Scotland: Public Service Broadcasting — Question for Short Debate
7:30 pm

Tabled By Lord Macdonald of Tradeston

What is their assessment of the future of public service broadcasting in Scotland.

7:33 pm
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Lord Macdonald of Tradeston (Labour)

My Lords, I hope that this debate will highlight some immediate concerns about public service broadcasting in Scotland and outline some of the options to secure its future. I declare my interests as an adviser to Macquarie Capital, whose funds invest in and manage Arqiva and Red Bee, companies supplying transmission and other services to UK broadcasters. In addition, until joining your Lordships' House in 1998, I worked for more than 30 years in ITV, first with Granada and then with STV, from which I receive a pension.

Most of the regional licences for broadcasting and Channel 3 are now consolidated into ITV plc, based in London. The three remaining independent companies include STV with its two licences to broadcast on Channel 3 to the north and to central Scotland. For these commercial broadcasters, this is undoubtedly the most difficult time since the launch of the ITV network back in the 1950s. Satellite and cable channels compete strongly for viewers and advertising revenue is migrating to the internet. Share prices have fallen steeply, and programme budgets and staff numbers are being cut back ever further by the current economic crisis.

Sadly, but understandably, ITV plc wants to shed the cost of key public service obligations by reducing quotas for regional programming and independent production. In Scotland, ITV plc also wants to renegotiate the programme supply contract it has with STV. However a deal done on ITV plc's terms could impoverish STV and undermine its ambition to restore to its schedules some of the specifically Scottish programming lost in recent times.

The other threat to STV's viability is the warning from ITV plc that it might be forced to hand back its Channel 3 licences and relaunch itself as a purely commercial digital channel, free of all public service obligation. If this happened, and Ofcom took the warning seriously, STV would be cut adrift from the network schedule of ITV plc on which it currently depends. The existing contracts between STV and ITV plc are protected by the network undertakings imposed when Granada was allowed to merge with Carlton to form ITV plc in 2003. These could only be removed with the consent of the Competition Commission.

My noble friend Lord Carter of Barnes knows more about these contractual matters than any of us, having been chief executive of Ofcom around the time these undertakings were given. Would the Minister now encourage his successors at Ofcom to broker a fair settlement which ensures the continuing viability of the Scottish licences, along with the measure of public service commitment appropriate to a nation with its own distinctive traditions and politics—obligations also expanded ideally to deliver a better service to the Scottish border region?

Another service that Ofcom might do for network programme-making in Scotland is to reclassify the separate production arm of STV as an independent producer. This would remove an obstacle to its winning commissions from UK broadcasters which must satisfy independent production quotas, such as the BBC and Channel 4.

The importance of broadcasting and programme-making to the Scottish economy is perhaps best demonstrated by the BBC, with its 1,300 permanent staff in a dozen production sites across Scotland. The Highlands and Islands got a welcome boost with the recent launch of the Gaelic channel, BBC Alba.

However, the BBC is also planning a policy change of historic proportions for Scotland. Noble Lords will be aware that public service broadcasters spend most of their network programme budgets on their peak-time evening schedules, which attract by far the biggest audiences. These network budgets total several billion pounds a year and fund high-quality drama, entertainment, comedy and factual series—programmes that help define how the people of Britain see their society, tell their stories, share their cultures and shape their identities. Yet, remarkably, after half a century of state-regulated television in Britain, the overwhelming proportion of peak-time, networked programmes is made only in England.

Viewers in Scotland, Wales and Northern Ireland make up about 17 per cent of BBC licence-fee payers and advertisers' audiences, yet barely 1 per cent of UK peak-time programming is commissioned from the three smaller nations. This arithmetic has denied Scotland the investment of tens of millions of pounds a year which would have supported a critical mass of talent, underpinned other creative sectors, and enhanced Scotland's reputation for quality through a heightened presence on screens in the UK and abroad.

However, the BBC is now committed to giving Scotland a fairer share, a due proportion of its network programme budget: 8.6 per cent of about £850 million, which represents an increase from just over £30 million a year at present to more than £70 million a year. That is a huge increase for which all credit is due to the director-general of the BBC, Mark Thompson. My only concern is that the 8.6 per cent target will not be hit until 2016—surely too long a transition. Could the Minister please encourage the BBC to speed things up? While doing so, could he also invite Channel 4, which Ofcom suggests will be the core of a new, more robust public service entity, to adopt a new, more reasonable policy by commissioning a significant share of its future programming from Scotland?

Lastly, I come to the most radical proposal. The Minister, having published a bold and purposive vision in his Digital Britain report, will be aware of the equally well received vision of a new digital network for Scotland. The Scottish Broadcasting Commission was set up by the Scottish Government in 2007. Its choice of Blair Jenkins as chairman brought industry experience and ensured political impartiality, as did its well balanced membership of Scots distinguished in their own fields, none more so than the noble and learned Lord, Lord Fraser of Carmyllie, whom I am pleased to see in his seat.

The commission's report, Platform for Success, has won the endorsement of all parties in the Scottish Parliament—indeed, I believe that its main recommendations are now Conservative policy north of the border. The key proposal is for a Scottish network, based around a linear digital channel and online platform. It would broadcast only high quality or innovative Scottish programming, becoming a secure source of competition for BBC Scotland and, one hopes, STV for many years ahead.

The unresolved question is obvious: how to pay for a new Scottish digital network that is estimated to cost between £50 million and £75 million a year. In its recent review, Putting Viewers First, Ofcom floated the idea of so-called contestable funding. This funding could come from the sums at present reserved inside the BBC licence fee pot for digital switchover. Another source might be a share of the income to the Treasury from the sale or lease of the analogue spectrum, which will be made available by the switch of broadcasting to digital. Ofcom suggests that producers and broadcasters might bid for this "contestable funding" to reinforce endangered areas of public service provision such as regional news on Channel 3, including Scotland, or programming for older children. Does the Minister think that a Scottish digital network could also be funded from these sources? Does he foresee any problems if the Scottish Government offered direct funding to support a new channel, as was done by the previous Scottish Administration to launch BBC Alba? In these hard times, of course, funding better broadcasting will not be the top priority of any Government. But it does seem to me uncommonly odd that a nation such as Scotland, after half a century of public service broadcasting, still does not have a television network it can call its own.

A broadcasting summit is being hosted in Glasgow next month by the Secretary of State for Scotland, Jim Murphy, and the Secretary of State for the Department for Culture, Media and Sport, Andy Burnham. It is potentially a pretty valuable event, which I hope the Minister, with his unrivalled expertise in broadcasting policy, will also attend. I hope, too, that the noble Lord, Lord Carter, will also see the potential of the proposals made in this debate to contribute to his ambitious strategy for a digital Britain.

7:43 pm
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Lord Fraser of Carmyllie (Conservative)

My Lords, it is something of a commonplace to compliment the chairman of a commission but, as the statutory Tory on the Scottish Broadcasting Commission, I compliment Blair Jenkins on an excellent task undertaken. It was not easy—predicting the future is never easy for anyone, particularly in the face of people who have diametrically opposed political views.

Prior to the setting up of the Scottish Broadcasting Commission by the First Minister, I am bound to say that I thought that Elaine Smith was a rather pretty face with a rather pleasing wit and strong political views. However, now I realise that behind that clever humour lurks a very real intellect. In fact, we all got on very well indeed. I recall her telling me that she was having a one-woman show; her character was an MSP from the Holyrood Parliament called Mrs Bridie from Forfar. Her philosophy of life was that, if you have driven a minicab in Dundee, there is nothing else you need to know about life. I tend to agree with that as a fine description.

I said to Blair Jenkins at the outset that I had no clear idea of what the future of broadcasting would be in five years, an even less clear idea of what it would be in 10 years and a deep distrust of anyone who told me that they knew the answer to either question. He said that that was exactly what he was looking for—someone who did not know just the technical arguments but was much more interested in what was going on in the living room at home.

What I would regard as being important in Scotland—I invite the Minister to take account of this in his assessment of what is going on in broadcasting there—is that, notwithstanding the fact that we had strongly differing political views, we came to the unanimity of view that there should be the maintenance of public service broadcasting and, as the noble Lord, Lord Macdonald, indicated, a new channel. That is not just a sentimental recollection of a happy time on the commission. We were less clear about how that would be funded, but we will leave that to others. It is not that we were avoiding the issue; we saw a number of options that could be taken up by those who were better able to come to a conclusion.

The other important point that the Minister should take account of is that in the Scottish Parliament there was a unanimity of view that what we had suggested in the commission report was the correct way forward. I hope that he will appreciate that it is quite remarkable to achieve such a unanimity of view in television. Even though the noble Lord, Lord Macdonald, was somewhat cheeky in saying that it was now Conservative Party policy north of the border, I confirm that it did indeed agree with us.

7:46 pm
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Lord Wallace of Tankerness (Liberal Democrat)

My Lords, I congratulate the noble Lord, Lord Macdonald of Tradeston, on facilitating this important debate on public service broadcasting in Scotland. It has already been made clear just how timely it is, given the publication last year of the report of the Scottish Broadcasting Commission and the fact that it comes just a few weeks after the publication of Ofcom's second public service broadcasting review. It is timely because of the stresses and strains on the viability of the Scottish licences, as the noble Lord, Lord Macdonald, indicated, and because it comes on the day when Border TV news, serving the Scottish Borders and Dumfries and Galloway, moved to Gateshead. As someone who was brought up on "Border News" and "Lookaround", I think that that is a regrettable step. This reverse devolution reminds us just how fragile good local public service broadcasting can be.

That public service broadcasting plays an important part in the life of Scotland post-devolution is reflected in the fact that Ofcom's second review paid specific attention to it. Indeed, it highlights the fact that what viewers want most from programming specifically made for the devolved nations and the English regions is news. It is also significant that the review concluded that there would not be one-size-fits-all approach.

For the most part, I believe that Scotland is well served by public service broadcasting. "Reporting Scotland" had a daily audience of 465,000 in 2008 and an average of nearly 2 million people weekly are unique users of BBC Scotland's exceptionally good online news service. I probably could not go home at the weekend without reflecting that BBC Radio Orkney and BBC Radio Shetland, each of which broadcasts a weekday half-hour news programme, have a percentage penetration into the homes of the northern isles that would gladden the heart of any producer.

STV has seen a 13 per cent increase in its viewing share over five years. Importantly, it has honoured the commitments made when Grampian was subsumed; there are two distinctive regional services at 6 pm and four new localised sub-regional bulletins. I know that this regional service is particularly valued by audiences in the north of Scotland. It contrasts with the perception—right or wrong, fair or unfair—of BBC Scotland's Glasgow-centricity when it comes to reporting Scotland, whereby a jobs announcement in Paisley will always command more attention than a jobs announcement in Aberdeen.

Noble Lords who have attended the highly informative briefings from Rob Woodward, chief executive of STV, will know of STV's commitment to deliver quality public service broadcasting in Scotland as well as the precarious nature of doing so because of the increasing cost—a cost that is seen increasingly to outweigh the benefit of holding the PSB licence. Indeed, Ofcom has recently reduced the obligations on STV's public service broadcasting licence.

When the Minister responds to the debate, there are three particular points that I would ask him to address. First, among its proposals, Ofcom has suggested that contestable funding might be made available for news services. Do the Government have a response to this and, if so, are they minded to consider it favourably? Will they also consider embracing current affairs output as well as news? I also acknowledge that, because of some of the considerations already mentioned, time is of the essence in coming to a decision.

Secondly, to reiterate a point made by the noble Lord, Lord Macdonald, STV has for some time argued that its production division should be given independent status. That has frequently been acknowledged, both by Ofcom and by the Minister's department, but the second review was silent on the matter. The increased commissioning by the BBC gives STV a chance if it is allowed to compete. I ask that the department acts promptly and favourably in resolving this matter.

Finally, will the Minister indicate at some point if not tonight that the Government will respond to the Scottish Broadcasting Commission's proposals, albeit that the commission was set up by the Scottish Government? The value of the work and the contribution that it has made to the broadcasting debate in Scotland have already been referred to this evening. An exciting opportunity is presented, although the cost is very high. It would be useful to have the Government's response, but that response in terms of cost should not compromise what we have already. We should secure what we have as good and then look forward to taking forward the proposals from the commission.

7:52 pm
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Lord Wilson of Tillyorn (Crossbench)

My Lords, I thank the noble Lord, Lord Macdonald of Tradeston, for launching this debate. I am conscious of the fact that we have only a limited time and that other noble Lords who are going to speak know a great deal more about the detail of broadcasting than I do, so I shall confine myself to some general points.

First, I share the view, which I am sure is common in this House, about the enormous importance of public service broadcasting. I see that as being at two levels: a local level and a national level. I was particularly struck in the happy days a few years ago when I had a job that took me fairly frequently to the northern isles and the Western Isles by what the noble Lord, Lord Wallace, has referred to as the quality of Radio Orkney and Radio Shetland and the significance of what they broadcast to the local communities. I was similarly struck by the Gaelic Service of the BBC in the Western Isles. That was of enormous importance. At a national level, public service broadcasting is very different, but it, too, is tremendously important in creating a well informed public opinion that knows not just about its own locality but about the wider world as well. I am sure, too, that most of us here would share the view that competition is important—it matters everywhere—and that monopolies are bad, but monopolies in the broadcasting of news must be a good deal more dangerous than monopolies elsewhere.

When reading with enormous interest the report of the Scottish Broadcasting Commission, in which the noble and learned Lord, Lord Fraser of Carmyllie, played a prominent role, I was struck by what he referred to as an interesting proposal for a new digital Scottish network. I can see the attractions of that, but I hope that I shall not sound too cynical if I also pick up the point about funding and say that I can see all too easily that this will be a pretty acrimonious business and probably rather long drawn out. One therefore asks oneself the question: if that new proposal does not get off the ground in the near future, what could be done with the present system that could make it work better? There is surely a great deal that could be done. I notice that the report refers to Radio Scotland. Here, Scotland has its own Scotland-based, directed-at-Scotland radio programme, which does a very good job. The commission noticed that there had been a good deal of criticism about it, but it is surely up to the BBC to deal with those points of criticism, to deal with the questions of funding and content of those programmes and to make Radio Scotland a better service.

The commission also made the point, which the noble Lord, Lord Macdonald of Tradeston, referred to, that the BBC has committed itself to significantly higher spend on creating programme material in Scotland. Indeed, if the BBC stuck to its original proposal of doing so by 2012 instead of 2016, and if it used the newly devised methodology on funding, the benefit to Scotland of the increased spend would be considerable, with all its knock-on effects. Similarly, if, as the report points out, Channel 4 was less metrocentric and put more effort into programme making in Scotland, that, too, would have a beneficial effect. I would be very interested in the views of the Minister on those points and whether he would support them.

My final point is simply that I have been struck recently by the increasing divergence in the way in which news and newspapers treat Scotland and the rest of the UK. I can sit down having breakfast in Edinburgh and read, for example, the Scottish edition of the Times and think that a great deal of material in Scotland is covered. However, when I come down to your Lordships' House and look in the Library, I find that there is hardly anything about Scotland. This divergence is dangerous. I hope that, in any public broadcasting arrangements that are made, a national broadcaster will cover Scotland not just as an add-on and that a Scottish system would not be too Scotocentric.

7:56 pm
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Lord Gordon of Strathblane (Labour)

My Lords, I join the general welcome for this debate and the congratulations offered to the noble Lord, Lord Macdonald, on it. It is not only timely but critical given the situation in Scotland. I shall start, however, by raising an aspect of public service broadcasting that is frequently ignored: universality of provision. We all recall how engineers from both the BBC and ITV painstakingly expanded at huge and, I would freely concede, in some cases unreasonable cost, and over a long period, the terrestrial transmitter network to ensure that 99.7 per cent of the British population could receive television programmes, a figure that is not likely to be equalled by either satellite or digital terrestrial broadcasting. It was therefore with great pleasure that I read the recent report, Digital Britain, and the Minister's commitment to introduce a universal service obligation for broadband at a minimum of 2 megabits a second throughout Britain by 2012. That is hugely good news, because, in addition to the vital role that broadband could serve in rural areas such as telemedicine, it could also be a major provider of broadcast programme content. More important perhaps, it could provide content aimed directly at local communities, which could be done only at huge, wasteful cost on satellite.

The scarcity of time this evening reminds us that money also is scarce. It is quite easy to reach the conclusion that Scotland could do with a new digital network; it will be lot more difficult to find the £70 million to pay for it. The first heretical question to be asked is whether Scotland would give up the funding of Gaelic broadcasting to provide some of the money for it. I suspect that that would split it right down the middle.

Let us start, however, with the BBC as the cornerstone of public service broadcasting. I do not want to be dismissive, but, by and large, it is all right; it has a licence fee settlement that was pretty generous and which makes it immune to advertising recessions or potential migration to the internet. The problem is much greater, as the noble Lord, Lord Macdonald, outlined, for commercial television, because STV has the normal problems of ITV exacerbated by higher public service obligations due to the separate nature of life in Scotland and compounded by a potential dispute with ITV over the rate at which it pays for network programmes. I have seen figures from both sides and they disagree. I can say only that I suspect that there is a subsidy, largely because there ought to have been a subsidy, but I echo the plea of the noble Lord, Lord Macdonald, that we get somebody from Ofcom to act as honest broker and try to deliver the goods.

I disagree with the noble Lord slightly on the digital service for Scotland. Let us not make matters worse by creating a competitor for STV. It certainly could not take money from advertising, because there is not enough advertising revenue to go around. The service therefore has at minimum to be publicly funded and, preferably, to be latched on to STV so that it can become part of this network and provide a spine of programming for STV if the dispute with ITV went sour.

My own background of commercial radio is due a word. The situation there is quite simple: there are far too many radio stations. Recognising that you cannot turn the clock back and that we will still have a lot of radio stations, I believe that the answer is to drastically alter the ownership rules. To put it very simply, if you have eight separate owners owning eight separate services in the one area, it is unlikely that any of them will be able to afford the good local news service and they will all end up producing programmes that compete with one another and are broadly the same. If you put one owner in charge of eight services, you will certainly get a good local news service and, not only that, you will get separate and different programming because it is in the owner's own interest. When you get self-interest and public interest coinciding, that is the best way forward.

8:00 pm
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Lord Steel of Aikwood (Liberal Democrat)

My Lords, I am most grateful to the noble Lord, Lord Macdonald, for initiating this debate, as it gives me the chance to speak on just one topic to which he made a passing reference: the future of news broadcasting coverage in the Scottish Borders. As my noble friend Lord Wallace of Tankerness pointed out, this week sees an end to the local programme that we have enjoyed from Carlisle studios and Border Television for very many years. During the time that I served as a non-executive director of Border Television, we were very pleased at the fact that that evening programme from Carlisle had the highest viewing figures of any local news programme on any channel in the United Kingdom. It was quite a remarkable achievement.

One reason for that success was that the news was local, which was very welcome. During the time when our noble friend Lord Bragg was our chairman, we managed to improve that by having split news coverage for the Scottish transmitter and the English transmitter. That helped greatly to encourage the localness of news coverage. Granada Television, when it took over Border Television, continued the programme but, now that it is part of the ITV conglomerate, from this week the local news about the Scottish Borders will come from Gateshead and will attempt to cover an area from Scarborough to Stranraer. The mind boggles. I do not think that it will work.

I wish those involved well. They say that they are going to have opt-outs, that they will have people sitting on a sofa in Gateshead talking about issues in the Scottish Borders and that they will have a cameraman here and there to send pictures down to Gateshead. It may work but, as we say north of the border, Ah hae ma doots. If it does not work, there is an obligation on Ofcom in relation to the continuing discussions between STV and ITV. I have attended meetings in this House with Rob Woodward, the chief executive of STV, and Michael Grade, the guru of ITV. They both agree that something should be done, but they cannot agree on the financial set-up. Ofcom will have to sort this out, as we do not want to lose in one part of Scotland the quality of local broadcasting that we enjoyed over many years. There is a real danger of that happening.

Moreover, if the commission of the noble and learned Lord, Lord Fraser, is to come to fruition, as I hope it does, it does not make sense to start off looking at an alternative channel to the BBC in Scotland, with one chunk of Scotland missing and being covered from Gateshead. This issue has to be sorted out. I am well aware that it has financial implications and that STV and ITV have failed and will continue to fail to resolve this issue between them. Therefore, I look to the Minister to give some indication that this matter is being taken seriously. Okay, it is a small matter dealing with just one part of Scotland that I used to have the privilege of representing in the Commons, but it is a matter of great importance to us. I hope very much that the Minister will give some assurance that Ofcom will pay attention to what happens to news coverage in that part of Scotland.

8:03 pm
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Lord Hope of Craighead (Judge)

My Lords, I, too, am very grateful to the noble Lord, Lord Macdonald of Tradeston, for initiating this short debate. I have to confess, however, that my reasons for saying this are not entirely altruistic. I am motivated in part at least by self-interest. As your Lordships will be aware, the time is fast approaching when, as a serving judge, I will be disqualified from sitting and speaking in the House. For various reasons, even now, it is hardly ever possible for me to take part in public business, but this evening's debate, because of its timing and its subject matter, provides one of those rare opportunities when these constraints that apply to me do not apply. So I thought that I ought to take advantage of it, and say just a few words on this occasion, before it is too late.

My own particular interest in the future of public service broadcasting in Scotland is based on my experience of working with the broadcasters during my seven years as Lord President of the Court of Session in Scotland. I saw it as part of my function to try to demystify the judicial process and to provide the Scottish public with a greater insight into the workings of the courts in their own country. Television was the obvious medium for achieving this. In contrast to the position in England, where photography of any kind in a courtroom was, and still is, prohibited by statute, there is no such prohibition in Scotland. We are all familiar with courtroom dramas based on practice in the English and American courts but, apart from one brief appearance by a sheriff during an episode of "Dr Finlay's Casebook", Scottish court scenes were never shown. I was able to take advantage of the absence of regulation by statute by permitting the televising of proceedings in Scottish courts so that the Scottish public could have a better idea of what goes on there.

The first documentary programme of a criminal trial ever to appear on television in the UK was broadcast by Scottish Television. It was of a trial which took place in the Sheriff Court in Glasgow of a man who was accused, and later convicted, of stealing a bus. This was not the most serious of crimes that had ever been committed in Glasgow, although it turned out, when his previous convictions were revealed, that the accused was a serial bus thief. But it was a very well made and very entertaining one-hour programme. Later, five documentaries of cases in the High Court and the Sheriff Court in Edinburgh were made and broadcast by the BBC.

This initiative would not, of course, have been possible without the co-operation of the broadcasters. Two things in particular were of the highest importance in making the thing work. The first was the mutual trust with I was able to develop with them, based on close personal contact, because they were in Scotland, close to where I was. The other was the ability which they had to find time in their programming schedules for this kind of activity. Showing Scottish judges in their own courts, wearing the distinctive robes that Scottish judges wear, makes an important contribution to public awareness of our own distinctive legal system. I wish that more was being done to make use of the opportunities that exist for making documentaries.

My successors have, I think, shown rather less enthusiasm for engaging with the media than I did. Devolution, too, has changed the focus of attention from what it was in my day. But the facility has not gone away, and I would welcome and encourage more use of it. I hope, too, that Scottish producers will make use of the television facilities that are being installed in the new Supreme Court. The prohibition of photography in the courts of England and Wales does not apply to that court. The delivery of judgments there will be available for public broadcasting, as will the hearings that will be taking place there. It is important that use is made of this facility for broadcasting north of the border. This is a court which will serve all parts of the United Kingdom. We believe that the public in all parts of it should be aware of its existence and of what it does. I hope that the Minister will feel able to encourage this.

Each Thursday evening I go home to Scotland, as most of us here do, and to the pleasures of our own musical and cultural tradition. We have our three languages—English, Scots and Gaelic—and we have our music too, such as no other part of the UK has, from fiddle music to piping, from dance bands to pipe bands, from classical to traditional. These are the sounds of Scotland, which hold our community together—and there is the landscape and the cityscape. This is a rich cultural tradition for broadcasters to draw upon. The universities—and I declare an interest as the Chancellor of the University of Strathclyde—play their part in keeping this tradition alive.

Public service broadcasting in Scotland has a part to play in this, through the investment that it brings and the opportunities that it provides to those who have developed their skills as actors, artists, musicians, producers or technicians in Scottish universities to put them into practice in such a stimulating environment. I warmly support the noble Lord's desire to see more Scottish-made programming appear on television screens throughout the United Kingdom.

8:09 pm
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Lord Maclennan of Rogart (Liberal Democrat)

My Lords, it is now clear that the whole House not only welcomes what the noble Lord, Lord Macdonald, has done in obtaining this timely debate but also strongly supports on all sides most of the points that he has made, which are matters of very great urgency and require a government response. I hope that we will hear from the noble Lord, Lord Carter, tonight some answers to some of the points.

The current economic situation is putting immense pressure on the commercial sector, as, indeed, is the switchover to digital broadcasting, and the structure of broadcasting is appropriately considered at this time. In addition, we have had three very notable, thoughtful reports: that of the Scottish Broadcasting Commission; Ofcom's second public sector broadcasting review, Putting Viewers First; and the report of the noble Lord, Lord Carter, Digital Britain. We cannot possibly cover all these subjects tonight but I hope that the noble Lord will address the most urgent issues.

The independent sector, which is very strongly valued in Scotland, as the Ofcom research showed, provides necessary competition to the BBC. There are differences of interest between ITV plc holding 11 licences and STV holding only two, but they both recognise that change is now required since the cost of ITV plc licences as a whole will exceed the value of these licences by 2011, even with the recent Ofcom regulatory relaxations. Both recognise the need for an alternative method of finance for public sector broadcasting news and non-news programmes in the devolved regions of Britain. But whereas ITV plc advocates that the networking arrangements with the devolved country licence holders should move on to a commercial basis, STV, because it cannot influence ITV network scheduling and commissioning, seeks assurance from the Government and Parliament that they will maintain,

"a strong, resolute and fair regulator in place".

I hope that the noble Lord, Lord Carter, will feel able to give that assurance tonight.

It is most welcome that Ofcom's January report has recognised that the needs of the nations of Britain are different and, as my noble friend Lord Wallace said, that no single situation can fit all. For STV in particular it is important that it should be recognised that its news broadcasting is not merely theoretical competition for the BBC. In the past five years its viewing share has increased by 13 per cent. It is now watched by 2.1 million people per week. Of not least importance in the Ofcom review—it is a treasury of objective information—is the acknowledgement that Scottish viewers value plurality, choice, domestic production and quality of output. Ultimately, we need a structure that enables co-operation with the creative industries and the exploitation of new technologies but does not result in monopolistic provision either at the United Kingdom level or at national or regional level. Therefore, it would be helpful if the noble Lord, Lord Carter, could indicate his thinking on the model proposed by Ofcom of a Scottish digital network sustained by a competitive fund to support a series of interconnected Scotland-wide TV, local television, online and radio content. In particular the financial aspects of the provision of regional news must be addressed since, as STV has pointed out, the cost of providing 600 hours of high-quality news across Scotland is approximately £7 million, and will very soon outweigh the benefit of holding a PSB licence.

8:13 pm
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The Duke of Montrose (Shadow Minister, Scotland, Shadow Minister, Environment, Food & Rural Affairs, Shadow Minister, Wales; Conservative)

My Lords, we on these Benches thank the noble Lord, Lord Macdonald, for securing this debate on this vital topic and for the very knowledgeable and good collection of speakers that it has attracted. I am grateful to my noble and learned friend Lord Fraser of Carmyllie for giving us such an informative picture as regards the outcome of the Scottish Broadcasting Commission. We are all most grateful to the noble and learned Lord, Lord Hope, for giving us the benefit of his wisdom, which, as he says, will not be available for very much longer.

I am a keen consumer of radio output in Scotland. In so far as I might have an interest to declare, I have been a latent supporter of BBC Scotland's effort to establish BBC Alba, stemming from my life membership of Am Comunn Gaidleach.

Many here will probably be aware that during Channel 4's political awards programme last week, Jon Snow said, "We will now take a break, provided we can find six advertisers". This highlights the challenge faced by commercial broadcasters in the UK. The financial crisis calls into question whether this sector can survive effectively, let alone make a public service broadcasting contribution that matches the BBC's, in Scotland or anywhere else.

Another challenge that has run through this discussion is the need to develop genuine local TV news. We believe that much of the national and regional coverage provided by ITV is not totally what audiences want. People do not identify with regions that are based simply on where the old analogue transmitters are, let alone the new ones to which the noble Lord, Lord Steel, referred. The basic message should be that in the long term to satisfy audience demands for local news we need to encourage Ofcom to do all it can to help foster a market with local channels. I understand that this means relaxing cross-media ownership rules so that newspaper groups can invest in community TV channels, and making sure that the interleaved spectrum that they are auctioning goes to companies which will use it for local TV. Will the Government give Ofcom any encouragement in this regard? The commission in any case calls for a review of existing structures. This is all the more urgent because of the sharp decline in the UK economy since it published its findings in September last year.

DCMS and BERR state in their interim report, Digital Britain:

"In the final report we will examine measures needed to address the challenges for digital content in more detail, including opportunities ... to foster UK creative ambitions and alternative funding mechanisms to advertising revenues".

Can the Minister enlarge on this theme tonight? One has to sympathise with the STV position as depicted in the Ofcom recommendations in Putting Viewers First. It states:

"Instead of four channels, there are over 400, and viewers are increasingly using the internet to watch TV-like content. STV's advertising revenue has fallen as it has lost audience share, and one area where it can make significant savings is in news. Even with other reductions"—

as the noble Lord, Lord Wallace, reminded us—

"the cost of STV's public service obligations are today significantly more than the value of the benefit it gets from being a public service broadcaster".

I hear that Ofcom has now given permission for STV to reduce its news output, as that is its most expensive item. In the digital satellite age, news has become more a matter of idiosyncratic choice across the world. For instance, the BBC and other British broadcasters have been banned from Zimbabwe for some years but have resorted to a cunning invention to circumvent this. Al Jazeera English TV has been allowed to have a resident reporter in Zimbabwe, providing at times exclusive pictures for British viewers concerning the suffering in that country.

The issue concerns whether the right regulation framework can be put in place to allow the ingenuity of the Scots to come up with a new forum of Scottish news and creative output that will be authoritative, genial and affordable.

8:18 pm
Photo of Lord Carter of Barnes

Lord Carter of Barnes (Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Labour)

My Lords, I, too, thank the noble Lord, Lord Macdonald of Tradeston, for initiating this timely debate and for bringing these critical questions for the Scottish nation to a debate in Westminster, not least given the quality of the discussion and analysis of these issues that we have seen in Scotland and the Scottish Parliament.

Speaking personally and as the relevant Minister, an opportunity to discuss how the issues which we are looking at across the United Kingdom relate to Scotland is very welcome. As has been said, the Government's Digital Britain interim report, which covers the strategic issues facing the converging communications industries and the increasing importance of this sector, tries to address some of the specific questions that have been raised this evening. Indeed, that report was published hot on the heels of Ofcom's own exhaustive second public service broadcasting review.

I welcome the entirely appropriate underscoring of the importance of universality on the part of the noble Lord, Lord Gordon of Strathblane. He said that often universality is achieved at uneconomic cost but that the commercial, cultural, social and political contribution of that universal provision of broadcasting is profound. I think that we all agree with that. It seems to me, therefore, a statement of the obvious that there is an equal level of importance in the universality of provision of broadband connectivity.

Our report and Ofcom's report made it clear that despite this changing world, audiences care about public service content and, interestingly, care more about local content and so-called hyper-local content. They care that it is provided in a format and by providers beyond just the BBC, whereby we have, in the jargon of broadcasting policymakers, competition and plurality beyond the BBC. It is less clear how that should be delivered and what the future platform should be.

Taken together, however, we have significant contribution already in Scotland, which has been mentioned this evening. We have public service content delivered by strong brands across Scotland, enshrined in SMG, the BBC and Alba, with regional variations within the nation. However, as my noble friend Lord Macdonald of Tradeston rightly points out, commercial broadcasters are going through a particularly challenging time, given the huge expansion of digital broadcasting, online access and declining advertising revenues.

Perhaps I may underscore this. The noble Duke, the Duke of Montrose, reminds us that advertisers are not flocking to commercial television in either the same volumes or, importantly, at the same prices as they were only four or five years ago. Some providers in the market tell me that they are facing declines of between 20 per cent and 30 per cent, when one looks at comparable year-on-year performances. Indeed, one major player in the market told me only two or three hours ago that it believed that when and if we come out of the cyclical recession facing these providers, we will see a structural repricing of advertising inventory in television which could see the rebased price at between 25 per cent and 30 per cent below what it was before the market hit a recession. This is a profound change in the sources of funding available for quality broadcasting and content—hence the timeliness of these debates.

This Government recognise that there is a need to secure adequate provision of content for the nations and, as we explained in our Digital Britain interim report, we need at least one other provider of scale, as well as the BBC, for the future; noble Lords, particularly the noble Lord, Lord Wallace, underlined that. We will later come back to how we will do that. Ofcom suggests that the current model may be unsustainable for the longer term, so our current review provides us with an ideal opportunity to provide some answers for PSB in Scotland and the UK as a whole.

My noble friend and the noble Lord, Lord Steel, asked specifically about the arrangements between ITV plc and SMG plc. These rest on a mixture of contractual arrangements, the undertakings to the Competition Commission given at the time of the Carlton and Granada merger and the networking arrangements between the channel 3 licensees. The undertakings, as well as dealing with the CRR, also require ITV plc to offer airtime sales to SMG plc on the terms in the contract with Carlton plc in 2003, unless altered by mutual agreement. The networking arrangements broadly require the supply of a clean feed of network programming with provision for opt-outs—again on a contribution level that applied in 2003, uprated by RPI.

All the parties to the networking arrangements agree that the changes since 2003 require a more fundamental reappraisal of the arrangements. What they do not agree on is how and what the final outcome should be. The Office of Fair Trading has said that while it has not included the undertakings that applied protections to the minority licensees in the CRR remedy review, it proposes to consider these issues separately and it is contact with Ofcom and the other parties concerned. Ofcom has made it clear that it intends to undertake a review of the networking arrangements during this year and is mindful of the need for them to work effectively and of the economic impact of any changes to the arrangements on individual licensees. Therefore, to answer directly the questions of the noble Lords, Lord Steel and Lord Maclennan, we will invite Ofcom in I hope its fullest, robust and independent form, with the Office of Fair Trading, to consider the longer-term implications of the airtime sales provisions alongside Ofcom's review of the networking arrangements.

The Government are clear that there is a priority for investment in UK original content at a scale which can deliver high-quality impartial news at UK and international level for the devolved nations and the English regions. The Government believe that plurality of provision, particularly in news and current affairs, is fundamentally important. Our ambition is to identify not an immediate solution, but the right solution for the medium to long term.

My noble friend refers to Scottish content and production. This is an intriguing question. For a nation with its own devolved institution, I, for one, recognise the importance, having been reared on it, of having news and content that reflects the nation's sense of itself. If I am allowed a personal observation, one of the things that we are seeing as a catch-up after the devolution agreements is how critical that is to a nation state's sense of itself.

The question that we are trying to answer is how we can achieve this, and that is rightly under scrutiny. We welcome the close attention that the BBC Trust is giving to ensuring that the BBC is playing its full part in meeting audience demand in Scotland for more content on Scottish topics presented from a Scottish perspective. We agree with the trust that the BBC can significantly increase network production in Scotland in a sustainable way, and we welcome the somewhat more stretching targets that it has adopted. The trust has decided that the BBC should source at least 17 per cent of its network television production under the definition set by Ofcom, and reach an interim target of 12 per cent by 2012. The trust has our full support in encouraging the BBC to press forward as rapidly as possible towards these targets.

In terms of coverage, the trust is rightly challenging the BBC to raise its game further in the provision of news in the nations and regions, including considering additional resourcing, and the trust has asked the BBC management to explore options for expansion in Scottish news and non-news programming to match the needs of a devolved nation. While some of this is clearly work in progress, taken as a whole, it represents progress and we should all encourage and support the BBC Trust in its endeavours to hold the BBC management to account on these questions.

My noble friend also asked about the potential for reclassifying the production arm of SMG plc to independent status. This is something on which I have form and conviction, and in which I am interested; we are exploring this through our work around public service broadcasting in the nations, and I am hopeful that we will have something determinative to say on this issue very soon.

The Government are considering a spectrum of options for the future of public service broadcasting which fall within four broad categories that are not necessarily mutually exclusive. First is an option whereby plurality is provided through a public service content provider that would draw on Channel 4's strength, but with scale and a recast remit, and specific obligations in relation to the nations, particularly around news provision.

Second is an option whereby existing providers and new entrants provide content through a competitive funding system. Again, there is a question of scale, and this could range from the competitive funding model for current PSB providers or, indeed, as Ofcom raised in its recent review, through a new network model established as a competitive fund offering Scottish-wide television, local television, online provision and radio. The question of whether a competitive fund would have sufficient scale or impact, or could act as a genuine competitor for the BBC, genuinely requires further consideration, not least because of the comparative funding position of the BBC under its current licence-fee settlement and the commercial broadcasters, given their particular commercial position.

The third option is to allow the current PSB system to evolve naturally, without any government intervention, whereby the nations would continue to benefit from the existing obligations on the BBC, ITV and the channel 3 licence holders, as I have already mentioned.

The fourth option is the creation of a wholly new channel or digital network for Scotland. This was also considered by Ofcom in its recent review. While the benefit of having a dedicated channel providing Scottish content would give Scottish viewers news and content that reflected Scottish culture and society, there is no guarantee that such a network would have the reach and access envisaged, given increased audience fragmentation. This option deserves considerably greater work.

Prioritisation of any public funding under any of the options must be carefully considered, especially given the current macroeconomic environment. As the noble and learned Lord, Lord Fraser, points out, despite the analytical and political consensus on the final report, there was an interesting absence of answer to the question of where the funding comes from. Given the competing priorities in these public service questions, it is not evident that the £75 million number is one that one can support.

The current framework, whilst it has served the UK well to date, may not serve as well in the new digital future. That is the key question I would like to leave noble Lords with. We are particularly keen to hear from business leaders within the Scottish broadcasting industry, and my right honourable friend the Secretary of State will be discussing this with them at a Digital Britain broadcasting summit in Glasgow in March, where we hope to discuss these options in greater detail.

I am very grateful to noble Lords for their contributions to this debate, and of course welcome their continued input as we move towards deciding the right public service broadcasting framework. We shall continue our work in earnest, which will culminate in the Government's final report in the summer, where we will have an answer to these and other related questions. I am afraid I cannot answer tonight the questions of the noble Duke, the Duke of Montrose, specifically on how and what those funding and structural answers will be, as we are in active consultation on those questions, as I have outlined this evening. The key question we all have to have an eye on is how to have a solution for the digital future as well as one that respects our broadcasting past. I thank noble Lords for the debate.

Sitting suspended.