PARLIAMENTARY DEBATE
Channel 4 Privatisation - 27 April 2022 (Commons/Commons Chamber)

Our TV and radio industry is one of our great success stories, and public service broadcasters such as Channel 4 are central to that success. Our PSBs sit at the heart of our broadcasting system, delivering distinctive, high-quality content and helping to develop skills, talent and growth across the entire country.

However, the broadcasting world has changed beyond recognition in recent years. Rapid changes in technology and the rise of American streaming giants such as Netflix, Amazon Prime and Disney+, not to mention YouTube and social media platforms, have transformed audience habits. Viewers can watch what they want, when they want, on their laptop, phone, smart TV or Fire stick. As a result, while streaming services have enjoyed a 19% increase in subscribers in recent years, the share of total viewers for linear TV channels such as the BBC and ITV has fallen by more than 20%.

The Government are determined to protect the role of PSBs in our nation’s economic, cultural and democratic life, and to make sure that they remain at the heart of our broadcasting system no matter what the future holds. Tomorrow, therefore, we will be publishing a White Paper that proposes major reforms to our decades-old broadcasting regulations—reforms that will put traditional broadcasters such as the BBC, ITV and Channel 4 on an even playing field with Netflix, Amazon Prime and others, and enable them to thrive in the streaming age. We will set out the full details of our proposals when the White Paper is published.

It is important to understand that the sale of Channel 4 is just one part of that major piece of reform. Like the rest of the White Paper, it is a reflection of the transformation that broadcasting has undergone in the last few years and the need to make sure that our PSBs can keep pace with those changes.

Channel 4 has done a fantastic job in fulfilling the original mission that it was set by the Thatcher Government: to spur independent production and deliver cutting-edge content. The independent production sector has exploded in the last few decades, growing from a £500 million industry in 1995 to an industry of approximately £3 billion in 2019. However, since it was structured to address the challenges of the 1980s, there are limits to Channel 4’s ability to adapt to the 2020s and beyond.

Channel 4 now faces a new set of challenges. It faces huge competition for audience share and advertising spend from a wider range of players, many of whose deep pockets have been driving up production costs. Streamers such as Netflix spent £779 million on UK productions in 2020, more than twice as much as Channel 4. While other PSBs, such as the BBC and Channel 5, have the freedom to make and sell their own content, Channel 4 has no in-house studio and relies almost entirely on linear television advertising spend at a time when those revenues are rapidly shifting online.

Under its current form of ownership, Channel 4 has few options to grow, invest and compete. The Government believe that it is time to unleash the broadcaster’s full potential and to open Channel 4 up to private ownership and investment—crucially, while protecting its public service broadcasting remit. We believe we can sell Channel 4 to a buyer who will fund emerging talent and independent and impartial news, and invest in every corner of the UK.

We intend to use the proceeds of the sale to tackle today’s broadcasting challenges. As I said, our independent production sector is thriving. Only 7% of its revenue comes from Channel 4. The much bigger challenge we face is a shortage of skills. Our film and TV studios are booming. We need to give people the skills to fill the jobs in them, so we will reinvest the proceeds of a Channel 4 sale into levelling up the creative sector and giving people in left-behind areas the training and opportunity to work in the industry.

The sale of Channel 4 will not just benefit the broadcaster; it will deliver a creative dividend for the entire country. As I said, the future of Channel 4 is just one part of our wider reform of the entire broadcasting sector, and I look forward to providing the House with the full details shortly.

Thank you, Madam Deputy Speaker. It is important to say that tomorrow is a sitting day, and we bid for a ministerial statement on this subject.

We are very keen that the House understands that the Channel 4 sale is not a stand-alone issue; it sits within a very important series of reforms that we as a Government want to make to the public service broadcasting system. Channel 4 is an incredibly important economic asset in that ecosystem, and we want to make sure that it is sustainable not just now but long into the future. We think it is our responsibility as the Government to do that future-gazing and to make sure that Channel 4 has the freedom and flexibility it needs to be able to make changes to thrive.

There are two important things to understand about Channel 4. First, it cannot retain control of its own intellectual property, and therefore it does not have the same financial flexibility as the likes of ITV and the BBC, both of which have their own studios. Secondly, its borrowing sits on the public balance sheet, and therefore if it required greater financial flexibility in the future, the Treasury would need to be content with that.

As I say, tomorrow is a sitting day. We had very much hoped that we would be able to set the sale of Channel 4 in the context of a wider series of incredibly important reforms that we wish to make to the public service broadcasting sector. I regret that the hon. Member for Manchester Central (Lucy Powell) does not think this is an important issue and has dismissed it as some culture war. That could not be further from the truth. The last time that important broadcasting reforms were made was 2003. I hope she will agree that the broadcasting world has changed immeasurably since then, and that the Government would not be responsible if we did not address some of those changes.

We think the public service broadcasters play an incredibly important democratic, cultural and economic role in our nation’s life and we want to sustain that role, so we think the privatisation of Channel 4 is an important part of a wider series of reforms. We will make further details available to colleagues, and I will be engaging one-to-one with colleagues who have concerns as we go forward.

I thank my hon. Friend for his comments. It is important to understand that the Secretary of State and I went into the entire process with a very open mind—[Interruption.] That is certainly true. We went into this looking at what is best for the public service broadcasting sector as a whole going forward. We looked incredibly carefully at alternatives, and I hope that the material that we will publish tomorrow will assure him of that fact. We think that we can get the right blend by retaining Channel 4’s public service broadcast remit, which maintains its distinct and unique appeal, while enabling it to get the private sector capital investment that it requires to deal with some of the wider challenges presented by the likes of Netflix.

I appreciate what my hon. Friend said about changes in subscriptions. I think that underlines the volatility of the market and the need to be able to compete and invest in content. That is incredibly important. If Channel 4 is to remain uniquely appealing, we need that investment in content, and we believe that the reforms will give it greater sustainability going forward.

I thank the hon. Member for his question. I did not suggest that Channel 4 would pursue a Netflix subscription model; I simply made the point that Netflix and others—this is not a Netflix issue alone—are changing the dynamics of the marketplace very rapidly. People now view content in very different ways and I do not think it would be a wise, sensible or responsible approach to leave PSBs untouched and unable to have the flexibility that they need to address some of those fundamental challenges.

The hon. Member made a number of unpleasant comments about the Secretary of State. She is not the first Secretary of State to have considered this question. This is not a Secretary of State-specific point of view but a question that has been live for a number of years. It was looked at previously, and the fundamental changes in the market have only deepened since that time with the move away from linear advertising and the rapid change in viewing habits. She took the responsible decision to look not just at Channel 4 but at how we ensure that public service broadcasters have the flexibility they need to be able to provide the content that we all love. She has done a sensible thing in looking at the decision afresh and dealing with it head on, and she has courage in doing so.

First, I thank my hon. Friend for his engagement on the issue and for the work of his Committee, which the Department very much values. I was able to speak to him about the proposal previously, and I am glad that we have a meeting scheduled for later today, for which my plan had been to take him through some of the wider reforms that we wish to make in the PSB sector and offer him the assurances that he seeks. As he knows from previous conversations, the Secretary of State and I were adamant that the proposal needed to go hand in hand with a creative dividend and a wider set of reforms to make it a success.

I agree with the hon. Member about how fantastic our broadcasting sector is—it has unrivalled creativity—and we are seeking fundamentally to preserve that in the reforms that we are making. In this country, we are able to have a great blend of specific public service remits that private broadcasters can deliver, and that is what we would seek to do with Channel 4 going forward, protecting the things that we enjoy and love about it. We believe that any future buyer of Channel 4 would seek to purchase it precisely to tap into the specific markets that it appeals to.

I will not speculate on the nationality of any company. We will be looking at bidders who share our vision for Channel 4, the important role that it plays in investment in our creative industries and the distinct and unique remit that it has in our country. We can provide further details as the process goes on, but I will not stand here and make commitments and crowd out particular buyers for an important UK company.

My hon. Friend plays an important role through her work with the all-party parliamentary group for Channel 4, and I am glad for the engagement that we have already had on the issue. I am also glad that she recognised the role of the Thatcher Government in creating this special entity. As I mentioned in my statement, it was set up to spur independent production in this country, and it has done a fantastic job in that, but the world has changed fundamentally.

My hon. Friend raises the alternatives that Channel 4’s management put forward. I assure her that we gave detailed consideration to those plans and tomorrow we will provide further details in a set of documents as to why we decided that they are not the right way forward. We also have duties to the taxpayer, to the wider creative sector and to the audience. Our reforms are really to sustain Channel 4’s place in in our creative ecology.

We do not think we are putting it at risk. There are a number of things we can do via the PSB remit on quotas for independent production and we would seek to maintain those. We will be bringing forward a series of reforms that we hope, ultimately, will grow the sector over the period of time we are talking, such that all independent producers will benefit.

I thank my right hon. and learned Friend for his question. In recognition of what he says, the reason that previous Secretaries of State looked at this matter was that they could see a number of trends, particularly on spend on linear advertising, that were only going in the wrong direction for a broadcaster like Channel 4, which is uniquely dependent on that spend. Something like 70% of its revenues come from linear advertising spend. I think he would recognise the speed of change in the sector and the fundamental changes in viewing habits, particularly among younger audiences. We think it is responsible for any Government to be very cognisant of that. He will be aware that a number of things can be done in terms of remit and how we engineer the sale to ensure that what is unique, distinct and valued about Channel 4 can be maintained and protected going forward.

I am desperately grateful for the hon. Gentleman’s sympathy and I am sure I will need it going forward. I would just simply say that the reforms we seek to make are about the fundamental sustainability of the public service broadcasting system. If the Opposition wish to bury their heads in the sand and pretend that those fundamental changes are not happening, then that is for them to worry about. We are making a series of fundamental reforms. As I say, the legislation was last looked at in 2003. This Secretary of State is looking fundamentally at this area to make sure that we are serving audiences, the taxpayer and the wider creative sector. I commend her for having the courage to make those changes.

I thank my right hon. Friend for his engagement already on this issue and I appreciate the conversations we have had. We will publish the consultation responses tomorrow. As I said, we have a whole package of information that hon. Members will no doubt scrutinise and hold us to account for, but I hope that they will also welcome it, because this is a series of important reforms. This is fundamentally about growing and sustaining our fantastic creative sector to the benefit not only of audiences but of the small businesses he cites. One thing we are keen to secure is a creative dividend to deal with the challenges that companies are actually talking to me about, which are the skills required for the booming production sector we have in this country.

The hon. Lady is right to highlight the great investment that Channel 4 has made in Leeds, which was actually at the encouragement of previous Secretaries of State when we previously looked at the question of privatisation. In our relationship with Channel 4, we have encouraged it to seek to increase what it does in the regions and nations of our country, and we think it has done a great job of that. We value the contribution it has made to regions and cities, and we will very much seek to preserve that in any sale process.

I thank my hon. Friend for raising the important point that we can get a number of our aims in relation to independent production via quotas in the public service broadcasting remit. We will be seeking to do that. We will provide further details as the process goes on, but I hope that when we are able to publish the White Paper tomorrow he will see that we will seek to retain and modernise the approach we take to independent production such that the companies he is concerned about will be able to benefit.

I am glad to hear the hon. Gentleman remind the House of the thriving creative sector in Northern Ireland, and the tremendous programmes and content that have come out of the place that he represents. That is something we all celebrate. We think that any future buyer would look at the unique and distinct content that Channel 4 provides as one of its great assets. We are able to protect some of that via the remit, which we would seek to do, but it is also important that Channel 4 is only one part of why the creative sector has been very successful in Northern Ireland. I commend him and his constituents for the contribution they have made to that success.

It is frustrating that I cannot set this entire question within the wider context of the reforms that we seek to make. Public service broadcasting is valued by the Government precisely because it provides the kind of content in which a lot of commercial operators are not necessarily inclined to invest. The challenge is to want to make channels continue to be PSBs. The reforms that we are introducing will provide people with a number of advantages in being public service broadcasters that we hope will mean that the important democratic content, which we all value, is retained in the future broadcasting system. I hope that that reassures my hon. Friend and I am happy to continue to engage with him during the process, because he is a champion for the sector and has a number of important views that need to be considered.

There is a fundamental misunderstanding that private ownership and being a public service broadcaster are at odds with each other. The whole point of what we are trying to achieve is to get capital investment and have a distinct public service broadcasting remit. We hope that that blend will sustain Channel 4 long into the future. It is important that those who are not in favour of privatisation answer some of the fundamental questions about the long-term trends that concern us as a Government.

I know that my hon. Friend is concerned about Yorkshire and the importance of ensuring that creative businesses there thrive. We share that fundamental aim. As I mentioned to my hon. Friend the Member for Warrington South (Andy Carter), the key thing is that we need broadcasters to wish to retain their public service broadcasting remit, because it includes our ability to impose quotas on production spend, including outside London. My hon. Friend the Member for Colne Valley (Jason McCartney) will know that his area has benefited substantially from that. We are seeking to stitch those kinds of commitments into not only the PSB remit, but the sale process, so that our aims on levelling up align with any future owners’ aims on levelling up.

I always enjoy engaging with the hon. Gentleman. The Government do not see “profit” as a dirty word; profit is key to creating investment in the companies and kinds of content that he is concerned about. He is right to celebrate Channel 4. We celebrate it and all the fantastic content that it brings, but this is about maintaining and increasing spend on content. That is why we will have a series of reforms in tomorrow’s broadcasting White Paper that I hope will reassure him of our intentions as a Government to have a sustainable PSB sector. I go back to the point that, through the PSB system, we get commitments in the remit to the kind of news content that he is absolutely right to highlight as incredibly important to our soft power.

I agree about the fundamental trends that my right hon. Friend highlights, and about some of his concerns. Channel 4 has fundamentally accepted those concerns in providing us with a range of alternative options, which we have looked at very carefully. We believe that the route we are highlighting is right because, through that, we will have a more sustainable public service broadcasting system, and we will be able to maintain the content and our commitments to some of the less commercially viable programming that audiences very much value.

The hon. Gentleman needs to understand that we are not seeking to have a subscription model for Channel 4. On the issues that we have highlighted relating to Netflix, there are trends that predate the pandemic, involving younger audiences, certainly, moving away from linear television and the decline in linear television advertising. The Government think that addressing all those things is incredibly important, because our public service broadcasters produce a whole range of free-to-air products that we want to maintain as free-to-air products. The range of reforms that we will introduce tomorrow are about the sustainability of the whole PSB sector. I hope that that reassures him that his constituents will continue to get high-quality British content long into the future.

I thank my hon. Friend for all his work on connectivity in his constituency. I am pleased to say that Cumbria is one of our priority procurements for gigabit roll-out and I look forward to working with him on that. I simply refer him to my previous answers: we would maintain Channel 4 as a free-to-air service. We are not looking for a subscription model. Everything that we are doing seeks to bolster the public service broadcasting sector. I hope that when he sees the context in which this decision has been made, he will feel reassured.

I appreciate the hon. Gentleman’s comments about the importance of creative investment in his region. I cannot be too detailed at the moment, because the White Paper is coming out tomorrow, but I hope that he will have taken heart from my comments about how we can put quotas in the public service broadcasting remit to ensure a certain level of non-London production spend and investment in our regions and nations.

In having a more sustainable public service broadcasting system, we seek to not only maintain investment and content production, but expand them. If we did not make the series of reforms that we seek to, we would be concerned about the withering of something that we believe audiences and the creative economy cherish. When we are able to provide further details, I hope that my hon. Friend will be reassured by some of the things that we hope to do in this field.

I am not sure that I wish to thank the hon. Gentleman for his slightly demeaning approach. I do not think that I have been particularly ideological in anything that I have said today; I have been clear that the reforms we seek to make are about the sustainability of the public service broadcasting sector that I value, he values, this House values and—most importantly—audiences value. We need to make sure that the PSB sector is sustainable. The Opposition can bury their head in the sand when it comes to current trends, but fundamentally, the reforms that we are bringing forward tomorrow aim to ensure that the things that the nation values culturally, democratically and economically are taken forward in tomorrow’s broadcasting system.

I very much enjoyed my hon. Friend’s contribution to the reception celebrating 25 years of Channel Five. The channel has made some very interesting news investments recently; it has taken up top-quality presenters and has really invested in its news content. That proves that private sector investment in our broadcasters can mean higher-quality content that is more attuned to what audiences of the 21st century want. I welcome the interest of any company that wants to do to Channel 4 what has happened to Channel Five, with the high-quality programming that it provides.

The Government are thinking carefully about the fundamental sustainability and future of the Channel 4 model. The hon. Gentleman may be aware of two key points about Channel 4: it does not retain ownership of its intellectual property, and any borrowing it does sits on the public balance sheet. Given its dependence on linear advertising, we have concerns, looking at viewer trends, that that model will be difficult to sustain if Channel 4 is to continue to make the investment in content that I think we all want. We are therefore looking afresh at what Channel 4 needs, not only to sustain itself, but to grow. I hope that what we bring forward will help the hon. Gentleman to understand how this reform sits within a wider set of reforms to sustain our public service broadcasters.

I very much welcome the opportunity to talk in this House about “The Crystal Maze” and the fantastic content that Channel 4 has produced over the years. Our reforms are fundamentally about making sure that Channel 4 can continue to make the investments that my hon. Friend and I both want in that kind of unique, fun and distinctive programming.

I thank the hon. Lady for her question and her concern, but I do not think that anything we seek to do in relation to Channel 4 would deprive low-income families of free-to-air content on it. Channel 4 has made really great strides in the digital space. We think that that will be attractive to any future buyer, and that any future buyer would seek not only to sustain that, but expand it.

I always welcome the hon. Gentleman’s comments and his perspective from Strangford. As I hope I have reassured him through my comments today, this is about the fundamental sustainability of the public service broadcasting sector. If channels wish to remain PSBs, they will still take on the obligations that the Government place on them through their remit, which can, importantly, include the production of impartial news content. I hope that the reforms that we bring forward will assure him that such remits will be taken forward and sustained, so that we have high-quality, important journalism going forward.