for example, you think of Radio 2 on 88 to 91 FM, that means you need to have transmitters all over the country capable of taking a signal between 88 and 91 FM effectively on quite a narrow piece of bandwidth. We think the migration to digital is going to free up quite a lot of FM spectrum, both for the smaller commercial sector stations that want to stay on digital, some of which for example might be the UTV stations that Philip Davies was speaking about earlier, or for the community sector. If we can ensure that those are local stations serving local communities and only need a mast and a signal strength to serve a relatively small geographical area - a small town or whatever - then I think we can have both systems potentially co-existing rather well.

Q294 Janet Anderson: I wonder if we could turn to the issue of music licences in the workplace? I was very surprised recently, and I have an equestrian centre in my constituency in Darwen, and the owner wrote to me to complain - she only employs a handful of people - that she was required to get a music licence because they wanted to listen to the radio when they were grooming the horses. I took this up with the Minister and he confirmed that that was indeed the case. This was something that was raised with us when we visited Real Radio in Yorkshire. What are views about that and have you measured the likely impact on the reach of commercial radio?

Mr Harrison: Our views on this are very straightforward. We already pay 10% of our revenue to license music. We pay the record labels, the PPL, and we pay the artistes and composers, the PRS. We already pay once for that broadcast licence. We think it is incredibly unfair that there is in effect double taxation on the consumers of our product that they are then obliged to pay for having the radio on in the workplace. It would seem a transparent example of iniquitous double taxation. The evidence we are beginning to pick up is that the rather aggressive licensing demands that the collecting bodies like the PRS and the PPL are putting on small shops, offices, hairdressers and factories are beginning to lead to a flurry of people certainly writing to us. I probably have 60 or 70 emails from people saying that they are going to switch off the radio. We are now tracking RAJAR quite closely, the audience measurement system, to see whether this is tracking through into a decline in listenership. We are very worried about it. Encouragingly, there was an important copyright tribunal case, the results of which were published last week, between the hospitality sector (pubs, clubs, nightclubs and so on) and the licensing bodies, which effectively ruled that the licensing deals that the collection societies had tried to publish were inappropriate. There has now been a demand that they will come down and potentially there will be rebates for operatives. We are looking at that ruling across pubs, clubs and nightclubs potentially as a template for what might be appropriate across shops and offices. The principal response has to be that we absolutely believe in the value of music and that it is right for our business that we should pay the rights collection bodies, but, having paid that to broadcast, we do not believe that there should then be double taxation on the recipients of our products as well.

Mr Fountain: I would add to that that apart from the occasional annoying advert or song that somebody does not like or the moving of somebody's favourite talent off the radio network, the one single thing that I get most complaints about is the tactics of PRS going into small premises saying that they need to have a licence. A number of people have said they are going got have to switch off; others have said that they work in areas where they may be able to listen on-line through headphones and stuff like that. It is hard to see that it will not have some level of impact somewhere.

Q295 Janet Anderson: Are their tactics quite aggressive?

Mr Fountain: That is certainly the feedback that comes to us. It is about: Have you got a licence? You need one and this is how much it costs. It is pretty direct. They see themselves as a business collecting the fees for their clients.

Q296 Janet Anderson: So that would apply even to the extent presumably of a small corner shop with one person in it?

Mr Fountain: It would be exactly the same.

Mr Baxter: I echo what my colleagues have said. One of the things we find equally, which I imagine is similar for others, is, as you would expect, they ring us up because they think it is the radio station sending someone to them saying, "Oh, you are listening to our radio station. We are now going to charge you for the privilege". We seek to explain that that is not the case, but it is quite difficult because they are sitting there trying to understand why they have suddenly been confronted by this charge, this double taxation, as Andrew said.

Q297 Janet Anderson: Would you remove that requirement altogether or would you perhaps have a different requirement according to the size of the workplace or the number of employees?

Mr Harrison: I would remove that requirement altogether. The truth is that we pay, as I have mentioned, just over 10% of our revenues in copyright, so we are repatriating over £50 million a year to the rights collection bodies for the benefit of playing music. That would seem to be a fair amount to me in return for that. Then penalising the listeners of that product would seem to be inappropriate. It is not something that happens across the EU, for example. There are other markets where that is not considered an appropriate way of dealing with this. It comes out of the historical copyright on public performance which we think belongs to a totally different interpretation around orchestra performance and that sort of thing rather than about radio stations. It is a loophole that we would like to see closed.

Q298 Chairman: To be clear, you are only concerned about the requirement on small businesses to pay a licence for broadcasting on radio, not broadcasting music. What about if they were playing CDs?

Mr Harrison: With my RadioCentre hat on, Chairman, yes, I am only concerned about radio. I do not know what the licensing arrangements are across CDs and so on.

Q299 Chairman: There is a whole other inquiry here, so we will not pursue that at the moment. I have one final question. I know that the commercial sector has always been concerned about the dominance of the BBC in radio. The BBC is now offering partnership arrangements and is proposing a radio council. Are you concerned that this might be a case of Greeks bearing gifts?

Mr Harrison: The honest answer is that we are absolutely concerned about Greeks bearing gifts. We are engaging constructively, as you would expect, with the BBC and I think there are one or two area where we are working together very well, not least on the whole transition to digital and potentially on things like a common on-line player and potentially how we may be able to look at local news provision and so on. We are absolutely engaging on the partnership offers. The truth is that at the moment they are long on rhetoric and short on delivery. In the meantime, if you think of an operation like Steve's in Kent, the day-to-day reality is that Kent Messenger Group is competing with three levels of intervention from the BBC in Kent. There is a large regional station with BBC London that overspills into half of Kent; there is BBC Kent, which is county-wide; and there are then all the national services. You have three levels of intervention. While partnership is important, and I think there will be increasing wins that we can take, I am not under any illusions about the size of the footprint and the relative strength of the BBC in the market, against which we have to fight for audience day in and day out.

Mr Fountain: Certainly last year when BBC Radio 1 brought Madonna to Maidstone, which was quite something as you can imagine, it was widely reported in our newspapers. We thought that as the local commercial radio station for Maidstone we ought to try and make some kind of capital out of it, so we talked about Madonna coming, we talked about Kent's big gig and all this kind of thing. I received a phone call from Radio 1's legal representative saying we had to refer to it as Radio 1's big gig. I effectively said I was not going to do that. I said, "You guys are coming to Kent. You have Madonna. Clearly it is a major story and it will be reflected in our newspapers. You are getting lots of free publicity about the event in our newspapers. I think you could at least cut me a bit of slack here and allow me to talk about this. We are not saying it is KMFM's big gig; we are just saying it is Kent's big gig", and it certainly is. To be fair, I did not hear anything more from them because I was probably nothing more than just an irritating fly, at the end of the day. For me, it just encapsulated the whole big brother thing really that you have to put up with sometimes from the BBC.

Q300 Chairman: Andrew, you said that the partnership had not amounted to anything or not very much. What specifically are you pressing to get from the BBC?

Mr Harrison: I think a good example of partnership that would be transformatory would be an agreement with the BBC in the spirit of partnership that they would not bid exclusively for sports rights. To me, that is transparently something where we could work together in partnership for the benefit of all of radio. At the moment, the reality is that what happens is that the BBC bids exclusively for sports rights, often to the exclusion of talkSPORT in England or the Bauer stations in Scotland for SPL football rights, for example, but they do not have enough physical capacity to broadcast all the matches anyway. If you can imagine that most Premiership matches all start at 3 o'clock on a Saturday, the BBC has one hour led on Radio 5 Live, possibly two with Five Live Sports Extra but that would be assuming they had no other sports coverage. So it cannot cover all these matches but it has an exclusive deal that shuts out the commercial sector, inflates the cost of the rides and effectively leads to a transfer of public money straight from the licence fee to the sports governing bodies. It would seem to me a breakthrough example of partnership to have the situation certainly in radio where exclusivity for music concerts or for film premiers or for major sports rights should be negotiated together or some sort of arrangement worked out in the spirit of partnership so that we can all cover those events together.

Q301 Chairman: Is there any progress on that?

Mr Harrison: Zero.

Chairman: That is all we have for you. Thank you very much.