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Session 2010-12
Publications on the internet

CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 915

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Culture, Media and Sport Committee

Responsibilities of DCMS

Wednesday 30 March 2011

THE Rt Hon Jeremy Hunt MP and Jonathan Stephens

Evidence heard in Public Questions 1 - 103

USE OF THE TRANSCRIPT

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Culture, Media and Sport Committee

on Wednesday 30 March 2011

Members present:

Mr John Whittingdale (Chair)

Ms Louise Bagshawe

Dr Thérèse Coffey

Damian Collins

Philip Davies

Paul Farrelly

Mr Adrian Sanders

Jim Sheridan

Mr Tom Watson

________________

Examination of Witnesses

Witnesses: The Rt Hon Jeremy Hunt MP, Secretary of State for Culture, Olympics, Media and Sport, and Jonathan Stephens, Permanent Secretary, Department for Culture, Media and Sport, gave evidence.

Q1 Chair : Good morning. This is a special session of the Select Committee to discuss the new responsibilities that have transferred to the Department for Culture, Media and Sport, but having the advantage of the Secretary of State here we may range beyond those. I would like to welcome Jeremy Hunt, the Secretary of State, on his second appearance before the Committee, and the Permanent Secretary, Jonathan Stephens, who is quite a regular now.

Perhaps I might start with the change in responsibilities. One assumes that the Department was not expecting to take on these quite wide-ranging extra duties. It has proved harder than we had hoped to discover the implications in terms of the cost to the Department and in terms of the number of staff. I believe there has been a Freedom of Information request that has produced some information, but perhaps you would like just to tell us what the implications of the changes are in terms of your overall expenditure and your staffing levels.

Jeremy Hunt: Absolutely. First of all, thank you very much for inviting me and thank you, too, for your excellent report published on Monday, which we may go on to discuss if you so choose.

Chair: We may indeed.

Jeremy Hunt: The first point to make about the machinery of government changes is that this was not planned and it happened unexpectedly and quickly. The costs involved are obviously something that we have been acutely aware of, given the overall spending climate and our desire to minimise any unnecessary costs to the taxpayer. We could make the argument that this is a multi-billion pound industry and these costs are trivial, but I don’t think that is the right argument to make because in the environment that we are in every penny counts.

I think the actual physical costs of the transfer of 73 civil servants, which is what it finally amounted to, is about £10,000. There is an additional cost of less than £250,000, which is a real cost but it is caused because the IT contracts at the Department for Business, Innovation and Skills and our Department are different. I am not sure if this is the detail that the Committee wants, but as you asked for it, Mr Chairman, our IT contract is done on a per PC basis so there is an extra charge when you take on 73 people, whereas the Department for Business is on an overall service level basis. Theoretically, that money ought to come back to the public purse when the Department for Business renegotiates its next IT contract. We have tried very hard to keep the cost to an absolute minimum.

Q2 Chair: The 73 staff, have they physically moved?

Jeremy Hunt: They are, I believe, moving from the beginning of next month.

Jonathan Stephens: That is right. The move will happen over this coming weekend and they will be in Cockspur Street from Monday, most of them.

Q3 Chair: How does that affect your consideration of possibly moving out of Cockspur Street?

Jonathan Stephens: We have decided not to move out of Cockspur Street, certainly this side of the Olympics. That was strictly based on the financials of the decision. The fundamental here is that we have a lease that expires in 2017 and in today’s market, even if you can find cheaper premises, and there certainly are cheaper premises to occupy, disposing of that lease and the risks around it are very significant. Once we went into the detail of that, it was clear that there were not to be savings over the course of this spending review period. In fact, the move of BIS staff means that we can occupy more of the space within Cockspur Street.

Q4 Ms Bagshawe: Secretary of State, what do you think the advantages are for the transfer of media merger policy from BIS to DCMS?

Jeremy Hunt: The first point to make is that BIS has overall responsibility for competition policy and has developed considerable expertise in competition policy, so it will be extremely important to maintain a close working relationship with-

Q5 Ms Bagshawe: We are going to come on to the division of responsibility on competition policy in general between the two Departments, but specifically on media mergers?

Jeremy Hunt: On media mergers, I think the two advantages are, first of all, that all communications policy now sits in one Department, and I think that will allow for more coherent policymaking but it also means that when you have contentious issues such as the BSkyB merger that has been in the headlines recently, the Secretary of State who makes the decision on that will be the Secretary of State who hopefully has good policy experience in that specific area.

Q6 Ms Bagshawe: One area that has not been transferred to you that might have been a much more obvious fit for transfer is the Hargreaves review on copyright, which would seem a natural area of interest for DCMS. Why was that not transferred from BIS to DCMS?

Jeremy Hunt: The Hargreaves review was commissioned by BIS and so it will see that process through, but when it comes to IP policy as it affects the digital and creative industries, DCMS will be jointly in the driving seat. This is a fundamentally important issue and I will be meeting with Ian Hargreaves to make sure that I express what I think are some very important interests that the industries I am responsible for have. I am very confident that policy in this area will not be made without an important seat for DCMS at the table.

Q7 Ms Bagshawe: That is reassuring because my next set of questions are on the Hargreaves report. Are you aware, as the Secretary of State for Culture, of the incredible concern the UK’s creative industries feel over the Hargreaves report and the process by which the Hargreaves report has been conducted? For example, they have made representations to me that they don’t feel they have been granted sufficient meeting time with Professor Hargreaves, that there are no representatives of the UK’s creative industry advising the panel, that it is composed solely of open rights people, and there is a general feeling out there among the UK’s creative industries that the report has already been written and only now at this last stage of the game is Professor Hargreaves even taking meetings with the creative industries. What is the response of DCMS to these extremely grave concerns?

Jeremy Hunt: I am aware of those concerns. I would point out that the Hargreaves report has not been concluded or published and that I and DCMS will also be having significant input into the Hargreaves report. I would also point out that when it comes to policy on, for example, digital piracy, which is a very big concern to the creative industries, that is an area in which DCMS takes the policy lead. We are absolutely determined to make sure that our extremely successful content industries are properly represented in any policy considerations.

Q8 Ms Bagshawe: That is extremely reassuring because, as you will be well aware, the UK’s creators are fearing the publication of Hargreaves as a sort of doomsday moment for the UK’s entire creative industries. Are you aware that I was told by Barbara Hayes, representing writers, that Hargreaves had refused to meet with the writing industry at all?

Jeremy Hunt: No, I was not aware of that and I will certainly bring that up with Professor Hargreaves when I meet him.

Q9 Ms Bagshawe: Are you aware that representatives of the BPI, the British recorded music industry, have told me that they have been seeking to meet Professor Hargreaves and have only just been granted a meeting, which they have described to me as a sort of fig leaf of respectability for the process. It is their opinion that the report was written without hearing their concerns.

Jeremy Hunt: I was not aware of that but I am pleased that a meeting is now taking place. What I would just reiterate is that the policy responsibility for the issues of most concern to the BPI rests with me and my Department. We are very clear about this. We want an environment on the internet that fosters innovation and new business models. We don’t believe it is the role of the Government to protect any current business models, but we also believe that people in a digital economy need to be able to buy and sell products that they are responsible for or have created without having to worry unduly about piracy. We understand how vital that is to the creative industries.

Q10 Ms Bagshawe: Given that you are very clear that you are taking the lead on issues of copyright, and it is an area where clearly there is some overlap between yourself and BIS, can the Committee take it that before publication of the Hargreaves report, before that is made public and open, it will be submitted to DCMS for comment so that you can have some proper input before it is made public and, let’s say, an open rights agenda is perceived to be the Government’s agenda?

Jeremy Hunt: Absolutely.

Q11 Chair: You referred to the fact that the Department now has lead responsibility on digital piracy and tackling that. The principal measures proposed for tackling digital piracy were contained in the Digital Economy Act, which seems to be completely stalled now in the courts with no immediate prospect of it being implemented. How do you view that and what prospect do you see of getting something done in the immediate future?

Jeremy Hunt: I think that it is obviously disappointing that we are in the situation that we are in and, without wishing to be overly partisan, I think that the Digital Economy Act would have benefited from much greater scrutiny in Parliament. In opposition, my party supported the Digital Economy Act, essentially because we supported the principles behind it, which is exactly what I was referring to just now with Ms Bagshawe. We absolutely do believe it is essential to have an environment where the creators of digital content are able to be properly rewarded for their efforts, not least because this is a massive area of competitive strength for the UK: the second largest music exporter, largest independent TV production sector in Europe and North America, and so on.

But the questions around the Digital Economy Act are really in two categories. First of all, there is this legal case that could threaten the implementation of it, which we need to take into account. Secondly, there is a question mark over whether some of the elements of the Digital Economy Act, particularly the site blocking elements, are technically feasible. I have no problem with the principle of blocking access to websites that have been set up to peddle illegal content or make it easy for people to download illegally, just in the same way that we would have no problem closing down a shop in the high street that was set up to peddle fenced goods. But there is a question about the technical feasibility of the measures proposed, which is why I have asked Ofcom to do a report to help me understand that better.

Q12 Chair: I think we did raise that at the time it was going through the House of Commons. You say the Conservative Party is supportive of it. Of course, this is a Coalition Government and, as I recall, the Liberal Democrats are less supportive of the site blocking provisions particularly. Are you saying the Government is still committed to site blocking if the technical objections can be overcome?

Jeremy Hunt: First of all, I work very closely with my Coalition partners and we have an agreed position. The agreed position is that we support the principles behind the Digital Economy Act but we want to make sure that it is technically feasible and technically implementable, as well as legally implementable, so there are some hurdles to get through. But you will be aware, Mr Chairman, that the Coalition Government is committed to having a Communications Act in the second half of this Parliament, so there will be a legislative opportunity, were we to find things that were not technically feasible or practically possible in the Digital Economy Act. There would be another vehicle through which we could put that right.

Q13 Chair: You do anticipate, therefore, that it will require another Bill to clear up the mess in the Digital Economy Act?

Jeremy Hunt: Let me put it this way. I don’t think that we will have settled all the issues around digital piracy by the time that happens. I think it is highly likely with changes in technology that we will develop new ways of looking at these issues. Given our national interest in having a successful creative economy, we need to make sure we are at the forefront of that.

Q14 Ms Bagshawe: Just as a quick supplemental, Secretary of State. Are you aware-and I can’t speak for the other creative industries in terms of site blocking but this issue was raised with me by the BPI last week-that the BPI is not requesting a blanket blocking on smallscale sites and the sum total of sites it wishes to see blocked numbers only 26? That would seem to be not that technically impossible.

Jeremy Hunt: That is what I am asking Ofcom to find out because, as you will be aware, it is not simply about blocking access to a URL. What can happen is if you block access to one URL someone can relocate their servers in Ukraine or Belarus or Tajikistan and it can be practically very difficult to prevent that happening. That is what I am trying to find out from Ofcom.

Q15 Ms Bagshawe: But the chief point being that the list of sites that the industry is requesting to be blocked is a very small, select and short list. It is not a large blanket list of, "Please go out there and try to block every site that is downloading illegal files".

Jeremy Hunt: Yes, but the other point I would make is that there may be other ways to do this. One of them, for example, is making it harder to find those sites on search engines like Google. One of the encouraging things that has happened as a result of roundtables that have been set up by Ed Vaizey has been that Google is co-operating in a way that has not happened previously. It is now much harder to find many of those sites than it has been before, but I am sure there is much more work that can be done.

Q16 Ms Bagshawe: That is a tremendous achievement for the Minister for the Arts, which the industry is very grateful for. Just one final thing on the Digital Economy Act: if there is new legislation brought forward it would be good to have a look at some evidencebased results from those countries that are implementing graduated response, namely France, which has just started, and South Korea, which has a longer history of implementing digital response. I wanted to know if the Government was aware of the beneficial effects that digital response has had in the South Korean industry, too, which is particularly relevant because it has the faster internet speeds and can easily trade film files as well as music files. Since they implemented graduated response its creative industries have put on 10% to 15% year on year.

Jeremy Hunt: I think that is very useful data and I completely agree with you, everything we do should be evidence based. I think South Korea is particularly interesting because it had one of the worst problems of piracy.

Ms Bagshawe: Yes. Admittedly, it is starting from a low base but it is making a big difference. Thank you.

Q17 Jim Sheridan: Secretary of State, just following on from what Louise was talking about, the internet, as I understand it we now have two Secretaries of State responsible for internet policy and, indeed, for the manufacture of telecoms equipment. Do you think that is helpful?

Jeremy Hunt: The Department for Business is responsible for manufacturing, and so you are correct to say it is responsible for the manufacture of telecoms equipment. But when it comes to media and communications policy, I am in the lead and I think the divisions are pretty clear.

Q18 Jim Sheridan: When did you last meet with the Secretary of State for BIS to discuss the telecoms sector?

Jeremy Hunt: We had a creative industries roundtable, which was the week before last, but I am in very close contact with him because he worked very hard on policies that appeared in the Budget to promote growth and to support the manufacturing industry that is doing very well at the moment. That was approved by the whole Cabinet and I was very involved in that process.

Q19 Jim Sheridan: These minutes with the BIS Secretary, have they been recorded? Are they in the public domain?

Jeremy Hunt: They are Cabinet minutes so they will be released in line with normal procedures for releasing Cabinet minutes.

Q20 Jim Sheridan: Just on the question of meetings, when you took on the responsibility for the BSkyB bid, within a couple of days you had lunch, I understand, with James Murdoch.

Jeremy Hunt: That is not correct.

Q21 Jim Sheridan: You didn’t have lunch with James Murdoch on 23 December?

Jeremy Hunt: I did not have lunch with James Murdoch on the 23rd.

Q22 Jim Sheridan: Have you had lunch with James Murdoch?

Jeremy Hunt: I have had lunch with James Murdoch once before I was a Minister.

Q23 Jim Sheridan: Since you have taken on the responsibility you have not had lunch with James Murdoch?

Jeremy Hunt: I have had lunch but not with James Murdoch.

Q24 Jim Sheridan: You have not met with James Murdoch?

Jeremy Hunt: I met James Murdoch twice as part of the process of coming to the decision that I am minded to take with respect to this merger and the dates of those meetings have been published. All those present and the minutes will be published as soon as the merger process is complete.

Q25 Jim Sheridan: Since your latest meeting with James Murdoch have you had any discussions with the Prime Minister, either face to face, telephone, e-mail, about the bid?

Jeremy Hunt: The Prime Minister was not consulted about the decision that I am minded to take, was not involved in the decision in any way at all.

Q26 Jim Sheridan: That is not the question I have asked you. I have asked you have you had discussions with him.

Jeremy Hunt: I didn’t have discussions with the Prime Minister at any stage of the process.

Q27 Damian Collins: Sorry, I was momentarily distracted by the Arts Council figures. I wanted to slightly follow on from Jim’s lead on Sky, less about the decision itself, which you presented to Parliament and answered questions on. It has been reported in the press that you want to keep a watching brief on the general issue of media plurality. I wondered if you could say something about that to the Committee.

Jeremy Hunt: Yes. I think the process that we have gone through has been very helpful in putting the spotlight on this incredibly important issue of media plurality. The decision that I had to take was an incredibly important one because it, in essence, was about making sure that no one person had an excessive degree of control over our news media, something that is absolutely essential in any democracy and free and open country. Ofcom pointed out in the report that they delivered to me on 31 December that, while we have a mechanism whereby a Secretary of State can intervene using the public interest test of the 2002 Enterprise Act when there is a transaction that is feared could undermine media plurality, there is no mechanism at the moment that allows intervention if a media company grows organically to develop a large share of control over news outlets. That is different from competition law where the OFT and the Competition Commission have mechanisms by which they can intervene, not just when there is a transaction but also if a company organically grows to have a large market share. That was the process, for example, that ultimately ended up in the breakup of BAA and the hiving off of Gatwick Airport. There is not a parallel in media plurality law, and so I said in my statement to Parliament that we would examine this as part of the Communications Act that we plan for the second half of this Parliament.

Q28 Damian Collins: If one company’s market share of the newspaper market grew as a consequence of the organic growth of their business or the failure of a competitor’s business, in the review you are considering might it be possible that rules may be put in place that would require such a company to divest of some of its interests?

Jeremy Hunt: Absolutely, but I think that we are more likely these days to be looking at people’s share of voice across different media platforms, because on the whole most people get their media from many different sources, and so that is what Ofcom tried to do in the report that they did on the BSkyB merger. I think this is absolutely something that we need to look at very carefully when we come to the new Communications Act.

Q29 Damian Collins: Will you be looking at share of voice within the total media market rather than by particular media channels?

Jeremy Hunt: I think that it is more likely that that would be an intelligent approach given the fact that most people get their news from a multiplicity of sources. Indeed, that was one of the key issues in this particular merger. But I don’t want to prejudge how that consultation will work. I think we need to have a very thorough look at this whole issue and make sure that we all believe that we have the mechanisms in place to make sure that we don’t have over-concentration of power within the media.

Q30 Damian Collins: Some media channels are more competitive than others; I think we all recognise that. Do you have a concern about the plurality within the broadcast news market, particularly with the experience you have been through with Sky?

Jeremy Hunt: The first thing to make clear is that the decision I had to make was not about whether the absolute level of concentration was too high or too low but whether this particular transaction, the News Corp-Sky merger, was going to push plurality from sufficiency to insufficiency. That was the judgement I had to take and I am confident that the proposal that I said I am minded to accept actually strengthens plurality because it strengthens the independence of Sky News over and above where it is now.

Q31 Damian Collins: Finally, with regards to Sky News, it has been commented that Sky News has often required the subsidy of the rest of Sky and if it is to exist independent or separate from the rest of the company it is uncertain whether it could rely on extra funding. As far as you are concerned, will Sky News be a standalone entity that if it needs extra money will have to go to the markets or go to the banks to find that and not rely on financial support from the rest of News Corporation?

Jeremy Hunt: You are making a very important point and it was exactly the point that I thought of when I first saw the undertakings that were proposed by News Corporation. This has to be a financially sustainable solution and that was why at that stage in the process I involved the Office of Fair Trading so that we had Ofcom’s advice as the expert communications sector regulator, but also the Office of Fair Trading which was specifically tasked with looking at the issue of financial sustainability. I believe that the agreement that is now being proposed does deliver that, as do the Office of Fair Trading, for the next 10 years. In place of what happens now, where there is total dependence on Sky for the funding of Sky News-James Murdoch is non-executive Chairman of Sky and it would be theoretically possible for the management of Sky to cut the Sky News budget in half tomorrow if they were to choose to do so-under the new structure, as in undertaking 4.4, there will be a carriage agreement that lasts 10 years. It will not be the same as a BBC licence agreement but there will be financial security in the support that Sky News will get from Sky through that contract that will last 10 years, and that will be set at a level that makes Sky News profitable. I believe that we have something that is going to be financially sustainable and it is very important it should be.

Q32 Damian Collins: Would News Corporation be free to put extra money into Sky News as one of its major investors if it thought that was appropriate?

Jeremy Hunt: Sky News, as an independent listed company, is free to make commercial deals with whoever it wants and there is no restriction on that. But where the restrictions are in undertaking 6.1 is on News Corporation buying any additional shares over and above the 39% that they would hold at the outset of the independent listing of Sky News.

Q33 Mr Sanders: Is it possible, though, that at some later date BSkyB could go to a court of law to remove the restriction on trade and could then increase its shareholding in the new company? How confident are you that your law is robust enough not to be challenged in the courts?

Jeremy Hunt: I am absolutely confident because this is a legally binding, legally enforceable undertaking that is made not by Sky News but by News Corporation in order to allow the purchase of the other shares in Sky to go ahead. I think it will be a very legally robust agreement.

Q34 Mr Sanders: What restrictions have you placed on News Corporation to stop it creating a new news channel under BSkyB?

Jeremy Hunt: Well, bear in mind that the entire concern around this issue has been about making sure that we have sufficient plurality of news provision. It would be perverse if I were to introduce restrictions that would stop people setting up a news channel as part of the solution, but what I would point out is that it would be a highly unlikely thing to happen because Sky News is going to be costing Sky a lot of money. Indeed, News Corporation will have a 39% shareholding in the company that it founded. It would be against News Corporation’s commercial interests to do that and people have accused News Corporation of many things but they have never accused it of being uncommercial before.

Q35 Dr Coffey: Ofcom has just put themselves out to consultation for the rules of the spectrum auction that is coming up. Is there a risk that the Treasury is setting that agenda in terms of setting a price expectation potentially to Ofcom behind the scenes rather than the policy objectives of how we want that spectrum to be used?

Jeremy Hunt: No, I don’t believe there is a risk of the Treasury approaching this issue in any different way to my Department because the responsibility that Ofcom has in the spectrum auction is to get best economic value and not highest price. There is a very important distinction and that is why Ofcom has introduced some very important controls on the way that auction happens such as saying that it thinks it is very important that we end up with four players in the market and don’t end up with an over-concentration of power that would reduce choice for consumers. I am confident that the way we are addressing this will make sure that we fulfil our responsibilities to consumers of telecom services as much as to the Treasury wanting to maximise revenue, understandably in the current situation.

Q36 Dr Coffey: I recognise that your vision for rolling out broadband is in terms of the digital pump, the fibre pump, as it were, to every village. I know your constituency is a relatively green area in south-west Surrey, but for many colleagues the constituencies are quite wide ranging. One parish can be several square hectares in size and just having one digital pump may not really address the issue unless there is that element of wireless or mobile spectrum that I think could create that. That was a view expressed quite strongly in last week’s debate in broadband that your friend-our friend-Ed Vaizey answered. I am just genuinely concerned that this may be done to get a higher price that could miss out big rural communities when it could be the lifeline, this mobile spectrum.

Jeremy Hunt: The first thing is that I completely share your belief that it is very important to involve rural communities in the digital revolution. The interesting thing about this debate is that the more remote the community the greater the social benefit from linking into super fast broadband and the greater the opportunity, incidentally, for the Government to reduce costs. If you think of things like telemedicine, the potential for doing surgeries remotely and the potential for home education is enormous and much greater when distances are larger. I was in Suffolk the week before last and I met with a number of representatives of the tourism industry. I remember one hotelier telling me that he thought that his hotel would be out of business in a decade if they didn’t sort out their broadband problems because it was absolutely mission critical to his business. I completely agree with you this is very important.

The fibre pump to every community, though, is slightly different, if I may say, to the way that you have expressed it, because it is not meant to be an alternative to wireless or mobile. What we are saying with this concept, which is essentially a village pump concept, is that we want to put a fibre point in every community. We will then leave it to local communities to work out how to connect themselves to the national fibre network and that, I am sure, in rural areas will involve wireless mobile solutions because, practically speaking, it would be too expensive to lay fibre to every farm. I think that there will definitely need to be a mix of technologies if we are going to crack this problem.

Q37 Dr Coffey: Could you tell me a little bit more about how you are trying to discourage judicial review by some of the mobile operators? There is some concern about that blocking up the whole process of the spectrum auction.

Jeremy Hunt: I am very confident that this should be something that everyone should get behind. Mobile operators have a very important role to play. Super fast on mobiles is going to be a really important part of this revolution. We have mentioned South Korea this morning. When I went to South Korea a year and a half ago one thing that struck me was how everyone is watching TV live on their mobiles. That is the kind of change that we want the UK to be at the forefront of, so it is going to be very important to get this right.

Q38 Damian Collins: I wanted to ask a couple of questions about the budget in the creative industries. Firstly, the Government’s Plan for Growth document sets out a proposal to introduce legislation to amend the 2003 Licensing Act with regard to the licensing of smaller music venues and also smaller venues used for performances of cinema and theatre. I wonder if you could tell us a little bit more about that.

Jeremy Hunt: Absolutely. We are very committed to this. We want to be as deregulatory as possible and we are looking at everything that it is possible to do that doesn’t require primary legislation to enable us to deregulate live music. We need to balance this with our commitment to localism and making sure that we give local communities the right to have a say over things that could affect their quality of life as well; we understand that. Basically, we are very strong supporters of this agenda, and that is why when we transferred responsibility for licensing to the Home Office we kept responsibility for music licensing. In fact, I think that machinery of government change has worked very well because it has meant that as a Department we have been able to focus on the bit that is most important to us.

Q39 Damian Collins: The response the Government will give, will that be this year or later in the Parliament?

Jeremy Hunt: Absolutely I expect our response to be much sooner than the end of this year. We are working on it very hard.

Q40 Damian Collins: More broadly, the Budget talked about and the Chancellor referenced digital and creative industries as a growth sector for the economy. Has there been consideration of how the Government’s enterprise strategy might affect or benefit creative clusters in different parts of the UK? Is that something you have discussed with the Department for Business?

Jeremy Hunt: It is something I have discussed with the Department for Business and something I have discussed with the Chancellor. We are absolutely clear that there is a huge opportunity to put the enterprise zones in the vanguard of the digital and creative industries. The most exciting development of all, which is not an enterprise zone per se but I think is something that will create the cluster you talk about, is our plans for a tech city in the Olympic Park. We are now working very hard to try and attract overseas investment, because we think there is a unique opportunity. We have green field space in the middle of London right next door to Hackney and Shoreditch, which have a large number of internet startups, and I think that that is unique anywhere in the world. You have Silicon Valley, which is fantastic in terms of the green field space, but it doesn’t have the excitements of Hackney and Shoreditch. I am sure even people in Silicon Valley would agree with that. I think there is a real opportunity to make East London into a hub for a whole group of growth industries.

Q41 Damian Collins: I suppose one sector of the digital and creative industries that was not particularly talked about in the Budget but has been referenced previously is the video games industry. Do you think it is possible the Government may review the decision on tax breaks for the video games industry or whether, if financial support is to come, it is more likely to come through other policies on supporting enterprise and growth?

Jeremy Hunt: It is constantly under review and we would love to be able to support the video games industry in the way that we support the film industry but there is a cost to these measures. It is one of those things that is very much, from our Department’s point of view, something that we would like to happen but it has to be argued for in the context of the overall financial deficit that we are trying to tackle.

Q42 Damian Collins: One final question within the area, I suppose, of licensing. We have discussed in the Committee, in our football inquiry, the ruling from Europe with regards to access to coverage of live football matches and the case a woman has brought where she has been allowed to access foreign coverage of UK sports footage. Obviously, that has a potentially detrimental impact to the UK sports industry that relies on broadcast money from Sky in particular. Is that a case that you have looked at and have any of the broadcasters raised any concerns with you about that?

Jeremy Hunt: The Premier League has raised it with us as a concern and it is a concern. The reason for that is because we are aware that the investment that comes into the Premier League through broadcasting deals is incredibly important in terms of the funding that is available for promoting grassroots participation in football, and indeed in other sports. We are looking at the moment at implications of that ruling and what we can do about it.

Q43 Chair : Just adding to that, as we have already heard, Secretary of State, another consequence if that ruling is upheld is that the existing bar on transmission of matches at 3.00pm can be undermined, which could have extremely damaging effects not just on the Premier League but all the way down to the bottom. The Football League and the Conference are extremely concerned and if there is a way of overturning or challenging that ruling we should look to do so.

Jeremy Hunt: I will certainly do so.

Chair: Good.

Q44 Mr Sanders: Just to emphasise that point, you only need to look at the attendances of League Two and One football matches last night that were matched against an England match that was live on terrestrial television. It does have a massive impact, particularly on lower league teams. Important issue.

Jeremy Hunt: Thank you.

Q45 Chair : Before we turn to the interesting subject of the BBC, Damian raised the question of what had happened to the live music exemption. Can I just raise one other policy that appeared and then disappeared? It was reported that the Tourism Strategy would contain a Government announcement that we were going to move towards daylight saving and then it disappeared at the last minute. Can you confirm that that was in the earlier drafts and can you explain why it was not in the final draft?

Jeremy Hunt: The Government policy on daylight saving has not changed. We believe that with respect to the tourism industry the case for daylight saving is made and we accept that case. But we have also said that we do not wish to proceed with moves to start a trial or make that happen until there is a consensus in all four parts of the United Kingdom. When we looked into this, we decided that the chances of securing that consensus in the short to medium term were small, and that is why we decided to leave it out of the Tourism Strategy. There are so many important things to deal with in tourism we didn’t want that to eclipse everything else that we were doing if we were not confident that there was a real possibility of change.

Q46 Chair: But the tourism industry does regard it as extremely important, as does the Royal Society for the Prevention of Accidents, and you will be aware of the environmental benefits. Yet something that clearly has such huge benefits has essentially been blocked by a small number of Scots.

Jeremy Hunt: I agree with you, there are huge benefits for the tourism industry, and when it comes to climate change, when it comes to electricity bills, road safety, there are many very powerful arguments. But there is also a wider national consideration that on an issue as fundamental as that the Government does believe that we need to carry all the constituent parts of the United Kingdom with us. That is why we decided that at the moment there was no realistic prospect of securing that and so regretfully we have decided not to pursue it.

Q47 Chair: But if the overwhelming balance of advantage lies in favour of the move, which I believe it does and I think you possibly believe it does, surely there will come a time where we are just going to have to say, "You may not like this in the north of Scotland but it is in the national interest"?

Jeremy Hunt: I think it depends how much weight you wish to give to the individual rights of people who may have very serious concerns about, for example, dawn at 10.00am and whether you take the view, that you are perhaps hinting at, that we should ride roughshod over those views, or whether you take the view that we do need to take into account those views. I think the interesting point is that even in the north of Scotland the figures that I have seen would indicate that children would have an additional 84 outdoor hours if we were to move to the system proposed for daylight saving, so there are advantages in the north of Scotland. My belief is that this is something that the debate in Scotland needs to move on. I am quite encouraged that it is in a very different place from where it was a few years ago. Things like the Scottish Farmers Union are officially agnostic about it when they were very firmly against it before, but I don’t think we are yet in a place where we would carry support for the change within Scotland.

Q48 Chair : Is the Government going to proactively make the case?

Jeremy Hunt: We decided that we were not likely to be successful if we were to proactively make the case and that is why we decided that it would risk distracting from the many other things that John Penrose wants to proceed with in his Tourism Strategy where we are confident we can make progress.

Q49 Ms Bagshawe: Just a very quick supplemental. Has the Government considered in its consultations with Scotland suggesting a time zone so that Scotland might not adopt the change and there might be a one-hour differential time zone, which might square the circle?

Jeremy Hunt: That is one possibility. That has ramifications that go beyond the tourist industry. It would have, for example, a significant effect on a number of people who live in the Borders areas and work in one country and live in a different country. There are obviously implications for them. I don’t think there is an easy way through this. The only thing I would say to supporters of moves in this direction is that I think the climate has moved significantly, even over the last five years, even in Scotland. I think I would encourage them to continue making the case that they have been making, but the Government in the short to medium term does not believe there is a prospect of securing a national consensus on the area.

Q50 Paul Farrelly: I am sorry I was late. The London Underground is disrupted. I wonder whether I might ask a couple of questions on the two big subjects you have just covered, transfer of responsibilities and BSkyB, that are not in the Committee’s brief.

Chair: On daylight saving? If you are on the subject we have just been at I will then come to you once-

Paul Farrelly: Okay.

Q51 Mr Sanders: Do you perhaps foresee that we could before 2015 have a pilot on this or do you rule it out completely?

Jeremy Hunt: I think the way I would like to put this is that we don’t see any prospect of being able to carry opinion in Scotland in the medium term. We will obviously keep this policy under review. Were the evidence on that to change, we would be happy to consider it, but as things stand at the moment we don’t see that as being something that is likely to happen in this Parliament.

Q52 Mr Sanders: I think a lot of people can accept that with Scottish elections coming up it could be a sensitive subject, but at the end of the day isn’t it a case that the tail is wagging the dog, that we are suffering greater accidents on the roads, are having to spend more money for our electricity bills, are paying a higher price in childhood obesity and in all the other benefits that we are being denied because the Government is not prepared to face down statistically a group of people who are a tiny minority?

Jeremy Hunt: I think it depends on how liberal your view is about minority rights. If you take the view that the wishes of the majority should always be imposed on minorities, then you could say this is something that should be imposed on the people living in the north of Scotland. I take a different view. I think that the time that we set the clocks is a pretty fundamental thing in most people’s lives and this is one of those issues where we should aim to secure a national consensus before we proceed. All I would say is that I think we are moving-

Q53 Mr Sanders: I think saving lives is actually more liberal and saving the climate and the environment is more liberal, but there you are. I am a liberal in name.

Jeremy Hunt: Well, I will always defer to you on that basis.

Chair: In the interests of fairness, Jim Sheridan.

Q54 Jim Sheridan: Can I say it is somewhat ironic for a Liberal Democrat to complain about the tail wagging the dog. Can I just ask-it seems to me that the Scots are getting the blame for this-what evidence is there that the rest of the UK want the change? Any surveys or statistics?

Jeremy Hunt: I suppose I have not seen any statistics on that, but I would just say that that is my experience on the basis of talking to colleagues in Parliament. I don’t think I have come across a single English MP or MP representing an English constituency who is against this change.

Philip Davies: I am.

Ms Bagshawe: I am, too. I voted against it.

Jeremy Hunt: There we are, there are two.

Q55 Jim Sheridan: I daresay that would be Conservative English MPs you have been speaking to?

Jeremy Hunt: No, I do in fact talk to other MPs who are not Conservatives.

Q56 Jim Sheridan: Name them.

Jeremy Hunt: What, name all the MPs I speak to or-

Jim Sheridan: No, that’s okay. Thanks, Chair.

Q57 Paul Farrelly: Just a couple of questions that were not in the brief on the ground you have already covered, Jeremy, before we move on to the BBC and the issue of budgets and cuts. On your transfer of responsibilities, the team of civil servants that advised you on your BSkyB deliberations, were they still in BIS, notwithstanding the transfer of responsibilities, competition staff?

Jeremy Hunt: Yes. When the decision was transferred to me on 21 December, the civil servants who had been working on that issue immediately came to advise me in DCMS.

Q58 Paul Farrelly: But they remained at BIS?

Jeremy Hunt: They remained in BIS until, in fact, this weekend when 73 staff will be moving over.

Jonathan Stephens: There may be a misunderstanding about physically where people are and in terms of where the responsibility of ministerial accountability lies. The ministerial responsibility transferred the moment the decision was made. Physically, the move is happening this coming weekend.

Q59 Paul Farrelly: They are all moving now?

Jonathan Stephens: This weekend.

Q60 Paul Farrelly: Are you creating a new team with dedicated expertise rather than a team that used to apply itself to different competition matters in different sectors?

Jeremy Hunt: All the civil servants who were responsible for media policy are transferring over and then the Permanent Secretary-he may wish to comment further-has been involved in careful discussions with BIS to make sure that where there are areas where there was shared expertise we are able to access that expertise in the future.

Jonathan Stephens: That is exactly it. We have, of course, access to the expert regulatory bodies, Ofcom with which we work already and the OFT with which the Secretary of State worked closely on this particular merger. We, of course, have access to expert legal advice through the Treasury Solicitor and we have arrangements with BIS, who retain responsibility for general competition policy, to have access to relevant expertise on those general issues if it is needed.

Q61 Paul Farrelly: It might seem ironic to some people, after Vince’s unwise comments to the undercover reporters, that the staff who were advising you on the issue remained at BIS, but I understand there is a transition issue. Clearly, the remedy might have been simply in the circumstances to ask you, Jeremy, to pronounce on that decision alone rather than take a decision to transfer a whole raft of responsibilities that were not part of Vince’s original sin over to a new Department.

Jeremy Hunt: The Prime Minister took the decision, not me, and he decided that the most sensible thing in the situation was to have a machinery of government change. I am afraid you will have to ask him why he decided to do that. He could have done as you proposed, but I think he decided that in the circumstances this was the best way forward. There are some advantages, which I think we talked about before you came, in having a single Government Department responsible for communications policy and some advantages in the Secretary of State who is responsible for media policy being the person who makes decisions when there is a public interest test about media plurality. I think that in that context he thought that it was a logical opportunity to make a broader change that would have some benefits for the industry.

Q62 Paul Farrelly: Maybe in the circumstances they are being seen as wishing to take Vince Cable down a peg or two. Did you have any sympathy for that perception and the effect it might have on his reputation?

Jeremy Hunt: None whatsoever. I think that Vince does an absolutely excellent job. I looked very carefully at the papers and the advice that he received to make the original decision to refer the issue to Ofcom and I think he made the right decision. I think it was obviously very unfortunate what happened, but I hope that the transparent way that we continued the process after that decision was made has given everyone confidence that this has been done in a fair and impartial way.

Q63 Paul Farrelly: Very briefly now on the decision itself, how did you become convinced that the solution that you accepted would be superior to anything that the Competition Commission might wish to suggest after the benefit of a much longer review?

Jeremy Hunt: That was not the decision I was taking. I was not comparing a decision that I might take with a potential decision the Competition Commission might take. What I was doing was looking at the plurality concerns that have been raised by Ofcom on the basis of the report that they delivered on 31 December. I accepted, having read that report, that the issue should be referred to the Competition Commission and I told News Corp that I was minded to refer it within, I think, the same week that I got back into the office after the New Year, so it didn’t take me very long to come to that conclusion. But News Corp in that situation are then entitled to come forward with a remedy, an alternative to a referral to the Competition Commission, if they think it addresses the plurality concerns that were raised in this case by Ofcom. I then did something that I didn’t have to do, which is I took those proposals back to Ofcom and to another regulator, the Office of Fair Trading, and asked for their independent view on whether the proposals addressed the plurality concerns that had been raised earlier. I took into account their consideration that those concerns had been addressed, which meant that it was not necessary to refer it to the Competition Commission.

Q64 Paul Farrelly: Final question, Chair, and I don’t know whether you have covered this detail, but the shareholding in the future is fixed in what I understand is to be a demerged company, which is currently loss making. Has your agreement dwelt on the detail of how the remaining 61% shareholding will be distributed? Are there any financial commitments that are specific that you have negotiated? It seems on the face of it that it is a costly exercise, a demerger and distributing 61% of shares to existing shareholders in what is a lossmaking company and, therefore, the shareholding is effectively worthless to them. You will have a lossmaking company that is entirely dependent on its 39% shareholder for its future existence, notwithstanding any commitments that it has made on the way it will operate.

Jeremy Hunt: Let me address those issues. First of all, as I understand it, the shareholding will initially be distributed to the other shareholders who are currently the other shareholders in Sky in the same proportions as they currently hold shares in Sky. But the company will be listed on the market so people will be free to buy and sell those shareholdings. News Corporation will not be permitted to increase its shareholding, as in undertaking 6.1. But this is not going to be a loss-making company. The carriage agreement, which I will have to approve-that is if we go ahead and accept this decision; we are still going through the results of the consultation but if we go ahead with this-will be a 10year carriage agreement that will be a contract between Sky News and Sky that will make Sky News profitable. Ten years is a lot higher degree of financial certainty than, for example, the BBC has with its licence fee agreement. It is a long time in this industry. It will be a profitable company but it will also be free to win business from other potential customers. There is a very big difference-we did touch on this earlier so I hope the rest of the Committee will-

Paul Farrelly: Yes, I apologise. Don’t go over anything covered earlier because I can read it in the transcript.

Jeremy Hunt: Fine, but the only point I just want to make is that at the moment Sky is able to reduce funding for Sky News through a management decision that could take effect the same day. Under this agreement, there is a 10-year carriage agreement, which gives Sky News financial security that will last a very long time.

Paul Farrelly: Thank you for your patience.

Q65 Philip Davies: Can I just ask about the appointment of Lord Patten to be the chairman of the BBC Trust? One of the things that sort of tended to dog Sir Michael Lyons in his position was a perception, rightly or wrongly, that he was a bit of a New Labour stooge in that position. Do you think it is particularly wise to have somebody who is so overtly political in their background in that position? Was there nobody capable in the whole country who could have done that job that didn’t have so much party political baggage?

Jeremy Hunt: The most important thing is the chairman of the BBC Trust has to be politically impartial and has to defend what I think most people would consider as the most important thing about the BBC of all, which is its independence. I had to choose the best person for the job on the basis of the people that I interviewed, and my consideration was that someone who has demonstrated in his own career that he is able to stand up to Margaret Thatcher, able to stand up to the Chinese Government, is someone who, whether you agree or disagree with the individual decisions he took, has demonstrated that independence in spades, and that is why I decided he was the right person for the job.

Q66 Philip Davies: But do you not see that the issue is one of perception, and that whenever a controversial issue comes along at the BBC that he has to take a decision on in terms of the view of the Trust that either he will be seen as making a decision because he is a Conservative and that his leaning was that way, or that he has been over-compensating for the fact that he is a Conservative and gone too far the other way? However independent he is, he is starting from a losing position, that the perception will always be he has either been biased or he is over-compensating for his bias.

Jeremy Hunt: I understand the point you are making, but I believe that won’t be the case with Lord Patten, because he is fundamentally a very strong person who will form his own views, and has demonstrated time and time again in his career that he is prepared to defend those views against all comers. I am absolutely confident in this case that he will do what he believes is right for the BBC and he will defend that, and I don’t believe that anyone will see him as in any way a party political stooge. As you say, it can go both ways. People stand up to their own parties and at other times people have concerns that they are in the pockets of their own parties. I think in Lord Patten’s case, what people will say is, "This is someone who has demonstrated his independence from his political masters time and time again".

Q67 Philip Davies: When Mark Thompson acknowledged and the BBC acknowledged not too long ago that they had had a somewhat institutional liberal, left-wing bias, that their coverage of events such as the EU, the Middle East, climate change, business had not always been as impartial as it might have been, did you agree with what Mark Thompson concluded? Did you welcome the BBC’s acknowledgement of that bias in the past?

Jeremy Hunt: Yes, and I welcome the fact that the BBC has started to engage on the issue of impartiality and bias much more actively than has happened before, but I did say to Lord Patten in the interview stage, prior to making a decision to appoint him-in fact, I said this to all the candidates I interviewed-that I believed that more needed to be done to strengthen the confidence of Parliament in the impartiality of the BBC. He acknowledged that and said that would be one of the things that he would look into were he to be appointed.

Q68 Philip Davies: Well then, isn’t a bit strange that when he came before this Committee before his appointment that when I put all those points to him, that the BBC themselves had acknowledged where they had been less than impartial in the past, his view was that they had not had any problems with their impartiality on any of those issues in the past? So, given that you accept that there is a problem of perception, that the BBC themselves have accepted that there is a problem of at least perception, if not actual reality, isn’t it rather strange that the new chairman of the BBC Trust is going to start off from the position of telling the Director General, "Don’t worry about all that. Don’t worry about all that perceived bias in the past, don’t even worry about the actual bias in the past, because as far as I am concerned everything is hunky-dory. You haven’t been doing anything wrong on those things"?

Jeremy Hunt: I am confident that the chairman-designate understands the importance of strengthening parliamentary confidence in the impartiality of the BBC and I am looking forward to engaging with him on that. He has said that one of the things that he will do as a priority is to look at BBC governance. The Government is committed to the current BBC charter until it expires, so any changes to BBC governance have to happen with the agreement of the BBC Trust, rather than being imposed on the BBC Trust. But he said that he will look at that, and I think as part of that it is important to look at the issue of impartiality, because if the BBC stands for anything it is impartiality and it does need to maintain the confidence of the public that it is exercising its responsibilities properly in that respect.

Q69 Philip Davies: Isn’t it the case though that what we have ended up with as the chairman of the BBC Trust is another sort of establishment figure who will be a cheerleader for the BBC, who is absolutely wedded to everything that the BBC stands for and that therefore the prospect of getting any real challenge to the BBC, the way it does things, the things it stands for, is virtually nil with Lord Patten because he is part of the BBC kind of establishment that lots of people in this country are sort of getting rather tired of?

Jeremy Hunt: I think, if I may say, you are painting a rather too broad brush picture of the way that Lord Patten will approach his responsibilities. One of the reasons I chose him is because, like me and like the Government, he strongly supports the best things that the BBC do, but another reason that I chose him was because I was confident that in Lord Patten we have a figure of sufficient strength and gravitas that where he thinks the BBC management have things wrong he will stand up to them, and he will make sure that things happen. I think that we have a combination of independent-mindedness and strength that will mean that Lord Patten will be a challenging chairman for the BBC, while being someone who also fundamentally understands what it is that makes the BBC important to many, many people.

Q70 Philip Davies: But it is only worthwhile having someone who will stand up and challenge the BBC when they do something wrong if you actually have somebody who thinks that the BBC does do something wrong. If you have a chairman of the trust who thinks that the BBC is absolutely marvellous and wonderful and never does anything wrong, then it doesn’t matter how independent or challenging they are, they are not going to challenge, are they?

Jeremy Hunt: I agree, and luckily we don’t have an incoming chairman of the BBC who fits that description.

Q71 Dr Coffey: I have to declare an interest because I used work for the BBC and am about to finish completing that administration issue.

The BBC is looking at ways to try and meet its freeze in licence fee as well as taking on other initiatives, as discussed with yourself and other of your colleagues. I am particularly concerned about the reduction of local radio coverage, local radio programming as a savings options. I know it is one of many ideas that are simply being floated. How concerned are you?

Jeremy Hunt: Let me start by explaining to the Committee the context of the cut in the BBC licence fee, which is a 16% cut in real terms, and say very clearly that it was agreed and understood with the BBC that that would be principally an efficiency saving. My view was that in time of great pressure on the public purse and on licence fee payers, it was right that the BBC should look to make efficiency savings, just like the rest of the public sector, and so it was in that context that we agreed on the 16% real terms reduction in the licence fee. So I would be concerned if there was a reduction in the BBC’s core services.

We didn’t agree, because the BBC rightly-we talked earlier about independence-makes its own decisions as to what services it invests in and there will be new services they want to invest in and there will be services they want to withdraw from. So there was no blanket agreement that every single service the BBC does would be sustained, but I would be very concerned if I thought that rather than making efficiency savings, which I believe the BBC is capable of, they were making those savings by cutting into core services.

Q72 Dr Coffey: I am glad to hear that, and I am sure the listeners of BBC Suffolk will be delighted by that, especially when you participated on their breakfast show a couple of weeks ago and talked about broadband, which was great. The Government has told the BBC to take on the World Service, BBC Monitoring, S4C, and be using some of its funds. So there has been some direction on how some of the BBC licence fee will be used, not necessarily the value or exactly how it is done, but what I am missing at the moment is the voice of the licence fee payer. There are a lot of ideas. Obviously, I understand that the staff are being used to come up with ideas on how to save money, but why do you think the BBC has not asked the licence fee payer, and why hasn’t the BBC Trust?

Jeremy Hunt: I hesitate slightly in answering that because sometimes in the past I have criticised the BBC for getting involved in huge consultation exercises that cost a lot of money, when I have been keen that they put more of their resources into producing great programmes, which is what I think the public want. But I very much hope the BBC will listen to licence fee payers in the process of making the decisions, the difficult decisions it has to take. I certainly had what I believe the views of licence fee payers were at the forefront of my mind when I negotiated the licence fee deal, and my take on it is that licence fee payers love what the BBC does but have been concerned about the way the BBC has used licence fee payers’ money in the past. There have been a number of incidents, which we don’t need to rehearse now, that have caused great concern, and therefore I thought it was right to set the BBC a challenging efficiency target in the licence fee reduction-I think I am the first Culture Secretary to negotiate a reduction in the licence fee-while at the same time making sure the BBC was well enough resourced to be able to continue its core services, the things that the licence fee payers love about the BBC the most.

Q73 Damian Collins: Firstly just to follow up the question on radio, what are your expectations now with regards to digital radio switchover?

Jeremy Hunt: I think the future is digital, I think the future is DAB, but I think the digital radio industry needs to do a lot more work to boost the penetration of DAB and to carry the public with it. I think that it has not been nearly as successful at that as the TV industry has been in persuading the public of the benefits of digital switchover. That is why at the moment the industry is having to bear the costs of running two systems in parallel. I very much hope that it won’t have to do that. We want to do everything we can to help the industry migrate smoothly, but we would like it to be user-led, so we have said that we are not going to have an arbitrary 2015 deadline. We will make a decision in due course as to whether we can have switchover in 2015, but we want the radio industry to step up to the plate in making sure there are better products and services available and the consumers really can see the benefit of DAB.

Q74 Damian Collins: Is your expectation that the financial commitment of the BBC to expanding digital radio coverage in rural areas will remain the same, or might that be affected by their review of spending?

Jeremy Hunt: The BBC are committed, in the agreement I did, to national availability of national DAB channels. There is still a discussion to be had about the funding of local DAB channels, which is an additional cost, and I am closely involved with discussions with the radio industry, and very keen to resolve this as soon as possible, because I think it is a very important next step.

Q75 Damian Collins: I want to ask briefly about local television. Firstly, I wonder if you could just update the Committee on where you have got to with your proposals for a new local TV service.

Jeremy Hunt: Yes. I think we have had a considerable degree of interest. I think the climate with respect to local TV has changed and it has changed in one way in particular, which is that I think it is increasingly clear that there are people operating in remote rural areas-indeed, places like Suffolk-where the bean counters might say that a local TV station isn’t profitable, but actually with local commitment, with volunteers, with the support of local newspaper groups, it is possible to get a local TV station going at minimal cost. So I am very optimistic that we will see a lot of local TV stations emerging as part of our plans in areas that are not necessarily the big urban conurbations. My intention is to develop a structure. We are just concluding a consultation at the moment. We have had 21 expressions of interest for being responsible for a national spine on which local TV stations could hang, so that is a route we could go. We have also, unsolicited, had 30 expressions of interest for local franchises and we are talking with the whole industry to try and make this vision a reality as soon as possible.

Q76 Damian Collins: I appreciate it is early days and it may be difficult to go into too much detail on exactly what it might look like, but I am sure members of the Committee will have representations from companies that have been part of that process. If the service was a national spine with local news and particular coverage, how dynamic a process do you want that to be? I could see that you would have a national spine and a number of services available at launch of a new service like that, but then if individual groups or companies want to come in later on with a more localised service, is that going to be possible? For instance, in Kent there are two main transmitters, one at Maidstone and one at Dover. I could see a situation where you might have a Kent general service launch, but then if someone else comes along and says, "We would like to launch a separate east Kent service" is that going to be possible or is there going to have to be a pretty rigid structure at the beginning and licensing agreements with the companies that are prepared to operate at launch?

Jeremy Hunt: We absolutely must make sure that it is a flexible approach, because the whole strategy is to create something that allows local TV to transition between conventional DTT transmission to the IPTV world, where in Folkestone we may well end up with 60 local TV stations. That might sound fanciful, but the people who are behind the launch of YouView told me that they thought there could be 60 local TV stations in every area. We need to make sure that we aren’t shutting out the potential for different products and services to emerge. With respect to the national spine, I think the key consideration here is to make sure that it is financially independent of the local franchises so that if it or any of them individually go under that doesn’t bring down the whole pack of cards, and that is the structure that we are trying to work out.

Q77 Paul Farrelly: Jeremy, you are also the Culture Secretary who asked the BBC to shoulder the entire burden of free TV licences for the over-75s, a suggestion so uncontroversial that the outgoing chairman told us that the entire board of governors would have resigned had you insisted on it. Could you just tell us here where that gem of an idea came from?

Jeremy Hunt: That is only marginally less complimentary than what you called me last time, when I think I was the eager axeman. Let me just say that this was a negotiation for the licence fee, and in negotiations you ask for lots of things; you don’t expect to get them all. But the result, I believe, was an outstanding one for licence fee payers and an outstanding one for the BBC, and it was outstanding for licence fee payers because in very difficult times they got a flat cash settlement for six years, and it was outstanding for the BBC because, again, in difficult financial times they have got financial security for the next six years. As a result of concluding that process, which I fully accept was a short process, the BBC is now in a position where it can get on with focusing on what the public wants, which is producing great programmes.

Paul Farrelly: I suspected that might be your answer. That was not the question though. The question was where the idea first came from: did it come from the Treasury? Specifically, did you understand, because you are a Coalition Government, that it had the approval of the Deputy Prime Minister as the leader of the Coalition junior partner?

Jeremy Hunt: Let me be clear, I am not going to comment on every single idea that came up in the negotiations at every stage and where those ideas might have come from, because it was a negotiation and the nature of negotiations is that lots of ideas are floated around and you don’t expect them to be adopted. But in terms of the responsibility for that licence fee settlement, my Department-and me in particular as Secretary of State-was the lead negotiator, and the process that we followed was we formulated what we thought was the Government’s position, we argued for it, and then we went back for approval before we finally signed it off. So, at the beginning of the process and at the end of the process there was wider consultation, but in the middle of the process we just carried on with the negotiations.

Paul Farrelly: But you backed down on this one at the end.

Jeremy Hunt: Well, I don’t accept that. We got what we wanted from that licence fee settlement for the licence fee payer and for the BBC, and I think we ended up with an extremely good settlement.

Q78 Paul Farrelly: I know we have given you some written questions on it. Finally, could you just tell us whether within Government the idea has been passed around or whether there are any plans to restrict the right of the availability of free TV licences, because after all, they are a universal benefit, irrespective of income?

Jeremy Hunt: The issue of free TV licences for the over-75s and the potential ways that you would achieve that were indeed something that figured in our negotiations. All I will say is that when you enter negotiations you don’t necessarily expect to get everything that you ask for but, to repeat, I was very happy with the final result.

Q79 Paul Farrelly: I asked a rather different question: are there any notions or plans in Government to change the availability of free TV licences, because they are, after all, like many other things-

Jeremy Hunt: Sorry, you are asking post the licence fee settlement?

Paul Farrelly: Yes. They are, after all, like many other things that are being cut, a universal benefit paid irrespective of income.

Jeremy Hunt: The answer is no.

Q80 Damian Collins: Just one question, something we wanted to clear up with regards to the negotiations. I think when Sir Michael Lyons was sitting in the chair Mr Stephens is sitting in now he said that during the negotiations he didn’t meet with you, the Secretary of State, face to face. You have subsequently indicated in writing that you did meet, and I wondered if you could confirm whether Michael Lyons was in the room with you during a stage of the negotiations or during one of the meetings or not?

Jeremy Hunt: Yes. Perhaps I can clear that up. I did meet with Sir Michael at meetings earlier in the process, but in the final sort of all-nighter that we had Sir Michael was not there. He was represented by someone else from the BBC Trust, but he was kept in touch with the proceedings by telephone.

Q81 Dr Coffey: Can I quickly go back to local TV, and thank you for suggesting Suffolk. Felixstowe TV did exist, then closed, sadly, and is trying to come back. I think you are right to mention YouView, because for me I think that is really the only way local TV can exist, but there is a particular concern about ATVOD being a bit heavy-handed and almost applying the same regulation in terms of the cost towards small providers. How are you going to encourage small providers to get out there and do it? It might be volunteers; it might be semi-professional. Will you be looking at the regulation?

Jeremy Hunt: Absolutely, and I think you have hit the nail on the head. If you look at the local TV station initiatives that have failed in the past, it is usually about a high cost base, and so a key part of this whole project is to reduce that cost base as low as we possibly can. That is why the support that we secured from the BBC in the licence fee negotiations to help with capital costs is very significant. Technology costs, of course, are coming down the whole time. The other point that we have been very keen on is to make sure that when the licences are issued there is only an obligation to produce a couple of hours of TV a day, because a lot of the cost for stations like Channel M in Manchester came from having to produce 18 hours of local TV every day, which is obviously very expensive. If you have any specific ideas as to how we could reduce costs, based on Felixstowe TV, we would be very happy to hear them, but that is very much part of our agenda.

Q82 Mr Sanders: Before we get involved with local TV, there are hundreds and hundreds of community radio stations out there desperate for a licence and there seems to be a real problem with Ofcom sifting through and issuing them. Who should resolve that problem and speed it up so that these community radio stations can get on air?

Jeremy Hunt: I am very happy to look into that, if you wouldn’t mind writing to me if you have any particular examples. I had a discussion with Ed Richards earlier this week about the success of community radio stations and how popular they have been. I think Ofcom are very supportive of community radio stations, but if unnecessary bureaucracy is slowing things up then that is something we should definitely look at.

With respect to the link to the local TV agenda, I am very keen to create an environment where the same company can offer a community radio station and a local TV station and a local website, and for the UK to become the first country in the world where we have a new generation of multi-media, multi-platform local media companies with a completely new business model to what has happened previously, and I think there is a very big opportunity for us.

Q83 Mr Sanders: That may well be a very good way forward, but it won’t always follow that the people interested in community radio are interested in websites or are interested in TV, and one wouldn’t want to prevent a good radio operator from being disadvantaged because they can’t offer other services.

Jeremy Hunt: I completely agree. We don’t want to be prescriptive at all about this. I just want to make sure the opportunities are there.

Q84 Chair: There is just a couple of other areas. First, I wanted to raise with you, while we have been talking you will be aware that the Arts Council have announced their decisions on the funding of arts institutions up and down the country. I understand you will maintain the arm’s length principle, but we understand that something like 205 organisations who have been regularly funded have been turned down for their funds and the result of that is presumably quite a lot of those may have to close. How do you feel that within the first year of your becoming Secretary of State for Culture, Olympics, Media and Sport arts institutions are going to be hit as badly as this?

Jeremy Hunt: My responsibility as Culture Secretary is funding for the arts, and I have always said that the arts should bear their share of the pain in tackling the deficit. The arts benefit from having a strong economy on sound financial footing, as does everyone else, and that therefore it is fair that they should bear some of the pain. But I negotiated a settlement that means that the arts are bearing less of the pain than many other sectors of Government. The regularly funded organisations budget of the Arts Council was reduced by 15%. That is significantly less than the 19% average cut of all Government Departments. After lottery changes, which we introduced, one of the first things I did, total funding to the Arts Council over the next four years is going down by 11%. I think there are only four other major Government Departments that got a better settlement than that. So I think that it is going to be difficult, but the arts, relative to other parts of Government, have not done badly.

You mention the arm’s length principle. What happened today is a test of the arm’s length principle, because the Arts Council tell me how important the arm’s length principle is. In fact, I think paragraph 58 of your report said that you thought the arm’s length principle was important because arts funding should not respond to the political or cultural prejudices of the Culture Secretary of the day, which I agree with. But that means the Arts Council being prepared to defend decisions they take that are unpopular as well as decisions they take that are popular. They have chosen-and I think it is right that they take a strategic look at arts funding-to withdraw funding from nearly a quarter of previously regularly funded organisations, even though the funding for that budget has only gone down by 15%. I appreciate this is a difficult time, but I think this is a moment to reiterate that they must take those decisions independently and they must take responsibility for the decisions they choose to take.

Q85 Chair: So your message this morning to any institution that has lost funding and is staring into the abyss, is that an attempt to appeal to you is going to fall on deaf ears?

Jeremy Hunt: I haven’t met an arts institution that has said they want Ministers to take direct control of arts funding decisions, and so I am not proposing to undermine the arm’s length principle by second guessing the Arts Council, but what I would say to those institutions is the Government is doing everything it can to make it easier for them to raise money. We have announced, working with the Arts Council, an £80 million matched funding pot that will be particularly focused on helping small arts organisations outside London develop fundraising capacity. The Chancellor last week announced a whole series of measures to promote giving, which we think will lead to an additional £600 million of donations to all charities. We are doing everything we can to make it easy for people to survive in difficult times.

Q86 Chair: Thank you. Before I bring in Tom Watson at the end, there is one other topic I wanted to quickly raise. You will recall the passage of the Gambling Bill in the last Parliament, which was supposed to create an entirely new framework for casino licensing in this country, but six years since the Act was passed not a single new licence has been granted. It also was going to make Britain the centre for online gambling, since when almost every online operator has moved offshore. Do you not think that this Act has proved a complete fiasco, and do you have any intention to revisit the legislation?

Jeremy Hunt: It hasn’t worked, you are absolutely right. There have been a whole series of problems with it, but we have said to the gambling industry that the Government’s policy on this is very clear. We won’t consider any moves to liberalise gambling until we are confident that we have a coherent strategy in place to tackle problem and addiction gambling, and the latest prevalence study that only came out a few weeks ago said that problem gambling had increased to 0.9% of the population, which is a significant number of people, and we have to be very careful that we aren’t letting the genie out of the bottle. In principle, we will look at any measures that people would like us to make, but we do need to address the issue of problem gambling and make sure that we are not embracing a policy that will make that worse.

Chair: Well, we may ourselves be revisiting this issue soon.

Q87 Philip Davies: On that I take problem gambling, as an example, as a benchmark for the Government’s test. Surely there are some sort of ludicrous restrictions in place that have no bearing on problem gambling. Just for example, the number of machines that can be in a betting shop is four. It is pretty obvious to anybody that whether there are four machines, six machines or eight machines, you can only play on one at a time. The fact there are four or six or eight, or however many there are, cannot increase problem gambling. It is just like saying that if a pub currently serves six beers in a pub and extends its range to 15, that would lead to increased alcoholism, which would clearly be nonsense. It is exactly the same principle. So if the Government’s key policy focus is on stopping an extension of problem gambling, will it remove unnecessary restrictions that have absolutely no bearing on problem gambling?

Jeremy Hunt: We are always prepared to look at the regulations that exist and if there aren’t any wider implications then we look at them with an open mind, but I am not sure that I necessarily agree with the analogy that you gave. I think if there is a problem of alcohol abuse, people would say, "Do we want to license another six pubs in this town?" and I think that it is not necessarily the case that there is no impact on problem gambling if you make it much easier for people to use a fixed odds betting terminal. But we have looked at issues. We are very conscious of the importance of arcades in seaside towns and we keep an open mind, but in terms of fundamental liberalisation, my earlier point stands that we do want to see a way forward and we encourage the industry to help develop public confidence that it is possible for that industry to develop without unleashing this issue of problem gambling.

Q88 Philip Davies: But if problem gambling again is a big issue, why are 16-year-olds allowed to buy National Lottery scratch cards? Is that not something that might impact upon problem gambling?

Jeremy Hunt: Well, there is a question, and we need to look at the evidence. I haven’t seen any evidence that scratch cards are a cause of problem gambling. I have seen evidence that problem gamblers use scratch cards, but I think everything we do in this area needs to be evidence based.

Q89 Philip Davies: I absolutely agree with that. While you are at it, could you just give the Committee an update on where we are with the sale of the Tote?

Jeremy Hunt: The sale of the Tote is proceeding. I had an update from the Gambling Minister, John Penrose, this morning on it and we are hoping to be able to make an announcement in the next couple of months.

Q90 Philip Davies: I am not sure you touched on this specifically in your answer to the Chairman, but where is the Government with its policy on remote gambling? Is that forthcoming in the near future?

Jeremy Hunt: It links to the earlier comments about problem gambling, because we think it would be enormously beneficial in tackling problem gambling if we had a regime that encouraged remote gamblers to locate their services onshore rather than offshore. I am concerned that the tax regime that we have at the moment has driven people offshore in a way that has been bad for Treasury revenues and also bad in terms of making sure that we have proper consumer protection, and that is again an issue that we are looking at very closely.

Q91 Philip Davies: In the meantime, there is a white list but that, it appears, has been suspended for new entrants. You may be aware that Jersey, who were a bit late out of the blocks on all of this issue, are anxious to get on the white list, but are prevented from doing so, even though there were no sort of fundamental objections that anybody could see to them being on there. Is there any opportunity in the meantime as a transitional period for countries like Jersey that don’t offer any particular problem being added to the white list while the Government is deciding its final policy on remote gambling?

Jeremy Hunt: Rather than adding to the list of countries that are able to offer remote gambling to UK residents without necessarily being subject to UK regulations, I would rather solve the fundamental problem, which is how we create a regime that encourages people to locate their remote gambling operations onshore.

Q92 Paul Farrelly: Very quickly, there are lots of concerns, as you will well know, up and down the country about library closures. Zadie Smith was on the Today programme today with a passionate defence of the importance to her and her family growing up of libraries and to children like her today. Can anyone concerned about the closure of a local library write to you to ask you to look at and, in certain circumstances, order an inquiry?

Jeremy Hunt: Absolutely. I have a power under the 1964 Libraries Act to make sure that no closures that are proposed threaten a comprehensive and efficient service. Ed Vaizey has already written to all local authorities in February, and I will be writing again to all local authorities as soon as the May elections are out of the way, to make it clear the circumstances in which I would consider intervening under that Act. I think it is a very difficult issue. The importance of reading is absolutely sacrosanct. The importance of libraries as community centres is also something we should not underestimate, but at the same time, we need to have a policy that doesn’t stop or stand in the way of change and adaptation and improvement to library services. I had a meeting with local authorities providing library services from eight local authorities in Birmingham, and there is a lot of innovation happening-people putting libraries in Sure Start centres, people finding other services that can be offered by libraries-and we want to encourage that innovation. What we don’t want is libraries to be the easy option when it comes to local authority cuts, because they are so important to the public.

Q93 Paul Farrelly: Sure. So you want all those factors to be weighed very carefully-

Jeremy Hunt: Correct.

Paul Farrelly: -and if people like Zadie Smith or anybody is deeply concerned that the decisions have not been arrived at properly then you would encourage them to write to you with their concerns?

Jeremy Hunt: Anyone who believes that I should be exercising my powers under the 1964 Act should get in contact with me, but I am not waiting for people to get in contact with me. I am also proactively talking to local authorities so that they understand the circumstances under which I would be prepared to intervene.

Paul Farrelly: That is very clear. Thank you.

Q94 Mr Watson: Just a couple of questions. When did you last borrow a book from a library?

Jeremy Hunt: I think it was certainly not in the last decade.

Q95 Mr Watson: Not in the last decade, okay. Do you believe the current framework of self-regulation of the newspaper industry is effective?

Jeremy Hunt: I think that there are self-evidently a lot of things that haven’t gone right in the way the newspaper industry has operated in recent years, but in particular the police investigation into phone hacking is something that I think has caused a lot of public concern. I know you have been very involved in that as well. I think we need to wait for the outcome of that investigation before we, as politicians, review what next steps need to be taken legislatively. I am a supporter of self-regulation, but for self-regulation to operate it has to have the confidence of the public.

Q96 Mr Watson: It could be that, as you raise the phone hacking issue-I wasn’t going to raise it this morning, Secretary of State-the civil cases and possible criminal cases run into the middle of next year and maybe the end of the year; there is quite a long tunnel of activity. Are you saying that you will look at engaging the industry in a new model of self-regulation only after those investigations have taken place, or is it the sort of thing you might think you could usefully play a role with the industry to facilitate a discussion on that in advance of the outcome of those cases?

Jeremy Hunt: I want to have evidence-based discussion with the industry. My hesitation in engaging with the industry before the outcome of those cases is that we won’t be in full possession of the facts, and I think that that is why it is appropriate in this case to wait until the judicial process has followed its due course before we are going to be able to be in a position. At the moment, a lot of allegations have been made, but this is still a judicial process that is carrying on. Now, I am talking about phone hacking.

Mr Watson: I am trying not to.

Jeremy Hunt: I know you are trying very hard not to, very, very hard. But that is not to say that there might not be other areas of self-regulation where if I felt that the current structure didn’t have public confidence I wouldn’t hesitate to raise it with the PCC.

Q97 Mr Watson: The current structure of the PCC doesn’t have the confidence of many editors and proprietors. The proprietor of the Express newspapers has brought out the current framework of self-regulation, the editor of the Guardian has publicly criticised the model, and yet there doesn’t seem to be an impetus at the core of the industry to accept that there is a problem and look at change, which strikes me might be your role in bringing editors and proprietors together to ask them to share their own concerns about the model they have now. That doesn’t require you to wait for the outcome of criminal or civil cases to do with phone hacking. There is a problem with self-regulation now. Is there any thinking in the Department about how you might be an honest broker in that process?

Jeremy Hunt: I think my job as Culture Secretary is to make sure that we have confidence, the public has confidence in the regulatory process that we have, and so if something comes to light that is evidence-based that has undermined public confidence then I wouldn’t wait to raise it.

Q98 Mr Watson: Is it your view that the public have confidence in the current framework of self-regulation as it exists?

Jeremy Hunt: I think there are many members of the public who are concerned about the way the regulatory process works, but a lot of that concern is around those court cases that are currently happening, and that is why I want to wait before dealing with that particular issue until that process is complete.

Q99 Mr Watson: There is a circular argument here. If it has to be evidence-based, who has to provide you with what evidence in order for you to make that decision that you need to in some way intervene?

Jeremy Hunt: I think the evidence of a court is pretty important in that respect. I also think that in this country we are innocent until proven guilty, so I don’t want to make a judgement on the basis of what are allegations rather than things that have been through a criminal process and where people have been found guilty.

Q100 Mr Watson: I am trying to park the actual issue of phone hacking. What I am saying is that I think the public have a wider issue with confidence in the way the press regulate themselves.

Jeremy Hunt: Which specific areas?

Mr Watson: Well, in our press standards inquiry, we looked at the intrusion into the McCanns, for example, or in the way that the press source their articles. We heard evidence from the editor of the Guardian that the PCC was not working. We see in front of our eyes that other newspaper groups have withdrawn from the PCC process, and your own words have raised concerns about that. What I am really trying to say is, what is the issue that would allow you to in some way take a look at self-regulation to make sure that we have a self-regulatory model that works, rather than-self-evidently in my view-doesn’t work at the moment?

Jeremy Hunt: It is constantly under review and as a Government, as I say-I am repeating myself-I do think it is important the public has confidence. But I do think we are in the middle of a judicial process and so, if we are going to have a proper review of how the system works and whether self-regulation functions or not, we do need to be in possession of all the facts.

Q101 Mr Watson: Have you ever met the Media Standards Trust?

Jeremy Hunt: Not to my knowledge, in office.

Q102 Mr Watson: If you are looking for evidence on self-regulation, can I perhaps suggest you do meet them?

Jeremy Hunt: I will happily follow your advice.

Q103 Mr Watson: Finally, on a slightly lighter note, I hope, a lot of people tell me that there is a reshuffle in the air and that you are a highly regarded, effective Minister in the David Cameron administration and that you are facing possible promotion to a bigger department. Can I ask if that happens what you would like your legacy at the DCMS to be remembered for?

Jeremy Hunt: Do we have an hour, Mr Chairman, because there are a lot of things that I would to talk about there? Let me just say though, first of all, I very much hope that I can stay in this post for as long as possible and I would be delighted to be here for the whole of this Parliament, but this is a decision obviously of the Prime Minister.

But, yes, let me tell you what I would like my legacy to be. I would like us to have a thriving local TV sector so that your constituents and my constituents can hold their local politicians accountable in a way that our national media is so successful in holding national politicians to account. For sport, I would like to see a legacy for 2012 that extends to every school in the country, and that is why we are setting up the school games, and that is a project that we want. The benchmark of success will be whether that continues in 2013, 2014 and 2015 and well beyond the Olympics. In technology, I want us to have the best super-fast broadband network in Europe. That will be a huge challenge because other countries are making great strides in that respect. For tourism, I want us to use 2012 to get an additional two million foreign tourists to come to the UK. When it comes to arts, a very topical issue this morning, I want to be able to say that I have helped pilot a sector that is incredibly precious to our economy and our society through a very difficult period of spending cuts, and I would like to see our major cultural institutions set up endowments to give them greater financial security to make sure that they don’t have to face the kind of nightmares that they are facing now in the future.

Chair: I think that is a good note on which to end. Secretary of State, thank you very much indeed.