DCMS ACCOUNTS 2009-10 AND RESPONSIBILITIES OF THE SECRETARY OF STATE - Culture, Media and Sport Committee Contents

Examination of Witnesses (Questions 1-92)

Q1 Chair: Good morning, everybody. This is the annual session of the select committee where we look at the DCMS accounts and the responsibilities of the Secretary of State. It is an opportunity for us to range far and wide across the remit of DCMS. I would like to welcome, in his first appearance before the select committee, the new Secretary of State, Jeremy Hunt, and alongside him Jonathan Stephens, the Permanent Secretary of DCMS.

Can we start with the annual report? For the past five years the Department has underspent each year in succession. Does that suggest a problem with your financial planning?

Mr Hunt: First of all, Mr Whittingdale, thank you very much for allowing me the opportunity to meet your Committee, and I welcome the opportunity to range widely across the brief this morning. On the specific question about the accounts and the underspend, I will ask the Permanent Secretary to respond, as he was around for that period and I obviously was not.

Mr Stephens: Thank you. Every Department underspends, because the parliamentary approvals are absolute. If you are a penny over them you are in deep trouble. Our underspend over the last five years has been between 1% and 2%, which is what I would expect. Last year there were two key factors. One is that the licence fee income was lower than forecast at the beginning of the year, and the second—this has been a feature of the last three years or so—was that Olympic spending came in under forecast, reflecting the inevitable variations in a big capital project of that size running over five years. The remaining underspend, when you exclude those, is around 1% of the relevant part of the budget.

Q2 Chair: In the years we are looking at, 2009-10, which is the latest one, the underspend was £115 million, which is over 2% at 2.3%, but a large part of that, as you suggest, is the ODA. Is that simply delayed expenditure by the ODA?

Mr Stephens: It is two things: it is savings—and, overall, the ODA has identified some £700 million of savings across the project as a whole—and it is also short delays. On a project of that sort it does not make sense to manage it on an annualised basis. Even a few weeks' shift at the year end, when cash goes out, will result in the underspend you have identified.

Q3 Chair: We have also been given figures showing the breakdown of DCMS spending, across different regions and nations in the UK in terms of spend per head. There is quite a wide diversity in that. I note that the region where spending per head is lowest is the east of England. As an Essex Member of Parliament, I ask you whether this is something that is of any concern that you might wish to address?

Mr Stephens: It is quite hard to break down spending in this way. Whereas a number of grant givers, and particularly the Lottery distributors, are under a duty to take very strongly into account the fairness of allocations across the regions and nations of the UK as appropriate, not all grants and spending are decided on that basis. The figures, of course, take account of only where the spending happens, which does not necessarily reflect where the benefit accrues. So, not surprisingly, we are responsible for a number of national institutions, the national museums and galleries located in London, which are visited by people from across the UK, so the benefit accrues but won't necessarily be reflected in the figures—of course, they are visited by a large number of overseas visitors as well.

Q4 Chair: Secretary of State, can I turn to your quite drastic proposals for reduction in administrative costs and possibly staff numbers in the Department? First of all, have you decided yet whether the Department is going to stay in Cockspur Street?

Mr Hunt: It is our intention to move from Cockspur Street and to find accommodation that is cheaper and also reflects the fact that we will have significantly fewer employees. If I could answer the general point about our approach to the Spending Review because it is obviously a major priority for me at the moment. Our approach has been fourfold with respect to the spending review. The first priority has been to eliminate waste wherever possible. It is an absolute priority to concentrate resources on the front-line services, for which we are responsible and for which members of the public consider themselves to be principally paying their taxes. The decision that I have taken, which is a very ambitious one, to ask my Permanent Secretary whether it is possible to reduce DCMS's own costs by half, leads to a saving of £28 million. The reduction in quangos that I have also instigated leads to a saving of £25 million we estimate, although we cannot be completely sure about the numbers at this stage. If you put those two figures together that is about the amount that is given to the Natural History Museum or the British Museum; it is about a third of the entire non-Olympic sports budget. So, significant sums of money can be saved to protect front-line services. It is not a reflection on the professionalism of the individuals who work at DCMS, for whom I have the highest regard, but it is a reflection of our priority, which is very much to protect the frontline.

Q5 Chair: To achieve a reduction of that size—this clearly is not just cutting out waste—you are going to have to stop doing certain things. What things that DCMS currently does are you going to cease doing?

Mr Hunt: That is the head office budget—of the £1.4 billion resource grant that we have at the DCMS, we spend just over £50 million on our own head office function. It is my intention that we continue with all the core head office functions, even after the 50% cut. We will have to do things differently, we will have to do things more efficiently, we will have to be more imaginative than any other Department in Whitehall, because I am not aware of anyone else who has set such an ambitious goal, but, given the immediate impact on the frontline of reductions in grant to the bodies that we fund, we believe that it was the right starting point.

Q6 Chair: You have about 500 full-time staff at the Department at the moment. Are you envisaging half of those will go?

Mr Hunt: Yes, but bear in mind that because of 2012 there is a slightly different profile to the way we will achieve that. The reality is that the GOE part of DCMS, which is the part of the DCMS that is responsible for 2012, will need to increase its manpower in the run-up to 2012 but then we will not need anyone in GOE after 2012. So, after the Olympics, by the end of the spending round, it is our intention that we will have half the number or we will be spending half the amount we currently spend on DCMS admin. I hope that we can avoid compulsory redundancies as much as possible and we can achieve much of that goal through natural wastage, but we anticipate that up to 70 posts will be lost by the end of March.

Q7 Chair: That is a large number to achieve through natural wastage. Do you think that is possible?

Mr Hunt: It may not be possible to achieve it all through natural wastage.

Q8 Chair: So the possibility of compulsory redundancies exists?

Mr Hunt: Correct.

Mr Stephens: If I may add a point. You are absolutely right. Of course, between natural waste and compulsory redundancies, there is voluntary redundancy and that will also no doubt feature as part of this plan over the forthcoming years.

Q9 Paul Farrelly: What are the anticipated redundancy costs?

Mr Hunt: Let me ask the Permanent Secretary to answer that because he has been doing a lot of work on it.

Mr Stephens: That depends on the profile and the take-up of various different schemes. The compensation arrangements themselves are subject to parliamentary consideration at the moment and they are likely to be amended. So we don't have a specific budget set aside yet.

Q10 Paul Farrelly: What is the range?

Mr Stephens: We do not have a specific budget. In particular, given that most of the reduction will be made after 2012, because of the reasons that the Secretary of State has explained, it is very difficult to anticipate at this stage how many—if indeed at all—will need to be made redundant at that point. So, we have not set a specific budget.

Paul Farrelly: I was just asking for a range.

Mr Stephens: I do not have a range.

Q11 Paul Farrelly: When you are putting submissions to the Treasury about cutting staff, does the Treasury not ask you how much it is going to cost in redundancy?

Mr Stephens: They have asked us for restructuring costs, in common with all Departments, across the whole of our budget. That is not to make any assumptions about where that will be funded.

Q12 Paul Farrelly: What is the range of restructuring costs?

Mr Stephens: Across the whole of the DCMS budget, again it is subject to wide variations according to take-up.

  Paul Farrelly: That is why I am asking for a range.

Mr Stephens: You might be looking at £100 million or so.

Q13 Paul Farrelly: What is the redundancy element of that? You have to build it up to £100 million.

Mr Stephens: I am sorry, I don't have that breakdown.

  Paul Farrelly: Could you let us have it?

Mr Stephens: I will happily give you more details on that, yes.

Q14 Paul Farrelly: Jeremy, if media reports are to be believed, you have been somewhat of an eager beaver when it comes to putting in your proposed cuts, as opposed to Ken Clarke, who doesn't seem to be that forthcoming from Justice, rather like a sort of world-weary sloth. How do you explain the difference in approach? Is it just age and experience?

Mr Hunt: You would have to ask Ken Clarke if you wanted some information about his approach. My approach has been very straightforward. It is: what decisions can I take that will best protect the front-line services for which DCMS is responsible, and also, what decisions can I take to protect some very important parts of the economy, for which DCMS is responsible, that will play a very important part in our return to economic growth? We estimate that the sectors that we are responsible for contribute around 16% of GDP and around 16% of employment. The museum sector alone generates around £1 billion in foreign exchange. So these are very important parts of the economy and my intention, in the changes that we are proposing, is to minimise the impact on the wider economy.

We have, I believe, one of the best cultural offers of anywhere in the world and I believe we have one of the best sporting offers of anywhere in the world and for me this will be a successful spending round if I'm able to avoid any long-term damage to those sectors and make reforms that help them to grow in the future.

Q15 Paul Farrelly: But why are you such an eager assassin?

Mr Hunt: I don't believe I am an eager assassin at all. I fully accept that I have been prepared to take difficult decisions when it comes to admin costs and when it comes to quangos. For example, the decision I took about the UK Film Council was largely because I believed they were spending far too much of the grant that they received for film on their own admin and bureaucracy and I don't think that is the right way to get value for money. So what I have done has been absolutely driven by the fact that we have a very difficult economic situation, we have a very difficult spending challenge across the whole of Government, and I want to protect the services for which I am responsible.

Q16 Paul Farrelly: Just a couple more questions. How many people are in the Olympics monitoring unit?

Mr Hunt: The GOE. I think it is 190.

Mr Stephens: It is about 100 now. It is likely to need to go up to about 190 in 2012.

Q17 Paul Farrelly: When all those employees go, they will count towards the 50% cuts that you are making?

Mr Hunt: Let me be clear. What I have said is that the amount that we spend on administration I want to halve by the time of the end of the spending review period—2014 to 2015. That is the challenge that I have set the Permanent Secretary.

Q18 Paul Farrelly: So if we take the 100 out as a one-off, because it is time limited, from the 500, that gives us 400. Are you intending just to cut a total of 150 extra jobs, which would be 100 plus 150 out of the 500? Is that your thought?

Mr Hunt: We do not have a target in terms of the number of employees, but we do have a target in terms of the amount we spend on our head office costs. So there will be ways that we can save on those costs, for example, through the use of external suppliers, through the use of temporary staff, through reducing the cost of our building. That is why we said we are looking at moving. We are looking at everything we can. Obviously, losing people is the last choice that we have. We do think that we owe it, as a responsibility to our sector, to see if we can minimise the money that we use ourselves to maximise the amount that we are able to distribute in grants.

Q19 Paul Farrelly: Mr Stephens, you must have greeted the arrival of the coalition's plans with glee and satisfaction because you are going to be telling 70 people, by the end of March, that they were doing useless jobs.

Mr Stephens: With respect, I don't think that is what the Secretary of State has said. Our part, as the civil service, is to implement loyally, and with full commitment, the Government's programme. A critical part of that is their programme for reducing the deficit. We are a Department that is strongly committed to our sectors, that wants to see our sectors thrive and succeed. We know we face a big challenge across the Government and we know we have to play our part in that. What I have said to the Department is that it is our job to implement the Minister's decisions on this, as on other matters. It is our job, too, to make this an opportunity to ensure that we remain a high performing, high impact Department with strong commitment from our staff, and to continue to deliver in the meantime our critical priorities, not least the Olympics where, as one of the smallest Departments in Government, we are delivering one of the biggest peacetime events that the UK will see and, so far, delivering it on track and within budget.

Q20 Paul Farrelly: Isn't the reality that, when cuts like this have taken place across public bodies, which may not have been entirely thought through, as sort of a, "Let's cut and then pick up the pieces" approach, a lot of the people who have gone out have come back through the back door as consultants, and public bodies have ended up spending more because they have needed the expertise of those people?

Mr Hunt: If I could respond to that, that may have been a problem that has occurred in the past, but we are being absolutely clear that what we are aiming to do is to reduce the amount of money that DCMS spends centrally by 50%. So any external expenditure will have to come within that reduced 50% budget and the same would apply to all the bodies that we fund who distribute grants as well. We are looking for a one-off, permanent reduction in the amount that they levy of their grant to fund their own head office costs. By doing that, we believe that we can concentrate resources on the frontline, which is what we think the public wants. We are not trying to underestimate the challenge of doing this. It is an incredibly difficult situation. It is not of our choosing, but, given the challenge we have, we are trying to do everything we responsibly can to protect front-line services, which in our sector are vulnerable.

  

Q21 Damian Collins: I want to go on and ask something particular but, in general terms, do you think there is scope for reform of the way arts projects are funded and the way in which the Arts Council distributes money and, indeed, whether some projects could be more directly funded rather than going through the Arts Council?

Mr Hunt: I do support the arm's length principle, and I think we do need an organisation that decides which arts organisations get funding and which organisations don't. I think that is preferable to politicians making those decisions because there is always a risk, if politicians make those decisions, that they become politicised and not based on artistic merit. So we don't plan to abolish the Arts Council and we accept that it has an important role in the distribution of grants. That is not to say that it too can't become more efficient in the way it distributes grants and we want it to make ambitious changes to reduce its own admin costs. It is something that I said when I was in opposition.

The general point about arts funding I would make is that front-line arts organisations are vulnerable in the situation we're in because if they have a sudden cut in their grant, that means they reduce their artistic output, that means they are able to secure less in ticket sales, less in philanthropic donations, and there is a risk of a cycle of decline. That is why we have to be very careful if we are in a situation, as we are, where overall the money going to such organisations is likely to be reduced. We want to do it in an intelligent way that helps people get through a very difficult patch, and taking difficult decisions about our own admin costs is part of the way that that is possible.

Q22 Damian Collins: You touched on the role of philanthropy in the arts. There was a report in last week's press that talks had broken down between Charles Saatchi and the Arts Council in regard to a large donation of his works. Do you think there are tensions in the system that prevent philanthropic giving and make it harder for private individuals or private organisations to support public art?

Mr Hunt: First of all, let me put on record my gratitude to Charles Saatchi for his extraordinary generosity. I wrote to him as soon as I heard about the announcement. I think it is an absolutely remarkable thing that he has done. I'm very concerned at the reports to which you refer, and I'm doing what I can behind the scenes to try and see if we can overcome some of the obstacles that have been referred to in the press.             The general point is that we do have some generous philanthropists in this country, but only 3.7% of all charitable giving goes to arts and culture and I believe we could do a lot better. I have never believed that philanthropic giving should be a replacement for state funding. State funding can offer security over very many years and is a tremendous contributor to a lot of the artistic excellence that we have but, given the difficult period that we are in, I believe it is right to ask: what can we do to boost philanthropic giving? Are there obstacles that we can remove? How can we develop a culture of asking, as well as a culture of giving among artistic organisations? That is why we have a very big programme designed to see what we can do to help arts organisations secure another source of income.

Q23 Damian Collins: Are there cost implications for that as well? I suppose it may involve tax breaks and things that have to be budgeted for.

Mr Hunt: This is not a period where we are going to win any arguments with the Treasury for things that are going to cost more, but there are things that we can do that don't necessarily cost money but can make a difference. One of the first things I did as Secretary of State was write to the 200 most generous cultural philanthropists in the country, simply to thank them, because for a lot of donors, what they want is recognition for what they do and I want to help that happen. I wrote yesterday to Lord Sainsbury to thank him for his very generous donation to the British Museum. So there are things that we can do and we're looking at making sure there is no stone unturned.

Q24 Damian Collins: One final question, if I may. The Raphael exhibition at the Victoria and Albert Museum at the moment seems to be a good collaboration between the UK Government, Vatican Museum, the Royal Collection and the V&A to bring a sort of blockbuster exhibition to London, and in relatively quick time as well. Are there lessons that can be learned from that process that might facilitate supporting other major exhibitions in the UK in the future?

Mr Hunt: The V&A is one of the best organisations we have, in terms of understanding the power of cultural diplomacy. I went to India in July and in our cultural delegation was Sir Mark Jones who has been working in India for years, doing exhibitions throughout India, and I think it is tremendously powerful what they have done. Their ability to be fleet of foot and persuade the Vatican to reunite the Raphael cartoons with the tapestries—something that Raphael himself never saw; the first time they have been together for 500 years—was a remarkable achievement. So, absolutely, I think there is a great deal that can be done and I hope the V&A will share its expertise. I know it's very open to doing so with other museums and galleries to make sure that we can have more of this kind of thing.

Q25 Chair: Can I ask you about some of the specific cuts you have already announced? You took a lot of people by surprise when you came out with the list of arm's length bodies that are going to be abolished or merged. That decision seems to have been taken very quickly. Can you tell us how you came to these conclusions in such a short space of time?

Mr Hunt: It was a relatively short space of time, Mr Whittingdale. The reason that we made the announcement when we did was because we wanted to be open with Parliament and the public before Parliament went into recess. That is why that statement was made on the last day or the day before the House rose in July. But the decisions were carefully thought through and they were based on exactly what I was saying earlier, which is: what is the best way to secure value for money to minimise the effect on the frontline? We have been asked, as have all Government Departments, to model cuts of between 25% and 40%. The Film Council spent 24% of the grant that it received on its own admin and we asked ourselves if there was a better way to support the UK film industry than having a large number of executives paid more than £100,000 and an office in LA. We asked whether there were different ways that we could do this, and we believed there were. In the case of the Museums, Libraries and Archives Council, it was a very professionally run organisation and they had made huge progress in reducing their cost base but, none the less, we believed those costs could be absorbed elsewhere in a way that, overall, saved money. So we went through a process, but it is a difficult thing to do to tell someone when you have decided that you want to abolish a particular organisation, and we decided the best thing to do was to be upfront about it.

Q26 Chair: A lot of clamour, particularly surrounding the abolition of the UK Film Council, has been based on what appears to be a belief that your announcement amounts to abolition of support for the film industry in the UK. Do you feel that the UK Film Council is behaving badly in arguing as strongly as it is for its own survival and is perhaps distorting the argument?

Mr Hunt: I did believe it was completely inappropriate for them to hire Portland Communications and use taxpayers' money to launch a lobbying campaign to protest against their own abolition, yes. But we have passed that point now and we are working very closely with Tim Bevan, Chairman of the UK Film Council, because they have expertise that will be helpful for us in designing a new way to support film. The UK film industry has enormous potential but I believe it could do a great deal better.

Very briefly, I think there are two challenges when it comes to films in the UK. The first is what you might call the culturally valuable films that are unlikely ever to make money but deserve to be made and are of artistic and cultural value. The challenge with those films is how you get them distributed. I don't believe that the Film Council has made as much progress as I would have liked in finding a way to get those films distributed and that is an area in which we will be announcing proposals in due course. We are waiting until the end of the spending review before we make a full announcement on that. The second area is how we get the next generation of Four Weddings and a Funeral-type British hits, and that is a related but different issue. We will be preserving the tax credit and we will continue to support the UK film industry and the Lottery will continue to support the UK film industry, but again my concern there is that the number of UK film producers in the European top 20 has decreased from five three years ago to one. We have been overtaken by Germany and Italy, as well as France, and I think we can do better in that respect as well.

Q27 Chair: Is it your hope that the amount of money that is going into the film industry itself, rather than the overheads of the UK Film Council, can be maintained?

Mr Hunt: All these decisions are subject to discussions with the Treasury but let me simply say it is absolutely my hope that a much higher proportion of the money that we support the film industry with, as taxpayers, goes into helping to get films off the ground rather than the bureaucracy and administration that has sometimes been associated with that.

Q28 Chair: Finally, of the projects you announced which were being dropped, some of them you have been critical of in any case, like the free swimming programme. Some of them always looked rather ambitious, like the BFI Film Centre. The one which perhaps caused the most consternation is Stonehenge, which has been a national outrage for a very long time. Can you offer any hope that that is going to be addressed in the near future?

Mr Hunt: Let me be clear: I, too, was very disappointed that we weren't able to continue to support that development of the visitor centre, because I think it could have potentially huge tourism benefits, as well as being our pre-eminent heritage offer. John Penrose, the Heritage Minister, is looking very closely at whether there is an alternative private sector-led solution that could make that possible. So, we haven't given up on finding a solution but it's not going to be possible to do it with state funds.

Q29 Alan Keen: I think I recall your Department was the first one to throw away the ministerial cars; is that true?

Mr Hunt: Yes, it is.

  Alan Keen: Whether it is different in your Department from others, I don't know, but I don't think the public realise that Ministers, certainly in other Departments, take away masses of work in the famous red boxes every night and have to get them back the next morning. How do you cope with that practically? You don't go home on a bike and have a car behind you with a box. How does it work?

Mr Hunt: First of all, let me say that that decision saved £250,000 per annum for the Department, which is significantly greater than a number of grants made by the Arts Council to regularly funded organisations. Let me also say that I'm not against Ministers having cars. I recognise that—in terms of the lifestyle that Ministers have and all sorts of reasons, often practical reasons—it's helpful to do that. But my view on this was that we are one of the very smallest Government Departments and any cuts to our budget risk having a disproportionately greater impact on the frontline, so I wanted to do everything I could, not just in terms of reducing our own costs but also setting an example to the bodies that we fund, to reduce our costs and that's why I took that decision.

  I personally tend not to take red boxes home. I work in my office later and do the work in my office before going home. Other Ministers have different arrangements but we obviously do have to be sensitive about carrying documents on the tube and so on.

  Alan Keen: It's civil servants who leave the documents on trains, I think, rather than Ministers. I think what you've done on that should be commended.

Mr Hunt: I don't pretend that there aren't times when things would have been easier if we had had cars, but I think it was the right thing to do. I think it demonstrated to the cultural and sporting worlds that we are trying to do what we can to protect the grants that we are trying to give out to them.

Q30 Alan Keen: This is a bit special to me. I am chair of the all-party athletics group and the all-party football group, and I am a little bit concerned about the future of the stadium. The Olympic Park Legacy Company hasn't made a decision yet. This Committee has a long history of inquiries into hosting major sporting events. Wembley Stadium was likely to be the Olympic Stadium, but it couldn't be because the IOC insists on the village being within half an hour's travelling time of the main stadium. I will come on to that point later. But what progress has been made? It was always a commitment that the stadium would remain an athletics stadium for the future, and we have the decision being made on the 2015 bid for the Athletics World Cup. What is the progress at the moment?

Mr Hunt: Thank you for asking the question because it is incredibly important to the overall viability of the Olympic Park, as a legacy project, that we find a good sustainable legacy use for that amazing stadium. I have never made a secret of my view that the best way to achieve that is to find a football club to be a legacy tenant in a way that doesn't exclude its use for things like the world athletics championships, but it seems to me that a football club is perhaps one of the only clubs that can get usage, week in week out, throughout the season, in a way that we need to happen. So that, for me, would always be a preferred solution.

  We have made some good progress since the election in setting up the Olympic Park Legacy Company and we are in the process of making the final administrative changes necessary to transfer full ownership of the land in the Olympic Park to OPLC, and they have already started the process of inviting bids for legacy use of the stadium. They are hoping to have a preferred bidder by the end of the year and to announce a lease by next April. I'm obviously not party to the commercial discussions that they are having, so I don't know who they're talking to, but I'm very hopeful that we can get a solution that will make both you and I happy.

Q31 Alan Keen: If the World Athletics Federation is making the decision this November whether we get the 2015 Athletics World Cup, the end of this year is too late. Whether we have a permanent athletics stadium or we don't must play a major part in their decision-making. If I was a football manager or chairman, I wouldn't want a permanent athletics track round a football ground. This problem arose years ago. I am not saying it is since you took over—it's not your fault, but it's a muddle. So you are saying you don't know whether we'll have a permanent athletics track? Or is it definite that there has to be a permanent athletics track and then, if football club doesn't like it, it's going to be possibly a semi-permanent white elephant?

Mr Hunt: All of us think the ideal would be to have a tenant who was willing to allow use of the stadium for athletics, and that is something that is very much in all our minds, but we can't prejudge this process. The most important thing of all, as you rightly say, is to avoid having a white elephant, but I very much hope that won't prejudge the decision about where the 2015 Athletics World Cup is hosted because it will be fantastic if we can host it in the UK. I think we have an opportunity now in the UK to become the premier country in the world for hosting major sports events with the Commonwealth Games, 2012, two Ryder Cups, two Rugby World Cups and, hopefully, the 2018 World Cup as well. So there is a big opportunity to do that. We are not in a position to make any commitments in terms of Government funding for the Athletics World Cup, until after the spending review, for obvious reasons, but I hope very much that we might be able to get good results all round.

Mr Stephens: May I add one point? The critical point in thinking and planning about the stadium and its legacy use, long before a tenant was ever going to be identified, was building the maximum flexibility into it, so the stadium will be able to accommodate 80,000 in 2012. It will be able to be adapted to reduce to 25,000, if that's the need, and suitable for a long-term tenant, but also able flexibly to accommodate the 60,000 or so that a World Athletics Championship might require.

  Alan Keen: Twenty-five thousand is no good for a premier league football club.

Mr Stephens: Absolutely. The point is the design has maximum flexibility built into it.

Q32 Alan Keen: As I said, the problem has not arisen since Jeremy took over. Because the stadium has been delivered on time, and even in advance of time, it's too late to have to have a flexible Stade de France system, which this Committee looked at a long time ago.

Can I come on to the issue that I raised with my colleagues? They must be fed up with my doing it, but we've got somebody new in front of us so I'll say it again: if the IOC didn't insist on having a city Olympics, it would be possible to use existing stadiums in other countries—forgetting about us now—but they've been very inflexible in allowing a national bid. We can do it because we're a relatively wealthy nation, but it stops any developing nations from bidding for the Olympics because they have to build virtually every sort of new stadium in one city. In the past I have pleaded with Seb Coe, and others from the IOC, to make this point strongly. So I'm pleading with you, Jeremy, to make this point: that the IOC insisting on a city Olympics stops any developing nations, which are much more short of money than us, from making such bids. I'm just asking for your view on that and, if you agree with me, whether you will voice that? We have the Games—they can't take them from us— so it doesn't matter who we upset now. You should make that point strongly I feel. Do you feel the same?

Mr Hunt: It's obviously a matter for the IOC, but I do have some sympathy with the general view that you're expressing. It would be wonderful to have an Olympics in Africa or in India, on continents that haven't done that so far, and the success of the World Cup in South Africa is an example of how developing countries are able to host tournaments in extremely impressive ways.

  Alan Keen: That's because FIFA don't insist on everything being in one city, and the whole nation of South Africa benefited. The IOC insists on the city—that's the problem.

Mr Hunt: I will reflect on your comments. The only thing I would say is that I think the best thing that we can do in 2012, to give countries like India the confidence at some stage in the future to bid for the Olympics, is to deliver them on time and within budget and for the local element of the budget to be a low cost to the taxpayer. That I think is a very important challenge for us in constrained financial circumstances.

Q33 Alan Keen: We had a very entertaining session on the Olympics, a year or so ago, when the London Mayor Johnson came. He had just come back from Beijing and one of my colleagues asked how we were going to compete with them because they had spent a vast amount of money in Beijing. Boris thought for about a tenth of a second and said, "Bikes! We'll all have bikes." If you see the bikes round London, he'll probably deliver them. He said that everyone getting about on bikes would make things wonderful and make a great impression. Then he said, "What about communications? Everybody will have a mobile communication and they'll know what's going on every minute of the time." So that was Boris's answer to how we compete with the quality delivered in Beijing with much less expenditure.

We're in an economic downturn, what are your views on the cultural Olympiad that we're referring to?

Mr Hunt: I think the cultural Olympiad, particularly Festival 2012, which is being organised by Tony Hall and Ruth Mackenzie, is one of the best ways that we can differentiate London 2012 because London is one of the great cultural hubs of the world, if not the greatest cultural hub of the world. We have a fantastic offer, and you are right to say that finances are very constrained so our ability to put additional public funds into this is very limited. But we have tremendous goodwill from artistic and cultural organisations, which are co-operating magnificently in putting together a programme of activities that will mean that we can offer the world's greatest cultural festival alongside the world's greatest sporting festival. I think that is something that will give a very different atmosphere to London 2012 and make it something that we all remember and, indeed, the whole world remembers.

Q34 Chair: It is said that one of the major reasons we won the Olympic Games is not just that we would deliver a fantastic games but that we would achieve a permanent legacy. In particular, we would inspire the nation to increase their participation in sport. You have now dropped the target of the previous Government to increase sporting participation by 2 million by 2012, is that not going to rather undermine the intention that we expressed when we bid for the Games?

Mr Hunt: Not at all. We dropped that target because we believe that having that kind of top-down target can often have a counterproductive effect, in the way that people spend money in order to tick a box rather than to achieve the objective that you're aiming for. We haven't dropped the participation targets for individual sports in the whole sport plans, and we will continue to fund over 40 sports national governing bodies—at least, subject to discussions with the Treasury, but it is our intention to continue to fund those whole sport plans in order to help, for example, the ECB deliver 270,000 people playing cricket, the RFU getting 370,000 people playing rugby, the FA getting 2.4 million people playing football.

  So we are absolutely determined to make sure that we continue to get more people playing sport. We think that has enormous social and health benefits, as well as just being a good thing for sport. But on the bigger question that you ask, Chair, we believe that we need to go a lot further to create a sporting legacy for 2012. If you asked, "What is the one thing that you're doing that is different from the previous Government with respect to legacy projects?", the answer is that we have set up this plan for an Olympic-style school sports competition. The idea is that we can have what we loosely term, "schools Olympics" that could take place in schools throughout the whole country, so that a primary school in Macclesfield or Chester or Cornwall or Belfast can be as excited by what's happening in London 2012 as the residents of east London, and we are making progress with our plans for that. But that is a way that we hope to create a lasting increase in the number of young people playing competitive sport.

  My final point on that is: this is a legacy programme so our success in this programme won't be about having schools Olympics in 2012. It will be whether they happen in 2013, 2014, 2015 and 2016—that is the real point of this programme.

  

Q35 Philip Davies: One sport I would like to cover is horse racing. Your Department has a lot of fingers in pies on this. It seems that the levy negotiations between the racing industry and the bookmaking industry are not going particularly well, and they appear to be as far apart as they have ever been. It appears that this is going to land on your desk for determination, so what is your view about what should happen to the levy? Would you be minded totally to revamp the system or would you just roll over the existing agreement for the future?

Mr Hunt: I have no long-term commitment to the levy. I think it's a complete anomaly that a Secretary of State should be intervening in a discussion between two groups of businesses that ought to be able to sort these things out themselves. Current legislation says that the Secretary of State does have to make that determination, and I would hope to find a way in which we can migrate racing and betting away from the system that we have, which I consider to be extremely archaic, whereby somebody in my position is having to determine this. I want to do so in a way that doesn't do long-term damage to racing. I'm very aware of the importance of the racing industry, and there is a migration path—a way of achieving this that is perhaps incremental rather than immediate. But is it the kind of thing that I want to be spending my time doing as Secretary of State? No, it isn't. They have to decide by 31 October whether they can reach agreement on the levy. My birthday is on 1 November and I can't say this is a birthday present I'm particularly looking forward to.

Q36 Philip Davies: One of the other things that is of great interest to people in the racing industry is the future of the Tote, to which the Chancellor referred to in his Budget speech. Can you just clarify exactly where the Government are at the moment on selling the tote?

Mr Hunt: We have no desire to keep the tote as part of the public sector. We recognise that it employs 4,500 people. It gives £11 million a year to racing, which is important income for the racing industry. So we're looking to find a way whereby we can transition the tote out of the public sector, as it is now, but in a way that maintains—perhaps in a different way—the support that the tote has always given to the racing world.

Q37 Philip Davies: What sort of time scale are we looking at? Of course, one of the problems the tote has suffered from over recent years is uncertainty, and it has been difficult for it to make investments, make plans or attract new staff because of the uncertainty about what is going to happen. I am sure from its perspective, whatever happens, the sooner the better, so what sort of time scale are you looking for to resolve this once and for all?

Mr Hunt: My colleague, John Penrose, is dealing with this issue and he intends to make a statement to Parliament shortly, so I don't want to prejudge what he says on that. But I agree with you, uncertainty is not helpful, and this is something which we will endeavour to resolve as quickly as we can.

Q38 Philip Davies: On the wider gambling industry, I was pleased to hear at the start that you recognise that the economy benefits from different parts of your Department's responsibilities. The gambling industry is an important part of the economy as well. Just in terms of the anomalies, can you explain to me, because I've never been quite sure of the answer, why the Government think that it's fine for a 16-year-old to buy five scratch cards on a weekend but that it's completely unacceptable for a 16-year-old to put a £5 bet on the Grand National?

Mr Hunt: I do think there's a substantive difference between the National Lottery and other types of gambling, and that's why I think there is a difference in age. But, to go back to your earlier point about the importance of gambling, it is an industry, it employs a lot of people, and the challenge we have, when it comes to gambling in general, is to find a way which allows it to expand responsibly without fuelling problem gambling, and that is a very difficult issue to wrestle with. But, with respect, I think it's unlikely that lowering the age at which people are allowed to make a bet will give reassurance to those concerned about problem gambling.

Q39 Philip Davies: I am not necessarily sure I was arguing for a reduction in the age of people being able to bet in betting shops. I was perhaps reflecting that the age at which you can buy scratch cards should be raised to bring it in line with the rest of the gambling industry. I still fail to see what is so much better about a 16-year-old buying five scratch cards each week than their putting a £5 bet on the Grand National. It seems to me to be a total anomaly.

Mr Hunt: I'm convinced that the risk is considerably lower for people taking part in the National Lottery than other types of gambling, so I'm content with the law as it is in that respect.

Q40 Philip Davies: One of the problems that the betting industry has is that probably about a third of betting shops now make less than £17,000 a year profit, so anything that adversely affects the bookmaking industry could lead to wholesale closure of lots of betting shops. Can you give a commitment that no decisions will be taken by the Department that will lead to the inevitable closure of lots of betting shops, such as on things like fixed odds betting terminals?

Mr Hunt: I can't give that commitment. What I can say is that any decision we take over the future of gambling will pay due regard to the number of people employed in the betting industry and to the economic impact. I would say that one thing that has contributed to some of the challenges faced by betting shops is the fact that a lot of gambling and betting now happens online, and one of the challenges in gambling policy is to work out how to stop the migration of online betting sites abroad to areas where they are out of the reach of British regulation. We are unable to police them, unable to make sure that they encourage responsible gambling, set limits and have age verification procedures—all the kind of things that are necessary to encourage and allow responsible gambling. That, I think, is one of the big policy challenges that need to be thought through.

Q41 Philip Davies: I tabled a parliamentary question asking what evidence there was to show a link between the number of things, like fixed odds betting terminals, in betting shops or casinos and problem gambling. The answer was that there was no evidence of any link between the two. So can you also make a commitment that these decisions that you make will be evidence-based and evidence-based alone, and won't be influenced by factors such as to trying to please certain elements of the media?

Mr Hunt: I can certainly give that commitment.

Q42 Philip Davies: One final thing is that bookmakers and the betting industry have been asked to put their hands deeper and deeper into their pockets to fund research into problem gambling and the GREaT Foundation[1]—the previous Government asked for a voluntary £5 million. Basically it was voluntary, but if they didn't do it, it was going to become compulsory, so I'm not sure what your definition of the word "voluntary" is. It was supposedly voluntarily, but with a big stick above the industry. It is my understanding that the GREaT Foundation hasn't spent that money, but is already asking for more money for next year.

I made a point to Ben Bradshaw, when he was in your post, which I fear is coming true, that this £5 million wouldn't make a blind bit of difference to problem gambling and that, when it didn't make any difference, the vested interests that are now controlling all this money would say, "It's because we haven't got enough, we need some more", and that when they got some more money, and that didn't make any difference, they would keep asking for more and more money. Can you also give a commitment that, rather than just agreeing to that kind of gesture politics, such decisions will be evidence-based, and that, if there's no evidence at all that spending all of this money makes any difference, you won't give in to calls to give more and more money needlessly?

Mr Hunt: I can absolutely make the commitment that our decisions will be evidence-based. Let me point out that the conversations I had when I was in opposition with representatives from the gambling industry generally involved requests for deregulation, relaxation of laws in one respect or another. I always said to them then, and I believe now, that what we need is an approach which deals with how you avoid a growth in problem gambling. Because if you look at places like California, they have problem gambling that's increased to 2% of the population, according to public studies in California. In the UK it's 0.6%. So, any change in gambling policy needs to be able to reassure members of the public that we are not going to unleash a big growth in problem gambling. The flaw in the last Government's approach, with the super casinos, for example, was that they didn't understand the importance of having a proper strategy in place to deal with problem gambling. So I would urge the gambling industry, if there are changes that they want, they need to frame them in a way that addresses the concern of many members of the public, who want to avoid that growth in problem gambling.

Q43 Philip Davies: Finally, I was heartened by your commitment to clamp down on unnecessary administration costs in your Department, and also in associated quangos. There's been a lot of disquiet about the Gambling Commission and their cost base and the fees that they charge some very small operators. Can you tell us what you're doing to make sure that the Gambling Commission are also doing what they can to control their costs and not keep ratcheting up fees that are becoming unaffordable?

Mr Hunt: I can tell you one thing that we will be doing, and that is to merge them with the National Lottery Commission, and expect them to find the administrative costs for both organisations from within the administrative costs that the Gambling Commission currently has.

  

Q44 Paul Farrelly: I just want to come back to the Olympics. Jeremy, I wanted to pick you up on your statement that you are determined it will come in within budget, which is very laudatory, but not terribly meaningful if you define budget as the whole lot, plus all the contingencies the last Government chucked in like the proverbial kitchen sink. What do you mean by "budget" when you say you are going to "bring it in within budget"?

Mr Hunt: We have an overall budget that was set by the last Government. There are different budgets in the whole process but there is an overall budget, for the construction of the Olympic Park and the venues, of £9.3 billion. That is publicly funded, and we are absolutely determined to make sure that public funding remains within that £9.3 billion for all those construction projects; that's the ODA's budget.

  There is another budget, which is the LOCOG budget for putting on the Games, which is £2 billion. That is not publicly funded. That comes from sponsorship and ticket sales and sponsorship revenue from the IOC. That again is something which we are determined to make sure is delivered within budget. If we don't deliver that within budget the Government have made a guarantee, and we would have to step in and fund it.

Q45 Paul Farrelly: New to the post but determined to set an example. Within the £9.3 billion is there a figure beyond which you do not want the costs to go?

Mr Hunt: My determination is to make sure that we deliver the Games within the £9.3 billion, and to make sure that we have enough headroom within that £9.3 billion to deal with unexpected changes that might happen nearer the time. They are nearly two years away. There will be things that happen between now and the opening ceremony in July 2012 that we are not able to predict now. We need to make sure that within the contingency amount there is enough headroom. That headroom of course, becomes more challenging when all the Government Departments that have responsibility for delivering in 2012 are themselves facing very constrained financial situations. Budgetary discipline is going to be very, very important.

Q46 Paul Farrelly: Can I just explore very quickly the headroom—the contingency—and where we stand on it? We read that venues, like the aquatic centre, have increased in cost yet again.

The National Audit Office report we have had is rather ambiguous with respect to contingency. It says that, as we all know, there is £1.972 billion in contingency, of which £790 million has already been allocated, meaning that £1.182 billion remains available to use in the event that risks to the programme materialise. Then it goes on to say that the majority of the remaining contingency has been earmarked to cover the costs of known, quantified risks. That leaves it ambiguous as to whether the remaining contingency refers to the £790 million that has been already allocated, or whether the remainder has been allocated, if you see what I mean.

Mr Hunt: Shall I let the Permanent Secretary go first?

Mr Stephens: The reference is to the £1.2 billion or so that remains to be allocated. The £790 million that has been allocated is in respect of risks that have materialised, primarily due to the economic downturn, so the bringing into the public sector of the village and the media centre. The remaining £1.2 billion has not been allocated to specific risks. None the less, every quarter we go through a process of identifying and seeking to quantify risks that may materialise against which that contingency needs to be kept. That explain that reference. However, those risks have not yet materialised. As they materialise, it demonstrates that, although it has been very successful so far, there are none the less a very challenging set of challenges ahead, which may yet require further funding.

Q47 Paul Farrelly: So the £1.182 billion—a big number—is free-floating and therefore available not to use?

Mr Stephens: No. On a construction project of this size—any construction project—you would expect to need to draw down contingency. These are risks that are foreseeable.

A particular risk for the Olympic programme is the interaction of delays on one project knocking on and having an impact against a fixed deadline, which requires action to keep it on time scale. Obviously, we want to avoid any unnecessary spending whatsoever, but this is a huge undertaking to a fixed deadline with a great deal still to do, although we are currently on track. Against that, what the report is demonstrating is that there is a set of risks that may well materialise that could well account for the bulk of the remaining contingency.

Q48 Paul Farrelly: One final question: why will you need 190 people to second-guess what the ODA and LOCOG are already doing, holding those purse strings?

Mr Stephens: Because the Olympics will require 19 Government Departments to be co-ordinated and this Department, one of the smallest Government Departments, is going to be responsible for that coordination. It will only be successful if we are able to co-ordinate what the Foreign Office does, dealing with 100 to 150 Heads of State; with the Department for Transport, dealing with the 112 miles of the Olympic Route Network; with the Department of Health, dealing with the ambulance services and medical facilities available.

Q49 Paul Farrelly: Rather than employ another 90 people, why don't they second people to you?

Mr Stephens: All the people who are employed will, effectively, be seconded until the Olympics is over. Then they will not be employed by us any more.

Q50 Alan Keen: With my football hat on, I'll be brief because I know that time is slipping away. The 2018 bid: based on our performance, the only chance we have of qualifying is to win the bid in 2018. Will the Government stick to the previous Government's commitment to underwrite the World Cup by £300 million? Are you sticking to that?

Mr Hunt: We are absolutely sticking to all the guarantees and commitments made by the previous Government. I think you could quantify that to be around £300 million, mainly associated with things like the additional security required if we were to host the 2018 World Cup.

We are four square behind this bid. We are doing absolutely everything we can to try and secure it for England. We are one of the great footballing nations of the world. Millions of people watch and play football every week. Our clubs have a bigger following outside England than any other country's clubs in the world. It would be fantastic for the economy—worth about £3 billion to our GDP.

I have personally met five of the 24 FIFA Executive Committee members who will be deciding on 2 December. I hope to meet some more between now and 2 December. I was here when the FIFA delegation came to inspect what facilities we have to offer, and I was delighted that they gave such a warm thumbs-up to our state of preparedness for hosting in 2018 but, in the end, it's not just that that they count, there are all sorts of other factors. Anything that I can do; that the Prime Minister can do; that Hugh Robertson, my Sports Minister, can do, we will be doing because we think this is a huge, huge opportunity.

Q51 Alan Keen: One other issue: the all-party football group did a major report after taking evidence from the whole of the football world—the PFA, the League Managers Association, as well as the football authorities and others.

We supported FIFA's proposal for six-plus-five. The FIFA version is six players on the pitch at any one time who were qualified to play for the home nation, rather than the UEFA one, which is less strict, in which case Fabregas would qualify as one of the six because he learnt his football mostly in this country with Arsenal. We supported FIFA. Within minutes of our report being released, it was FIFA-circulated around 180 nations so they were obviously pretty pleased with the parliamentary football group.

No one ever asked me whether I could help in any way with the bid. I know Hugh Robertson and I am admirer of his. Nobody in the previous Government asked me whether there was anything I could do. I think it is surprising: a little bit like the fact that I have lived under the flight paths of Heathrow for 45 years, and nobody ever asks me what I think about it until I stand up and tell people.

We were in FIFA's good books, and that proposal—the six-plus-five that FIFA wanted—was opposed by the British football authorities.

Mr Hunt: Why not come and see me and Hugh, and we can talk about any contribution that you can make, but the particular people that you need to see are the 2018 World Cup bid team. We are asking them what they want us to do to support them. I will certainly relay to them your interest in being helpful and supportive, and I am very grateful for it.

Q52 Paul Farrelly: Just for completeness, Jeremy, I am assuming that the statement with respect to guarantees and commitments given by the previous Government for the football bid also applies to the commitments that were given when we secured the Rugby World Cup for 2015, which will be another great money spinner for the economy?

Mr Hunt: Absolutely.

Q53 Mr Sanders: Our Committee did an inquiry into tourism. One of things that we found, which was most important for seaside resorts and inland attractions, was the need for good transport links. Are you at all having any discussions with the Department for Transport to ensure our tourist attractions can benefit from increased visitor numbers through improved transport links, both rail and road?

Mr Hunt: First of all, I thank you for asking a question about tourism because it is a very big priority for me that we make the most of our tourism industry. Indeed, the Prime Minister gave a speech on tourism in August, in which he gave me two challenges. He said we are the sixth most visited country in the world: what could we do to become the fifth most visited country in the world? He said Brits currently spend just over 30% of the money they spend on holidays, on holidays in the UK. What could we do to boost that amount to 50% of the amount they spend on holidays? We are going through a very, very big process to work out if it is possible for us contribute to those objectives, which I think could transform our tourism industry.

The point you make about transport is absolutely spot on. Look at a city like Brighton, which has been absolutely transformed as a cultural hub and a destination. When you talk to people in Brighton about what made that possible, it was when they got the train service running so that you could get to Brighton in about an hour, and get back from Brighton to London the same evening. That made a huge difference. Then you look at other towns along the south coast like Hastings, which is keen to regenerate in the same way. They will say that one of the biggest challenges they have is the length of the train journey to London. You are absolutely right, sorting out transport will be a very big part of our strategy. John Penrose will be spearheading our discussions.

Let me just give one example of an area where I hope we can make progress. I went to see a production by the RSC in Stratford. To get back from Stratford on a Saturday morning I had to drive to Birmingham to get the train because to go down from Stratford at the weekends would involve changing three times.

For the tourism industry, the fact that we have all our engineering works at the weekends is very unhelpful. Those engineering works have to happen but whether there is a way that we can time them to be more helpful for the tourism industry is one of the things we will be discussing.

Q54 Mr Sanders: There is also an issue of direct train services and people not having to change on cross-country services from one part of the country to the other, indeed even if it was from Scotland down to the south-west or to other parts. Is that something you take up with the Transport Minister?

Mr Hunt: We will absolutely take up those kinds of issues, in so far as they affect tourism. Obviously, the final decision on those things rests with the Secretary of State for Transport.

Q55 Mr Sanders: In a sense, being an advocate for tourism, if an area said, "We need a new road to improve the transport time for tourism", is that something your Department would say, "We think you ought to look at it from a tourism angle, not just the angle that the local area may be promoting"?

Mr Hunt: It is my intention that we should make the case for tourism within Government much more strongly than my Department has in the past, but also recognising the very severe financial situation that we are in, we have to be realistic about the funds available to the Secretary of State for Transport.

Q56 Mr Sanders: Two ideas to help you with what the Prime Minister has tasked you with: you will be familiar with the British Association of Leisure Parks, Piers and Attractions—BALPPA. They did a study that showed that if you were to lower the rate of VAT on tourist businesses—as has been done on the continent—you would not only increase the number of jobs in tourism, you would in a very short time increase the actual tax take. Is that something you could advocate?

Mr Hunt: Perhaps I should set expectations by saying that I think that any cut in VAT for the tourism industry is unlikely in the current climate.

Q57 Mr Sanders: In the longer term, is that something that you would try and propose, given that, according to the industry, the outcome is that you would actually increase your tax take so it would pay for itself?

Mr Hunt: Let me put it this way: we will look at all things that we think can help develop a very important industry that employs around 2 million people. However, we want to focus our energy on the things that we think we are likely to make progress on. We have to make difficult calls on that front. Our objective is to make real and tangible progress so that we are not a Government with Prime Ministers or Secretaries of State simply making one or two speeches, saying, "We love tourism", but a Government who demonstrate our commitment to the industry through what we do as much as through what we say.

Q58 Mr Sanders: Okay. Let me now throw one at you that does not cost any money at all.

Mr Hunt: I have been waiting for that.

Mr Sanders: You will familiar with the Lighter Later campaign and there is a private Member's Bill going through.

Could you use your Department to try and ensure that the Government make time available for that Bill to go through, so that we do not have this ridiculous situation of spending an hour in bed in the morning when it is light and having to go indoors in the summer months when it gets dark when we could be out enjoying sport? The knock-on effect, not just for tourism but for reducing carbon emissions, increasing involvement in sport, improving the nation's health—it's all there—and, of course, reducing the accident rate as well, is great.

Mr Hunt: With respect to the tourism industry, the tourism case for reforming daylight saving is very convincing, I think. It would extend the tourist season significantly. But it isn't just about the tourism industry. This is something that affects the whole of the United Kingdom. We will not proceed with any plans, unless we can get a consensus amongst different parts of the United Kingdom that this is a direction that everyone wants to go down. I understand what you're saying from the tourism point of view, but there are also other considerations.

Q59 Mr Sanders: But helping the Bill go through, so that it can be tested to see whether there is a consensus, would actually help you answer my question.

Mr Hunt: Yes, but I think we can also test whether there is a consensus by direct contacts with people representing different parts of the United Kingdom. That is a process that I am sure John Penrose will be going through.

Q60 Mr Sanders: One final thing on tourism is to do with licensing. The temporary event notices, which can only be objected to by the police on grounds that there may be some form of public disorder, prevent elected representatives from speaking up on behalf of their communities to stop a temporary event notice in their area. Would you be willing to review this and to try and have some sort of mechanism whereby people—as they can with any other application—at least have their say?

Mr Hunt: John Penrose is currently conducting a review of the licensing arrangements for all events that we are responsible for in DCMS, so I will happily feed into John your views on that. As you know, we are a Government who are committed to localism and devolving power and responsibility as much as possible. I cannot say what the outcome of his views will be, but I know he will give it very serious consideration.

Q61 Chair: I turn now to media policy. In July last year the Prime Minister said, "With a Conservative Government, Ofcom as we know it will cease to exist." Can you tell us what your plans are for scaling back Ofcom and in what areas?

Mr Hunt: The principal way in which we want to change the way that Ofcom operates is around the setting of policy when it comes to the media. Our view is that quangos are there for very specific reasons. There are times when it is appropriate for bodies to operate at arm's length from politicians. There are technical functions that politicians are not able to pursue. But when it comes to setting policy, that is something that should be done by elected Ministers. I believe that change has already happened since I have become Secretary of State. There was a feeling over the last few years—and I don't want to comment on whether it was accurate or not—that media policy was being set more by Ofcom than by the Secretary of State for Culture, Media and Sport. I do not believe that is the case now. That is one very important area.

The other area is that Ofcom is responsible for the regulation of the media sector, particularly the broadcasting sector. There are a lot of small regulations that it is obliged to implement through the Communications Act 2003. We are looking at whether it is appropriate to have that level of micro-regulation. There are some regulations that the public absolutely want, such as the regulations on taste and decency and on ad minutage. There are other regulations, which we think may not be necessary and we are currently examining whether any of those burdens could be lifted from Ofcom statutory responsibilities, in order for it to regulate with a lighter touch, in a more nimble way.

Q62 Chair: None of that suggests that Ofcom is going to cease to exist?

Mr Hunt: The Prime Minister's comment was that Ofcom, as we know it, will cease to exist. I hope that the strong lead that my Department is taking in media policy will be one significant reason why people will say that most of the important things when it comes to media policy are decided by ourselves, and sometimes by the Department for Business, but not by an arm's length organisation, which is not accountable through Parliament.

Q63 Chair: Ofcom employs a lot of people, some of whom get paid a large amount of money. Would you expect, with their reduced role, that that is equally going to be reduced?

Mr Hunt: They have already taken measures to reduce some of the costs of their management. We would expect Ofcom to go through the same process, which I talked about earlier, that all our arm's length bodies are going through to see whether they can reduce their spending and the burden that they impose on the organisations that they regulate.

The difference between Ofcom and other arm's length organisations is that we do not fund their costs through the taxpayer. They are funded through the companies that they regulate. It is a different process to go through but they too need to be looking at how they can do things more leanly and more efficiently.

Q64 Chair: If Ministers are going to take back this policy-making role from Ofcom, in areas which are quite technical sometimes, and often quite sensitive, are you going to be able to do it with 50% fewer staff in DCMS?

Mr Hunt: I believe we will. We are not saying we are going to take back Ofcom's technical responsibilities—there are areas where Ofcom has technical expertise that it needs—but when it comes to policy as to the direction we want to go—for example our determination to have a stronger local voice in TV is a policy we are pursuing at the moment—that has come from Ministers and not from Ofcom.

Q65 Paul Farrelly: Jeremy, as part of this strong lead on media policy, have you or the Department expressed any views or made any representations over the bid by News Corporation for BSkyB?

Mr Hunt: We haven't but, I think as you will be aware, that is a decision that will be made by the Business Secretary, Vince Cable. He will make that decision in due course. That is not something I want to prejudge.

Q66 Paul Farrelly: As part of the strong lead on media policy, why haven't you expressed any views?

Mr Hunt: Because, as I mentioned earlier, certain elements of media policy fall on the Department for Business rather than the Department of Culture, Media and Sport, particularly when it relates to competition policy. In this particular case the decision as to whether to invoke a public interest clause over concerns on media plurality is one that falls to the Business Secretary and not with the Culture Secretary.

Q67 Paul Farrelly: Does the media Department not have a view?

Mr Hunt: Our view is that this is the decision of the Business Secretary. If the Business Secretary chooses to consult me, then he will, but it is in the end his decision.

Q68 Mr Sanders: On broadband, I understand that a pilot study in Cornwall is exploring the use of analogue spectrum, in order to provide broadband in rural areas, as one of the regions of the country that has already had its digital switchover. What can you do to facilitate the use of analogue spectrum to cover hard-to-reach areas?

Mr Hunt: We are doing everything we can because our broadband policy is one of the most important things that we will be doing, as a Department to contribute to the Government's economic growth strategy. There are 160,000 homes—predominantly in rural and remote areas—that do not have access to broadband at all. There are over 9 million adults who have never used the internet, as compared with 30 million who use it every day. So it is a very important tool of social policy. Before Christmas, we will be announcing a policy that we believe will solve the big question of, first of all, how we deal with the homes that are not able to get access to broadband, or access at reasonable speeds, but will also lay the foundations for the next generation of broadband—superfast broadband—to meet our stated objective that by 2015 we will have the best superfast broadband network in Europe.

Q69 Mr Sanders: That is a very ambitious target. Do you see that being delivered through the use of analogue spectrum or by some other means?

Mr Hunt: I believe that it will be delivered by a combination of routes. Our belief is that we should not back a particular technology, or a particular platform, but try to create a climate that stimulates the maximum possible private sector investment. The reason for that is this: if you take the most commonly talked-about technology in this area, which is fibre optic technology, the broadband stakeholder who did a report for the previous Government estimated the cost of bringing fibre to every home in the country would be about £29 billion, which is unfortunately not money that I have at my disposal. Realistically, if we are going to deliver superfast broadband, we have to find a flexible regulatory solution that stimulates investment by the private sector. Those are the plans that we hope to unveil.

Q70 Damian Collins: Following on from that point, are there other areas where you think regulation needs to be relaxed? For example, some companies have talked about aerial deployment of fibre optic cables but there are a lot of regulatory issues restricting that. Is that something that your Department is looking at?

Mr Hunt: Absolutely. The problem really divides into two parts. There is, broadly speaking, the two thirds of the country to which we think the market would provide superfast broadband if the regulatory regime was set up in a smart way. The kind of things we are talking about there are, for example, opening up access to BT's pipes and ducts—something that BT has said that they are happy to do—but also providing regulated access to things like telegraph poles, electricity pylons, water mains, sewers and so on. That is one part of the solution.

The other issue that has to be resolved is the third of the country to which we think the market is unlikely to provide superfast broadband. There we will need to find a solution that involves more intervention.

Q71 Damian Collins: You spoke, in your speech in July on broadband, about developing rural market testing projects, with a view to starting procuring those in the autumn. I just wondered what progress the Department had made with that?

Mr Hunt: We are making good progress. We are going to pick three areas for which we think it unlikely that the market would provide superfast broadband, and then we will be inviting the private sector to bid to solve that problem. We want to use that as a learning process, over the course of the next year to 18 months, to inform the rest of our policy as to how we make sure that we deliver to the whole of that final third of the country the superfast broadband network that it needs. The more remote and rural areas, ironically, are the areas that benefit the most from access to broadband. If you think about the depopulation of villages, providing rural employment, the problems of isolation that you sometimes get in rural and remote communities, then broadband provides an opportunity, as well as potentially huge cost savings for the state, for example if you look at the potential of tele-medicine—treating people remotely. There are hugely exciting possibilities if we can get this programme right.

Q72 Damian Collins: There was a report in the press this morning claiming that a report to your Department has been published today by the Consumer Expert Group, saying that 2015 is too early as a target date for digital radio switchover, and even questioning the consumer demand for it. I wonder what your views are on that?

Mr Hunt: On 8 July Ed Vaizey published a digital radio action plan. We made it very clear that we think when it comes to radio, the future is digital. We aspire to the 2015 date but there need to be some changes in consumer patterns of radio consumption before we would agree to a switch-off of the analogue spectrum. Those include a greater-than-50% market share for digital radio listening. At the moment it is about 25% and DAB is only 16%. It includes, for national radio stations, coverage that is as good as FM and, for local stations, 90% coverage and coverage on all major roads. So until we are confident that those conditions are met, we won't be signing the bit of paper that says there will be switchover in 2015.

Q73 Damian Collins: But do you still see 2015 as a date the industry should be aiming for?

Mr Hunt: I hope that we can deliver it by then but they need to work much harder to persuade consumers of the benefits of digital radio. I would much rather this was a process similar to the transition from records to CDs and from CDs to iPods, which was driven by changes in consumer behaviour, rather than something that we change as a sort of top-down mechanism.

Q74 Philip Davies: Can I move on to the BBC? Was Sir Michael Lyons pushed or did he jump?

Mr Hunt: Sir Michael Lyons phoned me this morning and he told me that he had decided not to reapply for a second term, and I thanked him for his contribution as Chairman of the BBC Trust and I said that, on a personal level, I got on well with him. But it was his decision not to reapply for a second term and I accepted that decision.

  

Q75 Philip Davies: So he jumped. The reason I ask is that it was reported that you had a private meeting with him in June and, after that private meeting, he was asked if he was continuing in his role. He said that it had not been discussed at that meeting but he was up for it. So why might he have been up for it then but now, all of a sudden, he's fallen on his sword? What has happened in the meantime?

Mr Hunt: You must ask him those questions. By describing it as a "private meeting" you are suggesting, if I may say, there was something surreptitious about the meeting. It was just one of the regular meetings that a Secretary of State has with the people who run all our major broadcasting organisations. I discussed with him the things that I had articulated in opposition, which I thought needed to change in the way the BBC Trust operated within the current BBC Charter, and he said that he would go away and think about that. I believe—you will have to ask him this—he reflected over the summer and he has come back from the summer deciding he does not wish to reapply for a second term.

  

Q76 Philip Davies: Now that he is going, is this a good opportunity to look at whether or not the BBC Trust is the appropriate vehicle for what it does? Because whoever the individual in his position, trying to be at the same time a cheerleader for and a regulator of the BBC seems to me to be totally unsatisfactory. So before a replacement is found will there be a new governance of the BBC so that a new person can start afresh?

Mr Hunt: We have said that we will respect the governance arrangements of the BBC until the current Charter runs its course. The current Charter continues until 2016. The sovereign body of the BBC is the BBC Trust and the governance arrangements are enshrined in that Charter. So we won't be changing the governance structure of the BBC in this Parliament, but—and I've said this on a number of occasions—there are ways that we think we could improve BBC governance within the current Charter. One of them is to give the BBC executive board a non-executive chairman, so that you have a structure that is closer to that of a FTSE company where you divide the role of chair and chief executive. That's something we think would help the BBC operate in a more effective way. We've said that and we'll continue to have discussions with the BBC Trust—under whoever the next chair is—to see whether that's an idea that they're willing to progress.

  

Q77 Philip Davies: Can I just ask you to comment on the strike that has been announced by BBC staff, which I understand will coincide with the Prime Minister's speech to the Conservative party conference. Do you see that as a coincidence, or when Mark Thompson said that the BBC used to be biased against the Conservative party in Mrs Thatcher's day, but no longer is, was he talking nonsense?

Mr Hunt: I read your comments about that in the Daily Mail this morning, Mr Davies. I think people can make whatever inferences they want from the particular dates that have been chosen for strike action. All I would say is, from the point of view of licence fee payers, I hope that both sides in this dispute—and the BBC operates at arm's length, and rightly so—will reflect on the impact on licence fee payers, not so much on the Prime Minister's speech, although obviously I hope as many people see that as possible, but from the second day they have chosen, which is the day the spending review is announced. Because if you ask people what is the biggest concern right now, what is the single biggest defining issue in British politics, it is how we tackle the deficit. That is a very important issue to pretty much all voters and I think people will want to know about that. In the consultation process that is due to happen before they finally decide to go ahead with that strike—which starts on 20 September for 10 days—I hope that both sides will reflect on the impact on licence fee payers of any decision to interrupt coverage.

Q78 Philip Davies: You have said that you will give the National Audit Office full access to the BBC's accounts. What does "full access" mean?

Mr Hunt: What it means is that the National Audit Office should have the right to examine areas of its own choosing, at times of its own choosing, of the way the BBC spends licence fee payers' money. This is something that the BBC and the BBC Trust have not yet agreed to. I hope they will because there has been a huge change in Parliament and there is a huge change happening in Whitehall, in terms of the accountability for the way that we spend the public's money. The BBC is not part of the Government, but it does spend the public's money, and the increased transparency that giving full access to the NAO would demonstrate is, I think, something that would reassure licence fee payers about the way the BBC chooses to spend their money.

  

Q79 Philip Davies: We asked the BBC about this last week when they gave evidence, and there didn't seem to me to be any great evidence that the BBC are going to change their mind on this. It appears to be like the levy deliberation. So if there is no agreement to be found, will you overrule the BBC and impose it, or will you only do this if you get the BBC to agree to it?

Mr Hunt: Let me say this: it is part of our coalition agreement; it is something, incidentally, that the Liberal Democrats particularly championed and wanted to be included in the coalition agreement. The principal concern that I have been able to detect about giving the NAO full access to the BBC's accounts is that it could potentially interfere with editorial independence, and I am very confident that we can find a way of allowing the NAO full access that doesn't in any way compromise editorial independence for the BBC, which is a red line for us as well as them. I think it is a very important principle that the BBC operates on a fully independent editorial basis. So I am confident that a solution can be found.

  

Q80 Philip Davies: Finally, can I ask you about the licence fee? When the licence fee was last increased you opposed it at the time, is it your view that the licence fee is too high?

Mr Hunt: The thing that I opposed was the BBC deciding to take an inflationary rise in the licence fee, which they were entitled to do under the licence fee settlement that they had with the previous Government, in a year when there was no inflation and the country was in a very difficult economic situation. I hoped that they would voluntarily decide not to take that licence fee rise. They chose to take it. I'm pleased to say that Mark Thompson has now talked publicly about waiving a potential licence fee rise for the next financial year. I think that's a positive sign that the BBC is sensitive to the feelings of licence fee payers.

  

Q81 Philip Davies: For the future, what is your feeling about the licence fee? The Adam Smith Institute recommended a voluntary subscription model of funding for the BBC. Presumably, if the BBC offers such marvellous value for money to everybody, if it was voluntary everybody would be queuing up to pay it anyway. So are you sympathetic to a bottom-up approach to funding the BBC or are you still in favour of the current top-down approach?

Mr Hunt: Let me say this to you, Mr Davies: you and I both come from a party that champions free markets and, given a blank sheet of paper, I think it's unlikely that either of us would have set up a system which involves giving a cheque for £3.447 billion to an organisation to spend as it wishes. But I don't support changing it. I do support the current licence fee system because it has worked, and we have, I believe in this country, some of the best quality broadcasting anywhere in the world. The BBC is a benchmark for that quality. It is probably the most respected news-gathering organisation in the world. It has an incredibly important role in our democracy. I think the independence of the BBC—frustrating though it is for Governments of all colours—is something that licence fee payers value, and I think it delivers for British broadcasting and the British creative economy. So we do support that principle and I'm sometimes reminded, when I think of the licence fee, of the French Minister who was reported to say, "It works in practice. How can we get it to work in theory?"

  

Q82 Chair: Can I just come back to the chairmanship? First of all, I take it that you did not, in your conversation this morning, attempt to dissuade Sir Michael from his decision?

Mr Hunt: I listened carefully to what he said and I thanked him for the work that he had done.

  Chair: You said that you would have to see if the next chairman was willing to adopt the kind of changes which you would like to see to the Trust. Well surely, since you have the say in who is the next chairman, can you not just make sure that the next chairman is going to adopt your changes?

Mr Hunt: There is a proper process that has to be gone through, and I have to make a decision based on recommendations made by the panel, who are responsible for the whole process and, obviously, a willingness to understand some of the concerns that I have articulated will be one thing on my mind. But I want to say this as well: it won't be the only thing on my mind because there are a number of other factors, which are important for a role as important as that, and I will take a balanced view on the basis of all those factors.

  

Q83 Chair: Can I raise one specific aspect of the procedure, which is of great importance to this Committee? In the last Parliament this Committee argued very strongly that the Chairman of the BBC Trust should be included on the list of public appointments that are subject to pre-appointment scrutiny. That was supported by the Liaison Committee of all the Select Committee Chairmen, but rejected by the Government. Will you allow this Committee to conduct a pre-appointment scrutiny of the BBC chairman?

Mr Hunt: Thank you for asking that question. Let me say that I have always supported the idea of more pre-appointment scrutiny for public figures. I think there is a particular reason, in the media industry, why a certain category of person should be subject to parliamentary scrutiny, and that is people who are responsible for policing impartiality in broadcasting because the effective operation of impartiality is obviously a very important part of the democratic process. So I think it's absolutely right that Parliament should have a role in scrutinising roles which involve policing impartiality. I haven't had any communication on this matter, but I would certainly look sympathetically at any request that your Committee were to make were it to come across my desk.

  Chair: We will write to you formally, but you can take it that it is a formal request and perhaps you could talk to other members of the Government.

  

Q84 Paul Farrelly: Just on that very track. Jeremy, just before recess, at questions in the House, I asked you a question about political impartiality in TV news and you, very straightforwardly, said that the Government were not going to change the current rules, which left me elated. Then you deflated me by saying that you take no lessons in political impartiality from people like me in a Government who had appointed Ed Richards, a former Labour special adviser, to Ofcom, and Sir Michael Lyons, a former Labour councillor, to chair the BBC Trust. So that's a very commendable apolitical yardstick that you have set yourself. So can we take it that you will want to make sure that the next chairman of the BBC is not a current or former member of the Conservative party?

Mr Hunt: Let me, first of all—in terms of the parliamentary exchange to which you refer—complete the picture by saying that I did, later in those questions, make it absolutely clear that I had absolutely no doubt about the ability of either of those two individuals to exercise their responsibilities with respect to impartiality. I don't want to prejudge any decision I make as to who should be the next chair of the BBC Trust, but let me say this: the ability to give confidence in exercising judgement with respect to the impartiality of the BBC will be a very important consideration in the process because impartiality is a very important part of what the BBC is about.

Q85 Paul Farrelly: So the next chairperson might be a member of the Conservative party?

Mr Hunt: I am just going to stick with the form of words that I have given you, if I may, Mr Farrelly: I don't want to prejudge who might or might not apply for that role, but the ability to exercise those functions with respect to impartiality is incredibly important and I don't underestimate that for one moment.

    

Q86 Alan Keen: Just briefly, I am delighted to hear your answer on the licence fee and on the chair of the BBC. I have always argued for having a chairman, along with the Director General, and a separate person chairing the Trust. Would you agree with me that there have been some daft arguments put forward recently since the economic crisis, saying that because the private sector were finding it difficult to keep their standards up, that's the time when the BBC should also have its amount of money reduced? That is ludicrous. Surely that is the time when the public sector should go in and support the industry when the private sector can't provide it.

Mr Hunt: I wouldn't phrase it in exactly that way. I completely support the principle of a licence fee, but I also believe that what has made broadcasting successful in this country is that we have had competition and choice from people other than the BBC. So when it comes to dramas, for example, "Sherlock" on the BBC, "Lewis" on ITV, "The IT Crowd" on Channel 4, "Rev" on the BBC—as well as Sky News and BBC News—there is competition in virtually every important genre, and that is important. So it is—I've had this discussion with Mark Thompson—important to try to understand the level of the licence fee which is compatible with a flourishing independent sector because plurality of provision is extremely important.

That's why I think there has been some concern, as advertising revenues have shrunk, that the independent sector might find it difficult to compete but, under the new leadership of ITV, for example, they are very seriously looking at other potential revenue streams, aside from advertising. I think that's a very important thing to encourage them to do because I'm responsible for the whole of the media sector, and not just the BBC part of it.

  

Q87 Alan Keen: I agree with an awful lot of what you say, but is that not an argument for saying, now that Sky is grossing over £5 billion, that the BBC needs more money to compete, rather than less money, at which you seem to be hinting?

Mr Hunt: The investment made by Sky is, essentially, investment in a technology platform rather than an investment in content. We need Sky to make its investment in technology and we need the BBC to invest something in technology but also in content. We also need people to be able to make a business, which involves investing in content that competes with the BBC. So my real view on this is that we need all those players: Sky, the BBC, ITV, Channel 4, many other commercial players—5 as well—to play a role, and we need to find an environment where they're all able to thrive. The recession and changes in technology have caused fundamental changes in the market that have made that much more difficult, so we do need to think carefully about how we can pilot a way through this to ensure that viewers continue to get quality, innovation and choice.

  

Q88 Alan Keen: Would you not agree with me, that the public should make their mind up on what politicians deliver, rather than what they say, and if there is going to be anything blotted out, let's hope it is right across the political spectrum and blots out all the conferences—that would do a wonderful service to what people listen to and watch throughout the nation?

Mr Hunt: I very much hope that representatives of the NUJ and Unite are listening to all these comments that we're discussing this morning. But I think the real point here is not the impact on political parties, but that on licence fee payers. They're the ones who fund the BBC. I hope that all parties in that dispute will reflect on the fact that this is a very challenging time in politics for all of us politicians and Ministers, but most of all, it is challenging for members of the public who are very concerned about public services, and the BBC has a very important role to play in informing people about those decisions so that they can make their mind up as to whether they support them or not.

Q89 Alan Keen: Would you be sympathetic to members of the public who said they were going to withhold their licence fee for the days when the content was blacked out?

Mr Hunt: I wouldn't be sympathetic to that, but I would understand their frustration.

  

  

Q90 Damian Collins: Just a couple of quick questions. You mentioned advertising revenue and the performance of the independent sector. Would you be sympathetic to the views of some of the big companies in that sector that there should be a review of advertising minutage and the regulation of the advertising market, which is designed for a media market that existed post-ITV consolidation and which is not necessarily relevant to the market we operate today?

Mr Hunt: I note the Lords Communications Committee is conducting a review of regulations on TV advertising. I welcome that and I shall read what they recommend closely. I've made no secret of the fact that I think some of the regulations affecting ITV are outdated, in particular CRR (contracts rights renewal), and I would like to find a way of relaxing some of those regulations although, legislatively, it is quite challenging to do that. But there are also some regulations that the public want, and I believe they don't want the UK to go the way of the US where 19 minutes of every hour is advertising. I think that wouldn't be welcomed. I don't think it's welcomed by the advertising industry either. I don't believe the public want any relaxation of the rules on taste and decency, and there is still concern about what children are able to see at particular times. That is a very live debate as there is so much more catch-up viewing than there has been in the past. So an intelligent look at the appropriate role for regulation in a digital age is something that we absolutely want to do.

Q91 Damian Collins: Finally, just on Project Canvas, which I suppose touches both those elements, and going back to the BBC: there have been some reports in the press about complaints from independent TV companies who don't have access to the Canvas platform, that, effectively, this becomes a closed club that they're not part of and could be used to reduce competition in the market, particularly from smaller companies. Do you have any concerns about Canvas, ultimately, something that has largely been developed with public money and, therefore, should it be more broadly available?

Mr Hunt: My understanding of Canvas is that it will be an open platform and will provide very good opportunities for smaller channels to take part and to use IPTV (Internet Protocol television) to get into people's living rooms, in a way that's not possible with DTT (Digital Terrestrial Television) as the principal technology. I think it's a very exciting opportunity, but I can't speak for competition issues. That's a matter obviously for the Competition Commission but, in terms of what it presents as a consumer proposition, I think it's exciting.

Q92 Chair: Secretary of State, we are nearly at the end. Just before we finish, and I do not want to spend a great deal of time because we will be here all afternoon, a whole area that we have not mentioned is the Digital Economy Act and copyright—obviously it is too soon to judge the success of bits of the Digital Economy Act that did make it through to the statute book—but do you think there is a case for a more fundamental look at copyright, which obviously is of vital importance to many industries for which you are responsible?

Mr Hunt: I think there is. In fact, the Department for Business is doing a review of copyright—it started in August and they will come up with some recommendations in April —that is particularly looking at the impact of copyright law on innovation. But there may be bigger questions that we need to address with respect to copyright in the digital age. The decision that we have taken, as a Government, is to implement the Digital Economy Act, as it sits at the moment on the statute book, but to reserve the right, in the second half of this Parliament, when there will have been changes in technology, when we can see the impact of implementing the measure as it stands, to see if there are improvements that can be made. There may be changes, for example, in watermarking technology, that make it possible to develop a more secure copyright regime for digital images and digital clips; things like that may change the nature of the debate in a few years' time. But we also want to see the impact of implementing the Digital Economy Act, which, as you know, has been very controversial. So we will reserve the right to look at that but we want to allow the current Act to bed down, to see what the impact is before making any decision.

  Chair: Thank you. Secretary of State, Permanent Secretary, thank you very much for giving up so much of your time.

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1   Explanatory note: The GREaT Foundation fund raises for gambling research, education and treatment of problem gambling. Back

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Prepared 11 November 2010