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I shall emphasise four issues in the report, the first of which, the Government’s response indicates, will find favour. British experience since the BBC ceased to be the monopoly public service broadcast provider has convinced everyone that there must be at least one public service competitor for the BBC. I agree with other noble Lords that ITV, with its successful track record of combining PSB with commercial programming and, above all, its impartial, independent news, is the one of the most obvious candidates. We should not forget either its commendable record of sourcing UK content. On the other hand, because of the undeniable and increasingly rapid move of the advertising industry to the internet, ITV, as it made abundantly clear to us, will need adequate financing for any future PSB role, all the more so in light of the Treasury’s confiscation of the valuable analogue spectrum.

I underline, secondly, the crucial need for the continuance of a second nationwide, independent, impartial public service broadcaster news service. Again, ITV’s track record clearly makes it one of the major candidates, so long as the necessary finance and partnerships are assured. It is clear, too, that UK citizens want this. Ofcom’s research showed that 86 per cent of our citizens wanted international news to be available on more than one public service broadcasting channel.

In this context, the BBC has already suggested some sharing of facilities and the use of some of its material in regional news programmes. One understands that many conversations are still under way and one expects to see many of these initiatives rolled out in due course. In light of Ofcom’s research showing high citizen demand—72 per cent—for specific nations and regions news services, I agree that the Government should also consider the relaxation of competition rules to allow some combination of print news and broadcast media companies.

Children’s PSB programming is another area where more resources are needed, with 76 per cent of parents urging more UK-sourced provision. Here, too, PSB competition is important, but—I could not agree more with the right reverend Prelate the Bishop of Manchester—the BBC clearly has the major responsibility. We must therefore hear rather more from the BBC about what priority children’s programmes will have in its future plans. I would include in that not least its online programmes. Many people, for example, will want to know what will replace the recently axed children’s online service, BBC Jam.

There was particular concern at Radio 4’s decision to end the last existing BBC children’s radio programme, put out on a Sunday evening. My noble friend Lady Warnock made a quite brilliant speech on behalf of Sound Start—which has previously piloted a children’s radio programme—on 14 May, criticising Radio 4’s decision and stressing the importance of listening for the development of children’s imagination. I urge those responsible for Radio 4’s programming and, failing that, the BBC Trust to think again.

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My third point is on the proposals being advanced for partnerships and alternative forms of funding for public service broadcasting. The BBC Worldwide/ Channel 4 merger suggested by Ofcom, and perhaps still favoured by the Government, seemed to many if not all of us on the Select Committee a step too far. It would make good sense—and it is one of the benefits of the state that we are in—to use this time to see what kind of partnership can be developed and to see whether the BBC will form as good a partnership as it has promised to form. BBC Worldwide, under the direction of John Smith, has done exceptionally well. Not least, it earned one of this year’s prestigious awards for industry. Channel 4, with its hugely successful record of commissioning films, has far more international revenue to be exploited. A partnership would also give time to see how all that could be developed.

My fourth point is on the vexed question of where further funding can possibly come from for the underfunded, yet citizen-valued, PSB areas; whether news, drama or children’s programmes. As we say in paragraph 81 of our report, in some of those areas a case may already be outlined for contestable funding, to which would-be PSB programme-makers could apply. If by 2012 there is an underspend of the BBC licence fee fund—and many figures have been put on this—I, too, would go along with believing that it should be one source of funding. I am less sure about going much further than that.

Equally, I can see no reason why the considerable value of analogue spectrum should accrue only to the Treasury. However, if that was to happen—which I would support—how should such resources be allocated? It would not, I hope, be through the creation of yet another quango. Surely, Ofcom could do the job by setting up an organisation not dissimilar to its consumer panel. We may all have been aware of the fact that, although there was something called a content board, it was in fact the consumer panel that seemed to do a considerable amount on behalf of the citizen. Above all, it published its reports so that they were in the public domain. I urge that particular form on Ofcom and the Government to think about very seriously.

5.52 pm

Lord Lipsey: My Lords, we must be profoundly grateful to the noble Lord, Lord Fowler, and his colleagues, many of whom have spoken in this debate, for the admirably succinct, clear and well argued report. I shall focus on one issue—how we preserve Channel 4.

Despite the advocacy of the noble Lord, Lord Puttnam, the affairs of Channel 4 get only a fraction of the attention in both Houses of Parliament as those of the BBC or even ITV. That is partly because there is an All-Party Parliamentary BBC Group, as there is one for ITV, admirably chaired by the noble Lord, Lord McNally, but there is no Channel 4 group. That needs to be remedied in the very near future. Leaving aside the formalities of all-party groups, if you talk television with Members of this House—and with our hours being what they are we watch only a fraction of the television that normal human beings watch—it is surprising the extent to which it is Channel 4 that people are talking about and not the other main

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channels—even among those who, peculiar though it may seem, are not interested in racing, where the BBC is stuck in the starting stalls while Channel 4 proceeds to make the running.

Without Channel 4, the BBC would have a monopoly of non-commercial public service broadcasting. ITV has deserted or is deserting the field. Under its present leadership, it has downgraded—I apologise for the pun—anything that could claim to be public service broadcasting. Axing the “South Bank Show” is an act of cultural vandalism that future generations will wonder at. Sky Arts does a great job on limited resources, but it is of course an arm of a gigantic commercial broadcaster and relies on its benevolence to keep it going. Absent Channel 4, there would be the danger of a BBC monopoly. Monopoly is, ipso facto, undesirable, even if it is a monopoly in the hands of a world-class institution such as the BBC. Certainly, that is the view of the committee of the noble Lord, Lord Fowler. It says:

“We believe there would be dangers if the BBC were to become an even more dominant provider of public service programming”.

Channel 4 has done a quite remarkable job. It sometimes seems almost to defy gravity. That cannot go on for ever. The economics of the television market are such that it will not go on doing it on the present basis; it needs more money. Some sources can be ruled out. The advertising market’s extremely weak short run is likely to remain quite weak and in the end there will not be more money. Given the state of public finances, it does not have a prayer of getting more money from the Treasury. It is hard to avoid the conclusion that one way or another there is only one source of more money, and that is the BBC and its licence fee.

However, there is an obstacle. The BBC is a world-class institution and, among the things that go with being a world-class institution, it is a world-class lobbyist. The BBC’s position at Westminster has been noticeably weakened these past 12 months by the Jonathan Ross affair and its stance on the Gaza emergency appeal. That is not a statement of opinion on either of those things, but a measurable fact from talking to people around the House. If it were not so, the Tories would not have dared move their recent populist motion in another place to freeze the licence fee. To put it crudely—they thought there were votes in it. However, the BBC remains a giant beast in the jungle. I still bear the scars of the long battle to get it to be subject to some form of public account scrutiny. It came up again today with the BBC trying—rightly or wrongly—to keep Terry Wogan’s salary away from the committee. You get into a very dangerous and long drawn-out battle if you do not entirely take the BBC’s view on things.

The BBC will fight tooth and nail against topslicing, contestability, the reallocation of its digital switchover money and anything else that might cost it a bob or two. That is why the solution advocated by the noble Lord, Lord Fowler—and I hope that Channel 4 will get some money through some sort of partnership with Worldwide—is a good one. The devil is in the detail and the detail is proving very testing, but agreement there has to be. It is not the most logical solution—the most logical solution would be to take a chunk of licence fee money and give it to Channel 4—but it may

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be the most practicable solution, and I would rather that Channel 4 got more support through an illogical means than no support because we insisted on the logical means.

An immediate question arises from this—I think I am talking in this Chamber only to supporters of the BBC and I really mean it when I say it is a world-class institution—can the BBC afford to give up any money to Channel 4 while maintaining its role as a full service public service broadcaster? Can it even afford a larger knock from a direct subvention to Channel 4 as opposed to the indirect subvention involved in the Worldwide deal?

I was a member of the Davies committee on the BBC licence fee in 1999, and a great experience that was. The committee had a mixed membership but it agreed, as it happened, on everything except one thing; how much money the BBC needed. I recall that my noble friend Lord Gordon, who is unfortunately unable to be with us this afternoon, was on the low end of the spectrum. The chairman, Gavyn Davies, was at the high end of the spectrum, which was as well as he went on to be chairman of the BBC. I was somewhere in the middle, with all the other members scattered in between. I make that point simply to say that well-meaning people with a strongly pro-BBC view in life, which every member of that committee had, came to quite different conclusions on how much money it needed. It is a matter of judgment.

To conclude our Thursday Back-Bench contributions on a rather wicked note, my own yardstick is that so long as the BBC can afford BBC Three it has too much money. Here is a channel, much to most of the content of which is paltry, aimed at appeasing a mythical target audience of young viewers who the commercial market can adequately cater for in any case, at a cost of some £125 million per annum, and which is watched by the average viewer for three minutes a day. Compare that with the use that Channel 4 could make of money on that scale, which amounts to nearly a third of its total programme budget, and there is no contest.

6 pm

Lord Clement-Jones: My Lords, I join with others in congratulating the noble Lord, Lord Fowler, on initiating today’s wide-ranging and fascinating debate. This short report and today’s debate have rightly created a great amount of interest, not least from broadcasting organisations which believe that the noble Lord, Lord Carter, may still be in receiving mode prior to the imminent publication of the Digital Britain review. I also congratulate the noble Lord, Lord Fowler, and his committee on eliciting such a lucid holding response from the Government.

This is a brief but extremely impressive report, particularly the succinct—I note that the noble Lord, Lord Lipsey, used the same adjective—introductory discussion of what is meant by “public service broadcasting”. I agree that the nature of the content is increasingly crucial, as is universal access, but we should decreasingly predicate on which platform the content should be made available, particularly in the

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light of the spread of broadband. On that matter I strongly agree with the remarks of the noble Lord, Lord Inglewood.

The crisis in commercial PSB has been more drastic and happened more quickly than anyone ever expected because of the recession. That said, little planning was done to anticipate the inevitable. As we have heard today, ITV and Channel 4 are at particular risk. I worked at London Weekend Television in the 1980s, but I am not sentimental. At that time we saw the birth of Channel 4, breakfast television and home video. We have been extremely lucky that the PSB ecology of the past 20 to 30 years has lasted as long as it has, but now we need to recognise that the model needs changing.

However, it is essential—the public are insistent on this—that the plurality of PSB provision continues. If it does not, we will have the danger of the BBC being the elephant in the room, unduly dominating all forms of television activity. The committee made this point well. As it points out, however, we need better financial information from the commercial public service broadcasters. On any judgment, we are seeing PSB market failure.

I am a keen Sky news watcher, but I do not accept Sky’s denial that there is no crisis in advertising-based models. I do not want ITV, with its great PSB tradition which was so well described by the noble Lord, Lord Birt, in his evidence to the committee, to walk off into the purely commercial sunset—not least because of the impact that that would have on STV and UTV—or to allow Channel 4, with its extraordinary track record of innovation, to fail. That would have a huge impact on the creative industries, particularly independent producers.

In this debate, however, we should see the BBC’s position and strength as an opportunity and not a problem. We will not solve problems at ITV and Channel 4 by reducing the BBC’s ability to make good programmes. On these Benches we fundamentally disagree with the Conservative attempt in the other place before the Recess to freeze the licence fee. We are generally satisfied that the BBC is using its resources wisely, making considerable economies and efficiencies—some £2 billion over the past eight years. The answer is not to hobble the BBC but to ensure that it is part of the solution. We need to harness its increasingly innovative approach to the benefit of the wider PSB universe.

I usually agree strongly with what the noble Lord, Lord Puttnam, has to say, but I thought that he was unduly apocalyptic about the BBC in his speech today. On these Benches we are opposed to top-slicing. We opposed the use of licence fee money for digital switchover. We took the view that this was a government social policy that should be paid for by the Government in the same way as they pay for reduced or free licences for the over-75s.

In 2005, Sir Michael Grade said that,

That was strong but characteristic language and these Benches agree with that view.

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The BBC has a long history of working in partnership with other broadcasters for the public benefit—for example, on Freeview, Freesat, DAB, Canvas, SAC Wales—and there are many partnership proposals on the table or in the pipeline. Given that the BBC is already entering into creative partnerships—for example, sharing regional news facilities with ITV—we should formalise this role by establishing a duty on the BBC in the BBC Charter to work in partnership with other broadcasters for mutual benefit and added public value. The BBC could then set up a partnership fund for this work. This could include the anticipated £250 million digital switchover surplus and the money already identified as going into partnership work. In the future it could include the equivalent of the digital switchover part of the licence fee.

Any projects being funded out of the partnership fund should be justified and properly overseen. Any proposal would have to pass some basic tests before being considered, such as whether it benefits the BBC, the licence fee payer or a third party. Crucially, in order to ensure proper oversight of this new duty in the BBC Charter, we must set up an independent PSB regulator along the lines originally proposed by the noble Lord, Lord Burns, whose evidence to the committee I found fascinating. The BBC Trust would be folded back into the BBC and essentially act as a conventional board of directors responsible for strategy and governance.

In contrast, the committee advocates the idea of contestable funding for PSB content. That is a very attractive idea in many ways; the problem is where the funding for it is to come from if not from the licence fee. In our view it is viable only if we can deliver additional funding that does not raid the licence fee, such as through sales of the analogue spectrum. However, I suspect that that money has already been notionally spent twice over by the Government.

We have talked much about the financial crisis facing ITV. It is hardly surprising that a consistent theme of Sir Michael Grade’s term as executive chairman has been the need for ITV to throw off some of its PSB obligations to save costs. Some of its decisions are understandable but others are extremely regrettable, such as the decision to axe the “South Bank Show”. Ministers claim that they understand the crisis facing ITV and indeed other commercial broadcasters, but they have failed to provide a crucial piece of help which was within their power—allowing product placement. We should trust broadcasters to know how to advertise without destroying their viewers’ experience. If people do not like the way that broadcasters use product placement they will go elsewhere for their entertainment. Product placement is already being seen by British audiences in much of the imported content that we have on our screens. The decision by the Secretary of State, Mr Burnham, earlier this year means that British producers and broadcasters will lose out on that vital income. On some estimates this could amount to an additional £150 million per annum in revenue to ITV, which would be a significant boost.

Then, of course, there is the question of ITV’s regional news services. I am a Londoner, so others might be more qualified to speak about the value of regional news. However, we must find a solution and

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continue to provide a viable alternative to BBC regional news services. There is clearly a massive difference in perception on the right way forward, with the BBC seemingly in fundamental disagreement with Ofcom and ITV. The BBC has entered into a partnership with ITV to share some local resources, but although it provides some benefit, it is clearly not satisfactory to either party. Has the time come to have a partnership between the BBC and a new third party regional news provider, rather than to continue with ITV limping along as the provider? This should be discussed. I agree completely with what the noble Lord, Lord Macdonald, said about STV and UTV. It is vital that we ensure that they are able to carry on with their broadcasting without having ITV in such a strong position in the negotiations.

Like others, I have been following the progress of negotiations on a link-up or even merger between BBC Worldwide and Channel 4. At first I was very sceptical about whether that would work. I thought that they were very different animals set up to do very different things and with different rights granted by programme creators. However, I am now a convert, largely for the reasons put forward by the committee—that there is a common culture and it could work to the advantage of both organisations. Also, the enthusiasm shown by both BBC Worldwide and Channel 4 must be taken into account, as must the belief that a profit of £200 million per annum could be generated by a joint venture. But a merger—described as “corporate engineering” in the evidence to the committee—may not be a viable option. At the minimum, I hope that a joint venture is possible. If it is to happen there needs to be leadership, and I hope that both the Minister—the noble Lord, Lord Carter—and the Digital Britain report itself will provide that.

Although the noble Lord, Lord Carter, was very positive about the need to support children's television in his evidence to the committee, there are strong rumours that the Digital Britain review will do little to help. I therefore wrote to him on behalf of the Liberal Democrat shadow DCMS team urging him to consider that area anew. Less than 1 per cent of children's TV programmes broadcast in the UK are made in the UK. The situation is getting worse. Ofcom confirmed that UK children's television is a key public service genre and faces funding issues. It identified the clear market failure in children's television. It found that £40 million has come out of the industry in recent years, and that investment in new UK children's TV programmes is forecast to halve over this decade, with the BBC left as the only significant broadcaster outside pre-school programmes.

Both the House of Commons Culture, Media and Sport Select Committee and our own House of Lords Communications Committee, in reports last year, supported funding for children's television. The Digital Britain interim report acknowledged Ofcom's findings and stated that UK children's content would be a priority in its conclusions. Ofcom's most recent consumer research identified that parents valued children's programming as highly as nations and regions news, and in fact considered children's content a higher priority than regional news in terms of the need for an increase in current provision. A number of models

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have been put forward including an extension of Channel 4's remit. We on these Benches have advanced the idea of a tax credit akin to that enjoyed by the film industry. There is clear justification for special treatment to ensure the future production of UK children's television programmes, and it is vital that the Digital Britain review tackles the subject and provides solutions.

We are all setting great store by the forthcoming Digital Britain report, and are extremely grateful to the committee for its well timed report. I hope that the Government will take note of the many excellent points made by the committee but firmly set their face against top-slicing in favour of a strong partnership role and obligations for the BBC.

6.13 pm

Baroness Rawlings: My Lords, I too thank the noble Lord, Lord Fowler, for securing this diverse debate on this informative and important report by the Communications Committee on public service broadcasting. Having heard so many praises from all his committee members, I wish that I, too, had had the chance to be on the committee under his enlightened leadership.

The committee has made a number of recommendations aimed at modernising the public service broadcasting industry so that, in these difficult and challenging economic times, it may survive this short-term crisis and secure a long-term future. The perceived crisis within some areas of PSB could be seen as a little exaggerated, apart from in advertising. The report’s evidence illustrates that none of the channels is particularly suffering, perhaps with the slight exception of ITV, which experienced revenue losses of 3 per cent in 2008 and is predicted to have to make cuts to the tune of £245 million by 2011. However, even it remains confident that it will survive and be,

Channel Five’s owner, RTL, stated in its annual report that in 2006-07 revenue was up by 7 per cent, pre-tax, and that it was pretty self-sufficient. It, too, thought that it would weather the changes in the industry, despite the difficult economic conditions. The Enders Analysis report in 2008 stated that in many ways Channel 4 is financially in the strongest position among advertiser-funded public service broadcasters. The channel holds substantial reserves and has no pension deficits or indebtedness. Finally, the report describes the BBC’s financial position as being securer than that of virtually any other business in the country. The corporation’s total income in 2008 was £4.4 billion.

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