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Channel 4 Privatisation

Volume 820: debated on Tuesday 5 April 2022

Private Notice Question

Asked by

To ask Her Majesty’s Government what plans they have regarding the privatisation of Channel 4.

My Lords, on behalf of my noble friend Lady Bonham-Carter, I beg leave to ask the Question of which she gave private notice.

My Lords, following a consultation, the Culture Secretary has come to a decision that, although Channel 4 as a business is currently performing well, government ownership is holding it back in the face of a rapidly changing and competitive media landscape. The Secretary of State is now consulting her Cabinet colleagues on that decision. The Government will set out their future plans for Channel 4 in a White Paper shortly.

My Lords, will the Government publish immediately the consultation, which was completed over six months ago and has not yet seen the light of day, on which the Secretary of State is allegedly making this decision? Is the Minister not ashamed that this extraordinarily well-run company is being dealt with in this way—a shabby decision, made in a hole-in-the-corner way—while the House of Commons is in recess? The chairman of the DCMS Committee, Julian Knight, has commented that this is “payback time” for the record of Channel 4 in holding the Government to account and helping our collective creative industries. Does the Minister not feel a little ashamed answering this Question today?

On the noble Lord’s first point, the responses to the consultation will be published alongside the White Paper to which I alluded in my initial Answer. I disagree deeply with the rest of his question: the Government value highly Channel 4 and the part it plays, and has played for 40 years, in our broadcasting ecosystem. We want to ensure that its next 40 years and beyond are just as successful and that it can flourish. It is doing that in a very rapidly changing and increasingly competitive media landscape. Channel 4 is uniquely constrained by its current ownership model and limited access to capital. It is such a successful broadcaster that we think it will make an attractive proposition for people to buy, and private ownership will allow it to create new revenue streams and compete as effectively as possible to be fit for the future.

My Lords, last Friday the energy price cap increased by £700; inflation continues to climb and may reach 10%; we face record costs at petrol pumps and bumper increases to phone and broadband bills; and social security payments are to be cut in real terms from tomorrow. All this is at the same time as fines have been dished out to Downing Street officials for breaches of Covid regulations, so can the Minister tell us why the Government have chosen now to announce the privatisation of Channel 4, and can he give us three good reasons for doing so? It is not in the interest of public services or public service broadcasting.

I must say that I find that a weak argument from the noble Lord. The Government are capable of doing many things. There is an urgency in addressing this issue so that Channel 4 is fit for what is a rapidly changing media landscape. The proportion of viewing on subscription on-demand services has trebled since 2017; it is important that Channel 4 is able to compete with the likes of Netflix and Amazon, so that it can continue to support the independent production sector and produce the viewing for which it is rightly renowned. That is why, as part of a wider package of reforms to public service broadcasting, the Secretary of State has announced her decision, ahead of having the vehicles to do that.

Perhaps my noble friend could help me. If a former constituent came up to me in the street and said, “Lord Deben, given Covid, the disastrous Brexit, the European war and the cost of living crisis, why have the Government thought it urgent to bring forward something for which there is no public demand, and real opposition across the House?”, what would my noble friend say?

I am not sure that all my noble friend’s constituents might phrase it like that. As I said to the noble Lord, Lord Bassam, the risk of doing nothing is to leave Channel 4 reliant on linear advertising. Currently 74% of its income comes from linear advertising, which is part of the broadcasting landscape that is changing rapidly. It is trying to compete with the likes of Netflix, which spent £9.2 billion on original content in 2019, compared with £2.1 billion by all the UK’s public service broadcasters. We want to ensure that Channel 4 is fit for the future so that it can continue to thrive and flourish.

My Lords, in his initial Answer the Minister said that the current structure of Channel 4 was holding it back and that there was an urgency to move now. Yet in its own evidence to the Government, Channel 4 said that it had

“proposed a vision for the next 40 years”

seeking to

“build on the successes of the first 40”.

That is from the management of Channel 4. Why do the Government think they know better than the management of Channel 4 about its future?

My Lords, the Government recognise the huge success that Channel 4 has been over the last 40 years. We want to make sure that it is fit for the future. Sometimes people who are close to organisations can be restricted in their thinking because of it. A responsible Government are looking to the next 40 years and the rapidly changing media landscape to ensure that Channel 4 has access to private capital to borrow, invest and continue to do what it is rightly renowned for.

My Lords, the Minister mentioned a long-awaited and much-needed White Paper. This is a very complicated and difficult issue which he has attempted to unscramble, but we will need a White Paper to see behind what he is trying to tell us today. Will the sale proceeds—which are highly contingent on a number of very key policy decisions that are yet to be taken—be dealt with in the White Paper? This is so that we will know about the new licence required for Channel 4, the prominence issues affecting its online and offline support, and the question of advertising he mentioned—which is buoyant beyond all measure at the moment. It is very difficult to see why it needs to suddenly be brought forward. These matters all need to be considered in the context of what the Government plan to do with the BBC and what they plan for other areas. We need a White Paper. Can he give us some timings?

The noble Lord is absolutely right; there are many issues of detail which of course we cannot cover in a 15-minute exchange on a Private Notice Question. The White Paper will set out more detail and legislation will be brought forward to enable both Houses to have their say on all those points of detail. It is our intention to publish the White Paper in the coming weeks.

My Lords, does my noble friend not think it extraordinary that people who constantly complain about the need for more public expenditure are opposed to a policy which will result in revenue for the Exchequer, and more importantly, enable Channel 4 to grow and expand without competing for resources with the health service and other groups?

I heartily agree with my noble friend. Of course, the production companies in the independent sector, which are privately owned and run, are a shining example of how private investment can deliver the content which is enjoyed by people not just across the UK but around the world.

My Lords, the Minister has made much of the competitive challenges facing Channel 4 and has referred particularly—as have many other commentators today—to Netflix and the other streaming services. Does he believe that those are the right comparators? Netflix is doing a completely different job from Channel 4, and it is not reasonable to suggest that Netflix represents a significantly greater threat to Channel 4 than to anybody else, or indeed, that Channel 4 and Netflix cannot coexist within a complicated and sophisticated media landscape.

Of course they can coexist. What we want to make sure of is that Channel 4 is existing, competing and able to continue to attract the viewership it deserves for its excellent programming. Netflix, Amazon and many others are increasingly competing, particularly among a younger audience—who make up such an important part of Channel 4’s current viewership. The way people consume television is changing rapidly. Netflix spends two and a half times as much as Channel 4 does on original content. We want to make sure that Channel 4 has the ability to borrow and invest so that it can compete and continue to attract viewers.

My Lords, is it not the case that the Government do not like criticism? They have cowed the BBC over the licence fee. Now they are taking on Channel 4. Can the Minister explain how the privatisation of Channel 4, which will have to pay dividends to shareholders, will give Channel 4 more money for programmes?

At the moment, Channel 4 is uniquely constrained; it can neither borrow nor benefit from private investment in the way that other companies can. We see how you can be a privately owned public service broadcaster—ITV does it very well. What we want is to ensure that Channel 4 is able to borrow, invest and create excellent content, some of which may be critical of the Government and some of which may entertain people. This is not about the output of Channel 4; it is about ensuring that it is fit for the future.

My Lords, does the Minister realise that it was the Labour Party in the 1950s which bitterly opposed the establishment of independent television? He should not be surprised by the reaction of the party opposite.

I am grateful to my noble friend for that reminder; he is absolutely right. It is important that our broadcasting sector continues to innovate and to remain competitive. It is doing so in an increasingly innovative and competitive field.

My Lords, if the Government insist on pursuing this policy, what safeguard will there be against a foreign company buying Channel 4 and yet another of our major media becoming owned by people outside this country?

Like the sale of any Government asset, the sale of Channel 4 will need to meet a careful assessment process to ensure value for money for the taxpayer. Further details will be set out in the White Paper to address that. We expect a lot of interest in Channel 4 from around the world.

My Lords, but is not Netflix a complete red herring? How many journalists and camera crews has Netflix sent to Ukraine?

Netflix is not a news producer in the way that Channel 4 is a public service broadcaster, but it is competing with Channel 4 for all the other things which Channel 4 does, including its entertainment and other content. This debate is not about the remit of Channel 4 but about ensuring that it can continue to compete with those, such as Netflix, which produce different but, at the moment, very competitive things.

My Lords, I understand the need for Channel 4 to have extra resources, but could my noble friend the Minister reassure the House that Channel 4’s particular benefits—in sponsoring some of the very newest companies and young producers, especially in current affairs and documentary programming, which I often find of huge value—will be considered carefully when any buyer is found?

Absolutely. The independent production sector has exploded since Channel 4 was created 40 years ago. The revenues have grown from £500 million in 1995 to £3 billion today. However, Channel 4’s competitors spend more on commissioning original programming than Channel 4 does—ITV spends twice as much and Netflix spends two and a half times as much in the UK. This is why we want to ensure that Channel 4 can borrow, invest and continue to support the independent sector, which it has done so much to support over the last four decades.

My Lords, ever since the announcement was made, we have been hearing about all these rare cultural gems which are made possible by the unique way in which Channel 4 is financed and which somehow would not be possible in a red in tooth and claw jungle capitalism. So I have just been looking at what the programming is now. With permission, I will tell your Lordships’ House: “Kitchen Nightmares”, “Undercover Boss”, “Steph’s Packed Lunch”, “Countdown”, “A Place in the Sun”, “A New Life in the Sun” and “Sun, Sea and Selling Houses”. Is it really credible to say that we are defending something which could not be provided by the private sector? Will my noble friend the Minister comment on the disparity between the funds which come from the private sector to independent production companies and those which come from state broadcasters?

I will not join my noble friend in singling out particular programmes —de gustibus non est disputandum, and all that. This is not about the content which Channel 4 currently produces or about its recent results; it is about ensuring that it is able, in the decades to come, to compete, invest and continue to provide a range of programming from which a range of people can benefit.

My Lords, following on from the last question, would the Minister give us his thoughts on which other body could have done the work which has been done for the Paralympics and disability rights in general? Once he has dealt with that, could he possibly tell us how that will be put into some sort of bidding contract?

Channel 4 did a fantastic job in broadcasting the Paralympics, and indeed in bringing the entire country together to cheer on Emma Raducanu in the US Open final. We want it to keep doing that fantastic job in the years to come, and that is why we want to set it on the right path, so that it is a sustainable and successful organisation.

I have been trying to follow the Minister’s logic over the last 14 minutes. Basically, he is saying that it is a wonderful company, doing a fantastic job, and so we need to change it fundamentally—that does not follow.

It is a wonderful company doing a fantastic job, but the last 40 years look very different from the next 40 years, and it is the job of a responsible Government to make sure that Channel 4 is fit to face those next 40 years.