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British Film and Television Industries (Communications Committee Report)

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.