UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 614-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Welsh Affairs Committee

S4C

Tuesday 23 November 2010

IAN Hargreaves, GERAINT TALFAN DAVIES and RON JONES

Evidence heard in Public Questions 1 - 60

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 23 November 2010

Members present:

David T. C. Davies (Chair)

Stuart Andrew

Guto Bebb

Alun Cairns

Jonathan Edwards

Mrs Siân James

Susan Elan Jones

Karen Lumley

Owen Smith

Mr Mark Williams

________________

Examination of Witnesses

Witnesses: Ian Hargreaves, Broadcasting Expert, Geraint Talfan Davies, Broadcasting Expert, and Ron Jones, Chair, Creative Industry Group, gave evidence.

Q1 Chair: Good morning, gentlemen. It is very nice to see you and thanks for coming up today. Most of us know each other, but for the record could I ask everyone to state their names and also any financial or pecuniary interests that they might have in S4C?

Geraint Talfan Davies: I am Geraint Talfan Davies. I am Chairman of the Institute of Welsh Affairs. I have no pecuniary interest in S4C, although I did act as a consultant to S4C during the preparation of their submission to the DCMS.

Ron Jones: I am Ron Jones. I am here as Chairman of the Welsh Assembly’s Panel on the Creative Industries, but I am also Executive Chairman of Tinopolis, which has a significant business interest in producing programmes for S4C.

Ian Hargreaves: I am Ian Hargreaves, Professor of Digital Economy at Cardiff University. I have had and do not have any financial relationship with S4C.

Q2 Chair: Thank you very much. I am going to start by asking the leading question, if you like. We are all aware that the Government have been making significant cuts across most areas of the public sector. Could you tell us why, if at all, you think S4C should be exempt from such cuts? Perhaps we can start with Mr Talfan Davies.

Geraint Talfan Davies: I am not sure that any publicly funded body can claim exemption from cuts in the current circumstances, and I wouldn’t argue that particular case. There is an argument about what size cut a body might take, but I don’t think that one should seek to argue for exemption. I think what one has to secure is an adequate and secure stable level of funding for the years ahead. That is what is essential.

Ron Jones: I would agree with that in its entirety.

Ian Hargreaves: There is no reason why S4C should not face the same pressures as other publicly funded organisations.

Q3 Alun Cairns : The spending review will cut S4C’s funding from around £100 million to £83 million in four years’ time. Of course, the font of money, the direction of money, will change largely from being DCMS to coming from the BBC. What do you think will be the impact of such a change in funding from £100 million to £83 million?

Geraint Talfan Davies: It is very clear that that reduction in funding is bound to impact on the service. I don’t think that you can make that level of adjustment without any impact on what the service is. Of course, we don’t know, as yet, what savings can be made through any possible discussions of synergies with the BBC. My guess is that there will be a need to reconsider the nature of the service and the number of hours broadcast. My guess, too, is that there would possibly be some restriction on the range of programming. But that doesn’t mean to say that there could not be an improvement in what remains, as long as there is a more effective commissioning process.

Ron Jones: I think the funding crisis, if that is what it is, coincidentally comes at a time when there was anyway a very pressing need for S4C to reconsider the way it delivered its remit. Whatever the new definition of the remit will be, in terms of the range of services and the range of programming that it provides, at least we now know within what range of available money that discussion needs to take place. And that’s not a bad thing. I think that there hasn’t been a serious reassessment of S4C’s provision of services for a considerable number of years. Now we can look afresh and, hopefully, we can deliver a service which is perhaps more appropriate for the modern age than the one that is presently being delivered.

Ian Hargreaves: I have nothing to add to that.

Chair: Can I bring in Siân James and then I will come back to you, if I may?

Q4 Mrs James: Do you think that there are opportunities to boost the income through more advertising or more successful targeting of advertisers?

Geraint Talfan Davies: I think that S4C themselves pointed out to the DCMS that there is some scope for optimising their commercial income, their airtime sales. They seem to suggest, or they did suggest in their submission to the DCMS, that there is a need for a better connection between airtime sales and the scheduling of the service. By the same token, I think S4C intends to lease some of its existing bandwidth. You’ve got S4C2, so there is income that could be obtained there. But I think it is important to be realistic about this. I don’t think that it is going to be possible to get back to the level of commercial income that was there when S4C programmes were running alongside Channel 4 programmes.

Q5 Mrs James: Just carrying on from that to the actual programming itself, what programming and services do you think should be maintained? We know that S4C is going to have to change, but there is obviously a core of things that we need to maintain. In your opinion, can we make those savings without damaging those core programmes and the core remit?

Geraint Talfan Davies: There are two key elements which strike me. There is the service that S4C has launched for children. That is really a core function of S4C because unless we tackle that issue of the language amongst our youngest children, then there is going to be precious little hope. I would have thought, too, the other core issue is the provision of a service during the key peak hours of viewing. Those are the two essentials.

When you look ahead you have to look at how the nature of these linear channels is going to change over the next decade and what the impact will be over the next few years as we move to more videoondemand, a more true convergence, the whole "Project Canvas" idea. This is going to affect the concept of "the channel" as we know it and that is why I would agree with Ron Jones that now is absolutely the right time to consider all these issues in the round.

Q6 Mrs James: So this might be an opportunity, not a threat?

Geraint Talfan Davies: Of course it is an opportunity. One can argue that it is something that should have been done rather earlier, but there is no time to waste now.

Ron Jones: Fundamentally, the type of channel that S4C was created to be no longer fits modern requirements. It was one of four channels and people were choosing from a limited number of opportunities to view. Whatever else has changed about S4C, the environment in which it now operates is changed for ever. Welsh speakers are just as promiscuous in terms of their search for entertainment, information and all that sort of stuff as anyone else, so programming now has to find a much more defined niche than ever it had before. Therefore, I think S4C is going to be pushed, inexorably, towards providing public service broadcasting in the true sense of those things that no other broadcaster can provide. I think that opens up a whole range of creative opportunities. But, also, I think that in the online environment there is no one in Wales providing a whole range of online services in Welsh. It is a natural place for S4C to be and in fact I think can help it to reconnect with its users at community level, with community groups, with organisations and so on, in a way that perhaps it has neglected to do in recent years.

I agree with Geraint on the importance of the children’s programming, but again there is a need to engage that more actively with our education system. We are short of high-quality media content for Welshmedium education. And it is a natural fit which, without too much change to the present provision, could provide much more educational as well as entertainment value inside Wales.

Chair: Thank you, Mr Jones. I am gently nudging this along.

Q7 Alun Cairns : Can I ask you this, Mr Hargreaves, in the light of what all three of you said, that S4C shouldn’t be exempt from any sorts of cuts? There has been a lot of political debate around the scale of cuts. Bearing in mind that I said it was £100 million to about £83 million in four years’ time, together with the £27 million that is available for marketing and commercial purposes, as well as the advertising income that is available, do you think that it is a pretty fair settlement in the context?

Ian Hargreaves: I wouldn’t characterise it as fair or unfair. I think it is at the heavy end of cuts that have been applied to other organisations and areas of spending in the public spending changes that we have had. I don’t think that you can cut that amount from any organisation without affecting either the volume or the quality of what it does, or both. That said, I agree entirely with what Ron Jones and Geraint Talfan Davies have said: that this, frankly, is a reality. Nobody is contesting this particular point and it is important to move on from that point and to talk about what is a realistic set of prospects facing S4C, and I know that you are going to come to those issues in the questioning.

Chair: We are indeed.

Q8 Jonathan Edwards: Bore da. The Government says that a new partnership model with the BBC is the best way of securing the longterm future of the channel. Do you agree with that and does the partnership model necessarily mean a BBC Albatype solution?

Ian Hargreaves: I think it is important to recognise that the BBC has been a partner with S4C in the creation of the services S4C has provided from the very beginning. Today, the BBC provides the news service that S4C broadcasts and it produces its flagship entertainment programme. So there has never been a time when there was not a BBC/S4C partnership. The question is: what kind of partnership is right for the next stage? I think that is the heart of the matter.

The Alba arrangements in Scotland, which I had a good deal to do with because I was the Ofcom executive responsible for that area of activity in that period, bear only the most superficial resemblance to the case of S4C. In the case of S4C we have an operationally and creatively independent organisation whose value arises substantially from that independence. I think it is very, very important to have regard to that independence in the arrangements that are put in place. There is clearly a risk with the BBC, which is very large, very powerful and has many mansions, that if S4C is turned into a minor department of the BBC in Wales it will not get much talking time or air time around the BBC board table when big decisions are taken. We know that the BBC’s own strategic rethinking process in the last year has been a little bit light on attention to affairs in Wales. That is inevitable. If you have big organisations based in London with a small bit of business which is Welshlanguage broadcasting or Welshlanguage media activity, it is at risk of not being looked at properly. The heart of this matter is that the problem S4C now faces is a political problem, it has political causes and it requires a political solution.

Q9 Alun Cairns : I certainly don’t think that it being a branch of the BBC in Cardiff is anyone’s will. The Secretary of State and the Minister have made it clear that that is not what they want to see. Could the collaboration between S4C and the BBC offer potential for increased efficiency, reduced duplication and help achieve economies of scale to overcome the reduced funding settlement?

Ron Jones: To some extent, when looking at cost savings, the partnership with the BBC has to be looked at, first of all, on the creative and then on the administrative and operational side. My own instinct, I must say, is that S4C has developed over recent years to think of itself as a large and significant organisation. To that extent, the costs associated with that are the costs associated with a large and significant organisation. I wouldn’t mind a quick side bet that S4C could run its operational side much more efficiently on a standalone basis and more cost effectively if it began again to think of itself as a small organisation providing a service.

Q10 Alun Cairns : Are you saying that it is bloated at the moment?

Ron Jones: I am, yes, and it has been, I think, for a number of years. So rather than go for the obvious solution, which is to share some of these facilities with the BBC, I think there is a much more imaginative way of doing this and taking back S4C to what it ought to be, which is an organisation that, culturally and operationally, is much closer to its people. It is, after all, if you look at it in terms of size, a relatively small organisation. I think some of the lessons that can be learnt from the private sector here would be very well used inside S4C. It never used to be like this. It used to be what I would call a "professionally amateur" organisation. It had that sort of feel of knowing what it was doing but doing it in a very lean way.

I think there are merits, as you will see from my evidence also, in taking S4C out of its present environment and putting it into a Welshspeaking area where the economic advantage you get from having those quality Welshlanguage jobs in those areas is further enhanced. So I think we can get several wins by looking at it in a slightly different fashion.

Q11 Alun Cairns : Thank you. Mr Davies, can S4C retain its operational independence?

Geraint Talfan Davies: If I can enlarge on what Ron Jones was saying just now, essentially, I think there are two options. You can either, as Ron suggests, locate S4C elsewhere or you can actually seek operational synergies with the BBC within Cardiff as it stands. Those synergies are certainly possible and they could be there on the whole question of transmission and technical playouts. There are also synergies in terms of audience research which could be sought. I think that those really do need to be explored.
The other issue, too, is that I do wonder sometimes whether S4C, even in Llanishen, has become rather isolated and whether it needs more contact with the rest of the broadcasting community. As somebody involved with the opera company, I am conscious of some of the benefits of having seven or eight resident companies within the Wales Millennium Centre. Conversations with people working in similar but different areas can be very valuable. You do have to ensure-and this has got to be the trick, I think-operational independence because there are three essential values to the independence of S4C. One is what you might call the intrinsic value of S4C as a broadcaster and what it does on television. There is, secondly, what you might call the instrumental benefits of S4C, the public value that it can deliver in educational terms and in economic terms. And then there is an institutional value to S4C. It is very important that Wales has a broadcasting organisation that has some genuine autonomy. When you look at what has happened to ITV Wales, being subsumed within one ITV company, and when you see the pressures that exist on BBC Wales as part of a larger BBC, having an autonomous organisation is important.

Q12 Alun Cairns : Thank you. I would say that relocation, potentially, at this stage, would only add costs and create uncertainty as the budget is being squeezed. But I don’t really want to focus on that point.

My final two questions are to all three of you. Do you think that the S4C Authority should co-operate and negotiate with the BBC Trust in order to strike that operational independence that we all want to see as well as editorial independence? Bearing in mind the likely deal with the BBC and S4C-hopefully that we can all agree to-do you think that it is a foolish move at this stage to seek to appoint a chief executive under this structure on a permanent contract, bearing in mind the likely arrangement with the BBC that may well come two years down the road?

Geraint Talfan Davies: I have had a view for some time, but I think the essential precondition of everything else is to sort out the question of the Authority. The S4C Authority has lost its authority and credibility. I don’t think it is in any shape to conduct the negotiation with the BBC currently. That has to be sorted out, first of all.

Q13 Alun Cairns : And the chief executive?

Q14 Chair: You don’t think they can stay-

Geraint Talfan Davies: I would have said that sorting out the Authority is a precondition for everything, including the chief executive.

Ron Jones: I agree entirely.

Ian Hargreaves: I agree and would add that I don’t think anyway this is a matter that can be settled between the BBC Trust and the S4C Authority. This is a subject of politics at the UK level and of political concern, though not mandate, at the National Assembly of Wales level. I think that it is the absence of political underpinning of these arrangements which has produced political and institutional failure in S4C.

Q15 Jonathan Edwards: Can I ask you a question on the funding arrangements? Mr Jones, in your testimony you said that a preferable arrangement would be for S4C’s funding to be topsliced at the UK Government stage rather than once the licence fee has been transmitted to the BBC. Can you explain why you think that is preferable?

Ron Jones: What we have at the moment is a coincidence, again, of a funding crisis and also a governance crisis. The funding crisis is being resolved in the sense that there is some clearer guidance now as to at least what the shortterm funding arrangements are going to be for Welshlanguage television. In the case of the governance issues, I don’t actually believe that the structures we presently have are fatally flawed. The present arrangements we have, with some fine tuning and in the hands of fresh people, could deliver what S4C was originally intended to deliver. We have a breakdown of governance here, not a breakdown in the governance structure.

I think there has been a problem at DCMS level in not ensuring that there was adequate investigation. The S4C Authority has clearly lost credibility for a whole variety of reasons over a period of time. Management issues were allowed to develop to a state which brings us to where we are today, but there was nothing fundamentally wrong with those structures. That organisation, as a public body, is as capable of ensuring value for money, in terms of service delivery, as is the BBC. I think this is why the four party political leaders in Wales were able to come to a unanimous view in terms of what they saw as the definition of an independent S4C going forward. People understand that we need more political involvement and I can’t stress too heavily what Ian has said: political involvement at Westminster and at Cardiff Bay level is a prerequisite, I think, to being able to deliver a solution here with or without the detailed involvement of the BBC.

Q16 Chair: Thank you very much, Mr Jones. I’m sorry to keep nudging it forward but we are a bit limited on time. Did you want to add anything, Mr Hargreaves?

Ian Hargreaves: No. Thank you.

Chair: Now Guto Bebb on the management.

Q17 Guto Bebb: Good morning. Certainly some of the comments you have already made have touched upon the question I am going to ask, but, in your view, how well or badly has S4C been governed and managed over the past five or six years?

Chair: Mr Jones?

Ron Jones: The evidence is there before our eyes.

Q18 Guto Bebb: In what way?

Ron Jones: I think that there has, over a period of years, been a reduction in the connection between S4C and its audience, there has been a reduction in the quality of the relationship between S4C and its suppliers and there has been almost a disconnect between S4C and the politicians to whom it ought to feel accountable, politicians it ought to be able to justify itself to. That comes down, I think, to a sense of hubris and insularity at both authority and management level which has been very unfortunate. Those of us working inside the industry have been aware of this developing over really quite a long period. This is not a recent problem.

Q19 Chair: Who do you blame for that, Mr Jones? Do you blame the board or the actual management or both for that?

Ron Jones: Both have to carry their part of the can, but, fundamentally, the authority is there to provide the underpinnings for management to deliver. So I think you can’t get away from the fact that the authority has lost control here.

Q20 Guto Bebb: I find your comments very interesting because, obviously, as a Welsh speaker, I’ve been reading the comments of your codirector in Welsh publications and nothing you say is reflected in what has been said by Angharad Mair in any public comments on the issue of S4C. From reading Angharad, you would be of the view that S4C was a very wellmanaged and very wellloved organisation, fully in contact with its audience.

Ron Jones: I am not sure that I read her comments in the same way. I think that she perhaps expresses her views with more passion than I do. I try to give a clinical, dispassionate view of where we are because I think the service is so important.

Geraint Talfan Davies: All organisations suffer if they are not subject to proper scrutiny and I think S4C has suffered from a conspiracy of silence for far too long. There has been a fear, and certainly a fear in Cardiff Bay to some extent, of being mature enough to take responsibility for the channel. When we look at arrangements going forward, I think you have to have the involvement of the Assembly Government in this, as well as perhaps the DCMS-there may be some shared arrangements-because we have to grow up and we have to bring S4C out into the fresh air and be prepared to discuss it.

Q21 Guto Bebb: I wouldn’t disagree with many of these comments. I’m just looking at the differences between what has been said publicly in Wales and what has been said this morning.

In terms of the problems with the management of S4C, would you say that there is some evidence that the current board has not been holding management to account over the past few years in the way that they should have been doing?

Ian Hargreaves: The way you put the question implies too simplistic a response. It is not a question of the board not holding the management to account. I think that the internal structure of the boards within S4C needs looking at. There are two boards and an authority and the machinery that exists at the moment is excessively complex.

I would go back to further reinforce this point. I have worked in Wales for the last 10 or 12 years, and I now live there, and it surprised me and took me quite a while to understand why every politician that I met, whether a Westminster politician in Wales or an Assembly politician, would quietly explain to me why nobody wanted to debate S4C.

Q22 Chair: What was the reason for that?

Ian Hargreaves: The reason for that is the dirty little secret of S4C having secure inflationlinked funding through the DCMS, which wasn’t paying very much attention to what was going on, and was "nice work when you can get it".

Q23 Chair: Mr Hargreaves, did you ever have the private conversations that I have had with senior S4C people over the years who have said that, privately, whatever may be hinted at in public, the last thing they wanted is the Assembly having oversight of them?

Ian Hargreaves: Yes. I think that there has been a strong but rather silent conspiracy to keep the Assembly out of this. There are many different ways of approaching the future of devolution. I was very struck this morning when I switched on the Today programme to find senior military figures in a fury about a programme on the BBC yesterday evening. I never wake up in Wales and hear a vivid discussion about what was on S4C yesterday. The subject has become too quiet. It cannot be healthy for a media company to be surrounded by such quiet.

Q24 Guto Bebb: The comments you are making obviously do raise a great deal of concern because, again, the strategic direction of S4C over the past few years has been seen as problematic, especially in terms of the economic impact of S4C on various parts of Wales. We have seen the demise of many television companies in the north-west. We have seen the loss of Barcud Derwen, which is obviously not entirely down to S4C, but certainly changes in the way the industry was structured have contributed to that issue. Yet, until this summer, there was very little public debate about these decisions which were being made by an organisation spending £100 million a year in Wales. So in terms of the strategic direction, first of all, do you think that the direction taken by S4C over the past few years was the correct one? Secondly, why do you think those decisions, being made on a commercial basis affecting jobs in Welshspeaking communities, were not challenged? Geraint Talfan Davies, perhaps?

Geraint Talfan Davies: I think Ron has rather more direct experience of the commissioning process than I do.

Ron Jones: I am not going to sit here defending some of the commissioning actions of recent years or indeed the walking away, almost, from the responsibility to ensure that the economic impact of their commissioning process is as great as possible. Mr Cairns earlier talked about the cost of making significant changes to S4C at the moment. Fortunately, we do actually have the commercial reserves which are available and my view, for what it is worth, is that we should be using some of that money to bring S4C back to provide some of the social engineering, the economic engineering, that was so clearly a part of its remit in the early days.

The sector in Wales producing programmes is extremely fragile, and I think North Wales has more experience of this than anywhere else. You can’t, in a very small country, have an entirely free market in programme production. There has to be an element of the broadcaster. I think this is something that the BBC has not been doing terribly well over the last quarter of a century either, in terms of ensuring that this finite capacity we have for producing television programmes, creative content generally, is managed in such a way as to ensure that it is both credible and sustainable. I do see, in North Wales particularly, that there is a need to provide some direct S4C support to ensure that the industry can be brought back to its previous vibrancy.

Chair: Thank you. Can I bring in Owen Smith and then Mark Williams, please?

Q25 Owen Smith: First, may I apologise, gentlemen, for being late. I was speaking at a committee down the corridor.

I have two questions for Geraint Talfan Davies. The first is that you were very clear about the direction of travel that ought to be undertaken in respect of responsibility for managing S4C and to whom it ought to be accountable, that is, the Assembly. What are the implications of that for BBC Wales?

Secondly, one of the things that has been very clear in the recent debate is the lack of co-ordination and co-operation that there has been between BBC Wales and S4C over a very long period-10 years since a properly coproduced programme, and bidding against one another for sports rights. Hasn’t the BBC, to a certain extent, been complicit in the silence around S4C?

Geraint Talfan Davies: I think it has been extremely difficult. One of the things you see in the dynamics of broadcasting, certainly if you are living within the BBC in Wales, is that you get a pot of money from London and one of the tradeoffs you have to make is between what you are going to spend on Welshlanguage programmes and what you have to spend on Englishlanguage programmes. I know, for example, during the 1990s, when I was Controller of BBC Wales, that the spend on Englishlanguage programmes had declined. The only way we had of bringing that up to a reasonably healthy level was adjusting the balance with the Welsh language spend.

What you see at the minute, and I think where we need to bring pressure from the BBC, is that this has put the BBC Wales management in an impossible position. The BBC licence fee has been increasing during this period, so it should have been possible, if you accord the right degree of priority to the services in Wales, not to have this tradeoff between one language and another. I think we have to ensure, in the funding arrangements going forward and suddenly finding another £70-odd million from the licence fee coming into Wales, that that is not used as another reason not to invest in the Englishlanguage service. There is a problem there and that is why I think it is very, very important that this money is kept quite separate from the rest of the funding of BBC services. That has to be very clear. S4C has to be statutorily based, but I think the funding has to have a political involvement in the end.

Q26 Owen Smith: I follow. I agree wholeheartedly with your point, and I see a very real danger that you could see money being shaved off the funding for Englishlanguage programmes in Wales, but what are the implications of that for further synergies in terms of operations and infrastructure for broadcasting between S4C and BBC Wales? Won’t that inevitably lead to a bleeding together of those budgets?

Geraint Talfan Davies: I don’t think it need be that way at all. I don’t think it is impossible to structure things so that you get a certain clarity of costs on both sides of the fence. But you have to keep those funding streams clear. The autonomy of S4C has to be clear. It has to be an authority that is based in statute. It has to have, I think, a funding settlement that lasts for the whole of a licencefee period and is not subject to prioritisation by BBC management. That can be done. Whether, in the long run, this raises questions about the structures of the BBC-I have argued in the past that the structures of the BBC need to be brought up to date with the constitutional arrangements in the country-is another issue.

Chair: Thank you, Mr Davies. We had better leave the BBC for another time, I think. Can I bring in Mark Williams?

Q27 Mr Williams: I want to pick up on what Mr Jones was saying in terms of the independent production sector, something that was recognised by a report of this Committee in the last Parliament on globalisation and the great success of the independent production sector in Wales. You alluded to the balance to be struck between supporting those independent companies and the commercial realities of those commercial companies. Where is that balance going to be struck? We are always given wonderful questions to ask here, and I’m not sure I always agree with them, but do independent producers in Wales have a right to survival, courtesy of the taxpayer? It’s not a question the gist of which I agree with, but-

Ron Jones: Independent companies don’t have a right to survive. But the Welsh language has a right to survive. Welshlanguage television production has to come from a relatively small gene pool, and we are talking about a limited number of Welsh speakers that can provide the service. We are talking, therefore, about a limited number of companies, ultimately, that can provide the service. S4C has to accept-and I think it did for many, many years-that it was part of its role to ensure that that provision of service into the future was secure.

I accept there is a very fine line between that and the dependency culture and I would hate to see us having parts of the sector falling into that dependency culture, but that is the reality we face. We cannot have an entirely open and free market on Welshlanguage television. There aren’t enough people to provide it. Ian has done a lot of work in this area.

Ian Hargreaves: I don’t think anybody thinks that they have a right to exist at the will of the taxpayer. The facts are that there are a number of independent production companies in Wales which are entirely dependent for their existence on S4C. There are other independent companies in Wales-Ron runs the biggest of them-which have got very, very substantial business interests outside Wales. They, therefore, represent a success for the creative industries aspect of the investment in S4C which needs to deliver economic added value to Wales as well as supporting the cultural base of the production industry. So the Welsh independent production sector is a fragile creation, but it is very, very important and its transferable skills into the digital side of media are very, very important for the future.

Q28 Mr Williams: I applaud very much what you have been saying, but has there been a preferential policy for larger suppliers as opposed to smaller ones? We have had figures that S4C used to use 80 independent production companies and it now uses 32. Many of those are important concentrations in the north-west and west of Wales. Has there been a preferential policy?

Ian Hargreaves: Yes, there has. It was an explicit policy, and there’s an explicit and clear rationale for it, to try to build on the strongest parts. It is a little bit easy now for people to say, "Oh, that was terrible." I think that the decisions made under that heading were made for intelligent reasons and in good faith, but no approach has a perfect set of outcomes.

Q29 Mr Williams: Very finally, with regard to the cuts to the S4C funding, what are the implications on the independent production companies going to be?

Ian Hargreaves: They are going to be negative. Bankruptcies and insolvencies have already been referred to. There will be more.

Chair: Can I bring in Jonathan Edwards, please?

Q30 Jonathan Edwards: Again, this is to Professor Hargreaves. Obviously, S4C has been a very important economic driver over the 28 years of its existence. Looking at the preferred government model for the future, are there any economic concerns of which we should be aware?

Ian Hargreaves: Yes. I think there are significant economic concerns. The Assembly Government’s new economic development programme has identified creative industries as one of the half dozen strategic areas of importance for the Welsh economy. One of the legacy strengths that Wales has in creative industries arises from the investment that has been made in the independent broadcasting sector. Where it is working best is turning into an independent multimedia industry, and, frankly, if the bottom is taken out of that, Wales will lose one of its relatively few advantages compared with other nations and regions of the UK, and indeed other parts of Europe. So it is of firstrate economic importance for Wales as well as being of great cultural significance.

Q31 Karen Lumley: I think I know Mr Davies’ answer to the question, but I’m quite keen to know whether you think that the S4C powers should be governed from Whitehall or from the Assembly. If you do think that they should be governed from the Assembly, what mechanisms will need to be put in place to make sure that we are actually moving forward?

Geraint Talfan Davies: It is absolutely clear, I think, on a whole range of broadcasting issues, not just S4C, that the influence that Wales has been able to bring to bear on a lot of decisions has not been adequate. I think in the case of S4C, under the Communications Act, there was a need for a review of S4C to be carried out by Ofcom, I believe. That has not happened. I think there is no doubt there is neither the knowledge nor the will within a Londonbased department, quite naturally, with a lot of other things on its plate, to give this institution, which is important for us, the requisite degree of attention. It is only people on the ground in Wales who are going to understand the relationship between S4C and the rest of the language policy and the economic policy and so on. So I think the Assembly Government and the Assembly have to be involved in deciding these things.

In terms of precise mechanisms, I believe there is a need for a major review, commissioned jointly by the DCMS and the Assembly Government, to work out the wiring and the plumbing between four organisations, if you like, the BBC, S4C, DCMS, the Assembly Government, and of course you even have a fifth in Ofcom.

Chair: Thank you. Karen, do you want to come back on that at all?

Q32 Karen Lumley: Yes. How is it then that both central Government and the devolved Government have let S4C get into this state?

Ron Jones: I think S4C has been quite happy to live in that gap in the middle for some years. The Welsh language itself is, as we all know, fragile. It is showing some signs of strengthening, but ultimately the language remains in a fragile state. It seems to me inevitable that S4C has a very significant part to play in supporting and helping to develop the Welsh language. So regardless of what one’s views might be on devolution of broadcasting, the fact that it plays such a key part in Welshlanguage planning leads me to the conclusion that there has to be an involvement from Cardiff Bay as well as from Westminster, in terms of monitoring its activities and ensuring it delivers what I think we all need.

Q33 Karen Lumley: If you are saying that both should be running it together, is that not how perhaps we have allowed S4C to slip down the middle?

Ron Jones: I don’t think that need be the case. I think there are models which would allow much closer involvement by Cardiff Bay and Westminster in the S4C Authority. It would help if some of the reviews that should have been undertaken had been undertaken. I think that it is possible, even with existing structures, to get much more transparency into S4C’s activities, and transparency is good. It makes organisations do the things that really matter.

Q34 Alun Cairns : Mr Davies, can I come back on your point about the disengagement of the Westminster Government with S4C over recent years? Is that a judgment on the last administration? Do you not think that this Government deserves an opportunity to reengage with its review, with the changes and with the influence of the BBC that it wants to bring about?

Geraint Talfan Davies: No, I don’t think it has got anything do with the colour of Government.

Q35 Alun Cairns : No, but it’s a fact over recent years, from what you have said, isn’t it?

Geraint Talfan Davies: I am saying that whatever Government would be in place, a Londonbased department with a whole host of other issues on its plate, with substantial funding across all kinds of English bodies and so on, is not going to find the time and will not have the knowledge to deal with the S4C issue effectively. So I think you have got to play the Assembly Government into this. There has been a fear of doing that over recent years. A large part of the fear would be having to take the cost of S4C within the Barnett formula. Funding it out of the licence fee actually removes that issue. I think it makes the devolving of some responsibility much easier, but I would stress that when you talk about devolving responsibilities around broadcasting, it is not an allornothing issue. Responsibilities for broadcasting, I think, will always have to be shared between Cardiff and London. There is a legitimate place for the DCMS because it is crucial to the settlement of the licence fee.

Q36 Chair: Can I allow myself one then, Mr Davies? If, on a scale of 1 to 5, 1 denoted the status quo with DCMS calling the shots and 5 denoted complete devolution of S4C-and perhaps other broadcasting-to the Welsh Assembly, where would you put yourself on that scale? I would put those questions to Mr Jones and Mr Hargreaves as well.

Geraint Talfan Davies: On 1 to 5, I would probably put myself around 4, I think.

Chair: So 4 or 5?

Ron Jones: Yes, I’m in pretty much the same place. I can’t see a future where it sits comfortably in just the one location.

Q37 Chair: Then I will ask one more question. If you start doing that, isn’t there a danger that someone will say, "Fine. If it is going to be funded out of the licence fee it should be Wales funding itself out of the Welsh proportion of the licence fee"? I was doing some figures last night and-this is very rough-there are 1.2 million households in Wales. If, say, a million of them have got a TV licence it would bring in something like, I think, £150 million. If S4C is going to require between £80 million and £100 million, that doesn’t leave a lot of money to buy in all the Englishlanguage services that people want. Do you see the point I am making? Otherwise we would be dependent on English taxpayers and English licencefee payers for our output of-

Geraint Talfan Davies: All I would say to that, Chairman, is that the Welsh language is one of the most important cultural artefacts for Britain. It is a huge cultural asset, I think, for the whole of these islands. It is fundamental to the history of these islands and I don’t think that its preservation should rest solely on the Welsh public.

Chair: I happen to agree with you, Mr Davies, but I am not sure whether English TV licencepayers would necessarily share our enthusiasm. Can I bring in Guto Bebb while we ponder this?

Q38 Guto Bebb: I do think that this discussion is quite interesting. Obviously, it is looking at the fact that, over the past 10 or 12 years, we have had a devolved administration, quite often of the same political party as the one governing in London, and yet there have been no moves towards devolving S4C in any way, shape or form. Do you think the opportunity exists now to look at it again because of the fact that we are looking, as a Government, at changing the funding formula for S4C? In the same way, do you think, therefore, that the point made by the Chairman in relation to the BBC licence fee creates in itself similar problems to the Barnett issues which have been whispered in the background over the past 10 years as reasons not to devolve S4C?

Geraint Talfan Davies: I’m not sure as to the precise question there. Let’s go back to the beginning of S4C. When it was first created, it was an extraordinarily complex arrangement. People thought at the time, "This cannot possibly work." I think it was Willie Whitelaw’s phrase that, "Good chaps can make anything work", and they did. I am not suggesting that, going forward, we should rest on the virtues of "good chaps"-it would be highly inappropriate-but I think that you can find a way of making this collaboration between S4C and the BBC work in a way that can preserve the independence and can give you funding stability through the licence fee. But you have got to work through the detail and, with due respect, I don’t think even this Committee will be able to work through detailed arrangements. That is why I think you need an independent review with a lot of expertise on it which can tackle this issue in very considerable detail.

Q39 Guto Bebb: Very quickly on that specific point, in terms of the complexity, do you think that the current authority is in a position to deal with the complexities?

Geraint Talfan Davies: No. As I said before, I think-

Chair: Thank you. Right. That is a good answer.

Geraint Talfan Davies: -change is happening there.

Chair: We like that. Thank you.

Q40 Owen Smith: Continuing precisely that point, I sense you feel that, whilst there is a significant amount of agreement both in the Committee and in civil society in Wales that there needs to be reform of S4C, the way in which it has been proposed to date by the Government, effectively creating a wholly owned but arm’s length subsidiary under the aegis of the BBC, is a recipe for confusion, both in terms of the governance structures and indeed the funding structures.

Geraint Talfan Davies: I don’t think that the structure, as set out in the Secretary of State’s letter to the BBC, is a workable structure. I don’t think it is a desirable structure. It looks to me cumbersome and expensive. I think you can have a much simpler structure, and, personally, I would tend to want to go back to the situation in the 1990s where you had BBC representation on an S4C Authority.

Q41 Chair: Thank you. Mr Jones and Mr Hargreaves, very quickly: the current structure or something different?

Ron Jones: I think it is a unique opportunity at the moment for us to find structures that everyone is happy with. The fact that the political parties in Wales, at partyleader level, have agreed on a way forward tells me that somewhere out there is a consensus that it can be made to work.

Ian Hargreaves: Just to reinforce that, that is unprecedented. The statement made in that letter of the four party leaders is the political breakthrough that is needed to convince you that a solution is available.

Chair: Thank you very much. I will have to push on.

Q42 Mrs James: Just to comment, what I am hearing here is that for years the authority and the management of S4C have been flying below the radar, and they have been quite happy in that position, just below the radar. This is not a question of blaming Governments of whatever political colour, because the language is a very emotive subject. I want S4C to be as important to people who live in Hirwaun who are nonWelsh speaking as it is to people who live in Rhosllanerchrhugog in North Wales. It has to be important. You have spoken about a review. How urgent is that review and what would you like that review to be covering?

Ron Jones: In an ideal environment the review would have been there before the funding settlement as well because a needsbased analysis would always be the preference. But, where we are now, we need the review urgently because that review ought to inform the decision on structure. I think if we had a change in leadership in the authority, so that conversations could happen again between DCMS and the authority at a more civilised level, that review would give us the right signposts to put in place a structure which could last for another 20 years. That is what I think we ought to aim to do rather than just patch things up for the short term. It is too important for that.

Ian Hargreaves: That was the shortcoming of the deal at midnight on the licence fee with regard to S4C. It envisaged a very speedy process knocked together in a short passage of correspondence. What is needed is a serious review. It does not have to take for ever, but it needs a serious review urgently got on with now based on the emerging political consensus around this in Wales. Then, to be honest, you are home and dry.

Geraint Talfan Davies: I agree.

Q43 Owen Smith: I have a very simple question. Is it a good idea for S4C to be seeking to appoint a chief executive right now?

Alun Cairns : That one has been asked.

Q44 Owen Smith: What was the answer?

Ron Jones : No.

Owen Smith: I will read it in the transcript.

Chair: Okay. I am going to have to gently and politely get everyone to answer and ask questions more quickly, including myself now, or we are not going to get through all this. Jonathan Edwards has a number of questions.

Q45 Jonathan Edwards: Just quickly on the remit, do you think it is appropriate in the current climate?

Ron Jones: The remit is so widely drawn that I don’t think it can ever be argued that it’s not fulfilling its remit. I think a fundamental change is required, as I indicated, with much more focus on what is public service broadcasting in the new environment, new online services and a closer link between education and the children’s service. That, for me, is a fundamentally different remit from the present one, and I am for that.

Chair: Thank you. Anyone else on that? No.

Q46 Susan Elan Jones: One of the things that has come out of this is the fact that the context is quite different from what it was in 1982 when there were four channels. Now, if you include Sky, you are at about 500 channels, so surely one of the key factors is that there are very few programmes that have the level of viewing that any major programme did in the early 1980s. If we consider that, what do you feel about some of these calls for having Englishlanguage content dubbed programmes? Is this a sort of YouTube home video cheap excuse, or is there any merit in it whatsoever? You can probably tell from my question that I don’t really think there is.

Ian Hargreaves: I see Ron is inviting me to walk into that particular dragon’s den. There is no doubt at all that there is much to be optimistic about around the future of S4C in thinking about the place of online media. The capability of online media in community building, community engagement and knowing your audience is fabulously relevant for S4C. Does that mean I want to advocate precisely what you are referring to there? I don’t think I do want to advocate that.

Ron Jones: There’s a good linguistic reason why I think your prejudice is correct. Typically, most of the programmes you would want to subtitle are in English. That’s where the great bulk of international programming is, and you can’t, in all seriousness, subtitle an English programme in Wales into Welsh. It is virtually insulting, I think, to provide that.

Q47 Chair: Why is that, Mr Jones?

Geraint Talfan Davies: I’m sorry, that doesn’t mean to say that you can’t actually-

Q48 Susan Elan Jones : It’s been done.

Geraint Talfan Davies: -commission some programming that can be available in both languages. I can think back to the 1990s and there was a very substantial amount of animation commissioned. That is very easily done, not just in one language but in several. So there are things that you can do, but simply dubbing English language stuff into Welsh is not really an answer.

Q49 Chair: My wife is from Eastern Europe. We watch films all the time with subtitles and which have been dubbed. Why wouldn’t that work? Why couldn’t we buy in films from Germany or France or other countries like that and then dub them into Welsh rather than English?

Ron Jones: S4C, to be fair to them, did some work on this in the early and mid1990s when they experimented with such content bought in from overseas. They found that their experience mirrored that which had been found by Englishlanguage broadcasters doing the same thing, that there was something uniquely British about not liking subtitles. They bought in about a dozen films, I seem to remember, which they experimented on. They gave it a good shot and the content was good, but Welsh speakers, just like English speakers in England, wouldn’t have it.

Q50 Susan Elan Jones: I was very interested to see the submission we have here from Urdd Gobaith Cymru. One of the points they make in it is that one of the important factors of S4C is that ensuring that television is available in Welsh ensures that the Welsh language is a "normal language". I think that speaks into a context where we don’t have that many wholly Welshspeaking families and wholly Welshspeaking communities who never move out of Wales any more. I realise there is a fair nonWelsh-speaking audience who do watch S4C programmes subtitled, and I would be grateful if you could comment a bit on that, but also in terms of the diaspora population of Welsh people who, at some stage in their lives, may live outside Wales and may bring up children outside Wales but with a view to coming back to Wales and, hopefully, integrating those children into Welshmedium education.

Ron Jones: I think it’s a fabulously complex question because even inside Wales linguistic changes have led to a position where there are fewer allWelshspeaking families: you have one generation, one parent, just the children. Satisfying that audience with a traditional television channel is not easy. I think it is one of the great challenges for the next several years. If I had the answer to it I would give it to you, but I genuinely think it is one of the most difficult creative challenges we have of how we satisfy people in that environment. It may be that in some years’ time, when everyone is watching content independently inside families, this becomes easier, but at the moment-and this runs also to some of the audience figures we see for S4C-it is a huge issue of how you handle that linguistic difference.

The diaspora, I think, is less of an issue. Funnily enough, we met some of the diaspora outside who have come here to hear the Committee attending today. Diaspora tend to find the programmes they want because it means something to them. I think that service is very valuable. I have met people all over the world who watch S4C from their part of the world. It is inside Wales that the linguistic differences, I think, are the greater challenge.

Chair: Thank you very much, Mr Jones.

Q51 Stuart Andrew: What would you say are the realistic audience targets for S4C and to what extent do you think it actually meets them? Furthermore, what is the minimum audience reach that you think is needed to justify S4C’s existence?

Ron Jones: I think the honest answer to that is that no one knows. One of the really disturbing things about S4C’s use of this data over several years is that everyone knows the figures are wrong-not that they are too high or too low, just that they are wrong. I think that as part of the investigation into S4C going forward we need some serious research into what works with which audience and with what numbers.

I first complained about inaccurate audience numbers to S4C back in the early 1990s when I was complaining that the audience figures being shown for some of our programmes were too high. They were irrationally high. If you look back at the BARB information we get, realistically, that BARB information is not designed for this purpose. It doesn’t give you correct numbers. There are 309 Welsh speakers on the panel. Spread that across the linguistic differences inside families, across the geography of Wales, and you are going to end up with very dangerous numbers. I can give you several examples of programmes we have produced, some where the audience we know is too low and some, frankly, where it is too high. For example, we have an afternoon magazine programme, which is not subtitled because it is live, where the figures for the last couple of years have shown the majority of viewers are English speaking. You just know intuitively that is not right. With a recent series of programmes we tested the audience figures by having an onscreen competition for five nights, and if the BARB numbers were right it meant that one in four households watching our programmes were taking part in the competition. The experience across UK broadcasting is that around 1% take part. Again, don’t ask me what the numbers are and what they ought to be as I have genuinely no idea, but I can tell you they are wrong. This is such a key part of finding out the truth.

Q52 Chair: You wouldn’t agree with one of the suggestions in S4C’s response to DCMS in which they said that one way to cut money would be to reduce the BARB boost panel then?

Ron Jones: I suspect that BARB itself is not fit for purpose for this and I suspect we’ll end up with a conclusion which is that we find something that is different to BARB to make an assessment of what works.

Chair: Thank you. Do you have any further questions?

Q53 Stuart Andrew: How would you say S4C is perceived by the public, and particularly the quality of the production on the programmes that it shows?

Ron Jones: I couldn’t answer that in very simple terms. I can tell you that for many of our programmes, which obviously we get a more direct response for, we get a very positive response. People, on the whole, tend to enjoy them. They regard them as valuable. I have no reason to believe that other companies are in a different position. I just think that the empirical evidence in demonstration of that is, again, just absent. One is relying on intuition and what one knows of one’s audience, which is not enough really.

Geraint Talfan Davies: Clearly, public perceptions of S4C vary considerably, from those who are completely committed to it and dedicated watchers and so on to those who set it aside. But I think there has been a very general agreement that S4C, as an institution, as a channel, as an assistance to the language, is an asset and that it is not an asset that we should allow to slip away or slip entirely into the grasp of another organisation.

Q54 Chair: I am drawing this to a close. If anyone has any further questions on any aspects, I would welcome them. Finally, could I ask you whether you think it is right that S4C should be carrying out other activities, some of which have been quite profitable and some of which have not? A quick answer to that would be appreciated.

Ron Jones: No, it should not. It should stay close to what its genuine remit is.

Geraint Talfan Davies: I agree that it should stick close to its remit, but the Secretary of State, I think, has said that it should retain its commercial freedom. So I wouldn’t necessarily want to see it constrained beyond the freedoms that it has now.

Ron Jones: I think there is a real issue here. I don’t think you can have an organisation that ought to be committed to providing a Welsh-language service choosing to redefine that core purpose in order to gain commercial advantage elsewhere. If it can do both, that’s great. But I suspect, in practice, it can’t.

Q55 Alun Cairns : Can I put it to you, Mr Jones, that the Welsh-language viewers benefited hugely from the gains that have been made from some of these activities because of enhanced investment thereafter in their programming, maybe in your company and others?

Ron Jones: Possibly, but then again, if you look at the major commercial revenues they have created over the last several years-the commercial reserves they have arising from the sale of SDN-I don’t think that is the sort of operation they ought to go into ever again.

Geraint Talfan Davies: I think there is a problem area. If you take, say, the issue of bandwidth and HD which has come up-S4C, I think, has acquired some HD bandwidth-is that a commercial issue or is the use of bandwidth for public service broadcasting in Wales a question of the proper distribution of public assets? I think some of these things are not clear cut.

Q56 Owen Smith: On that precise point, Mr Davies, do you think that is one of the areas where you could develop the synergy between the BBC in Wales and S4C? As you say, S4C has HD bandwidth. The BBC in Wales does not. Is that an area where there could be further collaboration?

Geraint Talfan Davies: I think that is certainly the case. What you are going to see in Wales in terms of the BBC’s services in the next few years is that BBC1 is going to be broadcasting in high definition without any optout facility. I think the same will be the case on BBC2. So there is a major issue, I think, for the whole of Welsh broadcasting as to how we actually use the bandwidth that is available.

Q57 Guto Bebb: I’m very sorry to do this, but can I drag you back to the BARB figures? I accept the point that the BARB figures are not reliable. I think the sample is too small and I think there is a big issue to be discussed there. But is it the case that S4C use those figures in terms of assessing the success or otherwise of the programmes that they actually broadcast?

Ron Jones: They are wedded to them.

Q58 Guto Bebb: So that is the case?

Ron Jones: Yes. They are wedded to them.

Q59 Guto Bebb: So there are decisions made about commissioning on the basis of the figures that BARB supplies?

Ron Jones: Certainly over the last two years that has increased in intensity, where the BARB viewing figures are the ultimate assessor of whether a programme is working or not.

Q60 Chair: There is one elephant in the room, which we are going to have to be very careful about, and I will just ask you this in simple terms. Without in any way going into the reasons, the specifics-and I think there is a tribunal coming-do you think that we were entitled to more of an explanation from the board as to why the chief executive left?

Ron Jones: S4C is a public organisation. You are democratically elected. I think it is insulting that you have not been given an adequate response.

Chair: Thank you very much indeed, gentlemen. If you have nothing further to add, I thought that was a most informative and interesting session. Thank you.