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GTD WAC evidence on S4C 101118

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                            Welsh Affairs Committee
                               Inquiry into S4C

            Evidence presented by the Institute of Welsh Affairs
                           23 November 2010


Executive Summary


1. Whether the 24.4 per cent cut in S4C‟s budget announced by the DCMS was
   inevitable or not - given the UK Government‟s approach to public expenditure –
   the cut still represents the largest single reduction in cultural expenditure ever
   experienced in Wales.

2. The cut to S4C has also to be placed in the context of other cuts to television
   programming for audiences in Wales - within ITV Wales and BBC Wales (across
   both languages). According to Ofcom between 2004 and 2009 the spend on
   English language television services in Wales fell by 44 per cent, with further
   reductions in 2010.

3. In totality these reductions represent a significant diminution in Wales‟s capacity
   to reflect fully its own society and perspectives back to all members of that
   society, whatever their preferred language. Every effort must be made to ensure
   that this level of service attrition does not continue, as currently seems likely. In
   this context the BBC‟s failure to address the services for Wales, Scotland
   Northern Ireland and its March 2010 Strategy Review should be of particular
   concern to the committee.

4. The scale of the cut to S4C cannot but affect the available options for shaping its
   service in the years ahead, as well as the viability of parts of the independent
   production sector. The range of its programming will be significantly constrained,
   even if a more creative commissioning process improves the quality of that which
   remains.

5. The budget reduction should, however, force a thorough and valuable review of
   the organisation‟s strategies and operations – a review that is long overdue. S4C
   itself set out a possible approach to such a review in its submission to the DCMS.
   Such a review remains necessary, notwithstanding the proposals of the Secretary
   of State for a BBC-S4C partnership.

6. S4C will retain a capacity to deliver very substantial public value to viewing
   audiences and to wider Welsh society. Its effectiveness in optimising that public
   value has declined and needs to be revived, through a reconsideration of a range
   of strategies, better programming, more active engagement with stakeholders and
   improved governance.

7. The potential for collaboration between S4C and the BBC is substantial,
   regardless of the more fundamental partnership agreed between the Secretary of
   State and the BBC. Any proposals for collaboration will need to be justified on
   grounds of cost-effectiveness for both parties. This stipulation will need to be
   rigorously applied, especially given the asymmetry of the new S4C-BBC
   partnership.

8. The new partnership governance arrangements proposed by the Secretary of
   State need substantial reconsideration if they are to fulfil his stated commitment
   to the continued independence of S4C as well as avoiding the creation of an
   unnecessarily heavy administrative overhead. The BBC Alba model is not suitable
   for current circumstances in Wales.

9. Necessary effective negotiation between S4C and the BBC will not be easy to
   achieve given the S4C Authority‟s palpable loss of authority and influence in
   recent months. This is damaging its relationship with the UK Government, with
   Welsh Ministers, the production sector and its own staff, at the very moment
   when it needs to be at its most effective. The issue should be addressed urgently.

10. Accountability for S4C must become a formal responsibility of the National
    Assembly and the Welsh Assembly Government, although the future budgetary
    link with the BBC will mean that some locus for the DCMS, which sets the licence
    fee, will remain both necessary and desirable. This reflects the reality that within
    the UK devolution of responsibility for broadcasting will always involve a sharing
    of responsibilities between Cardiff and London. In this instance more detailed
    work is needed to define a set of relationships between four parties parties - S4C,
    BBC, WAG, DCMS – and a crucial fifth, the regulator, Ofcom. The DCMS and
    WAG should establish a working group to carry out this task.


A context for the cuts

11. For decades past Wales has prided itself on the strength of its public service
    broadcasting institutions. We have witnessed decades of growth in television
    programming for the Welsh audience, from the inception of BBC Wales in 1964,
    through the gradual growth of hours of production on ITV and the BBC, the
    creation in 1982 of the Welsh language service S4C and, following the migration
    of all Welsh language programmes to S4C, the growth of English language
    services on the BBC and ITV channels.

12. In the last decade, following the introduction of digital bandwidth, S4C, a service
    that had begun by broadcasting only about 22 hours a week of Welsh language
    programmes and sharing its channel with English language programmes from
    Channel 4, developed into a single language service broadcasting for more than
    12 hours a day. At the same time BBC Wales experimented with a solid block of
    programmes for Wales in a nightly BBC2W service.

13. The first signs of a turning of the tide came with the gradual reduction in the
    volume of programmes for Wales on ITV from its peak of 12 hours a week at the
    end of the 1990s. ITV pressured the regulators consistently to reduce its regional
    programming obligations, and this has seen the service for Wales diminish to
    little more than a news service. At the same time the BBC abandoned its BBC2W
    experiment, and imposed budgetary cuts that has seen the scale of its service for
    Wales shrink. Reductions in the BBC Wales spend were already set to continue
    until 2012-13, and will no doubt intensify now that the latest licence fee
    settlement will reduce the BBC‟s income by another 16 per cent.

14. In its latest Report on the Communications Market in Wales Ofcom reported that
    between 2004 and 2009 the spend on English language television programming
   for Wales declined by 44 per cent. It will have declined further in 2010. This is a
   necessary context against which to view the planned reduction of the S4C grant-
   in-aid from just under £102m in 2010 to £90m in 2011 and to £83m a year
   between 2012 and 2014. Gloomy estimates by the Welsh Assembly Government
   Advisory Group in 2008, that television spend on programmes for Wales would
   decrease by £25-30m by 2013 compared with its peak in 2006, have actually
   proved wildly optimistic. The reduction, in less than a decade, will now be nearer
   £45m. This must exacerbate the concerns expressed by the Welsh Affairs
   Committee in its report on English language television in 2009.

15. For some years S4C escaped this attrition, buoyed by a funding formula that
    guaranteed increases in line with the retail price index, and a generous settlement
    from the BBC that saw the BBC spend on output for S4C increase from just under
    £22m in 2006-7 to more than £25m in 2008-9 (an increase now to be sharply
    reversed, a reduction of £5.7m) Arguably, these two bulwarks distanced S4C from
    the realities facing the rest of the broadcasting industry, and the English language
    services in Wales in particular.

16. Now S4C is faced with similar challenges of retrenchment. S4C has scope for
    efficiency savings both within its own organisation and through seeking greater
    synergies with the BBC in Wales. But no public service broadcaster can lose 24.4
    per cent of its grant without it affecting the broadcast output, without some
    constraint on the range and value of programming, even if a more creative
    approach to commissioning improves the quality of that which remains.

17. This has cultural and economic consequences. Taken together, these reductions
    across English and Welsh language services represent a significant diminution in
    Wales‟s capacity to reflect fully its own society and perspectives back to all
    members of that society, whatever their preferred language. It will now be more
    difficult to meet the aim set out by the Welsh Assembly Government‟s Advisory
    Group, that “the totality of media provision in Wales must contribute to and fully
    reflect:

   i)      a properly informed democracy, able to access high quality reportage,
           analysis and investigation from a variety of professional sources.

   ii)     a culturally rounded society, for which the media provide adequate room
           for full and varied expression.

   iii)    a visibly creative economy in which the media pioneer innovation and are
           a driver of the creative industries.”

18. On the economic front, these reductions are a blow to a key part of the creative
    industries sector, a sector has been singled out for development in Wales. Many
    in the independent production sector have found in S4C a valuable outlet for their
    talents, sometimes when the paucity of output in English language services has
    provided no outlet at all. It is the volume and regularity of output on S4C that has
    allowed some people to build significant production businesses that go beyond a
    cottage industry.

19. Worryingly, there is no sign that the process of attrition is at an end. Although,
    S4C has some certainty about its admittedly diminished income, coming
    eventually in a combination of the licence fee (92 per cent) and the DCMS (8 per
    cent), the BBC is facing a 16 per cent reduction in its licence which will almost
    certainly impose further budget reductions on its programme services for Wales
   on top of those that are already in train. Welsh civil society and politicians will
   need to develop very urgently a much sharper and more robust challenge to the
   BBC‟s centrally-driven priorities if we are to avoid services for Wales sliding
   further down an increasingly slippery slope.

Change at S4C

20. No-one should underestimate the extent of the challenge posed for S4C by the
    onset of digital transmission, and the creation of the multi-channel environment
    with its concomitant fragmentation of audiences. It has been especially difficult
    for S4C, because these changes have run side by side with massive changes in the
    nature of the Welsh-speaking audience, its demographics, self-perceptions of
    fluency and even the nature of the spoken language itself. That is the rationale
    behind the joint study being undertaken by S4C, BBC Wales and the Welsh
    Language Board to arrive at a shared understanding of the audience to Welsh
    language services – television, radio and online. The study is an essential
    foundation for any decisions on the future shape of the S4C service, and the
    balance of linear television and online investment.

21. Even so it is arguable that S4C underestimated the scale of the change in recent
    years, and the one benefit that may emerge from the harsh reduction in its budget
    is a much more radical re-evaluation of every part of its service and organization.
    In its submission to the DCMS the S4C Authority described this as “a process of
    renewal”, and admitted that “it may not have made the correct judgments on all
    occasion or taken sufficient care to carry everyone with us.”

22. Such a process is urgently needed, notwithstanding the proposals of the Secretary
    of State for an S4C-BBC partnership. But some traps must be avoided. S4C has
    called this process a „root and branch examination‟, but it is important that the
    current atmosphere of protest surrounding the channel does not constrain it from
    examining radical options. There has always been a danger that the weight of
    emotional capital invested by the some parts of the Welsh-speaking community
    in a solution that was right for the 1980s might deter S4C from taking the right
    decisions to shape the channel from the next decades. It must resist such
    pressures.

23. It has said that it wishes to engage with key stakeholders “to become an even
    more effective partner in assisting the Welsh speaking community to achieve a
    wide range of social, cultural, educational and economic goals”. S4C needs to turn
    this into reality. Despite the budget cut, S4C will retain a capacity to deliver very
    substantial public value to viewing audiences and to wider Welsh society. Its
    effectiveness in optimising that public value has declined and needs to be revived,
    through a reconsideration of a range of strategies, better programming, more
    active engagement with stakeholders and improved governance.

24. This will entail a considerable cultural change in the organization that must reach
    right up to the S4C Authority itself. In recent years the organisation lost the
    ability to reach out, squandering a previously wide coalition of support. It ceased
    to be self-critical within or to communicate without. Some of these faults may be
    laid at the door of senior management, but it has also been a failure of
    governance, and the Authority to date has been singularly unwilling to shoulder
    any part of the blame. This is now a central problem for S4C itself, since the
    Authority lacks credibility at the very moment when it most needs it - in
    negotiation with the BBC, an organisation that never lacks self-confidence even
    when on the back foot.
25. The S4C Authority‟s palpable loss of authority and influence has been a key factor
    in its current plight. It has damaged the organization‟s standing with Ministers in
    London and Cardiff, and with the production sector. It also weakens the position
    of its own staff. The issue should be addressed urgently.

S4C and the BBC

26. In the current climate it is only right that we should seek to maximise the
    synergies between two public service broadcasters in Wales. There are plenty of
    ways in which savings could be achieved, even if those that require capital
    investment may take a few years to materialise. But if this is to be achieved it will
    be essential for both parties to surmount a degree of mutual distrust. The prize
    could be considerable. Some will see a danger of an asymmetric relationship. That
    is incontrovertible when one considers S4C up against the wider BBC. Within
    Wales the two organisations are much nearer in turnover, but in people terms the
    BBC is still much the bigger organisation simply because it is a programme
    producer as well as a broadcaster. However one measures these disparities, it will
    be essential to avoid a one-way asymmetric relationship.

27. The Secretary of State‟s letter to the BBC outlining his view of the partnership
    shows signs of the speed with which the plan was cobbled. He was right to stress
    the need to retain S4C‟s independence, including its commercial freedom. But
    this must entail more than simply a freedom to commission programmes
    crucially important though that is.

28. Implemented in the form set out in the Secretary of State‟s letter to the BBC, it
    would produce a cumbersome governance system, in which S4C‟s independence
    would be only partial. In reaching for models officials alighted on Scotland‟s BBC
    Alba. This is not an appropriate model for Welsh circumstances. BBC Alba is a
    BBC branded channel. S4C is not. The BBC partner in the Scottish venture is the
    Gaelic Media Service, which is not a brand in its own right, and does not have the
    history and track record of S4C. The bulk of Alba‟s budget comes from the
    Scottish Parliament. In future the bulk of S4C‟s money will come from the licence
    fee. The management arrangements for BBC Alba lack clarity, and few pretend
    that the relationship between the BBC and the GMS is one of equals.

29. Among the top line issues that need to be resolved in the next weeks we would list
    the following:

   i)      The lack of financial commitment to S4C beyond 2014-15, despite the fact
           that the licence fee extends to 2016-17, albeit that the level for the last two
           years is not yet fixed.

   ii)     Who decides on the S4C budget beyond 2014-15, or beyond 2016-17, the
           BBC or Government - and if it is government, what role, if any will the
           Assembly Government have?

   iii)    How to simplify the draft proposals in the Secretary of State‟s letter. The
           proposals imply several tiers of governance: first, a joint management
           board with a majority of independent directors; second, a combined board
           of the S4C Authority and BBC Trust to oversee delivery of a service licence
           or operating agreement; and third, but not mentioned in the letter, there
           would be the S4C Authority and BBC Trust as independent entities. This is
           a wedding cake of governance that needs flattening. One possible way of
           simplifying this would be to revert to the original practice of BBC
           representation on the S4C Authority.

   iv)     The routeing of the money. There will be no independence for S4C if the
           money goes anywhere near central BBC management. In order to have
           funding stability for S4C the money will have to be passed direct from the
           BBC Trust to the governing body of the channel.

   v)      The form of the service licence. In order to distinguish the S4C service
           from the BBC‟s services, it might be best to avoid the normal form of
           service licence and opt for a looser operating agreement.

   vi)     Who appoints the Chair of the key governing body? In our view this must
           be someone independent of the BBC Trust?

   vii)    What level of oversight is accorded to the BBC Trust? The letter of 10
           November 2010 from the Chairman of the BBC Trust to the Chairman of
           S4C, states that the Trust as “the guardian of the licence fee…will need to
           have oversight of how this money is spent”. This should be defined in a
           broad way that does not impinge of the managerial autonomy of the
           channel.

30. This is far from being an exhaustive list of issues that need to be resolved. There
    will be some pressure to reach an answer quickly, but it is more important to get
    it right. As we have noted above, the circumstances are less than ideal for S4C,
    currently under an interim Chief Executive and an unhappy governing Authority.

Devolution and broadcasting

31. It is surprising that it has taken so long for the issue of devolution for some
    element of broadcasting in Wales to come to the fore. That it has not done so
    before now is the result of fear – fear of having to pick up the bill but, more than
    that, fear of having to decide on the funding of S4C against competing priorities.
    That has not only been a less than mature approach, it has also been counter-
    productive. It has shielded S4C from proper scrutiny and it may be one reason
    why Wales not been listened to when it comes to other broadcasting issues.

32. The deficiencies of the broadcasting infrastructure in Wales – notwithstanding
    the existence of S4C – have been known for a long time: the collapse in spend on
    English language services, the weakness of commercial radio and the lack of
    Welsh involvement in allocating radio licences, the fact that BBC Radio Wales
    does not have full FM coverage, the fact that Radio Wales and Radio Cymru do
    not have full DAB coverage.

33. Equally obvious, has been our failure to influence decisions. Devolved
    administrations have so far failed dismally to achieve their objectives in the
    broadcast field, while at the centre of UK policy-making business and
    technological considerations have easily trumped cultural considerations.

34. In his report on the creative industries in Wales, Ian Hargreaves, commented on
    the fact that the level of public debate about S4C within Wales was not in line
    with its importance both culturally and economically, and asked whether this
    state of affairs was „a consequence of the fact that S4C is funded and largely
    regulated from London‟. In his own words: “The UK authorities involved (Ofcom
    and DCMS) lack the instinct and self-confidence to animate this uniquely Welsh
   debate and the Assembly Government lacks the formal mandate.” The debate has
   now been animated by the DCMS purely on financial grounds.

35. Without a willingness to contemplate the devolution of responsibility for some
    elements of broadcasting, such as S4C, we will leave the whole of media and
    communications policy for Scotland, Wales and Northern Ireland to be decided at
    the margins of a British debate - dominated by centralised institutions and
    centralised considerations - that will exhibit neither the will, nor the knowledge
    nor the empathy to generate solutions adequate to our needs and potential. We
    have to seek to change the nature of those institutions and to change our own
    approach.

36. We need urgently to address the issue of responsibility for S4C. Accountability for
    S4C must become a formal responsibility of the National Assembly and the Welsh
    Assembly Government, although the future budgetary link with the BBC will
    mean that some locus for the DCMS, which sets the licence fee, will remain both
    necessary and desirable. This reflects the reality that devolution of responsibility
    for broadcasting will always involve a sharing of responsibilities between Cardiff
    and London, not to mention Brussels. In this instance more detailed work is
    needed to define a set of relationships between the four key parties - S4C, BBC,
    WAG, DCMS – and an important fifth party, the regulator Ofcom. The DCMS and
    WAG should establish a working group to carry out this task.

37. While this should be the prime task, we must also begin to look beyond the issue
    of S4C at possible new governance structures within Wales as well as for
    organisations such as the BBC, that better reflect the new constitutional shape of
    Britain as well as changing technologies and consumer behaviour.



IWA
18.11.10

				
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