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British Film and Television Industries (Communications Committee Report)

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 Times to 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.