To be published as HC 743-v




Culture, Media and Sport Committee

Support for the creative economy

Tuesday 8 January 2013

Professor Ian Hargreaves, Richard Hooper and Peter Jenner

Professor Stuart Bartholomew, Professor Geoffrey Crossick, CATHERINE LARGE and Dinah Caine

Evidence heard in Public Questions 389 - 452



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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 8 January 2013

Members present:

Mr John Whittingdale (Chair)

Mr Ben Bradshaw

Angie Bray

Conor Burns

Tracey Crouch

Philip Davies

Paul Farrelly

Steve Rotheram

Mr Adrian Sanders

Jim Sheridan

Mr Gerry Sutcliffe


Examination of Witnesses

Witnesses: Professor Ian Hargreaves, Professor of Digital Economy, Cardiff University, Richard Hooper, Managing Partner, Hooper Communications, and Peter Jenner, Visiting Professor, University of Hertfordshire and Consultant to the World Intellectual Property Organisation, gave evidence.

Q389 Chair: Good morning. This is a further session of the Committee’s inquiry into support for the creative economy. I would like to welcome for our first session Professor Ian Hargreaves, who is the Professor of Digital Economy at Cardiff University and author of the Hargreaves Report; Richard Hooper, the Managing Partner of Hooper Communications, who is doing a review into digital copyright exchange; and Peter Jenner, Visiting Professor at the University of Hertfordshire.

Before we begin, I refer people to my entry in the register-I am a non-executive director of Audio Network plc. Adrian Sanders is going to start.

Mr Sanders: If I could ask a fairly general question, is copyright fit for purpose in the digital age?

Professor Hargreaves: Not as it currently stands, no.

Q390 Mr Sanders: Can you explain why?

Professor Hargreaves: It is because in a number of respects it has lost contact with the way that consumers actually behave. It has therefore become confusing and detrimental to the ability to enforce it where it needs to be enforced.

Q391 Mr Sanders: Is that right across the board or is there a particular group of transactions where it is less fit for purpose than others? Is there a case for its remaining somewhere within the system?

Professor Hargreaves: The disruption caused to the copyright system by the internet has affected different parts of the creative industries at different stages in time. The music industry was most grievously disrupted early. My own industry, the news industry, has been pretty seriously disrupted.

The film industry has yet to experience the full scale of disruption that the internet entails. It is working its way through the system, but I wouldn’t be able to reason-which I think perhaps lies in the premise of your question-to say, "Here is an aspect of copyright that does not need to be at least re-discussed or re-examined in the light of these changes that are taking place", because the technology that is changing runs not only right across the creative industries. As we know, it runs right across the economy, which is why a few odd souls like myself have the label "digital economy" attached to what they do.

Q392 Mr Sanders: Is it therefore possible to find a mechanism that addresses that technological change ahead of its pace?

Professor Hargreaves: I think to address technological change ahead of its pace would be dreamily ambitious. To catch up with it as best we can is realistic and achievable, and I think the UK has failed to do that for a number of reasons connected with the context of events in the last five years.

Q393 Mr Sanders: Could I ask the other two the question?

Richard Hooper: The question that I looked at is just slightly different from the one you asked. You said, "Is copyright fit for purpose?" which I would understand to be, "Is the law fit for purpose?" To a large extent, I think Professor Hargreaves has been involved with-and, of course, there is a lot of progress with-exceptions and so on. The question that I looked at was, "Is copyright licensing fit for purpose?"-in other words, the processes and the organisations.

My answer to your question, if you asked it that way, would be, yes, in places fine, but there is a lot of work still to be done by the industries in terms of both the way that they license and also the organisational structure.

Peter Jenner: My position essentially is that copyright was developed during the 18th, 19th and 20th centuries in response to technological developments. The attempt to shoehorn copyright into a digital environment has a fundamental problem, because copyright is about trying to control copying and a digital environment is entirely about copying; it is a series of copying. Everything is being copied all the time in the digital environment.

So I think in a sense you have to say controlling the copying of records and controlling the copying of books is a viable possibility because of the huge industrial structures that are involved around mass production. There is a whole economic basis then in terms of pricing and the issue of marginal costing and pricing and all the rest of it. When you put all that together in a digital environment that is giving copying machinery to everyone at a very, very low cost, is very, very economic and has the ability to transfer and communicate those copies to everybody, it is impossible to try to control it.

My view is that we have to try to look at reality and look at the underlying reason for copyright, which is to try to ensure that the people who create works get paid. It is not the 11th commandment that there should be copyright. It is something that we developed for functional reasons and in a digital world I think we have to radically look at how we approach those issues.

To that point, I will finish by saying that the way we dealt with radio and TV is, I think, a model we should be looking at much more closely than looking at retail. It seems to me the record industry particularly has been concerned with the analogy with retail, and I think we should be looking at the analogy much more with radio and TV. In those contexts, there are blanket licences, there are simple, single payments to people and there is a structure that works and there is remarkably little difficulty with.

Q394 Chair: Professor Hargreaves, in your report you propose a number of changes to copyright law, and you provided an estimate that, taken together, this could provide a boost of nearly £8 billion to the British economy. Can you tell us how that figure was derived?

Professor Hargreaves: Yes. I think the figure was a range of between £5.5 billion and £7.9 billion, if I recall the figures correctly, and I also recall what I said in the review in referring to these figures. I said, "We acknowledge the high degree of uncertainty inherent in projections of this sort. They require assumptions to be made, not only about the specific parts of the economy that are being discussed; it also requires assumptions to be made about the level of economic growth in the rest of the economy and a number of other factors."

So those were the figures that came out of the small group of economists that was asked to work on this and that presented these numbers. I regarded those numbers as being sufficiently useful to be included in the review, with that health warning set alongside them.

Q395 Chair: You will be aware that there has been some scepticism expressed about some of the figures. To take one example, the private copying exception, which many people think is simply going to recognise what everybody is doing already, nevertheless you think could lead to £2 billion extra of growth. Can you say how you think £2 billion is going to come about from bringing in the private copying exception?

Professor Hargreaves: I imagine that what the economists thought was that if you go from a situation where pretty well most people in the country are operating in a sort of grey zone of unclarity-actually, it is not really all that unclear. It is illegal to do what certainly I do frequently and what many others, I think, do frequently. We all know what the story is-you transfer the file from the CD to the portable player. The ending of that uncertainty might be thought to increase confidence in some way about the markets involved, the straightening out of the consumer’s position in the whole copyright question.

We know that consumers are confused. We have it up to and including the most recent data that has been produced by Ofcom under the heading of its responsibilities for trying to provide a satisfactory evidence base for the implementation of the new DEA powers. I think that is an interesting place to look for evidence, but those are the kinds of issues that arise.

But I have to say that I am not an economist; I did not conduct the economic impact assessment personally and in detail. I relied on a team of economists and I stand by my judgment then that I thought that, overall, the estimate that they made was not absurd but it needed to be taken subject to debate and further discussion, which it has been.

The question that I have put back to the many people who have challenged me about these numbers-because I have been challenged on them repeatedly over the month-is, "Would you seriously wish to counter-argue that the number here would be a negative rather than a positive? Are we having a discussion about how big the quantum is?" I think we are having a discussion about how big the quantum is and that is where the legitimate difference of view arises. I do not think it is possible to argue convincingly that you would substitute a negative.

Q396 Chair: I completely understand your point about confusion; there is no question there is massive confusion, but I am not sure it follows to say that just because you would not argue that it is going to be a negative somehow justifies saying-£2 billion is a huge sum, and I don’t quite see what it is that is going to start happening that is not happening now through the introduction of a private copying exception that is going to generate £2 billion.

Professor Hargreaves: It might increase confidence in the market. I don’t know.

Q397 Chair: Which market? Are people going to go out and buy more CDs?

Professor Hargreaves: Well, I don’t know-perhaps there are people who feel a little inhibited in the way that they operate in their own music collection or whatever by the confusion that exists. I think that that is a real issue. If you look at the most recent Ofcom data, over half the people surveyed by Ofcom report that they are sometimes confused about what is an illegal and what is a legal action. We have got ourselves into a situation in copyright where the public is confused.

Q398 Chair: I agree with you about confusion; I don’t see how removing confusion leads to £2 billion. I don’t see how it possibly can.

Professor Hargreaves: Economists put hard numbers on things, Chairman, as you very well know. Is that an incontestable hard number? No. I didn’t think it was when we published it and I don’t think it is now. Do I think that another hard number would be incontestably right either? No, I don’t. I think it is very difficult-in fact, I think it is impossible-to come up with an incontestably robust number when you are making a judgment based on assumptions about what is going to happen in a period, in the case of the initial economic impact review, of up to 2020, which is quite a long period of time.

We see it in the discussion about the economy day in, day out-judgments between economists vary and contend with each other. It is what you expect. But these were estimates that were produced in good faith by economists who have expertise in this field.

Richard Hooper: One of the things that the work I did on copyright licensing has established clearly over the last year is that the digital age and the analogue age are very different in terms of the number of transactions for licences. In the analogue age, you have a relatively low volume of high monetary value transactions. JK Rowling rocks up at the front door of Time Warner to do a deal on Harry Potter. That is a big deal-there aren’t many of them-huge amounts of money, large numbers of lawyers, endless contracts.

We are not talking about that in the copyright licensing and in the hub. We are talking about the fact that in the digital age there is a high volume of low monetary cost transactions. Your wishing to put music on your wedding video is a small transaction. At the moment, a lot of that is done with copyright infringement. I think what we established is that the pie will be significantly larger because we will pick up a lot of high volume, low monetary transactions that at the moment are either copyright infringement or a loss, because the copyright licensing systems are too difficult to use for you and I and therefore we don’t bother.

Q399 Mr Bradshaw: Professor Hargreaves, can you clarify whether this is a net figure, a net benefit, that you are talking about?

Professor Hargreaves: Which figure are we discussing?

Mr Bradshaw: The economic benefit that you referred to.

Professor Hargreaves: These are figures in that assessment that gauge the total economic benefit arising from whatever the line item is up to 2020. The figures that the Government published just before Christmas, when it announced its specific proposals on copyright exceptions, are total net present value figures over 10 years, which is a substantially different way of presenting the numbers and thinking about them.

Q400 Mr Bradshaw: You said that no one would contest that it could be a negative, but that is what some of the creative industries have been contesting with us-that any assault on copyright is going to lead to losses to the creative industries.

Professor Hargreaves: If the argument from the people that you are talking about is that the destruction of copyright would cause economic loss to the creative industries, I would be the first to agree with them. The point about the reforms that I propose, which the Government has picked up in some measure, is that it will strengthen the copyright regime, it will make it more effective, it will make it more plausible and accepted by consumers, it will make it more actionable and it will enable enforcement to focus on the parts of this that really do do economic damage to the creative industries, and that is what I am in favour of.

That is what I said in my review. I did not in any way suggest that copyright is not a property right. There are many things that the review has been accused of that the review can’t be accused of because it is in black and white. I would urge members of the Committee to bear that in mind.

Q401 Paul Farrelly: I should perhaps in this day and age declare, Chairman, that in 1995 Ian Hargreaves accepted my application to join Independent Newspapers when he was the editor. As I recall, I was your final recruit, sir.

Professor Hargreaves: The less said about that, the better, I think, Mr Farrelly.

Paul Farrelly: That said, just continuing this thread, you will be aware that on many occasions your view has been described as the "Google review" or, more strictly, the terms of reference have been described as crafted through lobbying by Google. To what extent would you understand those concerns?

Professor Hargreaves: I think when the Prime Minister chooses to announce an independent review into a subject and refers to Google’s views on one particular aspect of the matter, that association was invited from the outset. I would respond, however, to the question addressed to me that I carry no torch for Google or Facebook or any of the players in this. I have spent pretty much all of my working life working in the creative industries in one way or another, if we are allowed to think that journalism is creative-well, let’s hope not too creative-in all its forms. So I don’t feel at all that I was over-influenced by the Google question.

In fact, the Prime Minister, in the way that he put the terms of the review when he first announced it, referred to Google’s belief that the American fair use system in copyright was more obliging to innovation of the kind that Google has been able to do. I think that is a question that can be subject to honest and evidence-based debate, but Google itself has become a bit of a whipping boy in this debate. Google is now a very, very big company and big companies attract critical and other attention, so that is not surprising.

But what I was asked to do in the review was to consider IP from the perspective of innovation and growth. The Prime Minister, in making the point about Google, suggested that we should have a look at the fair use system and see what its advantages might be thought to be and to see whether we could secure some of those advantages for the UK, the underlying point being that the United States has both very successful creative industries and a very successful technology sector.

Q402 Paul Farrelly: For which there may be many other reasons.

Professor Hargreaves: For which there are undoubtedly many, many reasons beyond anything to do with copyright.

Q403 Paul Farrelly: Would it be fair to summarise your view as it was unfortunate the Prime Minister made those comments about Google, for whatever reason, at the time and that the concerns of those people wishing to cast aspersions on the terms of reference of the report don’t have any substance?

Professor Hargreaves: I think I heard Google’s own representative say it was beyond her pay grade to comment on the words of the chairman of her company. I think it is beyond my pay grade to say that the Prime Minister isn’t allowed to say what he likes in announcing something that the Government wants to happen. But undoubtedly it played into the hands of those who want to see it as a sort of Google and Facebook versus the UK creative industries, which I think is not a very constructive way of thinking about things.

Q404 Paul Farrelly: Do other members of the panel have any thoughts on this, so that we can get them out in the open?

Richard Hooper: Let me tell you that my experience with Google with copyright licensing has been entirely positive. One of the things that the hub is going to do is to encourage people to register their rights, so this is quite a hot topic in the copyright world. The fact of the matter is it is quite difficult, sometimes impossible, to find out who owns what rights to what. If you can’t find that out, it is quite difficult to get a licence because one naturally follows from the other.

At a public meeting that myself and my co-author, Dr Ros Lynch-the excellent civil servant from the Department of Business who worked with me-were at, a senior person from Google was there and said, "We very much like the idea of public registries of rights for the simple reason that day in, day out we receive at Google takedown requests for YouTube videos because they breach copyright, and to have an authoritative register where rights are shown, where permissions are shown, where licences are shown would be very helpful to us in our work". So that was an entirely positive response and we followed it up with meetings and, indeed, at the centre of the hub is the notion of rights registries.

Peter Jenner: Certainly I am very involved with the idea of the importance of registries. If we do assume that intellectual property is in some senses a property, I think we have an obligation to define our properties. If I say, "This is my land", I either have it registered at the Land Registry or put some stakes around it. If we do not do that, and if that information is not available, then there clearly is a problem for any form of licensing and any form of licensing structure.

I do think that some forms of compulsory statutory licensing or access charging are needed so that we can pick up what is happening. In other words, instead of trying to get people’s behaviour to conform with our copyright system, we should be trying to adjust our copyright system to conform with people’s behaviour, which reflects the developments in the technology.

I don’t think there is any question that Google would be quite happy to pay through money if they knew who or what to pay and if it wasn’t such a pain to try to sort that out and with conflicting claims. Under the present system, it is very normal for people to get claims of 140% of the appropriate revenue because no one knows who owns this song, who owns this recording in this particular territory for these particular rights. Consequently, there is an enormous amount of over-invoicing going on, which is extremely expensive to sort out and is an extreme pain.

I would like to briefly come back to the question of the £2 billion. I am a recovering economist-many years ago I was an economist-and I suspect that in those figures they are including the benefit to the consumer. If they are including the benefit to the consumer of being able to do something, you would get those figures pretty rapidly.

Q405 Chair: It is an entirely notional figure though. It doesn’t represent real money if it is a sort of benefit to the consumer.

Peter Jenner: Absolutely, but in the sense that if we are looking at people’s happiness with what they are doing, the benefit to the consumer is what you are looking at. The Prime Minister also put this up as something we should be looking at. In a sense, you can value the benefit; it is cost-benefit analysis.

When you look at whether we should build an airport, you look at the cost to the people who are having the planes flown over them and the benefit to the people who are taking off and getting there quicker. I wasn’t involved in this research, but it might well be that that might explain where the rather large figures come from. I agree with you; in terms of just trade, I can’t see it.

Q406 Paul Farrelly: Ian, in the time since your report, you have seen that the creative industries have raised certain concerns about some of the proposals. In the time that you have had to reflect on those concerns, in which areas do you feel the industries may have a point? If you feel they may have a point, how can concerns be allayed where you feel they are justified?

Professor Hargreaves: I think it is very difficult to give a generalised answer to that generalised question. The concerns are quite rich and varied and they differ from sector to sector and so on. I would say in general that in the period since the review was published, my confidence about what it recommends has increased, not decreased. I spent a lot of time listening to stakeholders during the review, so the views that they have expressed since the review was published have not come as a surprise to me. There is a set of things that some of them say that I think are not based on what the review says at all-that this is proposing the abolition of copyright as a property right, or indeed the end of copyright.

What the Government has done is go through a further very detailed consultation on each item around which I made a recommendation, or at least the ones that the Government is interested in taking forward, and they have sought further detailed responses. The Government has come up with its own judgment, published just before Christmas, under the heading of "Copyright Exceptions" at least, on where it now intends to go ahead.

I think that what the Government is proposing is at the cautious end of the spectrum in response to the changes that I propose. I understand why the Government would be cautious, because this is a controversial area and there are proper and legitimate interests engaged on all sides. I would be the first to recognise that. However, I think that the overarching point remains, as I see it, that our copyright system has gone unreformed, apart from further unfounded extensions in its duration, since the creation of the internet, since the arrival of the internet, and I think that this involves a head-in-the-sand approach.

If we do not grapple with the need to adapt in the face of change, I think that the system risks being broken and damaged much further than it will be by anything that I have proposed. The forces out there are very powerful.

Q407 Paul Farrelly: I want to come to the Government’s response in a moment, but would it be a right thing to say from your response there that, having listened to various concerns of the creative industries, there is no major point on which you would say, "Actually, on reflection, yes, fair point"?

Professor Hargreaves: If you take the issue of private copying or format shifting that the Chairman raised, what the Government has proposed is the narrowest version of reform, which would make it okay for an individual to shift files that they own among different devices that they own. The next-stage-along possible option would have been to have afforded that freedom to families, immediate tight networks of people, in the way that, say, Apple tries to do in its five uses approach to what you can do with its equipment and software.

It is true that while I greatly welcome the Government’s intention to make this change and I think it will be very helpful indeed in alleviating confusion among consumers, there will still be quite a bit of confusion. If I want to take a CD that I own and download tracks from it into the family car, who is the family car owned by? Is it my wife or is it me? Am I not allowed to share these things with my wife? Those are questions that will still feel quite confusing to consumers, so I don’t think that what the Government is proposing, or indeed what I propose, offers a clean sweep on the end of confusion.

What I argued was that we needed to change course. I said, "If we change course a little bit it will not be, in my view, genuinely painful for the creative industries", and I don’t believe it will be, but it would start the process of giving copyright a chance to be reinvented for the digital age in a way that the public has confidence in, so that markets know better what to do with it and it will result in a bigger pie if we also improve the way that we do licensing.

That was the recommendation of the review. I am not saying it is indivisible; it is not that at all. I left a lot of detail out and I am very happy that it has been the Government that has sorted through all of that detail. That was the job that they took on, and I welcome where the Government has put this, but it won’t solve every problem.

Q408 Paul Farrelly: Just before I ask the panel’s views on the Government’s response, Richard, in response to the opening question from Adrian-is copyright fit for purpose in the digital age-you were rather more finessed in your answer. Ian said no. You said, "Yes, in places it is fine but with a lot of work to be done".

Richard Hooper: I must make the distinction between changes to the law and changes to processes in organisations.

Paul Farrelly: No, we understand that.

Richard Hooper: Mr Sanders asked the question, "Is copyright fit for purpose?" and in response I talked about copyright licences.

Q409 Paul Farrelly: We understand the distinction. Are there any areas of the proposed reforms in what we properly call the Hargreaves Report?

Richard Hooper: On the law side?

Paul Farrelly: Yes, the law, that you would take issue with.

Richard Hooper: First of all, I have rather kept away from this. It is very much Ian’s baby and I have not got closely involved in changes to the law. What I would say to this Committee is we have had five years of to-ing and fro-ing on the issue, and if this Committee can get the laws sorted out, get it done, then we can start focusing on the really important issues, otherwise a huge amount of energy and time and lobbying is going to be spent on this for the next five years.

I think that the Government has come up with, by and large, very sensible recommendations on orphan works, extended collective licensing, codes of conduct for collecting societies and exceptions. You might disagree with some bits; some people will. You will notice that the industries, by and large-I wouldn’t say they have welcomed the exceptions, but they have not gone up in arms about it, so I think we have a sensible starting point. Let’s change those laws and then get to the real point.

Q410 Paul Farrelly: Peter and Ian, this document was only published just before Christmas and has only been made available through the Table Office here today so I have not read it in any depth, but presumably you both may have done. Which parts of the Government response are you satisfied with and which not and, where you are not satisfied, why?

Peter Jenner: First of all, I haven’t read it, you are absolutely right. I am an amateur, I am a professional manager and have to get on with my life and enjoy my Christmas. To me there are very basic things I am very concerned with. It seems to me that we should be looking forward to saying, "How do we make sure that artists get paid?" and one issue that has not been raised particularly is transparency.

I do not believe that many of the deals that have been done for the use of content online are done in a transparent way. No one knows what the labels get from people like Google or Spotify, and there is extreme discomfort from the artist community, who don’t understand what they should be getting a share of because everything is surrounded by NDAs. I do think that this is a very important issue-that when you are dealing with the rights of other people, to whom you have an obligation to pay, the uses that you are licensing should be in general principle clear to the people whose work you are acting as an agent for or you are exploiting. This is very important for me. I don’t know whether it is relevant to what we are particularly saying.

The other thing that is really important is that as well as thinking about the artists and the companies that work with the artists and help in their development and their investment and all the rest of it, we should be also looking at the growth of new digital services. There is no question in my mind that at the moment starting a digital music service is a nightmare. There is no question that it is incredibly complicated, requiring huge numbers of lawyers and a lot of front money, and I think that we are damaging ourselves. This perhaps is where monies could come if we can drive new businesses that exploit and develop music in a new way.

My hope for what we should be looking for from looking at copyright is how can we enable new businesses to develop in a way that ensures that the creators get fairly paid-not just paid, but fairly paid. I think that is something we should be looking at very seriously: what should be the role of collection societies as we go forward; what should be the role of the record companies; what should be the role of the artists and the unions and so on. These are really big issues, and I am worried that we are just fussing around with these little details and we should be looking at the major issues that are being raised within these areas.

Q411 Paul Farrelly: Ian, you describe some of this as "at the timid end", if I am not misquoting you.

Professor Hargreaves: Yes, and I gave you the example. Let me give you a couple of examples where it is not at the timid end of the market. One is the changes proposed on archiving and preservation. To be honest, I regard it as a violation of the most basic common sense that we have libraries and archives around the country that find it against the law to make a copy of something that is going to crumble and turn to dust, because copyright law prevents it. I would like to meet anybody who is capable of arguing that that is sensible.

The Government has proposed a straight reversal of the position about that, which is absolutely the right thing to do. Since the Committee hasn’t had the document, what the Government says it is trying to do, in summary, is, "It believes that the reforms here will make the UK a better place for consumers and for firms to innovate in markets which are vital for future growth". I believe that is true. I think that this package of things will have that effect and I think this package of things is strongly to be commended, even if I don’t personally find it perfect in every regard. I don’t expect the world to be perfect; it never turns out to be.

Q412 Paul Farrelly: Chair, just one final question, if you would permit me. On transparency and democracy, it is proposed that in the future further changes might be made by secondary legislation rather than primary legislation, and various groups, including the Law Society, have raised that that is contrary to proper democractic and full oversight in this House. How would you react to the concern that any major changes should be subject to primary legislation?

Professor Hargreaves: Certainly I would react to it with the general observation that parliamentarians are clearly very well placed to make a judgment on what should be subject to different levels of legislative scrutiny. That is not my expertise and I don’t believe that there is anything particularly unusual about this in that wide context. I would also, perhaps a little cheekily, make the observation that the full democratic scrutiny of primary legislation gutters a Digital Economy Act focused entirely on enforcement of copyright online, which is one of the reasons why it has proved so difficult to get it into service, to play the part it needs to play in a reformed system. The reform attempt was botched by Parliament at the end of the last Government’s term.

Peter Jenner: I would certainly echo that. It was such an important piece of legislation that just went bish bash bosh through, and it is shocking.

Chair: We will come on to that in due course, although I merely observe that I don’t think the House of Commons debated the Digital Economy Act at all apart from the Second Reading. It certainly had no Committee stage whatsoever and that was part of the problem. I am sure we will come on to that.

Q413 Angie Bray: One of the ideas that seems to be emerging from all this sort of complexity with some momentum is the creation of a digital copyright exchange. I don’t know which of you would be better, either Ian or Richard, to talk about how that would work.

Richard Hooper: That is very much a licensing issue. What we have recommended and what is now happening is the development of what we call a copyright hub and if you look up copyrighthub.co.uk, you will get the first early stirrings of our work. Basically, the copyright hub is a portal to which you go for three things. The first thing you go for is, "I am confused about copyright. I do not find my way easily through the thickets of copyright", so it has a signposting, navigation and copyright education role. That is just a nice, straightforward starting point.

Q414 Angie Bray: Who would go?

Richard Hooper: Everybody from users to consumers, rights users to consumers, particularly small businesses. Again, coming back to my JK Rowling point, she has the lawyers. We are talking about the long tail of users, the person who is wanting to make small uses of copyright, "I want to put music on my website" for example. So it is the smaller end of the market, those sorts of people who at the moment are not particularly well catered for. Finding one’s way through the complexity is number one.

Secondly, the one that I have already mentioned, and I am delighted to say that Peter fully supports-and other people-is the notion of registering your rights. I think the Copyright Act does in fact say that copyright is a form of property and, as Peter mentioned, in land property if you do not do things about your property after a number of years it is no longer yours. Now, because of the way copyright has developed in the world, there is no mandatory registration of copyright, but here we see an opportunity for people to voluntarily register their rights so you know who owns what.

That leads, thirdly, to the digital copyright exchanges, of which there are already a number. If you go on to Getty Images, for example, right now you can get images, you can ask for them, you can look at them, you can say what use you are going to make of them, and up on the screen will come a price. You can pay for them, download them and so on. So that is a digital copyright exchange. The whole point of that is making licensing automated, easier to use and quicker.

The interesting thing about automating it is that we had a presentation from a digital copyright exchange, a music one that is starting up. It was a beta test and they said, "This is what you want to use it for"-I think it was music on a website-and up came the figure of £700. We looked at those numbers on the screen and we thought, "Well, they are clearly ridiculous. It can’t be £700. It just doesn’t look right" and immediately they had taken the prices down, which I think is a very interesting example of transparency, of the prices being open and being up there on the screen.

Those are the three things: finding your way through, finding who owns what rights and, most importantly, easier licensing.

Q415 Angie Bray: So it is going to be very user friendly-obviously, it has to be-and the idea would be that it would simplify everything?

Richard Hooper: The word "streamline" is a word that I have used endlessly in the last year, and it was a word I used with the Royal Mail independent review I did for Peter Mandelson and Vince Cable; streamlining the Royal Mail, modernising the Royal Mail. It is simplifying it, making it easier and making sure people can get at it.

Q416 Angie Bray: But you are talking about it being voluntary and people coming and wanting to participate, including people wanting to register their rights.

Richard Hooper: Yes.

Q417 Angie Bray: What we have also heard from you this morning is that there are a lot of nebulous copyrights out there and nobody quite knows who they belong to. Would it help to sort through that as well?

Richard Hooper: This bumps straight into orphan works, and one of the key supporters of the work is sitting behind me-Ben White from the British Library. Orphan works is a critical issue, and there is already the idea that the hub will be a place you will go to for registers of orphan works. In the EU directive published in March, there is already a mechanism for having the registration of orphan works so that you can find out more easily what an orphan work is and why it is and when it is no longer orphan.

Q418 Angie Bray: Would it be recognised across the world? If somebody chose to register here in the UK, how much recognition could we enforce globally?

Richard Hooper: I think that we must not be too ambitious in our aspirations for the hub. It is definitely based in the UK, it is definitely coming from the UK, but an important issue about the web, the internet, is that it is fundamentally borderless. When we talk about fit for purpose for the digital age, what does that mean? It means, first of all, it tends to be borderless. Nation states and boundaries don’t really exist on the internet.

Secondly, and the other one that sometimes is forgotten, is that the internet is intuitively multimedia. You go on to the Daily Mail or the Daily Express site, which is a newspaper, and lo and behold there are moving pictures on it. So it is a multimedia experience, and in a sense the hub has to respond to both of those.

Q419 Angie Bray: I presume that the complication could arise that there could be more than one hub. There could be hubs set up elsewhere, and you might then have competing-

Richard Hooper: Peter mentioned the point about how difficult it was to get a licence for music services, and clearly at the heart of our work is to make that easier. There is a famous example of the Camden Town music service that spent eight or nine months getting its licence in the UK and then the chief executive looked across the Channel-only 27 licensing organisations to go, or was it 26. So those are big issues, but let’s get it right here, let’s get it going. It is very important it is industry supported, industry funded, and those are things that the Government can pump-prime possibly. Let’s get it going, but it must have that borderless vision as well.

Q420 Angie Bray: Peter, you are nodding your head.

Peter Jenner: I am agreeing with most of it, but I do think that we should be very mindful of not just industry but also of the consumer, the end user. It does seem to me that a lot of the copyright pressure comes from the industry, which tends to be rather conservative. You know, you tend to go on doing what you have always done. I think that one of the jobs perhaps of Government is to nudge people into the future, get them out of their comfort zone, and provide something that is of value to the consumer.

The consumer will support legislation through their actions if they feel it is fair. One of the things that has been clear with the whole issue of piracy is a feeling that somehow or another it wasn’t really quite fair that if you were providing your own computer and your own broadband service you should have to pay the same as if you were going to a shop and buying a physical good. It did not feel right. I think this issue of feeling right is absolutely fundamental and the transparency helps that come through, to see what is going on, "How can I get music onto my wedding video? If I can do that easily, I will do it. If I can’t do it easily, I won’t do it, and I hope I won’t get caught and I probably won’t".

Q421 Angie Bray: So the key will be that actually it does occur to Mr and Mrs Bloggs, who want to get their music transferred on to their wedding video, to go and visit the site?

Professor Hargreaves: That is exactly right. Sorry, I didn’t mean to chip in. On the point of other international systems, systems in other places, there will be-there already are-systems in other places. The argument that I made in proposing that somebody like Richard is ideally qualified to lead this work-because it is all voluntary, if business doesn’t want it it will not happen, but the opportunity is that the UK has the biggest creative sector in this time zone.

This should be the place where we are most adventurous and innovative in terms of developing these markets, and that is what all of this is about. But I said strongly in the review, the Government cannot boss business into doing this, and I am delighted that businesses have come around the table with Richard to take this forward. I very much hope that they will succeed, but I think there is still quite a lot of water to go under the bridge.

Q422 Angie Bray: How long would it take to set it up?

Richard Hooper: It is a big project. We will have things live certainly within the next six months, the beginnings of it, but you are talking about probably two to three years. It is complicated, because the portal itself will not be the main place. You will be going from that, travelling through the portal to other databases that are connected, so it will be a very interconnected network. It is rather like the technology called Arrow that is used in orphan works by people like British Library, where you make a request to find out about a particular book, whether it is orphan or not, and you in fact go into the University of Bologna portal, and then you go to libraries all round the world and back it comes and it tells you the answer. It is that sort of vision.

Q423 Angie Bray: Would it be reasonable to suggest that the music industry seems keener on this idea than the audiovisual?

Richard Hooper: I would put it slightly differently. I think the audiovisual industry, in its dealings with me over the last year, probably doesn’t think there is much of a problem. I think the music industry and the publishing industry and the images, still pictures industry, whereas they may have started out in early interactions with me and Dr Lynch saying there wasn’t a problem, I think have come to the view that there are a number of big issues to do with data and all sorts of things, transparency that Peter mentioned.

I think the audiovisual industry is still a little reluctant to say that there is major problem. One of the major problems that I put to them is the issue called repertoire imbalance. That is about the fact that if you are a digital native-I am not a digital native; I am a struggling digital immigrant-you go on to the internet expecting to see the Harry Potter film, only to be told that it is not available legally because of windows for cinema distribution and DVDs and so on.

I think that that is an area where the audiovisual industry is making progress, but it is still a fact of life that in television and the film industry it takes quite a while to get into the digital space. I have just been in Singapore where, for example, the Chinese population, about 85% of the population, gets incredibly irritated because their favourite Chinese soap opens in Hong Kong and doesn’t get to them for three months. They say, "Right, so maybe we will pirate it. We will find a pirate version".

If you think about it logically, in the digital world there is some notion of instantanenous. There are DVDs, windows, there are contracts, but I think the audiovisual industry has to face up to it. If you take LOVEFiLM, for example, I think I am right in saying it has 8,000 titles that are streamed on the internet but via Royal Mail I think it is 75,000. That is repertoire imbalance. Again, I am not saying, and I do not think you are saying, to the industry, "You have to change all the contracts" but think about it.

That brings me to something that I haven’t mentioned, which I have certainly talked about with the Chairman on other occasions-the political dimension of the work that I have undertaken. There is a sort of Faustian deal here, which goes like this. If you, the industry, images, audiovisual, publishing and music industry, get your act together and make copyright licensing processes and organisations fit for purpose and really work at it-and, incidentally, it is a never-ending job; like modernisation it never ends because the technology is changing the whole time-then the ball is back at the feet of you, ladies and gentlemen, as politicians, on things to do with piracy and copyright infringement. Politicians around the world are still quite nervous about biting the bullet.

It is not a UK issue; it is very broad. Therefore, I think that there is a notion of you making sure you get your work properly together and then the ball moves to the politicians’ feet in terms of making sure that unreasonable amounts of piracy stop.

Q424 Mr Sutcliffe: There seem to be a lot of issues here about the confidence of the creative industries in the proposals and in the future. I think you said, Peter, that people are naturally conservative in this area, except the rate of progress in the digital village is going super fast.

Paul raised the issue of copyright exemptions and I want to explore that a little bit further. He talked about the concern about secondary legislation being used for further copyright exemptions and people being a bit wary of that because the use of secondary legislation in our language means that things just get pushed through without a full debate. So what is your view about how we can deal with copyright exemptions in a sensible way so that people have confidence in the process? Some people have suggested it is a fundamental change to the business model of the creative industry sector. How do you react to those sorts of concerns?

Professor Hargreaves: I think that the problem is fundamentally insoluble. The question was asked earlier, "Could lawmakers get ahead of the technology?" I don’t see how. We haven’t discussed at all today-and perhaps it is to the side of the Committee’s preoccupations-the very serious effects of copyright laws and regulatory burden spilling out into areas that are outside the creative industries, such as scientific and medical research and text and data mining and so on, which is part of what the Government is proposing to change.

The way that I think about this is that we must do the best that we can, and that involves winning sufficient confidence from the businesses involved-from the consumers involved, from legislators-and we know how hard that is. We have experienced in real time how hard that is. If the UK Government is supported by Parliament and sends the signal that it has indicated that it intends to send on copyright exceptions, I believe you will hear a cracking of ice all the way across Europe. It will change the debate across Europe, even allowing for the controversy over Britain’s current level of influence on European questions, which is not a matter certainly for me, nor probably even for this Committee.

This is a well-timed shift. It is also belated. That is a bit of a contradiction, but if we don’t do it now I don’t think that we will ever do it, and I think that it will not be very long before these changes are found very comfortable indeed by some of the people-quite a lot of whom it is their job to complain about them-and they will learn to live with them pretty easily.

Peter Jenner: There are a couple of things I would like to add in this context. It seems to me that what was hinted at there by Richard was the issue that, implicitly, piracy is often a failure of supply. If you don’t supply the goods at the right price then people will find their way around it so, in a sense, the industry has to get to grips with these realities and somehow or other legislation has to be encouraging and nudging people in that direction.

As a member of the industry, someone who has indirectly made money from copyright for over 45 years, I look at mobile phones and I think that this is something that is really important for us to think about in the industry. When mobile phones first came out, it would be £1 a minute and you didn’t use them except in extreme emergencies. I now have no idea what a mobile phone call costs; I don’t think probably anyone here has. You phone America. What does it cost? No idea. It costs quite a lot? Probably. How much? No idea.

I now use my mobile phone in my home from my top floor where I have my office to my basement with my daughter and my grandchildren. I use a mobile phone, despite the fact that I have an internal phone system within the house that I could use. I use my mobile phone because I have no idea what it costs. It seems to me that that is something we should be looking at especially in the context of music. People have music on. They seem to be less involved with music that they own. They like to have a noise, they like to have something going on and, frankly, they will get it at the price that they can afford. If we make it at a price that they can afford and they don’t notice, we will get a lot more money into the music industry.

To this point, I have my magic figure, which I shall leave with you and stop waffling away. If there are 50 million devices that are broadband-enabled in this country, which is probably a conservative estimate, and if they paid £1 a month for the access to all the music that they could find-in other words, all the stuff they could get, pirate, legal, whatever it is, anything you can find-it would generate £600 million a year to the music industry. The current music industry turns over, from that sort of basic resale sale, somewhere in the region of £800 million a year. I am not saying that that is the solution, but looking at what happens when prices reduce, the more the price of mobile phones went down the more money the mobile phone companies made.

People are aware that the cost of delivering a file to me at home is virtually zero. They know that, and they wonder why on earth you should be trying to get me to pay whatever it is you want me to pay. I think we have to accept that that is a reality. You can send huge files; I can get the whole Hargreaves Report just "shoomp" down the line. Then I can go through it, and that is what we can get. I can send all of you a file of a piece of music that I like, and I still have it and you all have it.

It is not like in the old days when I had a record. If I had a record, I had to come around and lend it to you or get you all to come around to my house and listen to it. Now I can press a button and you all get a copy of that file. That is the reality, and that reality is going to become greater in terms of this multimedia thing, which I think is really important, because the kids are going to make multimedia files. They are going to take pictures, they are going to take clips from films, they are going to take clips from video. They are going to add that to music, and they then have a music track consisting of samples. These issues are unlicensable, and if you try to stop them you are going to fail.

Furthermore, I think morally it is inappropriate. It is like telling someone they can’t use a camera because it is going to put artists out of work. It is like trying to say you can’t go on a plane because it is bad for the shipping companies. I think we have to accept that things change, and we have to find ways in which the consumer, your electors, get what they want and need, and that the artists get their fair share of money from that system, and the people who invest in marketing and A&R and so on get their fair shares.

I think what you are doing is really important, because I don’t think you can just sit back and leave it to the market. I think you have to take a position. You have to take a view, and it is not going to be easy. There are no simple solutions.

Q425 Mr Sutcliffe: One of the things that is going to happen is the exemption that is planned for cloud-based services. That will affect the music industry.

Peter Jenner: That is absolutely catastrophic for the music industry, unless they come to grips with it. It depends on exactly what they mean by an exemption for cloud-based services, but what is a cloud-based service going to do? A cloud base is going to have all the music, and they are going to be trying to sell you a selection of music that you want. How is that going to work? How are you going to license that? We have to be thinking radically.

Professor Hargreaves: Also, clearly not everybody has had time to catch up with reading what the Government is proposing. You will find that what the Government is proposing on that I think quite carefully addresses some of the concerns that the Committee has.

Q426 Mr Sutcliffe: From a licensing perspective, Richard, in terms of these exemptions, would that affect your licensing system?

Richard Hooper: I don’t think so. I think the exceptions are going down the track that they are going down. I don’t think that there is any evidence that they will impact on this, but I come back to my previous point. Could we get that argument sorted, get the law changed, get on with it, and then get everybody to focus on the real issues, which is easier licensing, smarter licensing and simpler licensing? This distraction-Ian and his predecessor, Gowers, we have had five years of it. Can we not somehow get it on the books and get on with it?

Q427 Mr Bradshaw: I would like very much to explore your idea of a modern licence for the digital age based on the BBC licence fee, but we do not have time. Mr Jenner, I wonder if you could write to us, if you have time in your busy life, or if it is already available, and send us some more detail of this, because it is intriguing. We need to move on. You said earlier that you thought the Digital Economy Act was botched, and Ian Hargreaves also made clear that he did not think it was great. I wonder if you could both elaborate on that.

Professor Hargreaves: The Gowers review, which was a predecessor review to mine, of intellectual property, made, I think, 54 recommendations. In the end, processes that you were close to or in Government at the time-I was not really paying attention, to be honest-resulted in this rather one-legged horse, the Digital Economy Act. Anybody who criticises the Digital Economy Act is at risk of being pilloried as somebody who no longer believes in copyright or enforcement, which is not true of me and I think not true of many people who, nonetheless, do not like one-legged horses.

Peter Jenner: It seemed to me that it was extremely negative, rather than positive, and that all the positive things were removed and the negative things were left, and there was nothing in it that would indicate that the costs involved would be recouped in any way. Nothing that has been done in anti-piracy has led to increased revenues, so if the reason for it is to increase revenues, I don’t think it is going to work. I don’t think that it has been thought through properly.

Q428 Mr Bradshaw: But isn’t the broader political problem, Mr Hargreaves, that you have with your report in that context, when you talked earlier about the need for a change of emphasis or a change of direction, that the creative industries like the Digital Economy Act? It had all-party support in this House. That is the only reason we could get it through in the wash-up. We would not have got it through otherwise. This Government has not implemented it, basically, and the creative industries are not happy about that, and then along comes your report, which they see, as Paul said earlier, as a kind of Google report, so they interpret the bigger political picture as not doing anything about piracy, not implementing the Digital Economy Act, and then going off in a completely opposite direction.

Professor Hargreaves: I think that is a serious misrepresentation of what is going on, but I recognise the misrepresentation. It is important to look at what we are talking about here. What we are talking about in the approach to reform, legal and licensing, that is advocated in the review that the Government has picked up, I think the Government is not-it is not for me to say. I have no idea why the Digital Economy Act is taking so long to become a reality. Well, I have some idea, because some of it is in public.

There appear to be negotiations going on inside Government about that, but in the time that I was conducting the review I had the very clear sense that Ministers seemed to feel that the Digital Economy Act was the enforcement element of a package but the one leg had got disconnected from the three. It will have taken two years from the publication of this review to get to implementation, if we get to implementation. I think at this point it can start to come together. I think that opportunity still exists.

However, it is inevitable that in the two and a half years since the election, our understanding of how online markets work has changed because online markets have changed. If you look at the French experience, with their HADOPI laws, the first thing the new Culture Minister in France said, after François Hollande won the election, is that HADOPI, which is all about online enforcement of copyright, looked like a badly-overpriced solution or approach, so they have a review of what they put in in that period under way.

This is an unstable and disruptive climate that we are working in, and my regret is that Parliament dealt with this in such haste. I think it would have been a better piece of legislation if there had been more time. I also regret other things that were lost from the then-Government’s approach to these matters, including a rather excellent approach to the stimulation and development of local news, which I had a keen interest in. That got swept away too.

There was a lot that got lost in the wash-up Bill. What is there needs to be there, but it needs to be as intelligent and market savvy as it can be and as well based on evidence as it can be. That is why I recommended in the review that Ofcom immediately be charged to get on with understanding how online infringement is really working, and they have published one piece of work about that. I think there is another piece coming shortly. At least when we have got through the machination, whatever it is about, in Government about the Bill or the Act’s implementation itself, one hopes that it will be a well-judged, evidence-based mechanic, because if it is not it will end up like HADOPI, where they have done all of this work and they have had one fine.

Q429 Mr Bradshaw: But wouldn’t your report perhaps enjoy more support from the creative industries if they saw the Government implementing the Digital Economy Act?

Professor Hargreaves: I don’t know. There are some people who speak about these matters in the creative industry who, if I sprouted wings and flew around Big Ben, would not be in favour of agreeing that there is any need for any kind of change in the copyright system. That has been their position for so long they have forgotten how to consider any other possibilities.

Q430 Mr Bradshaw: How would you protect copyright on a national and international basis, and how would you deal with piracy?

Professor Hargreaves: I would have enforcement well focused on the people who were making money out of it, and, as you are seeing in many areas of internet-based, internet-related law enforcement, it involves going after advertising, it involves going after financial payment systems. I doubt that very much of it would involve writing letters to teenagers.

Peter Jenner: I would suggest you look at the example of pirate radio-the combination of measures that led to the BBC bringing in Radio 1, stealing all the DJs from the pirate ships, and at the same time Government making it very hard for the pirate ships to operate in British waters. It was a very positive move.

How do you deal with piracy? The key thing is you have to provide what the pirates are providing, and that is the key issue. You need to look at what has happened with Spotify in Sweden, what is happening with Spotify in Holland, and what has happened in Denmark to see that positive moves are much more likely to generate something happening than negative moves, and finding ways of getting money to the industry, which they need-I need, I want my share of it-in a way that runs with the technology and with the spirits of people.

One of the most extraordinary pieces of information that I got from within the industry and that has not been broadcast particularly was that they did some research that showed that the biggest pirates were the people who spent the most on music, because they are music fanatics. This is a piece of research that never really got out because it did not play to the standard "rah rah rah" of the music industry. It is a very complex world.

Q431 Mr Bradshaw: Wouldn’t the evidence be stronger for the development of those sorts of models if real action was taken against piracy?

Peter Jenner: If you provide really good, reasonably priced legal services then I think that the objection to going after piracy would be very minor. It is not going to be a big issue if I can get it for not very much and I don’t notice I am paying it, it is just stuck on my phone bill or through the BBC. People don’t pirate a lot of TV.

Richard Hooper: I think the Digital Economy Act got lost in peer-to-peer. There are four places where infringement happens. One is peer-to-peer. Then you come to the ones that Ian has just mentioned, the paying ones, which are websites. Then you have advertising and then you have payment systems. I would humbly suggest to you that if you want to be serious about this, go for websites, payment systems and advertising. It is a much richer vein. Peer-to-peer is important, but the Digital Economy Act got obsessed with peer-to-peer and I think that is not right.

I think Peter is right that you have to have the rich services, but I do not think you politicians can get away with saying, "So we don’t have to do anything about copyright infringement". I think you do have to do something about it, some things about it. I think you have to be vigorous, you have to be important about it, because this is heartland stuff. If the law is sorted out, as it is now being, if the industry is getting its act together on the licensing processes and organisations-just to make a point, the industry right now is funding the Copyright Licensing Office. It has a civil servant in it, Dr Lynch, who is on secondment, and you will be very pleased the deficit reduction has helped, because she has been paid for by industry, as we speak, for a complete year, so there is significant support from the industry going on. Therefore you, as politicians, can’t avoid the infringement piracy issues.

Chair: I think we probably should now move to our second session. Thank you all very much for coming.

Examination of Witnesses

Witnesses: Professor Stuart Bartholomew, Principal and Vice Chancellor, The Arts University Bournemouth, Professor Geoffrey Crossick, Universities UK, Catherine Large, Chief Executive Officer, Creative and Cultural Skills, and Dinah Caine, Chief Executive Officer, Creative Skillset, gave evidence.

Q432 Chair: For our second session this morning, we move from copyright reform to education and skills. Welcome to Professor Stuart Bartholomew, the Principal of the University of Bournemouth; Professor Geoffrey Crossick from Universities UK; Catherine Large, the Chief Executive Office of Creative and Cultural Skills; and Dinah Caine, who is Chief Executive Officer of Creative Skillset.

Perhaps you could start by saying to what extent you think that skills and education, or perhaps lack of them, is impeding growth in the creative industries and should Government be doing more about it?

Dinah Caine: Perhaps if I could kick off on that. I think it is well known and well understood that skills and education are key drivers of productivity and growth, and certainly in these industries our health and wealth depend hugely on the skills and talents of our workforce. The Creative Industries Council, when it first met and identified the three top priority areas that it saw as areas of potential market failure and areas that needed to be addressed, identified skills and education as one of those three. There are many and differing reasons for that, but I think perhaps one of the most important things to note is the structure and make-up of these industries, characterised by very high numbers of small to medium-sized companies.

Some 84% of companies in these industries employ fewer than 10 people. Also, there are high levels of freelancing and portfolio employment, where people move continually from a short-term project into a short-term project. That then creates, to a degree, mismatches around Government policies to do with skills and education, which tend to be predicated on assuming traditional methods of influence, and also, to a degree, mismatches around supply and demand, which perhaps we can explore more. The good news is, however, that these issues now are being quite attended to, and I think that these industries are reaching a level of maturity where they see this as a key issue, and where they are starting to be eager to address the challenges, although there are certain barriers that do need to be removed in order to enable us to do that.

Professor Crossick: Apologies for my voice, but I rose from a sickbed to be here this morning.

Chair: We are very grateful to you for doing that.

Professor Crossick: Let us hope I keep going. I agree entirely with what Dinah has said, and what I am about to say should not in any way be taken as a suggestion that skills as defined by the industry are not very, very important. They are enormously important.

I was warden of Goldsmiths, and Goldsmiths has a very strong media education department. I always used to cite, in terms of asking employers what skills they want now, the fact that if in the year 2000 you had asked employers what they wanted, no one would have mentioned digital content, nobody would have mentioned interactive media. The graduates who came out of Goldsmiths, because they were not simply trained for the skills of today, had the breadth of education, of theoretical understanding, of imagination, of flexibility, so that they adapted to that world when it came along, when they were employed in the media industry.

I think it is very important to get the balance right between what could be an over-narrow obsession with skills for today-we just heard in the last session about the rapid change in this area-when we are producing graduates who will be employed in the creative areas for 40 years. They have to be really educated to be adaptable.

I think that the two sets of skills councils represented here today are doing very well in their recognition of that, but I think there is a danger of just focusing on what employers say they need now, because that will not be what they need in five or 10 years’ time.

Professor Bartholomew: If I may add a little to what the two previous speakers have said, I think there is a cultural problem in our country when we use the word "skills". For some, skills have the whiff of "trade" about them, whereas "knowledge" has a rather more elegant position, but the fact is that all skills are informed by ideas and there is a much stronger connection between ideas and skills than I think is publicly recognised.

If we take ideas, they are the absolute raw material of the creative industries, and it is a raw material that you can’t go and dig up. It is something you have to nurture. You have to make it grow. I think one of the impediments-and it does amplify a little of what Dinah said earlier-is that we consider this progress of connecting things, because they are not in isolation. It is the connection between the school experience to a tertiary experience, the connection between the tertiary experience to industry itself, and the way in which industry exploits the ideas and skills that have been nurtured. It is getting stronger connectivity, and I think the progress that has been made over the last 15 years is remarkable.

Fifteen years ago, the creative industries were seen as some rather peripheral winger of our national endeavour and our national economy, but much of the research and focus has brought that nearer to centre stage. As a consequence of that, there is a much more earnest and thoughtful approach to how we can amplify the advantages that most distinctly do reside in the UK knowledge and economic economy. So progress made but there is still a distance to go.

Catherine Large: May I add just a fear, really, and a sense of risk at present in that, as Dinah said, a lot of work is being done but we are facing a number of risks. We understand that there are risks to creative subjects on the curriculum, and the industry has a great deal of fear around that and the impact of that long term. The industry has a great risk that it faces in terms of unfair access into that profession and the proliferation of unpaid work, which again a lot of work has been done around but does affect specifically technical and professional skills that the creative industries need. I think there is also potentially future risk around higher education-I am sure my colleagues will talk about it further-in terms of those higher-level skills that the industries need. I think we should address those today.

Q433 Tracey Crouch: I was going to touch on those issues now. Over the past decade, there have been a series of reforms within secondary education in particular. How do you think this has affected the number and the quality of applicants for university courses within the creative industries? Probably the professors are best placed to-

Professor Crossick: I think that if one looks at the pattern of applications to study in the category that is called art and design-and that includes all of what we are really talking about today, apart from media, within the HESA statistics-that has seen a steady growth through the last decade you were referring to until this year, the 2012 entry, in which there was something like a 16% to 17% drop in applications for the art and design category on the previous year. But I would not want to-

Q434 Tracey Crouch: Sorry, could I just interject? Do you think that is because of tuition fees?

Professor Crossick: I will come back to that in a second. The first thing I would say is that we still had a higher number of applicants last year, for the 2012 entry, than there were in 2009, so the slipping-back has still not gone back to below the growth that was achieved in 2009. In terms of whether students are applying to do art and design courses, it is too early to tell whether there is a significant change. To answer your question about the fees, we don’t know because we have only had one year. We don’t have enough evidence to base it on.

The fear that many of us have is that there is a discourse and a language out there that says, "If you are going to go to university you are going to have a big debt and, in order to pay off that debt, you have to go into subjects that will lead you to a career where you will earn a lot of money, and those are these subjects, science, manufacturing, professions".

There are so many false jumps in that argument, and the one I want to point to-and everyone has a role to play in this-is the notion that if you do art and design at school or music or drama or other subjects, or the computing that leads into, which is an important element in the creative industries, you are not going to be able to get a good job. Therefore, if you don’t do it at school, you are not going to do it at university. That is the fear.

It is not that there is precise evidence of anything having happened yet, but the language out there, the language of getting a good job, and getting into a good job is not the kind of world that Dinah described of people who are very excited by their creative energy, very excited about the opportunities they have, forming little microbusinesses, networking with other people to make a living out of it-and doing very well out of it, often. That is not what people think they are going to university for, and we need to get a rethink of that so that there is not the problem that might be building up.

Professor Bartholomew: Can I add to this? When Geoffrey said earlier that one is preparing this raw talent for careers that will span the next 40 years, when we survey the success of UK creative industries-and they are a global success-we then have to think back 40 years. We have to think of the raw talents that were nurtured, that entered careers and are now at the top of their professions.

What was going on 40 years ago had great qualities to it. Is that being developed and enhanced, currently? I have a very strong concern about the elimination within the school curriculum of making things. Although that may be rather simply put, one has to understand that the creative industries are about production. Ideas inform production but things are made. The gradual displacement of young people from contact with materials is a serious issue.

If you look at just one area in which Britain currently is seen as the world leader-three-dimensional design-we will not be that in the decade ahead. We are seeing an extraordinary drop-off of candidates presenting themselves for courses in three-dimensional design, which does encompass architecture, product, a whole range of activities in which we currently are very well recognised. That is a lot to do with the interaction, the unintended consequences of two things-the national curriculum and health and safety. If you go into a school now, the workshop is a place where you don’t touch, for either of those reasons. That physicality of creative experience is diminishing and that will have ramifications for us in the future.

It is very interesting to compare our circumstances with those in the developing countries and the Pacific Rim. We associated, for example, Korea with manufactures, of stealing design from Europe and making it cheaper and bringing it back. Korea is a case study of a country investing in design. It is opening specialist design schools. It is putting huge resources into capturing the design end and letting young people touch things. I think this is a very significant issue as we spool forward to consider who will be the practitioners 10, 15, 20 years hence. If Lord Foster was sitting here, one of the things he would say is that touching things, when he developed as a young architect and in his training, was essential to his subsequent success as probably the most important architectural consultancy worldwide.

Q435 Tracey Crouch: With the proposed reforms that are currently being considered at the moment on the English Baccalaureate, you presumably have some severe reservations about what is not being included going forward. What do you think needs to be included in the EBacc if there were to be changes to it? What impact do you think that will have in the long term-speaking economically, I suppose-if we continue down this narrow direction of purely having, as you say, knowledge-based courses?

Dinah Caine: Catherine will amplify on this, but just to say that when we introduced ourselves I should have said that I sit on the Creative Industries Council and I chair the skills and education group, whose report came out last January, which we had fully endorsed by the Council and are in the process of implementing.

This area was one of the ones that we have identified as being of concern for us, and in order to help articulate those concerns what we have done is to pull together all the various groups that have an interest in this area. At the moment, we have come together and drawn up a six-point agenda, basically, which we are now out and about discussing with all the parties. Catherine, do you want to amplify on that?

Catherine Large: Yes, partly just to say that one of our beliefs-I sit on the same committee with Dinah-is that it needs to be about a well-rounded education. It is not about that one creative subject specifically should be included. The general feeling is that the art and creative subjects should be included in the EBacc, should be nuanced, and it is evolving into a very sophisticated argument that goes into levels of assessment. We are anxious around that notion of 100% assessment, no coursework, all of those things, which are about academic rigour and which we appreciate are not relevant as such to creative subjects, or which need to be assessed very differently in a very practical sense. Portfolios and art and design coursework is an inherent part of that.

To answer your question specifically in terms of types of subjects, obviously the sorts of things that we are considering or talking about here are art and design, design and technology-very important for the design industry and the future of creative industries-performing arts, music and media. I don’t think we can pin it down to just one.

Dinah Caine: I think the other area of concern is the NextGen campaign, where we have been placing great emphasis on trying to ensure that computer science is included and recognised as a science within the science part of the EBacc. But I think one of the potentially unintended consequences of the rigorous focus on five key areas, key pillars approach is that, by default, schools will then be measured on their performance around those five core areas, which then starts to act as a disincentive to offer arts and other creative subjects. One of the things we want to do as industries is to concentrate on supporting some key schools and demonstrating how the importance of those subjects then leads on to the connectivity that Stuart is talking about, because there is going to be an integral link between the quality of people coming out of the school system and the quality of recruits into the tertiary education system.

If I could return to your question about tertiary education, I think the other linked area in all of this is careers advice and guidance. In many ways, now that students are paying fees, then clearly what they need is clarity around signposting the best courses and the courses that command respect and partnership from the industries. While there is a rich wealth of provision out there, it is many and varied and some of it is about the study of these-some of it is more practice-based.

One of the strands we have been looking at is the introduction of a quality tick and accreditation for key courses, which will then help signpost students, signpost parents and so on. I always like to describe that movement as, "Are you dancing? Are you asking? I’m asking. Then I’m dancing". Those really quite positive, profound partnerships between higher education and the industries are now being identified and are now starting to deliver real results, and will also serve to differentiate those that might enjoy higher levels of application, and those that will start to enjoy the reverse, if "enjoy" is the right word.

Professor Crossick: Stuart made a very fundamental point about what the quality of students coming into art and design will be in the future and what they are now, given the character of the education in school. So what we have been talking about in relation to EBacc reflects on that in a much more complicated way than, "Should art and design be in the EBacc or should it not be in the EBacc?" It is more complicated than that and more nuanced, as Catherine said.

In terms of the quality of the students applying, we only have one year to go on for this fall, but the view among many in the sector at the moment is that they might simply be losing the tail of less able students. That is certainly the case for the specialist institutions, the Conservatoire, the specialist arts/drama institutions, which get special funding because of their small and specialised character. They feel they have filled their numbers without any problem with the same quality of students, they just had fewer applications.

I think it may be different in some of the larger, multi-faceted universities-and I don’t know, Stuart, what your experience is in your institution-where it may be that the brighter students and the more talented students-and they are not exactly the same in terms of art skills, but the most talented art students-are being deflected by their own ambitious parents and schools careers advice into doing what are seen to be safer subjects for the future. One year, and in fact teaching these students for a few months, is not enough time for us to establish that, but there is a fear of that.

Professor Bartholomew: I think there is immense complexity that comes out of a very straightforward question, but it is that interaction of the influences that will determine the choice that young people make, and it now not only is very intense within the school but it is also quite intense from parents and also grandparents.

What has been very evident in my own institution, which is a specialist arts university, is that when students attend an open day or an interview it is not just them with their portfolio, it is them with their parents, and them often with a grandparent, because the whole funding of this experience has become a family event. The pressures that they bring to bear often lack the currency that the institution is trying to share with the candidate, which is "where you will go in the future", where so frequently the parent is thinking of where they were in the past and what was the best option then.

There is a huge amount in this, and it is, I think, trying to get a level field such that talents can express themselves. The problem with EBacc is not that we should not have five pillars of essential learning. It is the impact of that on the other areas of learning and the potential of them being pushed to the periphery and us losing a generation of talent as a consequence.

Q436 Tracey Crouch: I want to press you on two further higher education issues. Just going into a bit more detail about tuition fees, are your institutions by and large charging the top rate for courses within the creative subjects? I see you are nodding your head, but is there much of a market in creative subjects?

Professor Crossick: No. There is no market, no.

Q437 Tracey Crouch: So, no students being charged £9,000?

Professor Crossick: Well, I don’t know how much you are charging.

Professor Bartholomew: We charge £8,600. If you then just spool that forward three years, do you make a decision, given that you will still have incurred £25,000-plus of loan, what is the difference of £1,200? What we will see inevitably over the next year is gravitation to £9,000. All institutions that are over the threshold that might allow them, under the bidding process, to pitch in because of the lower fee, you will see the others gravitate towards the upper limit. I don’t think the fee difference is an issue but what will become an issue is the ways in which some of the key indicators begin to privilege some institutions over others, and what is emerging as being a very important indicator-how that indicator is sourced is a bit unreliable-is progression of your graduates to employment.

In my own institution, we are in the top five of UK universities in that progression rate, 97.7%. The outcome this year, against a trend of lowering applications, our applications are up by 15%, and I am pretty sure it is that one indicator that is the magnet for attracting students.

Professor Crossick: Another point on the fees issue is that the fees are there to pay for the education, and the Government decided that HEFCE would pay a top-up for high-cost subjects, science subjects. I have no problem with that at all because they are much more expensive than can be covered by the £9,000 fee. The question is whether the top-up is enough and we shall have to see. It is in some doubt.

For humanities and social science, in terms of blackboard and chalk notions of subjects, universities charging £9,000 are probably a bit better off than they were. Not a lot. For these creative subjects we are talking about, which is the old price group C-it includes computing and psychology as well actually-it is not clear whether they are going to be covered effectively by an £8,500 to £9,000 fee.

In addition to the additional income that you get from the fee, you now have to pay for a significant amount of scholarship funding, which is compulsory through offer agreements and through the national scholarship scheme, and virtually all capital funding for teaching has now been removed from universities. So that £9,000, the additional money, is not all extra. Much of it is taken up with other costs. There is a real spread of costs in the creative universities and disciplines within universities, and we need to look very closely at how that cost base is working. It could well be that in some of these key areas the fee that is being obtained is not enough to cover the costs.

What will then happen is that universities will make decisions and universities are already making decisions on the basis of what a university should be like. They don’t simply shut down every subject that is losing money, but they are much more careful about which subjects they will maintain and why they are maintaining them, and we could see some reduction of provision in these areas.

I am not saying that any reduction of provision is something that we should rebel against and be appalled by, because we are in a dynamic situation and there will be growth and decline, but we need to be very careful that we do not see a reduction in provision that will damage the flow of students into the creative economy without anyone noticing that it is happening. One of the problems with the current fee regime is that it has produced a lot of instability and not yet enough monitoring of what is really happening as a consequence.

Q438 Tracey Crouch: My final question, and it may be a bit of a daft one, is do you think that the merger, however many years ago it was now, of universities and polytechnics may have had a negative impact on the creative industries?

Professor Bartholomew: I sit here also as chair of a small but very influential group of specialist institutions. The merger settings have suffocated some of the specialisms that were nurtured 10 to 15 years ago. Manchester Metropolitan University, extremely good, but it encompassed as well Manchester College of Art, which was a world leader. Certainly, in the world of art and design, one does not point to Manchester now in the way that one would have pointed to it 20 years go.

You might say a similar thing about Birmingham, although there have been very tremendous efforts to reincarnate the Birmingham School of Art and Design. I think we missed a trick, and, interestingly, if we go back to the example of Korea that I gave you, they are doing the reverse. They are creating small, highly-focused, specialist institutions, where there is a better opportunity to mesh skills with knowledge. For the creative industries, that is the trick.

Q439 Paul Farrelly: I have a couple of questions regarding the approach to EBacc. Just beforehand, Chair, can I congratulate my colleague Tracey Crouch on standing out from the Government crowd in not voting for the university fees increase? I hope the Whips are listening.

When I was at the Independent as a journalist in the mid-1990s, while Ian Hargreaves from the previous panel was the editor, we stood out from the crowd by saying very publicly, "We will not take anyone who has studied media studies at university". Does the panel feel that because of the proliferation of some pretty rubbish media studies soft subjects out there this thinking with the current Secretary of State for Education has percolated down in a misguided way into how you use the EBacc and what should be in an EBacc and has therefore unfairly tainted subjects such as design technology, drama, arts and all the other creative subjects?

Professor Bartholomew: It is very simple. Yes.

Professor Crossick: Shall I give a slightly longer answer? I think that the media coverage of media studies, which became the bête noire for all those who believed they were standing up for educational standards, was extraordinarily misguided. I do not know whether there are weaker media studies courses than there are English courses in UK universities. I suspect we can go round the universities and find some subjects that are less well taught in one university than in another, and significantly less well taught. That is the nature of the beast with 130 institutions and all these subjects.

The problem with media studies is that it got this name as being the example of a Mickey Mouse degree. To his great credit, the current Minister for Higher Education stands up for media and says that media courses at university are really important and they are critical for the creative economy, as they are. One of the interesting figures about media graduates is that 50% of all graduates in media, as 50% of all graduates in design, are employed outside the media or the design industries. They are employed right across the economy because media and design are two sets of qualifications and experience that are needed right across the economy. We just need to reinstate the importance and, having been warden of Goldsmiths, I know full well what a very high-quality, industry-related media programme can look like. Let’s move on from media studies, is the answer.

Q440 Paul Farrelly: Dinah is straining at the leash.

Dinah Caine: I am. I couldn’t possibly answer whether or not there is a link between media studies as the sociology of the 1980s and 1990s and the present Secretary of State’s position, but I would like to address that subject, which is that I think it was an unhelpful debate. Nevertheless, within that debate it is true that there was potentially a mismatch between the industry perceptions and education perceptions as to the benefit that each was bringing to the other, and research studies that we did many years ago kept on pointing to that.

The problem and the unhelpfulness of the "Media Studies is just Mickey Mouse courses" debate was, of course, it marked and created white noise around where there are genuine centres of excellence, where there are courses that are highly specific and relative to the needs of these industries, and where greater partnerships between the industry and those institutions can address. Some of the mismatches and some of the blockages and problems that we find in the industry are in terms of having the right skills in place to support the industry’s growth. But to pretend that all was well and always has been well is not the case, I would argue.

What then happened was that very mature, progressive, systematic work took place between industry and some centres of excellence, and I think where we are now is that out of the 4,469 courses currently available for undergraduates and post-graduates in the UK that relate quite specifically to the creative industries, we have started the process, as I said earlier, of accreditation, of recognition of centres of excellence. At the moment, out of 180 course applications, we have accredited 132 HE courses. That figure will grow as that process extends.

That is not to say those other courses do not deliver academic excellence and deliver in other ways, as Geoffrey is saying, for other industries, but it is to say that to identify fewer helps to harness more support from industries, which then goes to Geoffrey’s point about these real concerns about costs, about capital, and allows us to bring the best of industry investment and support to the best of the higher education provision.

Q441 Paul Farrelly: My second question about an EBacc takes a completely different approach, a more traditional approach, to choice of subjects than the argument about what else should or should not be included in an EBacc.

My son is just about to do his options for GCSE in what we called the third year. I find that he has no choice. He is good at and likes design technology, music, art, drama but, because of what is in the EBacc and what they are going to be measured on, he can’t take a bundle of subjects because he is effectively down to a one subject choice. I went to an old mortarboard and chalk grammar school, ironically, given the current approach, and found that we had much more choice in terms of the subjects we could drop and bundle, because nothing was specified. We were not measured on bundles of subjects. Do you think this whole approach is damaging to choice, whereas previously we had much more choice in the traditional education system?

Professor Crossick: I think Dinah or Catherine will answer more fully, but I think you are absolutely right. Therefore, the debate on the EBacc has driven us into the wrong position, which is what should we add to the EBacc? What choice should we reduce? I think the right approach to say is what is the minimum that we should have in something like an EBacc in order to maximise the choice-not just for the creative subjects but for lots of other subjects that will lose out, including computing at the moment?

Paul Farrelly: Years ago it was English and maths.

Professor Crossick: Yes.

Catherine Large: Exactly, and I think we are at huge risk of creating a core curriculum in terms of our pursuit of academic rigour, which is, as you say, essentially the whole curriculum. We have to have space for creative subjects, and I think there is a whole conversation to be had around EBacc and how it is assessed, as I mentioned earlier. But the main thing that we have to argue for is that schools have, as a measure of their success, engagement with creative subjects and opportunity for young people to engage with creative subjects for as long as possible throughout their school career, matched with careers advice and guidance in the right way, delivered in the right way for these industries, which are multiple.

We talked earlier about the creative industries being about small businesses and that very high proportion of small businesses. It is also an industry of cottage industries. It is not similar to hairdressing in terms of that being a sector as well made up of small businesses. Our careers website, Creative Choices, is getting off the ground now. It has 100,000 visitors a month because there is that degree of interest in a creative career and need for information to find out about it. It has 80 different categories of the different sorts of jobs that you can do, just to give that as an example, and I think that is the real challenge for us in terms of the creative and cultural industries engaging with Government. We are talking about multiple different types of industry, and it is very hard, obviously, in that context.

Dinah Caine: I think the other thing that is of interest here is that the Welsh Baccalaureate does include creative subjects. As we go forward it will be very interesting to compare and contrast the different routes that the devolved nations are taking, both in relation to the subject of fees and impact of their approach to primary and secondary education around these areas.

Q442 Mr Bradshaw: Are Maria Miller and Vince Cable fighting your corner with Michael Gove on this?

Dinah Caine: The next Creative Industries Council will be focusing on the issues around the EBacc, but that leads into one of the issues that we would like to draw to the attention of the Committee, which is the importance of all departments really joining up around-

Q443 Mr Bradshaw: What is the answer to my question? They should be battling very hard in Cabinet against this mad plan. Are they doing so?

Dinah Caine: My answer to you is that we don’t know the answer to that yet because we, as the Creative Industries-

Q444 Mr Bradshaw: Can you not ask them?

Dinah Caine: The Creative Industries Council, as we were saying, brought together all of the groups that are interested in this. We have come forward with our six-point agenda. That is going to the Creative Industries Council, which they jointly chair, at its meeting at the end of January. We have requested the DfE also attend that meeting, and I think I would be able to come back to you then with a clearer answer to the appetite for pursuing this.

As colleagues have been saying, of course one supports the emphasis on rigour and the need for the five pillars, but it is the concern about the squeezing out. It is of concern to a lot of industry leaders and it is of concern to partner colleagues in terms of training and education deliverers. It is an issue that I think is of concern and needs to be addressed, and indeed I hope will also be addressed by the Opposition as it starts to look at its approach to its review on skills and its review on Tech Bacc and EBacc.

Q445 Mr Bradshaw: Is it not even possible to say whether you have the sense that the Ministers who should be fighting your battles in Cabinet are even listening to your concerns and taking them seriously?

Dinah Caine: I think they are indeed listening to our concerns, but I think, as you know, there are strong views and potentially differences within Cabinet as well, and the Department for Education has a head of steam about it.

Professor Crossick: Could I throw in a comment about the compartmentalisation? All four of us have been resisting the notion of compartmentalisation of those things that matter in education and those that don’t, and it is simply something that Steve Jobs said about why Apple succeeded. He said, "Apple succeeded because I employed musicians, poets and artists who were all also good at computing", and I think that is what we need to remember. The creative industries should not be compartmentalising the subjects we are interested in. It is a huge breadth that really matters.

Dinah Caine: That is something that came out very strongly from our report, which is that one of the things that we absolutely needed to lay the foundations around at every level, primary, secondary and tertiary, is an address to what we are calling fusion skills. There is a big emphasis on STEM, as Geoffrey has been saying, but fusion is where you bring creativity, technology and business and entrepreneurship skills together. It is that mix, going back to what Geoffrey was saying, that is needed in order to enable people to have 40-year careers.

It is a mix that we need in the industries to really support and power growth and productivity, and compartmentalisation is an issue-indeed, within some universities still-where those disciplines sit within different schools. That is absolutely critical and it is something that we need to make sure is a golden thread through everything that we are addressing and something that I very much want to see highlighted in more coherent industry strategy. One of the things that we wanted to draw to your attention was the need to look at nesting far more clearly the skills and education policies into an industrial strategy. At the moment, we are there in some areas but the EBacc is one area where we would say there was a dissonance.

Turning to BIS and its investment, I think it is very interesting at the moment that out of the £2.5 billion to £3 billion that gets invested in skills, only about £350 million at the moment-and we are very grateful to see this and it is something that we want to see enhanced-is going in investments that go directly to employers to enable them to coinvest in the kinds of delivery and the kinds of sourcing and provision, be it from higher education or be it through further education, that they want to see. At the moment the system operates with large amounts of investment going to colleges who then seek to find the employers and I think that whole issue needs to be turned on its head.

That work started at the end of the last Government. It is continuing through this Government, but it is very important for the creative industry. We hope this Committee would support that approach and would particularly be identifying our sector as a priority sector that should be starting to achieve coinvestment and enjoy some of that co-investment in order to drive some of our key plans forward.

Professor Bartholomew: I think the point about dissonance in the politics of this is rather important. It is very interesting that David Willetts has done much to recognise the value of higher education focused upon creative industries. Of the 10 new universities recently created, six are very longstanding specialists whose work goes way back into the 19th century-long established but never able, by virtue of their size, to use full university title. They now can and that is very much something he supported and pushed through.

You see it, too, with Vince Cable. The Heseltine report places a lot of emphasis on development of skills, so this is business innovation and skills. It somehow seems disconnected with education, but one of the points that all of us have been raising throughout this meeting is that you have got to connect these things because they will become more than the sum of their parts. Currently there is a feeling that they are being separated and as a consequence will become quite distinct estates with no connection that will produce the sorts of outcomes we all desire.

Q446 Conor Burns: I want to pick up on a point that Tracey was probing earlier, which is around the drop in the numbers of applications and particularly to explore with you that around foreign students. I know the Bournemouth campus very well and one of the things that is very interesting when you visit is how multinational it is. The companies that these graduates go on to work for are often global companies with links across continents.

You made a point, Stuart, about looking back 40 years. If we look forward 40 years it will be some of those connections that are made, relationships that are built by undergraduates and affection for Britain by coming to study here. We see it in the English language schools in Bournemouth where people come back and do business in Britain because they enjoyed their experience of being in Britain. Are you noticing a decline in the number of foreign student applications? If you are, is that linked in any way to the Government’s rhetoric around immigration and student visas?

Professor Bartholomew: I can answer for the two universities in Bournemouth that work very closely in the area of creative industries. We are not seeing a reduction-in fact, rather the reverse, but that is a lot to do with some of the things that we are engaged with that do have a global relevance. For example, in the relationship between the graduate and employment, we now have on campus a division of the largest European postproduction VFX company, which is providing internships.

That company works in India, it works in Hong Kong, it works in Bournemouth, and there is a sense that international students get that to be associated with that type of activity is an enhancement to their professional portfolio. They do develop a strong affection for their studies and the place where that is conducted and that is a huge asset, both financially and in terms of the cultural export that it provides. I think there are a great deal of worries about the way in which the UK Border Agency is exercising its responsibilities. I think it is a very serious issue for the higher education sector, although it has not impacted upon us as severely as I know it is in other settings.

Professor Crossick: At the moment, there has been a significant drop in applications for student visas but the figures for universities are about flat. People are still coming, they are applying in the same numbers and there is no evidence at the moment of a drop in numbers coming. But as in so many areas, if we wait for a problem to arise it will be too late to correct it and it will take a few years before we really see the impact of it.

I make two points. The first is you noted the vibrancy of the campus at Bournemouth, Stuart’s institution. If you are studying computing or mathematics or physics, diversity of students from different parts of the world, different ethnic and cultural backgrounds is good for your experience but it does not change the way you learn. In the creative subjects it is that diversity and difference that is one of the great drivers of excitement and energy and change and ideas. I think all of those who have worked in these institutions know that.

The fear is, therefore, that it is not just that we will lose the income from overseas students or even that we will lose, as Stuart eloquently argued for, the subsequent importance of these students of their links to Britain, but our own UK-based students will get a less good education as a consequence.

The thing that worries us most in the policy change-put to one side the way UKBA operate, which can be very difficult and hard to understand-is the change of the visa rules to remove the post-study right to work and to limit the ability of an overseas student who did have the right to work for one or two years after they completed their studies. That was removed and it has been replaced by a tier 2 system.

For a tier 2 visa, you have to be in a highly skilled occupation and be earning £20,000 a year or more. We have all been talking about the portfolio careers of creative people. They are not in one occupation earning £20,000 a year and yet for students who are coming here from other parts of the world, from outside Europe, the ability to stay on and work in the extraordinarily dynamic and vibrant cultural world of the UK is one of the great attractions of studying here, but very few of them can meet the requirements for a tier 2 visa.

What we need, if that visa requirement is to stay, is for it to be an aggregation of your income from different sources that produces the £20,000, because that is how most people particularly start their careers in the creative economy, that is how they make a living. We need to get that recognised otherwise I do think we will see a falling away of applications in the coming years from outside Europe to the damage of the whole cultural scene and university education.

Q447 Conor Burns: I made the offer to the English language schools in Bournemouth that I would take them to see the Minister and the meeting resulted in the introduction of the extended student visitor visa. I would make the same offer to you guys. If you wanted to come and see the new Immigration Minister to make that case, I would happily facilitate that.

Professor Bartholomew: We would welcome that. A very small but very successful part of our creative industries is visual effects. It is a big growth area. It is very interesting to compare, on precisely your point, the way in which Canada is approaching the global market and the way in which we are. Vancouver is increasingly becoming a major centre for VFX work. It is sucking the talents out of the United States of America just across its border. It is drawing them across from the Pacific Rim and it is taking UK students, and it is largely to do with a thoughtful policy towards high talent migration.

What we have not done in the current setting is aggregate. It is all lumped as a person coming here. We have to be much more thoughtful about getting the talent from wherever we choose to source from.

Professor Crossick: Can I add one final point about the bizarre consequences of policy? Overseas students are allowed to work but they are not allowed to work as entertainers and therefore people coming to study drama, music, dance from outside the EU cannot do one of the things you have to do, which is go out and find some part-time work in that industry, because of it. Universities UK is going to submit some further evidence on this issue of visas and overseas students and I know that UUK will be delighted to take up, with Stuart, your offer to lead some discussions on it.

Q448 Chair: Leading on from that, can I ask probably particularly Dinah and Catherine, are there any particular areas within the creative industries where there is a clear shortage of skilled applicants?

Dinah Caine: Part of our work is very much to analyse with the industries in a very granular way, subsector by subsector, challenges, issues, barriers and so on. The one that I would cite as being the most significant at the moment is the one that Stuart has just been talking about, which is the VFX industry. It is the only area in the creative industries where key grades appear on the Migration Advisory Council’s lists.

There are significant issues there in terms of gaps and shortages in this country that have been brought about by the lack of appropriate skills and talents being developed. Therefore, it is a priority for us and what Stuart has been talking about, which is this partnership in Bournemouth for example, is one of the key areas that is being looked at to start to address this because that has to do largely with nurturing of talent, as Stuart was saying, but also a mismatch between what has been historically delivered within the university in our education sector and the needs of these industries, basically.

I think that points as well to post-graduate issues and it is very interesting then to look at the kind of star courses that the industry would point to in France and in Germany and our ability to mimic and deliver that high level approach to nurture that kind of high quality talent. As I say, we have broken through in some areas but it is a key example. I can talk about others, if I may, Geoffrey, before you come in.

I think the other thing that is really important at the moment, going back to fusion skills, is technology and the impact of technology in these industries-intellectual property you were just discussing before-is having a profound effect, as you know. But what is very interesting is that in industries that previously have enjoyed many people wanting to join them, and therefore in a sense that oversupply of talented people wanting to sign up to work has, I think, masked some serious issues, is now very much starting to come to an end in terms of the technologies because that pool is getting fished in not just by these industries but by every industry where digital technology is beginning to impact. For example, you have the BBC having problems filling posts within its organisation, which must be the first time ever around some of these areas.

I can supply some of this if you are interested, John. We can send further detailed information about how that impacts and also how that impacts in terms of how people manage business, how they manage creating products for multi-platform environments, how they monetise that. There are all sorts of ways in which the impact of technology is changing these industries at the moment.

Q449 Chair: I remember some time ago-I think you and I discussed it-that the games industry’s great complaint was that there were 25 to 30 courses claiming to provide a degree in the games industry when the games industry told us, I think, that only three were of any use to them at all. I seem to recall Bournemouth was one of the three.

Dinah Caine: Absolutely. There are now about 89 or 90 courses and we are a partner to NextGen and we have been working very closely with them. We now have 13 accredited courses for computer games, so the numbers are increasing. I would say the benefits of that relationship are now encouraging other institutions to apply, but we still have efforts to make.

Q450 Chair: But is it not extraordinary that there are still all these courses claiming to produce people with degrees in computer games and yet the games industry says they are of no value?

Dinah Caine: You are absolutely right, which is where I think, as I was saying earlier, the signposting point is very important because, in an environment where fees are being charged, that careers advice with the signposting to the key courses starts to create a market dynamic.

Professor Crossick: The information to prospective students that will be required will begin to show those courses that are weak or those courses that claim that they link to industry when they do not. There can well be courses in computer games that are not aimed at the industry, but at other kinds of ways of thinking about computer games, but if you say you are about the industry then you need to demonstrate that your people are actually being employed.

We are back to the issue of compartmentalisation in what Dinah was saying. In VFX, in games, in post-production the shortage the NextGen report showed is in people with the right kind of physics, maths, computing high level experience, but if they don’t have creative skills as well then they are not going to be a great deal of use. I remember talking to somebody on the plane ride to LA. You never have a conversation with the person next to you until half an hour before you arrive, but I wish I had started earlier, because he was from a major post-production company and I asked him where he got his high level staff from, his young staff, and he said, "We can’t get them in the UK because they have plenty of computer skills but they are not creative, or they are creative and they don’t have computer skills. We go to Italy to find the right people". It is bringing those together that is crucial.

Can I pick up on the post-graduate point? This is the most significant answer, I think, to Tracey Crouch’s question about the impact of student fees. The one thing we know pretty well for sure is that there is going to be some kind of a major disruption to recruitment in post-graduate education in 2015, when students are emerging with the full current debt. What that will be and how it will hit we don’t know. Not only are the creative industries a very highly graduate industry, and in the areas we are talking about now it will be 80% to 85% graduates, but actually it is the post-graduates that are particularly important.

In areas like VFX and games and so on that is where the real skills and abilities develop. Are students going to want to stay on and do post-graduate education when they already have very substantial debts? This applies to all areas of post-graduate education. Government at the moment is refusing to engage with this as an issue and it is hoping that somehow other people will come up with solutions. I think for the creative sector we really need the funding of post-graduate education to be addressed as a major issue now because 2015 is not very far away.

Q451 Paul Farrelly: With the narrowing of choice through the EBacc in the state sector and then the impact of fees and the debt and what may or may not come on the post-graduate sector, is there a general feeling that there might be a narrowing of the social background of people who in the next few years will be going on to achieve great things in the creative industries?

Professor Crossick: I think it could be social and it could be gender.

Catherine Large: There is already a very narrow talent pool because we also work in industries where there is enormously high demand for jobs and as such we have a proliferation of unpaid work. When I graduated and went into the theatre industry I did my three-month work placement. Now we hear stories from the music industry where people are working for three years unpaid and that is absolutely impossible when you consider any sense of social diversity. I think what you are pointing to is the sense of EBacc tuition fees and the nature of the workplace in that sense, which all constitute a real narrowing so I am adding another layer to your point really. It is a great concern.

Dinah Caine: That is why the apprenticeship route-something we have not really talked about here-is absolutely critical for these industries.

Professor Crossick: What is essential in internships and work experience is that these are properly regulated, not by Government but by the universities, by sector skills councils to ensure that if people are going and doing unpaid work then they are doing it in a structured environment in which everyone knows what they are going to get out of it and they are properly mentored to come out of it more employable. At the moment, there is a great fear that a great deal of it is not that at all.

Q452 Paul Farrelly: I think John was just about to ask briefly about apprenticeships.

Professor Bartholomew: Would you allow me to make a very brief point?

Chair: Yes.

Professor Bartholomew: It relates to something Geoffrey said earlier, which is this compartmentalisation and in particular the cultural belief here that there is a distinction between science and creativity. We were talking about VFX.

I want to give you one example. On a three-month cycle, so four times a year, six of my students go and join the Nanjing Film Corporation. They have been sourced by China because these are students who have a computational skill but also the creative visual understanding that will enhance animation and they spend three months in China at China’s expense.

China’s benefit is that they get that visualisation that they are very thirsty for. Our students get the immense experience of working in a massive production setting. It is an example where globalisation means that the talents are sought wherever they reside and we should not continue with the sort of belief that Britain is naturally creative by some sort of magic, and that we just have it. We are not naturally creative; we need to nurture that creativity and once we have done it others seek it if we don’t seek it for ourselves.

Chair: I think we should probably draw a line at that point. Thank you all very much for coming.

Professor Crossick: I assume that you are aware of the UK report on this, which covers quite a lot of the issues we have been talking about.

Prepared 14th January 2013