Motion to Take Note

British Film and Television Industries (Communications Committee Report) – in the House of Lords at 3:19 pm on 6 April 2010.

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Moved By Lord Fowler

That this House takes note of the Report of the Communications Committee, The British Film and Television Industries-Decline or Opportunity? (First Report, HL Paper 37-I).

Photo of Lord Fowler Lord Fowler Conservative 3:31, 6 April 2010

My Lords, this debate could hardly have come at a better moment. With the election declared only this morning, it gives all the parties their first opportunity to set out their policies for the film and television industries. We shall listen to my noble friend on the Front Bench, we shall listen to the noble Baroness, Lady Bonham-Carter, from the Liberal Democrats and-with the close attention that we have always accorded to that great old trooper of these debates-we shall listen to the noble Lord, Lord Davies of Oldham.

Let me try to set the scene. In this inquiry, our purpose was to examine the current state of the British film and television industries and to see what we could propose to help their further development. Together, these two industries already make a major contribution to the British economy. They employ well over 100,000 people, with British films generating overseas earnings of over £1 billion a year. Last year, British studios brought in another £750 million in inward investment. In television, BBC Worldwide, the commercial arm of the BBC, has sales of over £1 billion a year and the potential for substantially more.

In terms of quality of production, there have also been some quite outstanding successes. British films such as "Slumdog Millionaire" and "Four Weddings and a Funeral" have been major international successes. Equally, we have had very successful television programmes, including "Planet Earth", "Prime Suspect" and, of course, the current cult favourite "Ashes to Ashes", which is now starring on posters all around the country.

All this looks like a story of undoubted success, but it is an account that needs to be qualified. Inward investment in films may have increased by over 50 per cent in the last year, but part of that was due to the fall of sterling rather than any permanent improvement. In television, the total value of expenditure on UK-originated output by the five main public service broadcasters has been reduced by 15 per cent in real terms over the last five years. Spending on British-made children's television has been sharply reduced, while in regional news we face the prospect of ITV withdrawing altogether. Just as serious is the fact that, in film and television, training budgets are being cut, which is a fundamental problem for industries that depend so crucially on skilled staff. There are serious challenges for whichever Government are in power after this election. Although this may not be a matter of great debate on the hustings, there should be no doubt that these creative industries deserve serious policy attention.

Although film and television share some strong characteristics, they are also very distinct. The first point to be made about the film industry is that it is dominated by the big American studios. Britain simply does not have companies such as Warner Bros, which makes the Harry Potter films at Pinewood, where we visited. It both finances and distributes the films internationally. Even a quintessentially British film such as "Chariots of Fire", produced by the noble Lord, Lord Puttnam, had only a minute £17,000 of UK financial investment in it. A film may be evidently British but much of the profit flows back to the Hollywood companies that provide the money and, of course, take the risk.

Inevitably, much of the effort of the British film industry is to attract the Hollywood companies to make their films here, but we are up against formidable international competition. Many countries in Europe compete to put together attractive incentive packages. Germany, for example, spends more than €300 million a year to bring film-makers to studios such as Studio Babelsberg, which we visited. However, this happens not just in Europe: across the Atlantic, Canada offers special terms for animation companies and, inside the United States, individual states compete to bring in productions. We in Britain need to recognise that we are in a very competitive market. Even in these difficult times, it is vital that the financial support given by the present tax credit system should be maintained.

It is not just a matter of financial help. A skilled workforce is also crucial in attracting investment. There is no question but that training has been cut back. The commercial public service broadcasters have cut back and so, too, has the UK Film Council in its contribution to the skills set. However, there is another point as well. Many witnesses from both film and television said that the universities do not offer the specialist training needed to equip graduates to work in these industries. In other words, we need to better match the training to the demand, particularly when these industries can provide good, well paid careers.

On a further point on films, we all tend to think about box-office receipts as the crucial financial measure of a film's success. Obviously, it is good to know that cinema admissions in the United Kingdom rose significantly last year. However, few, if any, films make a profit from cinema revenue alone. It is the other sales, the tail revenue, that make the difference between a profit and a loss-that is, sales to television, merchandising and, most important, sales of DVDs. That is why we supported the anti-piracy measures in the Digital Economy Bill, which in this House-contrary to one suggestion on the radio this morning-received as detailed a consideration as any Bill that I can remember. Whether it is seen through in the wash-up-perhaps the Minister will guide us on that-or as a new Bill, it is important that that law is strengthened.

In one respect, we felt that the Government could have gone further. I am talking about camcorder crime where camcorders are used illegally to record new films and the recording is sold as DVDs. There is no question here of genuine error. It is organised crime, which is why most European countries have specific laws against it. However, the UK does not. For many months the Government said that they were waiting for a test case under the Fraud Act. Was this test case before the Supreme Court or the Court of Appeal? Well, not exactly: it was before the Isle of Wight magistrates' court in Newport, where a man was convicted of recording a film on a mobile phone. He was fined £150, but his phone was returned to him. As you can make between £20,000 and £30,000 for a good recording, it is not immediately obvious how this is going to provide a deterrent to illegality. Indeed, it is not obvious that many people other than residents of the Isle of Wight such as me and loyal readers of the admirable County Press even know about the case. I gloss over the fact that the Secretary of State himself caught up with this vital test case only two weeks after it was decided. This is an area that we should return to in the new Parliament.

Turning to television, we find a difficult position. The BBC is sustained by the licence fee, but even that has not prevented cuts in some important areas such as children's television. As for commercial television, the days when Roy Thomson could call it a "licence to print money" have long gone. In the same way as newspapers, British television has suffered from the migration of advertising to the internet. Revenues are down and, as a result, home-produced British programmes have been cut. It is often cheaper to buy the American import. Nor let it be said that that gap has been filled by subscription income broadcasters, which have not suffered remotely as much as the channels that rely on advertising.

The result is that a number of areas of British production are under serious pressure. One of those is children's television. The head of broadcast at Aardman Animations, one of the leading animation companies in the world, has said that less than a quarter of children's television now shown here is made in the UK and the same message has come from other British producers of children's programmes. The Government's response is that they have now put a responsibility on Channel 4, but that raises the question of where the finance is going to come from. Our suggestion was that, on a pilot basis, the tax credit available for films should be extended to children's programmes and animation productions for television. The Government replied that this would put pressure on the public purse and rejected the proposal.

However, the Chancellor accepted a number of our proposals. We said that, in the face of foreign government- subsidised competition, the British Government should provide tax credit support for video games production. That measure was announced in the Budget only a few days ago. Obviously, we welcome the Government's conversion, but I have to say that, as far as the future is concerned, it is at least equally important to encourage British-made children's programmes as it is to encourage the production of video games. This is another issue to which a new Government should turn their attention.

A second casualty of the parlous state of commercial television is regional news. I shall not repeat the arguments that we made in previous reports, but I want to make this point. In my view, it would be immensely serious if competition from ITV went and the alternative for the public was eliminated. I am a great admirer of the journalistic standards of the BBC, which I think has some of the best reporters both at home and overseas, but I do not want to see a BBC monopoly. In national and international news programmes there is no prospect of that, but in regional programmes inside the UK, with their enormous audiences, there is every prospect of that happening if ITV pulls out in the way that it has announced. Such a development would come at a time when regional and local newspapers are also under unprecedented pressure. A regional monopoly must be prevented and, if that means using some of the licence fee or another form of support, that is a decision that we should take.

I shall make one further point about these industries. Policy towards both film and television should be proactive in the interests of the United Kingdom. Sadly, we have not always taken our national opportunities. In 2008, there was a proposed joint venture between the BBC, ITV and Channel 4 to provide video on demand-the so-called Project Kangaroo. Almost by definition it was in the national interest, but it was blocked by the Competition Commission, doubtless applying rules that it had been given. There is something deeply absurd and objectionable when a decision of that kind simply results in direct benefits for American video-on-demand ventures coming into this country. In this case, the interests of the UK were not upheld; they were ignored.

An even greater test case for the future concerns BBC Worldwide, the commercial arm of the BBC, with £1 billion revenue and £150 million profits, much from exports. It is a very successful company but it is held back by lack of finance to develop further and by frankly counterproductive BBC Trust rules seeking to limit how successful it can be. It must be unique in the world of business to say to a commercial company, "You are being too successful, so kindly reduce your activities". However, that is what is happening. The obvious solution is to provide finance to bring in private investment, which is what the current Government support. There is no reason why such a public/private company could not become a truly global brand selling not only BBC programmes but other British television to the benefit of the whole industry and those who work in it. That is the test for the BBC Trust when the question comes to it. Is it prepared to look outwards and help to create a really successful British distribution company, in a way that has proved impossible in film, or is it going to continue to look inwards and ignore the opportunity? One part of the bargain with the BBC is, I think, that it should represent the national interest, not just a narrow corporation view.

I have one last word. This is the fifth report of the Communications Committee, which was set up only in 2007. Another report on digital switchover has just been published. Before 2007, there were two reports from the BBC Charter Committee, which I also chaired. This has all represented a big workload for the members of those committees. I would like to thank sincerely all those who have worked on this report and the ones before. They have worked extremely effectively. I also thank the clerks, the support staff and the advisers, who have been superb. I must also thank the noble Lord, Lord Davies of Oldham, who has replied to so many of our debates. I know that in his heart of hearts he would have liked to have accepted many more of our proposals. Above all, I say to the House generally that I very much hope that we have shown that this is an important area of policy and demonstrated why the Communications Committee should be one of the Select Committees that will continue in the next Parliament.

Photo of Lord McNally Lord McNally Leader in the House of Lords, Spokesperson for Constitutional Affairs , Liberal Democrat Leader in the House of Lords 3:48, 6 April 2010

My Lords, it is very easy for me to continue where the noble Lord, Lord Fowler, left off. There are very few things in political life on which you look back and take great pride, but the battle to establish this committee was not an easy and straightforward one. I would like to think that I gave the noble Baroness, Lady Howe, support during a long and difficult time. Certainly, if she is the godmother of this committee, I like to think that I am the godfather. When the committee was established one of the things I was most keen to see was the noble Lord, Lord Fowler, as its chairman. Both the committee itself and the leadership he has given it fully justify his final plea.

I hope that I do not have to strap on the armour again at the start of the new Parliament and that this time there will be a real understanding of the benefit of this committee. We had a great deal of opposition from down the Corridor because the DCMS committee thought that a committee in this House would tread on its toes. I do not think it has-it has shown great skill in selecting the issues. As the noble Lord, Lord Fowler, said, in this, the last debate we have on its work in this Parliament, we have a very forward-looking document which will be of great use to Ministers-whatever the complexion of the next Government-in setting an agenda for a very important part of our economy.

My interests in the industries are all non-financial. I am chair of the All-Party Parliamentary Group on ITV and an active member of both the BBC and media groups. I also have-like, I suspect, many noble Lords-a firm belief that film and television play an important role in defining the social and cultural life of a country. Film can so often reflect accurately the mood of an era. We see the defiance of the 1940s in wartime films, and the optimism of the 1960s in the films of that time. With television and radio, we learn how to communicate with each other and how we speak to the world.

Many obituaries of cinema have been written over the past 50 years but it is still, as the noble Lord, Lord Fowler, indicated, a vibrant force. Because we are in the midst of a technological revolution, similar obituaries are being written about terrestrial television. These are equally premature. No other platform, no other service, could have gripped the nation's attention in the way BBC1 did on Saturday night when we had our first view of the new Doctor Who, or last night on ITV when we held our breath to see if Inspector Frost walked off into the sunset or came to a sticky end.

There are those, often with vested interests, who say that the need for a strong, publicly funded, public service broadcaster belongs to a bygone age. Convergence and new technologies create a new world of diversity and consumer choice. They also offer great opportunities because of technical skills, the English language and our acting and production in this country. This report is a timely reminder of how important film and television still are to our creative industries, and how, far from being replaced by them, they provide a launch pad for an impact on the new technologies.

Let me start at what is first base for me. The BBC is essential, and it is essential that it emerges from the coming decade strong and well financed, the iron pole around which our commitment to public service broadcasting is sustained. Tessa Jowell once memorably said that the BBC licence fee is,

"venture capital for our creative industries".

So it is. But to survive and prosper the BBC will have to show both generosity of spirit and nimbleness of foot-skills often lacking in recent times.

I have doubts about the proposals in the report for top-slicing or shaving-or whatever-of the licence fee. Any of these proposals will quickly become a soft option for almost any idea that comes up. I would need a lot of convincing before I saw the idea of touching the licence fee as anything other than a slippery slope.

The BBC still has to fight its battles, with the rest of the media concealing vested interest behind their criticisms. When I read a knocking story about the BBC, I think the newspaper carrying it should carry a health warning-something like: "The media corporation that owns us will make millions of pounds by charging you for news and information you at present get from the BBC as part of your licence fee, if we can persuade the Government to prevent it providing this excellent service". Or perhaps Sky News could run a strap-line where it usually shows breaking news stories, stating: "If we can persuade the politicians to impoverish and marginalise the BBC, we will be able to charge you many times more than the licence fee for our inferior service".

The BBC could help itself in the battles ahead. Executive pay in a broadcaster whose cash flow is guaranteed by public funds cannot use the private sector as a comparator. Chasing talent with a cheque book is also unacceptable. The BBC does not buy stars; it makes stars. Matt Smith and Karen Gillan are not stars, but they will be if the first episode of "Doctor Who" is anything to go by. We pay our licence fee for the wide range of programmes that the BBC provides across television, radio and the internet, but we also pay it so that the BBC can be a breeding ground for talent. I welcome paragraph 317 of the report, which says:

"In the light of the variability of training across the sector, we welcome the continuing role played by the BBC and the BBC's willingness to make its training more widely available through the launch of the BBC Academy".

That is what I meant by generosity of spirit. I know that it can sometimes be irksome for the BBC. How often have many of us sat on committees receiving evidence from somebody trashing the BBC, who says, "I know what I'm talking about; I was trained by the BBC"? Yet long may the BBC retain its record as a trainer which can endure such hand-biting. The report also had something important to say, as did the noble Lord, Lord Fowler, about training and skills, particularly in paragraph 305:

"In our view, apprenticeships and internships in the film and television industries are under-used and uncoordinated".

Also, in paragraph 313, it says that the film and television industries need,

"to provide more equal access to training and skills-based career development through greater use of apprenticeships and graduate internships".

That rings true not just for this industry but for the British economy as a whole. We have got to train, but in this industry we have positive evidence. The Americans who gave evidence said that one reason that they came to Britain was the skill base that we had. We have to invest to retain that skill base.

Quite frankly, I was slightly surprised that not a single university or further education college, or a group thereof, gave evidence to this committee. It is an example of a lack of joined-up government that that should be so. I am on the court of the University of Hertfordshire, and we are told that our Faculty for the Creative and Cultural Industries, within the university, is making efforts to make contact with the creative industries, to see if they can identify their needs. Clearly, however, that message has not got through; there is a need for greater co-operation and co-ordination. It is also time that we stopped sneering at some of the "funny" degrees that some universities give; those funny degrees are exactly the skills that the new technologies and creative industries need. We have to understand that the creative industries are now job and wealth creators on a par, within our economy, with manufacturing and financial services.

The report also has some important things to say about finance and investment. There seems to be general satisfaction in the film industry with the present tax structure and no great demand for new public money. Yet there is a lot of evidence that it could be used smarter and more effectively, and that there are too many disparate pots of public money for entrepreneurs to go searching through. Existing public money needs to work in a smarter way and public policy needs to help drive new business models, develop skills and secure meaningful access to finance.

Film investment still seems to be a major problem. I noticed the evidence from the Corporation of the City of London, but that was about what a good job it does in locating sites within the square mile for film companies to film in. What has always puzzled me is why the City of London, which prides itself on being able to raise finance to mine tin in Bolivia-or to do almost anything else in the world-has no capacity for raising finance for British films. I know, because it used to employ me, that the corporation of London has an excellent economics department which produces and commissions some excellent economic studies. I suggest that one thing the City of London could do is to commission a study of how the City could be made a conduit for finance for British films. That certainly would be a way forward.

I associate myself with what the noble Lord, Lord Fowler, said about anti-piracy laws. I have been involved in various campaigns ever since I came into this House on the simple theme that, if somebody steals somebody else's creative ideas, that is theft. We should have the laws to protect our creativity, particularly when everybody is telling us that it will be one of the things that will rescue us in the world ahead. I also share the noble Lord's concerns about the rulings of the Competition Commission on Kangaroo and contract rights renewal. It seems that the Competition Commission is operating in a rather austere, narrow academic way. Frankly, I wonder whether it was sensible to have two regulators in this area rather than leave these matters to Ofcom's judgment. As the noble Lord, Lord Fowler, indicated, they certainly do not seem to have taken the public and national interest into account.

There is certainly also a need to look at the legacy regulation on the commercial public sector broadcasters. Frankly, it is a disgrace that 90 per cent of investment in original UK programming still comes from the main public service broadcasters, including £800 million from ITV-something to be remembered next time Sky blubs about being bullied by Ofcom. I pay tribute to Ofcom. It is not quite the Eliot Ness regulator hoped for when I sat on the pre-legislative scrutiny committee of the noble Lord, Lord Puttnam, but it is respected and has proved itself a research-based and proactive regulator.

The noble Lord, Lord Fowler, said that this was a timely debate. This is an excellent and thought-provoking report that should be required reading not only for the next Secretary of State for Culture, Media and Sport, but for the Business Secretary, the Minister for Higher and Further Education and the Chancellor of the Exchequer. The report and the creative industries deserve a joined-up response from government.

On a final and personal point, Appendix 7 lists decades of British television highlights which I realise mirror the story of my life. It starts with "Crackerjack" and "Juke Box Jury" and ends with "Strictly Come Dancing" and "Faking It".

Photo of Baroness Howe of Idlicote Baroness Howe of Idlicote Crossbench 4:02, 6 April 2010

My Lords, it is a very great pleasure to follow the noble Lord, Lord McNally, who, as he said, was an enormous help in getting this committee up and running. I am flattered to be thought of as a possible godmother and I can think of no better godfather than the noble Lord.

I take a slightly different approach in that I do not totally welcome this opportunity. Apart from the fact of our current economic plight, I should have thought that the day the election is announced is hardly the best time to try to persuade the Government to accept and finance our report's recommendation to increase support for the important and financially valuable work of British film and television. Incidentally, as has already been said, it is one of the most successful examples of our creative industries. Although the Government's response shows that they are grateful for much of what the report says, we shall clearly have to say it all over again when the next Government-whether the same or a different one-take office, but at least it is a splendid opportunity to rehearse.

I want to mention two issues: the importance of education and skills training for the industry; and, particularly as we are now firmly within the digital economy, the need to look for further ways of encouraging the industry-and wider than the industry-to complete the digital conversion of local cinemas and, indeed, to take this conversion to local and rural community centres.

First, I have a few more general points. As the noble Lord, Lord Puttnam, has said, among others, the Government's 2007 film tax credit scheme for firms making culturally British films is now, after a few initial hiccups, working well. However, I hope the next Government will give serious consideration to our suggestion, not least in these difficult economic times, that qualifying films with budgets under £5 million should have their net rate raised to 30 per cent. Also deserving of attention is the idea to extend the export credit guarantee scheme, currently mainly geared towards manufacturing, to films and especially to foreign pre-sales of British films. Our report also endorses the UK Film Council's commitment to promoting the UK as an inward investment destination for film production. In particular, we strongly support its proposal for the already highly successful Office of the UK Film Commissioner in Los Angeles to be given increased financial backing to do an even better job. It is good to see that the Government support that move.

As your Lordships know, Channel 4 has been particularly successful in its contribution to the reputation of the British film industry. We have already heard of the success of "Slumdog Millionaire", just one testimony to the superb quality of films from that channel. The Government's Digital Economy Bill will, I hope, give Channel 4 greater responsibility here by bringing film production firmly within its public service remit. Having not picked up "Digital Economy Bill" in what was said earlier today, I fear that it has maybe fallen by the wayside but I continue to keep my fingers crossed. There is also encouragement in the Bill for Channel 4 to make UK quality films and drama programmes for older children and young adults-again, widely to be welcomed.

The BBC's role in all aspects of film and drama production is central. It was rightly identified by PricewaterhouseCoopers as pivotal in the stimulation, development and sustenance of the UK's creative sector, not least in so many aspects of its training role. We have already heard that from our chairman. Indeed, it would be interesting to know how many of those employed in the film and television industry have not been trained at some stage of their careers by the BBC. As well as itself making feature films through BBC Films, the BBC has a particularly important role in showcasing British films. "Man on Wire" and "The Duchess" are two of this year's award winners.

Both the BBC and Channel 4 spend between £10 million and £12 million a year on new British films. This sum should increase for the BBC as the effects of its strategy review kick in. Some amazing commitments within that review will take us all a little time to absorb. It promises an extra £10 million a year to be spent on high-quality, UK-produced children's content. If this is combined with the BBC's significant commitment to spend at least 80p of every licence-fee pound on content creation, we should see the possibility of considerable improvement for the international promotion of our British film industry.

One sadness for me here is that those earlier plans for a possible joint enterprise between Channel 4 and the BBC's commercial subsidiary, BBC Worldwide, which we have heard about already, is no longer on either channel's agenda. Both channels could have worked together to promote, even more effectively and productively, successful films and programmes internationally. This is a great shame, not least when one remembers that BBC Worldwide over the past four years-we have already heard this, but, my goodness, is it not a significant sum?-has generated and invested back into UK creative talent some £1 billion.

I turn now to the first of my two issues, which is the need for more education and training in the film industry. There is certainly a need to alert more children, earlier in their schooling, to the possibilities of exciting careers in the industry, and particularly to the value of achieving good results in maths and science. There are, of course, increasing numbers of students taking media studies at university. This has already been referred to. However, I take a slightly different view, because the adequacy of some of these courses is criticised with some justification in paragraph 286 of our report.

There remains a considerable shortage of specialist skills. That was pointed out also by Pinewood Studios. One of our most interesting days-I could talk about this for a long time, but I will keep it short-was spent on a visit to Pinewood. It acts as a landlord, letting out its specialist services, stages and studios to producers and their staff for every kind and size of film and television project. Watching some of this was an inspiration. The studios' income comes 50 per cent from film, 30 per cent from television and 20 per cent from rents paid by other on-site businesses. There is plenty of space for further growth. Seventy per cent of projects filmed there are American. They are attracted by the scale of Pinewood's facilities, the skills of the workforce and the cost-effectiveness of production. However, skills shortages persist. Judging by the glamour of film and television, and the importance that the Government give to apprenticeships, not least in their plans for raising the school leaving age to 18, this is one avenue that, if it were more effectively promoted, might well attract more students, including far more girls, who are still in a considerable minority among apprentices.

From discussions with those in the industry, such as the BFI and others, I discern a vagueness about the exact range of skills that are needed. I will return to the different skills that we were shown on our tour. Facial and hair masks were made with each strand of hair sewn individually into the scalp. The mask could be worn only for one day's filming and then had to be discarded. The next day, you would have to put on another beautifully created mask. There is such a range of skills there, not just devotion. Pinewood might be the ideal place for at least part of an approved apprenticeship scheme, as well as similar HE courses and internships.

My last point is about the distribution and exhibition of films. I do not know whether other noble Lords share my puzzlement, but I find it difficult to know when a television programme is a film and when it is not. Certainly, one has heard sensible arguments about why relevant UK TV dramas, with the same content quality as a film, should be treated in the same way as films-and not least, for example, given the same tax concessions-particularly in light of the huge pressure exerted by the internet on the advertising revenues of the TV industry as a whole.

I return to the dominance of the US film industry and to its financial benefits, over so many years and covering most stages of a film's development, in particular its distribution and exhibition. Perhaps I am being overoptimistic, but we may be facing the possibility, in this digital and internet age, of a range of different film-viewing patterns that will make the USA's control of distribution rather less dominant.

In light of the number of cinemas still to be digitally converted, our recommendation at paragraph 123 of the report urged the Government and the UK Film Council to find a way of completing the digital equipping of cinemas in the UK, and in particular to find ways of helping small independent cinemas. However, the Government's response remains gloomy, no doubt because of the cost as it is currently being estimated per conversion. But is not one hope, particularly in rural areas, to fund local community centres and simultaneously help local cohesiveness with the necessary digital equipment? As the Digital BritainWhite Paper pointed out, there will be interest in viewing other sporting, cultural and arts events, as well as films, on these rather larger screens. I know we will all be able to look at everything on every form of thing we carry, whether it is a telephone or some of the latest equipment, but there will still be this need to see on these large digital screens the sort of areas we are now looking at. Indeed, I recently had an experience of seeing one such opera, "Der Rosenkavalier", at the admittedly central London cinema, the IMAX, live from the Met-a really brilliant experience which I highly commend to anyone. Equally, I have seen more than one excellent film at a digitally equipped local Warwickshire community centre.

To end, I shall be leaving the Select Committee from tomorrow and I, too, add my grateful thanks to our quite amazing series of clerks and subject experts. As our chairman has said, our committee has certainly been productive and very hardworking, but it has also been a hugely enjoyable and interesting experience to be part of such a team. Above all, we owe a more than special vote of thanks to our chairman. He was the perfect choice for the job and it has been an enormous pleasure to be part of his team.

Photo of The Bishop of Gloucester The Bishop of Gloucester Bishop 4:17, 6 April 2010

My Lords, I am deeply grateful to noble Lords and to support staff for both welcome and help when I was introduced in December. I promptly made my integration into this House more difficult by disappearing on a 12-week sabbatical from which I have just returned, keen to delay no longer my maiden speech and my involvement in the life of this House, which I will seek to serve well.

I begin by paying tribute to the former right reverend Prelate the Bishop of Portsmouth, whose recent retirement it was that caused me to receive the Writ summoning me to this House. Kenneth Stevenson, battling for so long with ill health, took very seriously his membership of this House and engaged with its Members in his inimitable and energetic way both in this Chamber and outside it.

The diocese which I serve covers almost all the historic county of Gloucestershire, including that part which is now part of the unitary authority of South Gloucestershire. Though it is predominantly a rural diocese, in terms of employment some, of course, commute out of the diocese to London, Birmingham and Bristol, some only come into the diocese at weekends, but a great many gravitate each day to Gloucester and Cheltenham to work.

Gloucestershire produced the first jet engine through the work of Sir Frank Whittle in Gloucester, where much of the early jet and aircraft technology was developed. We are conscious of the need to harness these skills again in the changing conditions of today. We have nevertheless some astonishing business successes at the present time.

One company in Bishops Cleeve supplied the whole of the enormous kitchen facility for the Olympic Games in China, the Winter Olympic Games in Canada and the astonishing hospital unit at Camp Bastion in Afghanistan. Another at Wotton-under-Edge has won 13 Queen's Awards for Enterprise-more than any other company in the UK except ICI. A Gloucestershire scrap metal dealer has won two Queen's awards for its initiatives in the reuse of metals, aluminium in particular.

We will soon be welcoming the multinational Allied Rapid Reaction Corps to Innsworth, which will liven up our culture with representatives of more than 15 nations taking advantage of our music, literature and science festivals and being integrated into our schools.

The tourism industry is very important, too, with the Wye Valley, the Cotswolds, Gloucester Cathedral and docks and regency Cheltenham. Indeed the city of Gloucester has been transformed through the work of the Gloucester Heritage Urban Regeneration Company, of which I am a board member, and which has brought £450 million of investment into the city over the past five years.

A major issue for us is that of an increasing number of people coming into the county to retire. They are living longer and longer. We are facing the question of how we can, as a county, continue to support these older people. It needs visionary thinking. But by the same token, this growing army of older people gives us a great opportunity to harness their experience and their minds. Perhaps Gloucestershire could be a national exemplar for this growing sector of our population who have still a major contribution to offer to our communities.

Younger people wishing to stay in the county of their birth face a tough struggle to do just that in Gloucestershire. The price of buying a home is out of their reach in most of our areas, especially in the rural parts of the county. Government action is needed to develop a programme of affordable housing for these young people. But many of our young are well served by the University of Gloucestershire, of which I am proud to be pro-chancellor. Awarded the title of university in 2001, it has established itself as one of the most forward-looking, modern universities with some world-class research identified in the last research assessment exercise and producing graduates with one of the highest levels of employment nationally.

This is the county that my diocese, with its more than 300 parishes and 400 churches, and with a population of two-thirds of a million people, seeks to serve. Among those living in the county are many names of those associated with the film and television industries: Kate Winslet, Liz Hurley, Lily Allen, Kate Moss and Anne Robinson, to name just the most famous. Harry Potter, who has already been mentioned, although fictional, can also claim a Gloucestershire connection as we have twice welcomed the makers of those box-office record breakers to Gloucester Cathedral, transforming the Chapter House and the medieval cloisters into Hogwarts School. So Gloucestershire is not unaffected by the health of the film and television industries and I, therefore, read the committee's report with great interest.

I am aware that my friend the right reverend Prelate the Bishop of Manchester is a member of the committee, which has clearly taken a considerable amount of time to look at these issues. He is sorry not to be able to be in his place today.

The report lays bare the fact that the provision of quality training for the workforces of these two industries is growing increasingly patchy, not helped by the economic downturn. In that I echo the words of the noble Lord, Lord McNally. Retraction by the commercial public service broadcasters from their investment in training appears to be crystallised in ITV's recent announcement that it is pulling out of the new Media City development at Salford Quays, a decision that suggests it will have little involvement with the world-class training facilities that are being built there. Failing to sow properly now will reap poor harvests in future which could genuinely threaten the competitiveness of the UK television industry. I am proud that the University of Gloucestershire has a flourishing film studies course.

As shown in the report in the example of highly skilled animation and multimedia work, when we fail to provide the right type of training in our universities, colleges or in-house schemes, skills have to be brought in from overseas, which is a cause of resentment among the hundreds of graduates seeking jobs in the sector each year who would willingly have increased their skills in these specialist areas had the training been available to them as part of their course. If we fail to close the gap between what employers want and what training institutions are providing, we are perpetuating an informal system that relies on who you know. Wider application of more formal apprenticeship and internship models is vital to creating a more meritocratic and socially diverse sector.

Perhaps, in concluding, I may pass comment on one other aspect of the report mentioned by the noble Lord, Lord Fowler. I welcome the suggestion in paragraph 188 that new provision will be made to ensure regional and local news coverage on Channel 3. In Gloucestershire, we are now receiving so-called local ITV news that is often bereft of any real county coverage. Good local news coverage is vital to the sense of identity of a region and of a county and we need that provision in place.

I, again, thank your Lordships for your welcome. It will be a privilege to play a part in the future business of the House.

Photo of Baroness McIntosh of Hudnall Baroness McIntosh of Hudnall Deputy Chairman of Committees, Deputy Speaker (Lords) 4:24, 6 April 2010

My Lords, it is a great pleasure to be the first to welcome the right reverend Prelate the Bishop of Gloucester, finally-if I may say so-to our debates. I congratulate him on a really excellent maiden speech. He comes to this House with a distinguished record, both as a priest and as a scholar, and-as he has just told us-with a very strong commitment to education and urban regeneration in his own diocese, which, again if I may say so, he described to us with such lively enthusiasm that I think those of us who are not lucky enough to live there already might immediately want to go and find somewhere there to set up home. I also note that he is the father of four daughters, and as one of four girls myself-with a brother bringing up the rear-I recognise and salute the challenge that that represents. In his speech today, he has put down a marker that tells us that we can expect a great deal from him in the future. I welcome him very warmly to the House and wonder whether the Select Committee on Communications possibly beckons.

Yesterday, my son-in-law, hearing that I was going to speak in this debate, looked up from his newspaper-a rare thing you might think, somebody actually reading a newspaper, but he was-and said, "All I want to know is why there is never anything good on telly on a bank holiday". I thought that was an excellent question, and one that, in a way, this report addresses.

I thank my noble colleague-if I may call him that-the noble Lord, Lord Fowler, for introducing this report so elegantly. I take this opportunity, along with my colleagues on the committee, to thank him for being a generous, impartial, and, where necessary, an extremely robust chairman. It has been a pleasure and a privilege to serve with him. His achievements will surely be more than enough to ensure that the Communications Committee is reinstated in the next Parliament. If it is, which I fervently hope it will be, I hope it will be lucky enough to be as well served by the Clerks and advisers who work on it as we have been.

I also thank the Government for a commendably speedy response to the report and for making time to allow this debate to happen-just-before the election. I hope my noble friend on the Front Bench will forgive me if I say that speed may have been the enemy of reflection in some aspects of the response to the report. I do not mean that unkindly, but I hope that he will accept it as a mild criticism.

Most issues raised by the committee have been covered by other speakers, but I want briefly to reinforce a couple of points. The first is the decline of UK-originated content for children and young people, which was mentioned by the noble Lord, Lord Fowler, and others. It was a matter of concern to every witness who gave evidence to us about it. It seems clear that the economic challenges faced by the television industry, and by the commercial companies in particular, which the report sets out in detail, are having a disproportionate effect on the creation of high quality programming for children-especially for the older age group. Even the chairman of Ofcom, quoted in the report, speaking to a Select Committee in another place just over a year ago, said that,

"we are sleepwalking into a situation where we do not have UK-generated content of a high quality for our kids. I believe that would be a very bad outcome".

It is pretty hard to disagree with that sentiment and, as has already been said, the Government have declined to accept the committee's recommendation that tax credits should be extended to children's programming on a trial basis, preferring to rely, at least to some extent, on the requirement that they have placed on Channel 4 in the Digital Economy Bill to include content for older children and young adults in its services. Although that new provision is very welcome, it is unlikely to be enough on its own to halt or reverse the decline in spending on children's programming, which is a mighty 48 per cent since 2003. It is surely not reasonable to expect Channel 4-obviously, in conjunction with the BBC-to bear that responsibility alone.

I hope that the Government, when they are returned to office, as I am sure that they will be, will take another look at that issue. We must accept that money is in short supply in both the public and private sectors, but investment in our children's development, which is what high quality television programming represents, must surely always be a priority.

My second point concerns training and education for the film and television industries, which was mentioned by several other speakers. Here, again, the committee received overwhelming evidence that greater investment in skills by funding bodies such as the UK Film Council, training institutions and the industries themselves is essential if the UK is to retain its competitive edge, particularly in areas such as animation and computer-generated design. In fairness, the Government's response acknowledges the seriousness of that issue, but the Government are perhaps less willing to recognise how quickly the UK's current prime position in the supply of top-quality production skills could slip away if we do not keep our eye on the ball.

Recent policy emphasis on the so-called STEM subjects in universities has given the unfortunate impression that less value should attach to the disciplines that come under what we might call the creative umbrella. That is a false and unhelpful distinction. Our creative industries are among our most successful. As has been said, they need science, technology, engineering and mathematics graduates to recognise the opportunities that they can offer, along with opportunities for graduates in languages, literature, music, media and business studies. Ensuring that that point is reinforced when funding decisions are made by HEFCE, for example, is the Government's responsibility. Those points have been made by the noble Lord, Lord McNally, and the noble Baroness, Lady Howe.

Finally, I add a few words about the importance of the UK film industry, which continues to punch well above its weight in a market dominated, as we have heard, by the massive output of the Hollywood studios. We should be proud of the distinctive achievements of production companies such as Working Title and of the worldwide success of films produced by Channel 4 and the BBC-the noble Lord, Lord Fowler, and the noble Baroness, Lady Howe, remarked on that.

I want in particular to celebrate the artists who contribute to those films and, to make the point clear, to note the names of a few who have done so well both in UK films and in Hollywood: people like Helen Mirren, Judi Dench, Kate Winslet-who has already been mentioned-Alan Rickman, Daniel Craig, our current James Bond, made at Pinewood, James McAvoy, Ewan McGregor and, new on the scene, Carey Mulligan. There are directors such as Sam Mendes, Danny Boyle, Stephen Daldry, Phyllida Lloyd and Stephen Frears; and writers such as David Hare, Tom Stoppard, Christopher Hampton and Frank Cottrell Boyce.

It was Frank Cottrell Boyce, in his recent appearance on "Desert Island Discs", who said of the UK film industry,

"it's not industry-it runs on good will and people working for nothing".

He also noted that it took 15 years for one of his scripts to get from its initial stage to being made into a film. What he said is to some extent true, as the committee's report touches on in the section headed, "Apprenticeships and Internships". That is why proper investment in training is so important, but talent continues to emerge, and many of our most gifted practitioners in the film began-and some still practise in-our publicly funded theatres. As we move towards a new Government, let us not forget, whatever our political allegiance, to nourish our creative industries at the grass roots to ensure a rich cultural heritage for our children and grandchildren.

Photo of Baroness Eccles of Moulton Baroness Eccles of Moulton Conservative 4:34, 6 April 2010

My Lords, I, too, start by welcoming the noble Prelate the Bishop of Gloucester, whom I thank for his excellent maiden speech.

Our committee has held six inquiries in a little less than three years. This is the fifth. The total weight of written and oral evidence will amount to quite a few kilograms. This is in no small part due to the drive and energy of our excellent chairman, my noble friend Lord Fowler. He has led us at some pace through a series of fascinating inquiries. I should like to echo the noble Baronesses, Lady Howe and Lady McIntosh, by saying how much we have enjoyed his chairmanship and admired it. It has been an especially interesting committee to be part of. I should also like to say that we have been extremely well supported by our clerk and specialist advisers and by all those who have done so much for us in the office. Thanks to them, too.

Our report includes the history-a very brief history-of the British film and television industries in two separate sections. Cinema for public entertainment emerged more than 100 years ago, mostly in the United States, France and Great Britain. The world's first regular television service was launched by the BBC in 1936 but was suspended throughout the war and resumed in 1946. It has been helpful to our inquiry to be able to understand how and where these two industries started and have their roots and to have some idea of how they evolved.

While working on the committee's earlier reports, we became very aware of the effect of the digital age, long term, and the recession, hopefully short term, on the film and television industries. As this report considers in more depth the actual making of film and of television programmes, we continued to find out how penetrating these two influences are. On the digital front, one example is the need for cinemas to be adapted so that digital projection takes over from analogue. This is particularly serious for small cinemas, where the investment is disproportionate to their income-a point that has been referred to by the noble Baroness, Lady Howe. The more small cinemas are able to project digitally, the more opportunity there will be for low-budget films to be screened. Added to which, it costs less to prepare a film for digital transmission. Because of the recession, there has been reluctance on the part of the banks to provide the essential start-up funding for new films and programmes. Alternative sources have to be found.

I shall touch briefly on two subjects, one of which, tax credits, has already been mentioned by the noble Lord, Lord McNally. The other has not been discussed but I think that it is important: the proposed merger of the UK Film Council and the British Film Institute.

On the first subject, the answer to the question posed in the title of this report-decline or opportunity? -has a core message, which is funding, so it is not a bit surprising that many of our recommendations consider the effect of pressures on funding and what can be done to alleviate them. One theme that occurred again and again in the evidence was tax credits or, as the Government call them, film tax relief. These were revised in 2007 and, although the previous scheme provided important funding for the film industry, it was drawn so widely that some of the benefit went where it was not needed. Some witnesses told us that the revised scheme was drawn too tightly and that this has affected the funding of lower-budget films.

At present, as I am sure most noble Lords already know, if a British film is shot partly overseas using a British crew, there is a financial penalty. This problem could be alleviated by extending relief to British filming that is carried out overseas. In addition, that would recognise the creative and commercial needs of film-makers to film outside the UK. Oxford Economics carried out a study on the impact of increasing tax relief on low-budget films; a hopeful message for the Treasury is that the results suggest that an increase would be close to fiscally neutral.

An adjustment would also sustain the UK as an attractive venue for international film-makers. For instance, the industry here in the UK is renowned for its post-production expertise. Other countries have caught up and are challenging the UK's position-they know that generous tax credits attract inward investment. However, the Government do not believe that any adjustment is necessary at present. In response to our recommendations, they quoted some impressive numbers, but they did not indicate how much greater the benefit to the industry could have been if the scheme had been more sensitive to the needs of low-budget films, nor did they reflect the risk of international film-makers finding more attractive venues than the UK. However, they said that,

"the film tax relief will be kept under review to ensure that it is meeting the policy objective of promoting the sustainable production of culturally British films".

While looking further into the film industry, we took evidence from the United Kingdom Film Council in March last year and from the British Film Institute in June. At that stage, the question of a merger was not being openly discussed. The subject came up during our last session in November when we took evidence from the Secretary of State at the DCMS, Ben Bradshaw. The UKFC is a non-departmental government body established in 2000. Its funds are provided by grant in aid and the lottery. The BFI is a charity founded in 1933, which was granted the royal charter on its 50th anniversary. A little under half its funds are grant-aided through the UKFC and the remainder is self-generated income. The UKFC, principally a funding body, provides finance for the production of new films. The BFI provides cultural support for the industry through distributing films that might otherwise never reach the public, through the national film archive, through annual festivals and through other activities.

The merger between two such apparently disparate organisations gave us some cause for concern. We were concerned that any savings on administration would be too small to warrant the upheaval. We were also concerned that the BFI's cultural role would not be maintained and that its charitable status could be affected. However, the Minister assured us that the charitable status would be retained and we understood from the Government's response that the boards of both organisations were in support of the proposed merger, which is an important factor.

As we speak, four months later, things have moved on. Agreement has been reached in principle with the Charity Commission that the new body formed by the merger can have charitable status and it is assumed that that will include retaining the royal charter. However, the merger could cause complications when it comes to good governance and board membership. The existing board of the UKFC consists mainly of directors from larger commercial organisations and so represents the commercial interests of the body. The BFI's objectives are firmly embedded in film's cultural interests. Therefore, if good governance is to be maintained by the merged body, a number of the directors need to represent the cultural remit of the BFI. In order to make sure that their respective responsibilities are properly recognised, it is proposed that an interim board should include both directors from the predecessor boards and some new blood. The two organisations agree that the proposal to merge is in the public interest. They have much to offer each other-the UKFC's ability to fund new productions and the BFI's cultural support to the industry through distribution, exhibition and the national film archive-so we must wish them well and hope that the merger goes through and succeeds.

In conclusion, this report should continue to be considered seriously. The digital age is proceeding at a galloping pace and the interests of the film and television industries are deeply affected. Our report and evidence contain valuable opinions and information from leading experts in the field. We hope that it will be useful to the Government when they are formulating policy for the industry in the future.

Photo of The Earl of Glasgow The Earl of Glasgow Liberal Democrat 4:44, 6 April 2010

My Lords, I congratulate the Select Committee on Communications on an excellent and surprisingly readable report. It describes clearly the history and present state of the British film industry and its value to the British economy. The film industry is apparently a net contributor to our balance of payments, which can only be a good thing, but the report fails to differentiate clearly enough, at least to me, the two quite separate aims of the British film industry. One aim, surely, is to produce a regular flow of home-grown films that are intended to appeal to the home market but also, whenever possible, to the people of other countries, so that they can earn much needed foreign currency.

The other quite different aim is to make Britain so attractive to foreign film companies that they will be enticed into making their films here-what I believe the report refers to as "inward investment". British film technicians and our major film studios provide facilities that are second to none in the world. "Star Wars", "Superman" and many other big blockbusters were made here and this trend must obviously be encouraged and built on.

The other aim is quite different. It suggests that the Government should invest in native film-making talent and encourage British film companies to make a certain number of wholly British films that preferably reflect our culture and our way of life. This is a much more questionable proposition. Film-making is primarily a commercial business and an art form second. Should it not be expected to look after itself? Does it really deserve government support? After all, the United States, perhaps obviously, feels no obligation to support its vast Hollywood-based industry. On the other hand, most European countries, particularly France and Germany, do support their industries. Besides reasons of national pride, most other European countries have to compete with the power of the predominantly English-language films that flood them and most other countries in the world. We, on the other hand, are the English language and we have quite an advantage over them.

Between January 2009 and now-just over a year- 108 British films have been made, all of which have had some sort of theatrical release, plus there have been another 67 British co-productions in which British money and usually a lot of British talent have been invested. However, I suspect that noble Lords will not have heard of more than 75 per cent of those British films and never will hear of them, probably because they are cheaply made and not very good. Most of them will probably be super-violent action or horror films-genres, we are told, that appeal to the 16 to 25 year-old market and quickly find their way on to the shelves of DVD stores. They are sometimes referred to in the trade as slasher movies or gore fests.

Incidentally, vampire movies are the flavour of the moment. Some of us might have thought that they had gone out-or were dead and buried, we might say-with Christopher Lee and Hammer films, but they seem to be having a surprising new resurrection. It is difficult to pick up a film magazine nowadays without being confronted with at least one photograph of a mad, staring beauty with mouth open and blood, or something looking like it, spilling from her fangs.

However, some of these British, and British co-produced, films are excellent: "Moon", "Bright Star", "Sex & Drugs & Rock & Roll", "Me and Orson Welles", "Fish Tank", which rightly won BAFTA's award for best British film of the year, and the remarkable international success of "An Education". All were made on relatively small budgets and, I assume, although I do not know, all were financially profitable. When British films can get guaranteed American distribution and the financial backing of big American distribution companies, Britain can also go in for big-budget films, which have already been mentioned, such as the Harry Potter films and the James Bond franchise, although no one would suggest that government money should be invested in films such as these.

It is the surprise hits that help to make the film industry such a fascinating business. As far as I know, no one expected "An Education" to do as well as it did. Even more surprising was last year's "Slumdog Millionaire", which has also been mentioned in the debate. It had no stars, was set mostly in the slums of Mumbai, and some of it is spoken in Hindi, with subtitles. Surely no Hollywood producer would have predicted its extraordinary international success. When, as a member of BAFTA, I was sent a pre-release copy, I had not heard of the film-only of its director, Danny Boyle, who had made, along with other great films, the groundbreaking "Trainspotting" some 10 years before. Yet "Slumdog Millionaire" went on to win the Oscar as well as the BAFTA for best film of the year.

"Slumdog Millionaire" is one of those once-in-every-five-years special British films that seem to come out of the blue, usually with modest budgets, and take the international film world by storm. Sadly, and for no obvious reasons, such successes are often followed by a slump in the British film industry. Maybe overconfidence and overambition take over, as seems to have happened in the case of Goldcrest. That company inspired the world with "Chariots of Fire" and charmed it with "Local Hero" but then, after three expensive failures, went bankrupt. It is unfortunate that the noble Lord, Lord Puttnam, is not here: he would be able to tell the House much more about that than I can. More recently, "Four Weddings and a Funeral", with its relatively ordinary-but very British-storyline, swept the world and turned a previously unknown actor called Hugh Grant into a big Hollywood star.

I was involved in one of those Great British breakthrough movies. In 1960, I was employed by the film company Woodfall, the brainchild of John Osborne and Tony Richardson, which had already made quite an impact on the British scene with films such as "The Entertainer" and "A Taste of Honey". I was the runner in "The Loneliness of the Long Distance Runner". I then went on to work on Woodfall's production of Henry Fielding's "Tom Jones". There was a great deal of anxiety in the post-production stages of that film and a lot of re-editing and music changes took place. The result, however, was a huge international hit. It was only the second British film ever to win the best film Oscar. After "Tom Jones", Tony Richardson had no trouble raising money for anything that he wanted to do. However, with the possible exception of "The Charge of the Light Brigade", he never made another good film or a financially successful one. Woodfall eventually went down. What, I wonder, does international success do to aspiring British film companies?

Another interesting experiment took place in the early 1970s, when EMI set up a division to finance modestly budgeted British films. This was a time of the film industry's slump, when several major American companies-no longer intoxicated by swinging London-were withdrawing their investment in British-made films. EMI put Bryan Forbes in charge of the new company. He was a highly regarded director and producer, who had made a string of modestly successful British films, the best known of which was the very popular "Whistle Down the Wind". I remember that at the time we had great hopes for this new company, but it resulted in a number of unmemorable, middle-class, middle-brow films that failed to make much impact either here or abroad. That company, too, collapsed. Its one success was "The Railway Children", which did well at the time and has continued to be popular; it is actually showing this week in London in a new digital version.

In such a volatile industry, how could or should the Government help? If government money could be focused on assisting only those quality British films that allow British talent to flourish in companies that have difficulty finding funding elsewhere, that would make sense. If the proposed film has hopes of some sort of distribution in art houses all over the world, it would be taxpayers' money well spent. All I am saying is that government money should be spent on good films and not on bad ones-but that, as we all know, is easier said than done. Nobody knows-though some pretend that they do after the event-whether a film is going to be good or bad until after it has been made. Even then, they do not know whether it is going to be a commercial success. Nobody ever sets out to make a bad film-at least, I do not think that they do-but a lot of things can go wrong. Film-making, even on a modest scale, involves many different talents, skills and egos, as well as financial restraints. The trick is to make the chemistry cohere. That is often a question of luck rather than good management. Most of us have heard about the making of "Casablanca"; out of almost total chaos came one of the most popular films of all time. To some extent, that was also true of "Tom Jones". This is just one of the elements that make film-making such a fascinating business.

If we believe that we should support British film production in some way, what is the best use of taxpayers' money? Clearly, indiscriminate tax incentives to individuals prepared to invest in British films does not and has not worked. I know that, in 2004, unsaleable films were produced quickly in order to ensure that their rich backers got their tax relief. The present law, which allows film companies, rather than individuals, tax relief on their own films, seems to be working much better. However, if the Exchequer really wants to get its money's worth, it has to back the right films. Choosing the right films is now the job of the UK Film Council. Let us hope that it makes the right decisions and does a lot better job than Bryan Forbes did.

Photo of Lord Gordon of Strathblane Lord Gordon of Strathblane Labour 4:55, 6 April 2010

My Lords, I join in the general welcome accorded to the right reverend Prelate the Bishop of Gloucester and thank him for his interesting and thoughtful maiden speech. It will also come as a great relief to my fellow members of the Communications Committee, who greatly enjoyed the contributions made by his colleague the right reverend Prelate the Bishop of Manchester, to know that it is not a doctrine held de fide throughout the Anglican communion that Salford is the creative capital of the world.

I hope it will not go unnoticed that, on the day a general election is declared in Britain, this House is debating the future of television and film, and the House of Commons is having its Second Reading of the Digital Economy Bill. In my view, that is appropriate. While undoubtedly the problems of the economy are more immediate and will certainly dominate the election campaign, the hope must surely be that by the end of the next Parliament, if it goes a full term, we may begin to see light at the end of the tunnel in terms of the economy.

However, the problems and opportunities afforded to us by the digital economy will still be with us. The digital economy has already transformed our lives and I think that one can say, without exaggeration, that the internet has proved to be a more important invention than printing. It has the capacity to transform our lives even more and to make the best available to everyone. Yet it carries the potential to destroy creativity or at least render it so bereft of adequate remuneration that it will wither on the vine. It is vital that the Government of the day continue to monitor our progress towards a digital economy.

I think that it was Tim Bevan, of Working Title, who said, "The problem is, in Britain, we have a huge bucketful of talent, but the bucket has got a hole in it". The hole is online and camcorder piracy. The very qualities that make digital a great addition to film-better quality and longer-lasting copies can be made more quickly and cheaply than when making film prints-are the same as those that make piracy an even bigger threat than it has ever been.

As far as I can see, it has been recognised for about 100 years that the film industry is important to Britain and that it is right for the Government to intervene in one form or another to help it on its way. As various members of the committee have already mentioned, the general consensus is that the current tax credit system works pretty well and they have suggested only minor changes. Perhaps I may reassure the noble Earl, Lord Glasgow; the feeling also was that the UK Film Council is by and large doing a good job. As our chairman, the noble Lord, Lord Fowler, pointed out, even more important than tax credits in recent years has been the fall in the value of the pound. While that is regrettable in many ways, it will have the advantage over the next few years of making Britain an even more attractive investment for Americans in particular.

As has been pointed out, while in America the studios are big enough to vertically integrate, finance, produce and distribute films themselves, we in Britain just cannot do it. We have tried, and Rank is probably the example that will come to most people's mind, but we are not big enough. Therefore we have to do one of two things. We can enter into partnerships with the big American studios, where we surrender independence in exchange for security of funding, and-provided that we can negotiate considerable artistic freedom, as some of the best British producers have-it is a good deal. The other possibility is inward investment, and it is true to say that about two-thirds of all film production in Britain has been financed by the United States. The problem with inward investment is that it is highly mobile; it can and indeed will go anywhere in the world. We face the danger of getting into an incentives arms race, as it were, so that if someone else offers bigger tax credits than us, people will migrate. It is the task of the Government to make sure that our tax credits are generous enough to be competitive without being profligate.

The independent producer, confronted with raising the considerable amount of money required to make a film, turns to the British Film Council in the hope of a tax credit and perhaps to the BBC or Channel 4 for some assistance, and on that basis, tries to parlay some money out of a bank. In the past he might also have hoped to get money up front from those who will subsequently either distribute the film or hold the DVD rights. The problem is that online piracy has put these latter two parts of the funding patchwork quilt in jeopardy because the distributors feel that they might never see a return on their investment, since pirate copies will have ruined the theatre audience for any subsequent distribution.

We were particularly taken with the evidence given by Michael Kuhn, who suggested that the big five or six producers should get together and offer a slate of films for the private investor to put money into, in much the same way as unit trusts make the business of investing in one share rather than another less risky. By happy coincidence the noble Lord, Lord Lucas, has just taken his place, so I shall say that we were also taken with the evidence given by various people who told us that the creative industries needed to change their business model. As the noble Lord has pointed out frequently during our debates on the digital economy, a lot of piracy occurs not because people want to get something for nothing, but simply because the material is not available legally. Increasingly, creative producers will have to offer people a legal alternative for their product. If a film is a great success in America, but people here are asked to wait far too long before they can get the DVD, of course they are going to resort to piracy. We have to change our ways as well.

Along with the noble Lord, Lord Fowler, I am delighted that the Government have relented on the video games industry, which is an important one that shares many skills with the film industry, particularly at the post-production end. Some 9,000 people work in an industry that raises around £2 billion a year, of which 46 per cent comes from exports, so I am confident that what the Government give with one hand they will get back in increased revenue. Again, we have to watch the incentives arms race. In Quebec the workforce employed in producing video games has gone up by 52 per cent in recent years. The reason for that is not unconnected with the fact that 37.5 per cent of the wage bill will be paid if a company relocates its video games production to Quebec.

Let us look at the area of television, which makes up the other half of the report. It shows quite dramatically the changes that digital has brought about. I agree with the noble Baroness, Lady Howe, that we should extend many of the tax credit benefits to television programmes that are film in genre. While I agree with what has been said about children's television and animation, I would go quite a bit further and include films that are delivered via our television screens rather than shown in the cinema.

The problem is that the world has changed and, even if we wanted to politically, the genie is out of the bottle in terms of the number of channels we have and we cannot turn the clock back to the old duopoly days when ITV was, in my view, the jewel in the public service broadcasting crown. I mean no disrespect to the BBC whatsoever, but in a way doing public service broadcasting with a licence fee to finance you is comparatively easy. Doing it dependent on advertising revenue was the real trick that made British broadcasting supreme.

Unfortunately, having the right to broadcast by licence from Ofcom is no longer the big commercial advantage it used to be. It is very difficult to replace that. We are now driven to looking at concepts such as independently financed news consortia. I in no way resile from the committee's support for them, but I share the misgivings of the noble Lord, Lord McNally, that there are some problems associated with them. After all, if you give public money to television to produce local news, why not local radio or local newspapers? If you do it to provide news, why not children's programming or drama or countless other types of television programme? I was impressed during the debate on the Digital Economy Bill by the idea of the noble Lord, Lord De Mauley, of making this a finite investment-in other words, to tide ITV over a particularly bad spot but not for ever. I think if in a few years' time we were faced with a proposal of that nature, I would be tempted to support it.

Rather than go for intervention by grant, and although we cannot recreate the ideal conditions for ITV, it would be better if we removed some of the restrictions and inhibitions that prevent it operating more efficiently and allow it, in enlightened self-interest, to produce high-quality local news of its own accord. It is worth recalling that local news is still the most popular television programme. The trouble is that it is being done now by the BBC where it used to be done by ITV.

Free spectrum is not very important nowadays but it would be a benefit if we put some form of spectrum tax on the non-public service broadcasters, which produce very little in the way of local origination, so that they would pay some sort of tax to help those who did. The payments to the Treasury have virtually ended now but they should have ended many years ago. The balance of trade in negotiations with the independent producers needs looking at again; I am conscious that the noble Baroness, Lady Bonham-Carter, is yet to speak, so I will tread very delicately. Some of the independents are not small. Indeed, the big four or five produce about 70 per cent of the output. In terms of advertising revenue there is great scope for change. ITV should not be compelled to sell every minute of advertising revenue; I gather Ofcom is looking at that at the moment. Others have already alluded to contract rights, which I think need looking at again. Control of that should be repatriated to the Secretary of State away from the Competition Commission, which I do not think has a handle on the media at all; reference has already been made to Project Kangaroo.

I want to make two sort of related points. First, although the noble Lord, Lord McNally, had some harsh words for Rupert Murdoch, I would actually congratulate him on trying to persuade readers of the Timesto pay for online content. It is the only way ahead and I genuinely wish him every success in doing it. The internet has grown up in such a way that everyone feels it is part of their birthright to have it for nothing. It is not. It is just another method of viewing something-one that is particularly user-friendly. Secondly, I joined this committee almost exactly a year ago. Since the first subject we were investigating was film, which is the area I know least about in the communications sector, I have more reason than most to thank very much indeed our able Clerks and advisers who helped us so much.

Finally, I join others: having observed the work of the Committee in the past and contributed to most of the debates on the reports, I greatly value the opportunity from the inside to realise just how good and effective a chairman was the noble Lord, Lord Fowler. The House is greatly in his debt.

Photo of Lord Inglewood Lord Inglewood Conservative 5:10, 6 April 2010

My Lords, I begin my remarks in the same place as the noble Lord, Lord Gordon, concluded his. I have been on the Communications Committee for some time now and have enjoyed it very much indeed. The work that we did was interesting and worth while. All those people involved, both the clerks and the Members, contributed to what, for me, was a very worthwhile experience. I pay tribute, too, to our chairman, who good-humouredly wielded an iron fist in a velvet glove, thereby, I suspect, skilfully getting his own way most of the time without ruffling our feathers too much-so thank you for that.

I draw attention at the beginning of my remarks to my chairmanship of the CN Group. This is particularly significant in this context, given the blurring between web TV and conventional television and the fact that we are involved in the regional news consortium, which has been successful for the northern ITV region. In that context, as an aside, I point out that the smaller the region that any regional news consortium covers, the greater the amount of public subsidy will be necessary to make it economically viable at all.

In discussing the film and television industries, one needs to be clear about one question at the outset. Are we talking about culture as seen as a kind of public good or are we talking about business? Are these activities, at least in one way, a trade like any other? Of course, there is an overlap, but I believe that the right point to start is in recognising, particularly in this digital era, that we are talking about business. In my own case, perhaps because I have a lot of book publishing in my genes, I think that the comparison to which the noble Lord, Lord Gordon, referred-the idea that digital technology is doing for TV, film and radio what moveable type did for books-is interesting and relevant. After all, in the case of the written word, moveable type led to a plethora of new products: high literature, low newspapers, university texts, trade catalogues, great culture and populist nonsense. There was a great growth and burgeoning of output. For those activities in the TV and film industries, the business process is basically the same. You start with creativity, leading to creation, publication, distribution and consumption. The relationship between those things determines the business model that is applied in any particular case. As is so often the case in this world, there is no simple, single answer to how to do that.

The cultural component must be paid for by somebody in some way. In the case of the BBC, there is the licence fee, which is a form of compulsory subscription attached to having a television set. To use a phrase recently deployed in the context of care for older people, it is a compulsory levy. Alternatively, as has also been mentioned, spectrum can be provided at a discounted rate or for free in return for producing something. Or you can rely on advertising.

The BBC has grown into the United Kingdom's only real global TV player, but its legal framework and place in the market here is a peculiarly British compromise. I should make it clear that I am a strong supporter of the BBC and what it does, but I am firmly of the view that it will have to evolve, probably quite dramatically. In particular-this is something that the committee touched on on a number of occasions-the current split between the operational end of the BBC and the BBC Trust is not a long-term answer.

As for the other ways in which to pay for what can be described as the cultural public goods provided by these industries, spectrum, which has been mentioned, is not worth much any more, while advertising has over recent years and months collapsed-hence the tribulations faced by ITV. We will, then, have to find other ways of paying for the provision of the things that we want to see. The fact that the regional news consortia are being directly paid is an interesting straw in the wind. We may, for better or worse, see more of that in future. However, in this context it is terribly important, as my noble friend Lord Fowler said, that there must not be a monopoly of public service broadcasting. The BBC alone cannot and should not be the only body carrying out that function.

One of the most interesting aspects of the digital era is the role of interactivity, which is why I join those Members of your Lordships' House who have commented on the video games industry. While I suspect that that industry is not of immediate familiarity to all that many of us, it is now a big and significant business in this country. That is why I was pleased that the Government, in the Budget, responded to our recommendations about the industry-the Treasury appeared to be more enthusiastic than the Department for Culture, Media and Sport.

At first blush-certainly, it was this way when I began to be interested in these things-I rather assumed that film was in many ways similar to television in business terms. Of course, that is not really the case, in much the same way as writing, producing, publishing and selling novels is very different from doing the equivalent for magazines. We all know that successful films are incredibly lucrative and, like good books, leave an important and enduring mark on our culture. However, as with good books, you cannot buy them off the shelf just like that. The creative business is a curious business.

The difficulty that the film industry faces, which has been touched on, is that its business model is distorted not only by a high incidence of risk and uncertainty but, as has been said, by the existence of subsidies that are permitted as cultural exceptions under EU and other international trade rules. I remember once asking Sir Sydney Samuelson whether he could tell me if a film was going to be a success. He said that he could not but that he could tell me the 10 films from which the successful film would come. In recent weeks, we have seen a great contrast between the financial success of "Avatar" and that of a film whose name the promoters will, I think, be glad that I have now forgotten. It starred Uma Thurman and had, I think, 38 theatrical performances; it has just closed.

In this country, we have a slightly strange set of circumstances. The Treasury seems to take a perverse view about film-making. If a film or a number of films start being made in Britain, it takes the view that the tax regime is too generous and, almost invariably, makes changes to make it more onerous. Surely the opposite should be true. After all, profitable activities always contribute more to the wider economy than unprofitable ones. In particular-this, too, has been touched on by a previous speaker-the "use and consume" provisions and the tax reliefs associated with them seem perverse. If you want to film Shakespeare's "Henry V", which is by any measure a British icon, and decide to go to France to film the battle of Agincourt or the siege of Honfleur, because you have gone to France it ceases to be part of British culture and you lose your tax relief. That is dotty; culture is not defined in that way.

This might come as a surprise to most of your Lordships, but there may be certain apt comparisons between the film industry and agriculture-I am a farmer in another life-because each, at least to some extent, has its own tax regime. The reason put forward for that, whether or not one agrees with the argument, is that each is producing public goods that otherwise will not be paid for and that, if they are not paid for, those public goods will ultimately not be available for society. The much maligned common agricultural policy-in many respects, quite rightly much maligned-is intended, among other things, to establish a regime of equivalence across the European Union. That is a sound idea because, as the noble Lord, Lord Gordon, said, we need to have in place mechanisms to ensure that countries do not engage in bidding wars for subsidies while hiding behind the fig leaf of culture.

I have been talking about supply and I now wish to discuss demand. Film and television, like many other media products, enjoy a huge range of different delivery or distribution systems. Increasingly, at their heart there will be congruence via the binary code of digital technology. The bottom line is that there are now about 1.4 billion users of the internet. Physical location is less and less an identifier of demand. In the future there will be huge demand for good material-even more than there is now. That, of course, is why intellectual property is so important and why, as was said earlier, the protection of intellectual property rights is important. Unless people gain a reward for their creative work, they will not do it and things will not happen. I am partly convinced that the Digital Economy Bill will get this right because it matters to the future of the creative industries that piracy problems are resolved.

The biggest advantage that our film and television industries have-although it is also a threat-is the fact that across the internet the common denominator is the English language. We should not forget that and we should always try to use it to our advantage rather than see it as a threat coming from the United States or elsewhere. Those who are involved in these businesses must decide whether they will try to create a niche or a general product, just as those involved in hard-copy media must do. All the evidence suggests that there will be massive demand for media products, including film and television. We know-this is commented on in our report-the extent of that in the UK economy, but how much more will the future bring? In simple terms, it seems to me that we must allow the laws of supply and demand to carry this forward in the context of a free and fair marketplace. Of course, we cannot necessarily allow that market to work in a purely mechanistic way, because certain aspects of film and television-and what will evolve from them-are public goods. If part of the working of this marketplace destroys or degrades aspects of that, society will have to find ways to pay for what it wants. I suspect that that may involve direct payment rather than excessive regulation.

As a nation we have been in the vanguard of film and television since their birth. They and their successors will become ever more important in our society, both economically and socially. There are great opportunities to be grasped. This country should set out its stall to be a fertile seedbed for creativity, with finance and trained people being made available. If we can have, against that background, policies of hands-off encouragement, I believe that great national benefits will be achieved.

Photo of Viscount Falkland Viscount Falkland Liberal Democrat 5:23, 6 April 2010

My Lords, I intrude in the gap in this riveting debate to say a few words about film distribution, an aspect of film that has not been overemphasised in your Lordships' debate. I think that the noble Baroness, Lady McIntosh, said most clearly that we have much talent bubbling in this country. However, that talent lies not just in our performing artists but at every level, and film gathers all the talents. Young people are dedicated to becoming film-makers. They gather groups around them and get a bit of money by mortgaging their houses. They do the preparation for the film but, ultimately, they cannot get it distributed. Distribution is absolutely essential. People talk about funding production. However, if you have a good story and somebody who can get big American money involved, production is not so difficult. What is really difficult is to get the film into cinemas. The only way in which you can do that is through distribution. It is rather like books; if you write a book but do not have a publisher, no one will read it.

It is not quite as grandiose to start a distribution company as the noble Lord, Lord Gordon, said. It can be done. It is expensive-companies have to lay out a lot of money to gain the rights to distribute films-but we have recently seen an encouraging piece of good news. Curzon Cinemas was an exhibitor, as those of your Lordships who have been into its comfortable cinemas will know. It has acquired Artificial Eye, one of the surviving distributors of world cinema in this country. It has the interesting idea-probably from Philip Knatchbull, the son of Lord Brabourne, who contributed so much to our industry-of doing everything in one group. It shows films in its cinemas, produces films and distributes them. Furthermore, it has had the wonderful idea of getting together with HMV record stores, which are interested because they usually have spare space where retail is beginning to decline. They now have two or three small, 60-seat cinemas where they can show, alongside a mainstream film, either an interesting independent production in world cinema or a British film that cannot get distribution. This is an important development and I hope that the Government will take notice of it.

I tried in this House many years ago to persuade the Government not to use lottery money to produce films. The slate of films made via the Arts Council that never got distribution bears out my argument. I hope that the Government will take notice of this new development. They will see that for taxpayers' money-public money-to be well placed, this needs much more serious investigation. The path that Curzon is going down-and taking that path seriously-could be the shot in the arm that our industry needs.

Photo of Baroness Bonham-Carter of Yarnbury Baroness Bonham-Carter of Yarnbury Spokesperson for Culture, Media and Sport 5:27, 6 April 2010

My Lords, I congratulate the right reverend Prelate the Bishop of Gloucester on his interesting maiden speech and on being the father of four girls. Like the noble Baroness, Lady McIntosh, I, too, am one of four girls. It is a good thing to be.

I also thank the noble Lord, Lord Fowler, for being such a wonderful chair of not only the Communications Committee but also the BBC Charter Committee, which I also sat on. I thank the clerks, special advisers, committee specialists and the one member that has been through the whole process, committee assistant Rita Logan, for everything they have done. I also thank the Minister, who has politely found so many different ways to disagree with me over often the same point, which I kept bringing up in our various debates. Occasionally he would agree with me, which was nice. I am not sure how appropriate it is, but I take the opportunity to thank him and his officials for the constructive approach they took to that section of the Digital Economy Bill that I was involved in, pertaining to television. Like the noble Baroness, Lady Howe, I hope that it survives the wash-up.

A great deal of what I want to say has already been said so I will be brief. The British film and television industries have a lot to be proud of as major contributors to our creative economy and a valuable means of representing Britain to the world. They provide employment and, as the noble Baroness, Lady McIntosh, said, the people they employ are a great national asset. While we politicians languish at the bottom of the popularity charts, actors, presenters, directors and producers are lauded as national treasures. As our report and everyone who has spoken today point out, both industries are facing huge challenges, due largely, in ways that affect them differently, to the internet.

It is interesting that, in all those futuristic films and television programmes-my noble friend Lord McNally mentioned "Dr Who"-no one predicted the internet. By now, we would have colonies on Mars; talking, walking robots; and man-eating plants. One of the greatest sci-fi films of all time, Stanley Kubrick's "2001: A Space Odyssey", had a murderous computer called Hal, but not one that connected individuals in the way that the internet has, thereby affecting the future and very existence of industries that until a few years ago thought they had a watertight financial model. As one of our witnesses, Charles Sturridge-who at the age of 28 directed "Brideshead Revisited" for ITV and was given the time and money to do it over 11 episodes-put it, we are,

"a generation of cavalry officers trying to work out tank tactics".

We are moving from one system to another.

I will start by talking about the British film industry. As others said, the Government are to be congratulated on the tax credit system that they introduced in 2007. However, I agree with the noble Lord, Lord Inglewood, that there are problems with it. We on these Benches are concerned that the narrow definition of "UK expenditure", which applies only to money spent within the UK and not on UK elements abroad, has had negative consequences, in particular for co-production deals. Co-production deals are more often than not vital to secure sufficient capital for lower-budget and independent British films. However, this often means British talent making what are clearly British films abroad, as the noble Lord, Lord Inglewood, said. The present definition of UK expenditure makes it hard for such films to achieve the requisite UK spend for tax relief. We agree with the report that there should be a change to the "used and consumed" provisions that would extend the tax credit to production expenditures overseas. We are disappointed at the Government's response in acknowledging simply that this is something to look at. The change would chime with the DCMS's original stated aim for the cultural test-namely, that:

"The flexibility of the new system will allow producers to clock up points if they use UK content, facilities and personnel, but is not intended to penalise them if they look to source some of their film making outside of the UK".

For television, the new world brings with it problems for the old. Broadcasting has historically made a hugely important contribution to the British creative economy. The inspired creation of the BBC, followed by ITV, BBC2 and Channel 4, has played a crucial role in sustaining and fuelling British creativity. The creation of Channel 4 and more recently the changes in TV terms of trade have seen remarkable growth in the independent production sector. Britain currently exports more than 53 per cent of the world's TV format hours, while the UK is only 6 per cent of the global market. However, I recognise the point made by the noble Lord, Lord Gordon, about the size of the independent sector.

We all know that British broadcasting has reached a critical point; the transition from one age to another, from the analogue to the digital. The statistic that is most relevant to today's debate about British content-my noble friend Lord McNally brought this up-is that the five terrestrial channels that are universally available and free are responsible for about 90 per cent of the investment in UK-originated content, while the new players, the digital channels and the internet, contribute less than 10 per cent. This is despite the fact that together they receive two-thirds of the income coming to UK TV. The British creative industries need our public service broadcasters. We must protect the BBC. We on these Benches strongly welcome the Digital Economy Bill's commitment to, and explicit support for, Channel 4. The recognition of the need to update its remit will help to secure its role as the main public service competitor to the BBC.

As the noble Baroness, Lady Howe, and my noble friend Lord McNally, said, an essential element to ensuring a healthy future for the BBC and public service broadcasting is competition. Currently Channel 4's remit relates only to linear TV and ignores the growth of digital media. We welcome the Digital Economy Bill's extension of this to new formats and platforms, where the channel is already pioneering PSB. We also welcome the new obligation placed on Channel 4 to produce content for older children and young adults, and the fact that a commitment to the making and showing of British film is enshrined in the Bill. However, it is very important that these new arrangements do not lead to any diminution of PSB on Channel 4's main terrestrial channel.

An essential element to the continued success of the British television industry is its public service broadcasting, but it must not be relegated to digital channels with small niche audiences. We have seen with the expansion of the BBC into digital channels some great new PSB programming-indeed, through BBC4, a whole new channel of it. However, I am concerned that the BBC is increasingly using the existence of these digital channels, whose audiences are tiny compared with those of a terrestrial channel, as an excuse not to commission programmes for the channel that they should be on-namely, BBC2. For instance, Michael Cockrell's latest series, "The Great Offices of State", was broadcast on BBC4. It should have been on prime-time BBC2.

As noble Lords who took part in the Digital Economy Bill will know-although they did not agree with me -we on these Benches are concerned about Channel 4 being allowed to produce PSB programmes, or online content, in-house, provided that it is not for the main channel. We worry that this could have negative consequences for the independent production sector. We support the idea of independently funded news consortia to provide regional and local services. We cannot understand the Conservative Front Bench's commitment to scrapping them, which will simply leave the BBC as monopoly suppliers-something that I thought none of us wanted.

Finally, many noble Lords have mentioned training. The fact of the gap between demand and supply emerged very strongly from our inquiry. I was told of a post-production house which hired 60 people between July and September last year, half of them from abroad-at a time when jobs, particularly for graduates, are so scarce. Mr Bullough from Aardman Animations, which makes Wallace and Gromit films among other things, told us:

"We probably take more graduates from Superinfocom in France and from the Filmakademie in Ludwigsburg than we do from UWE"- the University of the West of England-

"which I could walk to from my office".

Aardman tried to set up an academy in Bristol, in partnership with local universities, to plug this skills gap, but found that the nature of higher education funding meant that it made no financial sense for it to do so. What a missed opportunity.

At a time when the Chancellor of the Exchequer has admitted personal experience of youth unemployment through his son, the Government should listen to what employers want and need. We hear often-this was touched on by the noble Baroness, Lady Howe-about the decline in the take-up of sciences at school. The post-production and games industries are experiencing a skills shortage. If boys and girls were told that if they took maths and science they could end up making video games or doing special effects for Harry Potter, I am sure that things would change. Kate O'Conner of Skillset told us that,

"there is a blockage in the system, to get that careers information through the schools, about the range of careers and kinds of skills people might need ... We need to make sure that people understand".

In conclusion the question posed was about decline or opportunity. I will quote my old friend Charles Sturridge again:

"What is exciting from the point of view of the creative originators ... is that ease of access to the audience, which offers enormous opportunity to those people who create content".

We must nurture and back those people who create content-and protect them. The old joke that the BBC would be an efficient, well oiled machine if it were not for the pesky programme makers is not the way forward.

Photo of Lord Luke Lord Luke Shadow Minister (Also Shadow Minister for Defence), Culture, Media and Sport, - Shadow Minister (Also Shadow Minister for Culture, Media and Sport), Shadow Minister 5:39, 6 April 2010

My Lords, I, too, congratulate the noble Lord, Lord Fowler, and the Communications Committee for this comprehensive and thought-provoking-and, I fear, a little worrying-report into the British film and television industries.

First of all, like other noble Lords, I congratulate the right reverend Prelate on his excellent maiden speech, and suggest he might like to join the Tourism Group-the Gloucestershire section.

Photo of Lord Luke Lord Luke Shadow Minister (Also Shadow Minister for Defence), Culture, Media and Sport, - Shadow Minister (Also Shadow Minister for Culture, Media and Sport), Shadow Minister

Why not?

As many noble Lords already know, the film and television industries make a significant contribution to the British economy. The combined workforce of these industries is more than 110,000 people, including actors, directors, producers, reporters, cameramen, animators and make-up artists, as well as staff in post-production studios and special effects, and those working behind the scenes, ranging from electricians, plasterers, sound technicians and researchers to name but a few.

In 2008, British films accounted for around one-third of the British cinema box office and generated overseas earnings of more than £1 billion. In addition, British television companies like the BBC, ITV and Channel 4 also made a significant contribution in 2008. The total revenue from the international sale of UK television programmes and associated activities was almost £980 million, while BBC Worldwide's overseas revenues amounted to around £430 million and ITV's overseas revenues to around £150 million.

However, the report rightly identified that both industries face very serious challenges to their sustainability in the future, particularly in the context of the current global recession. There has been a steady drop in the level of original content produced in the UK. This is obviously most concerning. What action are Her Majesty's Government taking to ensure that public service broadcasters and UK-based film-makers maintain investment levels to avoid stifling this sector altogether? The level of children's programmes produced in the UK in particular has seen the greatest falls in expenditure. Why is this and what steps are being taken to improve this sector? Arguably, one of the other main problems faced by the commercial sector can be traced to the fall in advertising sales and the growth of competition from the internet. This has led to a decline in the amount of money devoted to original British material. What are Her Majesty's Government doing to address these important issues?

Does the Minister agree that our educational system has a vital role to play in the future success of these industries? The UK is and has been for a long time well known for its reputation for producing highly skilled workforces in these sectors. However, representatives from Warner Bros. and Aardman Animations both stated in their evidence to the committee that the education system in the UK is not delivering the graduates they need and they had to recruit from abroad.

Is the Minister concerned, as I am, that the overall British workforce in these sectors has declined by 33 per cent since its peak in 2003? What measures are being taken to provide opportunities and greater job security for British workers in this sector? What steps are being taken to close the gap between the industry and the education system to ensure that we produce the skilled graduates we need to maintain the UK's position as a global leader in these fields? The report states that, in particular, apprenticeships and internships are "under-used and uncoordinated". What is being done to help provide better structured careers for this industry?

Linked very closely to this issue, Kate O'Connor from Skillset commented that:

"It does concern us that, overall ... we have now 50 per cent of the fund that we had last year, with a growing list of skill requirements and a real need to prepare for the future upturn".

What action are Her Majesty's Government currently taking to ensure that sufficient funds are available to safeguard the future competitiveness of the UK television and film industries?

The report highlighted that another big challenge facing the UK film industry in particular has been that the distribution and financing of movies-dominated, as always, by the big American studios-has led to intense global competition to persuade producers to make their films in particular countries. What measures does the Minister believe are necessary to help the British film industry take a larger slice of the revenue generated from this lucrative field? Also, given that the UK's three largest film studios are based in the south-east of England, what measures have been taken to encourage the development of other studios across the nation?

Two other significant threats to future success and increased revenue for this sector are audio-visual piracy in the form of illegal file-sharing or camcorder crime. The committee believes that the Fraud Act 2006 is unclear, provides an insufficient deterrent to abuse and is inadequate to tackle increasingly sophisticated camcorder crime. Does the Minister have any plans to amend this legislation to provide a clear and sufficient deterrent?

It is clear much needs to be done to help these two industries overcome the significant problems they are experiencing and will face in the future. British film and television companies need help to develop and expand so they may be sustainable, and benefit employment and overseas earnings as well as adding to our national reputation for excellent and innovative production. We cannot afford to miss the potential opportunity to grow and prosper off the back of our creative industries. The Minister must seriously consider ways in which to support and encourage these particularly vulnerable UK businesses.

Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) , Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (and Deputy Chief Whip) 5:46, 6 April 2010

My Lords, I am grateful to all noble Lords who have participated, and particularly to the noble Lord, Lord Fowler, for introducing this most timely debate. He does not need any encomiums from me as he has received plaudits from his colleagues on the committee on all sides. We know the value of the committee's work and have seen it on a number of occasions.

The debate has also been graced by the maiden speech of the right reverend Prelate the Bishop of Gloucester. He mentioned his colleague, the right reverend Prelate the Bishop of Manchester: he was not missed at all in this debate. Although we might have thought we would miss him because of his very significant contributions to the work of the committee and all previous debates, as I recall, the right reverend Prelate the Bishop of Gloucester filled his position ably-though his geographical references were slightly different to those which I am quite sure his colleague would have introduced to the debate.

I was grateful to the right reverend Prelate for commenting on the question of regional and local news. He will know that the Government have clear proposals with regard to the independently funded news consortia which are directed towards meeting what we all recognise as a very real difficulty for broadcasting in the foreseeable future. My noble friend Lord Gordon indicated that he was not sure whether that was a permanent solution to the position. It is indeed the Government's position. We want to see pilots developed; we want to experiment and see how the market responds. I agree with my noble friend that this development has to be watched with care, but unless we do some pump-priming in this area and make some progress, the decline in television which we have all appreciated and has been reflected on by a number of contributors to the debate this afternoon will continue. We need to direct ourselves towards that.

This is one answer to the battery of questions which the noble Lord, Lord Luke, produced on behalf of Her Majesty's Official Opposition. On the day a general election is announced, to subject the House to nothing but a withering load of questions and not a single suggestion as to what on earth the Conservative Opposition might do if ever a calamity occurred and they were returned to power is testimony to the fact that the constructive responses in this debate have come from his Back-Benchers, other parts of the House, and also, as I hope I will be able to identify in these terms, from the Government.

The committee is all too well aware of the profound technological and cultural changes in the media landscape over the past two decades. We are moving swiftly from the analogue to the digital world and film and television now operate in large multimedia markets which throw up a whole range of questions that we need to address. The fundamental question, of course, is that asked by the committee: is this a decline or an opportunity? In many parts of the House it has been identified as an opportunity and that is certainly how the Government respond to the challenges that we face. There is no doubt that those challenges are very significant but, during the course of the debate, issues have been identified and some recognition has been made of the way forward based on actions which the Government have taken.

I have already mentioned the independently funded news consortia, which are a very important dimension. The other issue, mentioned by the noble Baroness, Lady Howe, is the anxiety about children's television, which was widely reflected in other parts of the House. I reassure the noble Baroness that the Digital Economy Bill is going through its Second Reading in the other place as we speak. It will come to this House on Thursday, when we shall have the opportunity of ensuring that the positive parts of that Bill on which there is agreement-she reflected parts of that agreement today, as did other noble Lords-will become law, if Parliament so decides in the limited time available. The virtue of the Bill is that it gives some plurality and provides competition for the BBC by supporting Channel 4 in its crucial role of public service broadcasting. The Bill will play an important part in that and it will help as regards children's television. The noble Baroness, Lady Howe, will know that my noble friend Lord Young has written to members of the committee on safeguarding children from material on the internet which might do them harm, and so on.

The issue of tax credits has been raised in relation to support for children's television. We are not against tax credits in principle, but we want to see the impact of the video games tax credit, which was reflected by the noble Lord, Lord Fowler, in the first instance and by a number of other noble Lords who commented favourably on it. I noted that there was a slightly grudging response to tax relief in that regard, but this is an important illustration of the way in which help can be given in what, as the noble Lord, Lord Inglewood, indicated, is an important part of the general economy of broadcast content. Video games are a special instance, but we shall look at the progress of the tax relief offered to them to see whether that might transfer across to other parts of broadcasting. Noble Lords have sought incentives which might give aid to what we appreciate are problems with the quality and provision of children's television at present. Although I cannot commit the Government to this issue of tax credits, we shall look at the development of the tax credit in regard to another area to see whether we can provide answers there too.

The noble Baroness, Lady Bonham-Carter, and the noble Lord, Lord Inglewood, spoke about tax relief. The noble Lord, Lord Inglewood, will know that we have to tread carefully in this area and the noble Baroness, Lady Bonham-Carter, will know the position, because we debated the issues at the time. The noble Lord will recall that, prior to 2007, the danger was that the old tax system for the film industry did not reward film producers but the financial interests that benefited from using film as a way of reducing taxation impost. That is why we need to address this issue, but we have to take care with regard to film tax relief. We are working with the UK Film Council to gather evidence so that we can get a clearer picture of the effects of the new tax relief criteria before we consider any changes. As noble Lords have indicated, and as the report of the noble Lord, Lord Fowler, indicated, the areas in which the changes have been operated since 2007 have already had some beneficial effects.

In answer to the noble Lord, Lord Luke, action has already been taken and it presages action for the future, when we are in a position to take that additional constructive action. Once again, that is an answer to his question, rather than anything else-except a failure to respond. Of course, I am concerned about the points raised on all sides, but raised first by the noble Lord, Lord McNally: he was drawing on the insights from the report about the necessary investment in film. His concept on how the City might be approached in more direct terms, with regard to support for the film industry, is an important one. We probably know why that has been assumed in the past, with the City being more concerned with what it often regarded as safer bets than perhaps aspects of the film industry.

However, the creative industries are making their mark. Around us we are seeing a decline in certain aspects of our economic life, but, as the noble Baroness, Lady McIntosh, said, the creative industries have shown very considerable health and growth in recent years. Therefore, we need to seek opportunities for investment and the thoughts of the noble Lord, Lord McNally, formed an extremely constructive suggestion.

That leads me on to a major feature of this debate and one contained within the report. The debate has followed the report in a great deal of detail for the obvious reason that the report is so comprehensive. The other great area on which all noble Lords were emphatic was skills and training. We need to meet the enhanced skill levels that the industry requires, and testimony was given to the committee of the failures in certain limited aspects of all the skills of graduates in this country. It would be a little better if the party opposite encouraged its Back-Benchers, and even perhaps some of its Front-Benchers, to talk a little less disparagingly about media studies and those degrees which do not fit into the traditional pattern of the more established universities. They should recognise that media studies and issues revolving around the creative economy require our higher education system to ensure that it produces courses which are relevant to the employers of today. That means that we have to put greater emphasis on some skills.

I was conscious of the point that the noble Baroness, Lady Howe, also emphasised with regard to the imbalance between the sexes in terms of employment in this area; too few girls are adequately equipped in this respect. I remember, to my great distress, that when I chaired the funding council concerned with the further education colleges and we were concerned with skill levels, it did not matter what kind of engineering skill was needed-even the cleanest form-to provide the technical back-up and technical product for the media industries, the courses were overwhelmingly dominated by male undergraduates. We were not successful even in the areas of the most attractive engineering-and least demanding in physical terms-where there was no reason at all why women should not play the same role that men played; the imbalance on those courses was very pronounced. We need to make a great deal more progress in this area, and I was most grateful to the report and to the speakers in the debate for the significant emphasis that was placed on the skills agenda.

There was an issue raised about the question of the merger of the UK Film Council and the BFI; the noble Baroness, Lady Eccles, spent a great deal of time in her speech talking about this important matter. We are clear that we want to see a new board that retains the knowledge of the BFI and the UKFC but delivers fresh perspectives in a challenging world. We certainly want to retain the powerful brands possessed by both those existing organisations, but it is important that we realise the advantages of the two coming together to produce a single brand on behalf of the new body. This seems to us a potential step forward in what all noble Lords have emphasised is a very competitive world.

The noble Viscount, Lord Falkland, emphasised the issue of distribution-a point that was also identified as a very great difficulty for the British film industry. We can be creative with regard to the production of films; our problem is so often getting the resources to ensure that they get effective distribution. We all know that in the UK, for obvious reasons in terms of resources and scale, we have never been able to match the vertical integration of the vast industries of the United States. It is important that we look at the question of what kind of investment we can encourage with regard to distribution, but it is a tough nut to crack and one that conditions some aspects of the relative success of the film industry.

One other aspect came up, which I emphasise noble Lords will have the opportunity to debate-I imagine all too briefly-later this week as we give our support to the Digital Economy Bill. The point that was raised by a number of noble Lords concerned the essential issue of intellectual property rights. The Bill represents a very significant dimension in those terms. We will not see the development of film and television products if those who produce them see very limited rewards because of instantaneous transmission through piracy.

The noble Lord, Lord Fowler, although not too many of his colleagues followed him down this path, referred to Project Kangaroo and the extent to which the Secretary of State might have looked at the merger which was being discussed under that general heading. I emphasise that it was not a question of reluctance on the part of the Secretary of State to intervene; it was the lack of powers to do so because of the way in which competition law is framed. That is why, when the Competition Commission reached its judgment, it was not the role of Government to intervene.

Once again, I join those who have paid tribute to the noble Lord, Lord Fowler, for his leadership of the committee, which has produced a most constructive report. As ever, the report identifies areas of very great challenge, as far as government is concerned, and for those concerned with the industry too. It is quite clear, however, that action is being taken in certain crucial areas with regard to this already, which has been generously identified and recognised in the debate. The Government look forward to the additional challenge as soon as the small interlude of the general election is over.

Photo of Lord Fowler Lord Fowler Conservative 6:06, 6 April 2010

My Lords, I think we will ignore that last point. This has been a good debate. I just correct the noble Lord on one point; all my colleagues follow me on the inadequacies which were shown by Project Kangaroo. I congratulate the right reverend Prelate the Bishop of Gloucester on his maiden speech. The right reverend Prelate the Bishop of Manchester made a great contribution to our committee. In our review of the BBC, the future of "Thought for the Day" provided some of our more diverting moments during that committee and a triumph-if I may say so myself-for my chairmanship, by getting agreement from the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Maxton, on the Back Bench, who does not altogether share his religious views, on this. I can see that the right reverend Prelate the Bishop of Gloucester is a great recruit to what I hope will be the new committee.

I thank everybody who has spoken in this debate: the noble Baroness, Lady McIntosh, who underlined the importance of these industries and also the British actors and directors and the contribution they make; the noble Baroness, Lady Eccles, who pointed out how the tax system could be improved further; the noble Earl, Lord Glasgow, with his experience, who surveyed the history of the British film industry and the difficulties of financing-a similar point was made by the noble Lord, Lord Gordon, who again emphasised the funding problems and the "international incentives arms race" which is a memorable and very descriptive phrase to describe it; the noble Lord, Lord Inglewood, who, with all his experience, warned against a BBC monopoly in regional news and the noble Viscount, Lord Falkland, who came in right at the end of the debate.

I also thank the Front-Bench speakers, who set out their rival stalls. There was, encouragingly, much more agreement between them than one might have thought. The Minister was not exactly correct when he said that we were grudging about the Government's admission on tax credit for video games. We supported that; we wanted to see it extended to children's programmes. I think there is a strong case for that.

Finally, I particularly thank two of the crucial supporters in the setting up of this committee; the noble Lord, Lord McNally, the leader of the Liberal Democrats, and the noble Baroness, Lady Howe, whose persistence finally triumphed. Many of the members of this committee will now stand down-all that we hope is that this committee has now established itself and that it will continue after the election, whichever party happens to win that election.

Motion agreed.