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A range of solutions were examined by the committee. There was a proposal to merge Channel 4 and BBC Worldwide—corporate engineering, as one witness described it—leading, as the Minister memorably put it, to PSB2. The government response indicates that this is still on the table for consideration. Such a merger would undoubtedly be to the benefit of Channel 4, but the evidence we heard suggested that it was opposed by the BBC. Perhaps that is not the best basis for a merger, but others may have things to say on that point. There was another proposal to put together Channel 4 and Five. This was enthusiastically supported and pursued by Five and just as enthusiastically rejected by Channel 4.

Having looked at all those options and others, the committee proposed that the best way forward would be a system of contestable funding. I think that was first advanced by the noble Lord, Lord Burns, not only in his evidence to us but previously. The noble Lord has the great advantage of previously having been an adviser on broadcasting to the present Government.

There is a danger in today’s media world of being buried in jargon, so I shall explain in practical terms what “contestable funding” actually means and how it could relate to regional news. The prospect with ITV regional news is that unless something is done it will disappear. We will be back to the 1950s: the BBC will be the monopoly provider. In fact, it would be appreciably worse than the 1950s. In those days, regional newspapers had large readerships. There were flourishing morning newspapers and very strong evening newspapers. In those circumstances no one would talk of a BBC monopoly. But today regional newspapers face as serious a crisis—perhaps an even greater crisis—than the broadcasters. Some newspapers have already closed and more closures are threatened, just as in the United States. Evening newspapers in the big cities face particular challenges. I here declare a past interest as a former chairman of the Yorkshire Post Group, based in Leeds, and of the Birmingham Evening Mail and Post Group, based in the West Midlands.

I shall try to explain why contestable funding provides a way forward. ITV would continue to provide the slots—if you like—for regional news programmes on channel three, but would neither provide the news nor bear the cost of producing it. Public funding would be offered to companies that could provide that news, but that process would be open to competition. Regional newspapers would be allowed to take part in those consortiums competing for contracts, meaning that it would be necessary to change the regulation here, and so, too, would an organisation such as ITN. However, I would welcome confirmation from the Minister that the case for relaxing regulation by allowing newspapers to take part in those consortiums would receive favourable treatment from the Government.

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The net result of all that is that in the end you could have news provided with the television skill of ITN and the local knowledge of the regional press. We should remember that much of today’s regional television news is a follow-up to the newspaper stories that appear in the evening press. That plan is very close to the Ofcom proposal of independently funded news consortiums. As Ofcom points out, there is a choice between retaining the current ITV regions or going below those regions.

We should not believe that the present regional boundaries necessarily represent local interest. When I was Member of Parliament for Nottingham South, there was little interest there in what was happening in Birmingham. When I became Member of Parliament for Sutton Coldfield in Birmingham, 40 miles away, there was little interest in what was happening in Nottingham, but they were both covered by the same regional company. Of course, I add that what I propose about the regions of England also applies to the nations of Scotland and Wales, and to Channel 4’s evening news programme, which is already contracted out.

The big question then becomes how you support such a system—where does the money come from? The committee rejected more taxpayer support but made a number of other proposals. At that point in their response, the Government became remarkably coy and basically said, “Wait for the final report”. I have the utmost confidence that that is exactly what the Minister will say tonight, but let me set out some of the ways in which money can most certainly be raised.

First, there is the obvious potential in increased partnership between the BBC and other broadcasters. Whether it be BBC Worldwide co-operating with Channel 4 or studio space being made available at a regional level, the potential is great, although I accept that it will take time to deliver and develop. It will also require a commitment by the BBC to partnership that has not always been evident in the past. Secondly, the digital switchover scheme—financed by agreement by the BBC—is underspent. There is no reason why that money should not be used also and, even more so, why that amount should not continue to be used to provide secure future finance. Thirdly, although we are moving to digital from analogue, there is still a value in analogue. It is not unreasonable to say that as analogue provided the undoubted subsidy for public service broadcasting in the commercial sector, that sector might also benefit from the sale of analogue spectrum.

I do not run away from the prospect that in the final event those measures may not be sufficient or, more likely, will not be able to provide the resources quickly enough. If that is the case, there would be no other option but to use the money—or a little of it—from the licence fee. We might remember that, between 1927 and 1961, a portion of the licence fee was devoted to general public funds. I obviously recognise that that would not be welcomed by the BBC and agree with it that the licence fee should not be treated as some kind of milch cow available for the Government to finance any proposals that they happen to have in mind. Personally, I think it is questionable whether the licence fee can be diverted for providing broadband, for example,

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but that is doubtless a debate that we may come to. There is a much stronger case for using some small part of the licence fee for providing broadcasting; after all, that is what the public believe that they are paying for. The public would not want a situation where the BBC was the only television news provider. It would put far too much power in the corporation’s hands. Frankly, I do not think that the corporation would welcome it either.

This proposal is not an attack on the independence of the BBC. It would be ludicrous to characterise it in that way; it is to ensure proper competition and proper choice for the public. It also recognises that, in the middle of the worst recession since the 1930s, the BBC has a unique advantage of a secure income of over £3.5 billion a year. The BBC should not be defensive on this; it should not seek to defend its budget to the last pound. It is in a uniquely privileged position and should take a leadership role to help all public service broadcasting, particularly the news, through this challenging and difficult time. I take some comfort from the Government’s response, which says that they agree with the committee that,

We will see exactly what that means in practice.

I also believe that what I am saying is what the public would want. In the Government’s response we come to the department’s familiar Stalinist tradition. I remain of the view that it is a great pity that our elected Parliament does not have a greater say in some of these affairs.

I emphasise that I am not seeking to intervene in the day-to-day running of the BBC or challenging its independent reporting. That is a lazy argument of last resort used by those who simply want to defend the status quo. But the public’s view is crucial in deciding exactly the case that I have been arguing: whether some part of the licence fee should be used for other purposes, such as helping to support public service broadcasting in the commercial sector. That is where Parliament has a proper role to play.

Those who oppose that might consider what happens at the moment. The Minister will certainly remember that the BBC charter and what flows from it are not the subject of legislation or any serious decision in Parliament; it is a straightforward deal between the Government and the BBC in which Parliament has no meaningful role. In this age of much greater transparency and promised reform, I do not believe that the present system deserves to last.

Even more, what I and the committee want is a range of public service broadcasting in this country with the BBC remaining in the lead, but with other broadcasters being enabled to make their contribution. That is the aim and the goal and it is the challenge, over the next years, that we must meet. I beg to move.

4.56 pm

Lord Macdonald of Tradeston: My Lords, as a member of your Lordships’ Select Committee on Communications, I pay tribute to our chairman, the noble Lord, Lord Fowler, for initiating our brief but very timely inquiry, for his skill in editing our deliberations

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in such a cogent form and for that excellent review of the issues that we have heard today. I declare my interests as an adviser to Macquarie Capital, whose funds invest in and manage Arqiva and Red Bee, which are companies supplying transmission and other services to broadcasters.

We await the publication of the Digital Britain White Paper this month with great interest, but we do so in the knowledge that some of its proposals are unlikely to be implemented until after the next general election. Therefore, I trust that those drafting party manifesto policies will note our concerns and the options explored in our committee report and in this debate today.

The good news today for public service broadcasting is that the policies of the past decade have protected and expanded the BBC. For that, the Government should be applauded. Licence fee income is now about £3.5 billion a year and BBC Worldwide turns over about £1 billion more. The licence fee money, as the noble Lord, Lord Fowler, said, is also being top-sliced, as they say, to help to fund the transition of households from analogue to digital broadcasting.

Looking forward for cash to sustain other parts of public service broadcasting after digital switchover is completed in 2012, the option to keep top-slicing the huge licence fee total will be almost irresistible for any cash-strapped Government, I predict. Today’s switchover subsidy may well become tomorrow’s contestable funding, in Ofcom’s phrase—money that could be bid for to fund good works such as regional news or children’s programming. Our report calls for the introduction of contestable funding to support public service broadcasting outside the BBC.

Our report also suggests that a partnership between Channel 4 and BBC Worldwide should be pursued. A joint venture might generate profits of up to £200 million a year—a win-win deal, one hopes—but an important consideration in structuring such a partnership must be to ensure that BBC Worldwide is not distracted by internal politics or fettered in its international ambition. In its highly competitive global marketplace, up against media giants many times its size, BBC Worldwide is Britain’s last best hope of producing a national champion. For politicians, that should be a priority, and any partnership with Channel 4 should be fashioned to strengthen BBC Worldwide as our global player.

It is worth noting that after 26 years on air Channel 4’s audience share is still below 10 per cent. In terms of the quantity of popular quality output, particularly in drama, ITV is the most important public service broadcaster in the commercial sector as regards programme investment and employment. It is accepted that the regulatory constraints on ITV should now be relaxed so that it can continue as a viable public service broadcaster. I therefore welcome the prospect of ITV being released from any outdated undertakings that limit its ability to get a fair share of the television advertising markets.

If the economy begins to pick up later this year, ITV will hope that past experience of television advertising being the first to suffer in a recession but the first to recover will still hold true. However, we accept that there will be a continuing threat of a loss of advertising

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to the internet and that that will continue to undermine the traditional business model of commercial broadcasters in the future.

That said, one area where Channel 3 must continue to compete with the BBC, and ideally match its peak-time audiences, is in news and current affairs, both nationally and regionally. Despite the quality of UK news on Channel 4 and Sky, both have relatively small audiences. The BBC, like all big, long-lived institutions, has developed its own distinctive culture, which inevitably influences its news agenda and colours its reporting. With a medium still as influential as television, it is important that peak-time audiences can still watch their popular alternative news and current affairs on Channel 3. This is particularly important in the three nations of the United Kingdom peripheral to England, which, with 83 per cent of UK viewers, naturally dominates the London-based news services.

Since Scotland got its Parliament and Wales and Northern Ireland their Assemblies, the BBC has broadcast news services adapted to the new needs of the devolved nations. Therefore, it is to be hoped that the surviving independent broadcasters on Channel 3—namely, STV in Glasgow and UTV in Belfast—are encouraged to pursue their ambitions to supply distinctive national services in greater measure than is required of any English region. In this regard, we should keep in mind that in English regions it does not matter quite as much if you have restricted local coverage because almost all you see on the ubiquitous UK news broadcasts will reflect other aspects of your nation, England.

The Government and Ofcom are understandably sympathetic, as I am, to ITV plc’s plea that it be allowed to shed its remaining public service obligations. However, ITV plc also wants to renegotiate its contract to supply programmes on the Channel 3 network to STV and UTV. Clearly, this would not be a negotiation of equals, and a deal imposed by ITV could undermine the viability of both smaller companies. A condition of the merger that created ITV plc was the network arrangement imposed by Ofcom regarding the supply of network programmes to the two smaller companies. Can the Minister assure us that Ofcom is playing a constructive role in brokering an agreement on this issue? Can we also be assured that the release of ITV plc from other public service obligations will be conditional on a settlement that ensures that STV and UTV can still aspire to make programming appropriate to the needs of nations with their own distinctive cultures and politics?

Our Select Committee concluded that the affordability and practicability of a new Scottish network and digital platform deserved further exploration. The proposal for a Scottish network broadcasting specifically Scottish programming came from the Scottish Broadcasting Commission, set up by the Scottish Government. Its report, Platform for Success, has been endorsed by all parties in the Scottish Parliament. The obvious question is how to pay for a new network costed at between £50 million and £75 million a year. Could that be a candidate for contestable funding?

Will my noble friend explore whether the Scottish Government are prepared to co-fund a new Scottish network, as the previous Scottish Executive did in

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alliance with BBC Scotland to launch the Gaelic language channel, BBC Alba? In the twilight of the old duopoly in public service broadcasting, it might be timely to reflect on the fact that Scotland, a nation of 5 million people, is almost unique among comparable countries in not having a television network that it can call its own.

Let me end with positive news for the UK’s other nations. Thankfully the BBC, with its licence fee income of £3.5 billion a year, has never been better off. For the three smaller nations that make up 17 per cent of all those BBC licence payers, the good news is that, at long last, their pitiful share of programme production for the BBC’s UK channels will rise to 17 per cent. For Scotland, that means 8.6 per cent of a network production budget of almost £900 million—an increase from just over £30 million a year at present to more than £70 million a year. That is a huge boost for which I give all credit to the director-general of the BBC and to the BBC Trust.

I have one concern: the 8.6 per cent target may not be reached until 2016. Surely, after half a century of marginalisation, that is too long a transition, especially in these rapidly changing times. I hope that Ofcom can put further pressure on Channel 4 to push up its percentage of programmes made outside England. I trust that our report Public Service Broadcasting: Short-term Crisis, Long-term Future, which has been so ably outlined by our chairman, will help my noble friend and the Government to preserve what is best in our broadcasting industry so that we can continue to make what I believe is still the best television in the world.

5.07 pm

Baroness Flather: My Lords, I am grateful to the noble Lord, Lord Fowler, not only for bringing the debate to the Chamber but for so clearly stating the case. That was extremely helpful because not all of us have the noble Lord’s experience.

I have always had one anxiety. I think that we in this country treat the BBC as a sacred cow. I am sure that noble Lords know what I mean. The BBC can get away with far more than any of the commercial channels, whether in its regulation or in showing something that would count as advertising in a commercial broadcast but does not in the BBC. I feel strongly that as we pay not £3.5 billion but £3.6 billion for the BBC this year, the regulation should be the same; there should at least be a level playing field in regulation because there is not one in any other sense.

I have had some small experience in a regional television company called Meridian Broadcasting, which I joined when it started and stayed with until it was absorbed into ITV. There was always a feeling that the regulators came down much harder on the commercial companies than on the BBC. If there was a dispute, the BBC had an internal mechanism for resolving it while the ITV companies did not. I have never been happy with that. We should start looking at the BBC as part of the total provider sector in this country and not as something special to be protected as a sacred cow.

When we started to talk about digital switchover, I thought that there was bound to be a lot more

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competition. There would be a lot more channels and a lot more people providing advertising, and that would affect us.

I do not remember people getting very worked up about that. I was very surprised by that. I am not an expert, but it seemed to me logical to think that there would be a problem with having all those channels. I read somewhere that there was an idea that more time could be provided for advertisements. Clearly, that will not work because there is a finite amount of advertising. It just means that companies will compete with each other for that advertising; the total pot will not increase. Secondly, I fear that the quality of advertisements will decrease. I think that we have quite good quality advertisements in this country and we should protect them. We should not allow advertisements to become ridiculous and of poor quality.

As has been stated, with that £3.6 billion there is now a gap between ITV and the BBC. For the first time, the BBC has more money than ITV, and that gap will grow. Next year, there will be a gap of £1 billion. Clearly, ITV will not be able to provide what it has been providing. It is useless to imagine that it can bridge that gap through revenue, which has been hurt not only by competition but by the current financial climate. That kind of gap will mean that we will not be able to stop at just finding a way to provide regional news; will have to find other ways to help commercial companies to stay viable and provide the best television.

As has already been said, we have the best television, but I would also say that we do not have the best television from the BBC. No commercial provider would make some of the programmes broadcast on the BBC. Meridian was offered a programme about Spain—I have forgotten what it was called, but it was a serial about Spain. Meridian said that it was a ridiculous programme and refused it, but the BBC took it on. It ran for a while, but it was always a ridiculous programme. There was a very expensive serial called Gormenghast. I do not know if any noble Lords saw it or followed it, but I still do not know what it meant or what it was about. Perhaps I am stupid, but it did not seem to me worth sitting to watch.

We get a lot of what I feel is a waste of a good amount of money. If you have to earn every penny and set up a department that has to sell advertising to get the money in, you do not make that sort of programme. Then you value the money that comes to you. If the money just arrives in the pot, obviously there is a slightly different attitude towards it, which is not a good thing.

I once watched 48 hours of regional broadcasting from the BBC for diversity content. I am sorry to say that it had very poor diversity content. We were given cassettes, I am glad to say, because we could not have done it otherwise, but it had very poor diversity content. A lot of the documentaries that the BBC makes about minorities and minority areas are not nearly as good as those of Channel 4. I cannot imagine who would ever think that we can bring Channel 4 and five together. I do not see much merit in channel five. It never had merit to begin with and it has not acquired it. I do not speak for channel five.

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My other point is that the BBC paid money to Sky to go on its digital platform—£40 million, I am told. ITV tried to find an alternative. If the BBC had joined ITV to try to create an alternative platform, that would have meant real competition, because everything is now controlled by Sky, including cable. I have also been part of a cable company, and all the packages are put out by Sky. It controls them all. I find that distressing. Of course, it is water under the bridge and we can do nothing about it. However, it is time to start supporting our partner broadcaster in this country.

5.15 pm

The Lord Bishop of Manchester: My Lords, it is a privilege to serve on this Select Committee under the excellent chairmanship of the noble Lord, Lord Fowler. He has eloquently expressed many of the concerns of those on the committee. The case for public service broadcasting has never simply been about certain subject matters themselves, but about how specialist knowledge of those genres within the industry can help to inform other programme-making and, in turn, permeate our culture. No aspect of public service programming should ever be seen as a weight around the neck of broadcasters, but rather as an opportunity to enrich the fabric of our shared society. The loss of some of that sense of responsibility and the chasing of ratings as a primary objective have led to some gaping sectors of programming which the marketplace, if left to itself, would simply not provide. In other words, there are certain definable core elements of public service content that should continue to be supported. The noble Lord, Lord Fowler, alluded to that at the beginning of his speech.

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