S4C ... The Proposed Funding Model

It's taken me a few days to consider all that has happened in the last week regarding S4C. We now have a proposal on the table which we know has been agreed between the DCMS and the BBC, and we know that the Westminster government is minded to impose this proposal on S4C irrespective of what S4C themselves or the Welsh government think of it. This is hardly a satisfactory situation for anyone. All the ingredients are there for a fight, and plenty of people in Wales are up for that fight.

In such a situation, we need to be able to strip away the inessential from the essential, and we need to know what we can reasonably expect and realistically hope to achieve. So I want to set out what I think is reasonable and realistic.

In this post I want to concentrate on the proposed funding model for S4C, and I will address other issues such as its management structure and independence later.
 

The Principle

Whatever the causes of the economic mess we are in, we have to accept that public spending cuts are the primary way in which the elected Westminster government has decided to deal with the UK's deficit; therefore it is pointless to argue that any public service should be immune from spending constraints, and that includes S4C. I think nearly everyone realizes that the funding model, and in particular the link between S4C's grant and inflation, needs to be revisited. The question is how to do it fairly.

My concern is that S4C is not singled out for unfair treatment. It is a public service broadcaster which receives the main bulk of its operating income from public funds, and I have therefore argued that the measure of how fairly it is treated should be to compare it with the BBC, which is in exactly the same position of receiving the main bulk of its income from the licence fee.

So in principle, I positively welcome the proposal to fund S4C from the television licence fee. It is a good idea, because in the long term it ensures parity of treatment between these two public service broadcasters. Provided that S4C's income is linked to the licence fee, it means that S4C cannot be unfairly treated in the money it receives relative to the BBC.

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But a few things about the TV licence need to be clearly defined. The main thing to be clear about is that it is not the BBC's money. Although the BBC fought for complete control of the money raised from it, their fight against "top slicing" the licence fee was lost some years ago when a proportion of it was set aside for the digital switchover. I'm sure the BBC hoped this might prove to be only a temporary arrangement. But we just need to look in detail at some of the points in the agreement just reached between the BBC and the DCMS.

•  The current ring-fence of approximately £133m per annum will be raised to, and capped at, £150m per annum from 2013/4 to 2016/17 but re-purposed for broadband, consistent with the BBC’s public purposes.

•  The BBC will play an active role in supporting new local television services through a partnership fund providing capital costs of up to a total of £25m in 2013/14 for up to twenty local TV services, subject to any necessary regulatory approval. The BBC will also commit to ongoing funding of up to £5m per annum from 2014/15 to acquire content for use on its own services from these new services. Should capital costs be required earlier then this will be facilitated by access to the existing digital switchover underspend by mutual agreement.

So money from the licence fee is going to continue to be given directly to non-BBC organizations. In other words the principle of top slicing the TV licence fee is now firmly established.

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When it comes to funding S4C, there are several sections of the agreement which provide an equal guarantee of this ring-fencing:

•  In 2013/14 and 2014/15, the BBC will contribute £76.3m and £76m respectively in cash in addition to its statutory commitments [i.e. the 10 hours per week of original programming]

•  In the event that a new partnership model does not prove viable for any reason, the Government will not take licence fee money itself for this purpose. But in this situation the Trust will propose a one-off reduction in the level of the licence fee which would be equivalent to the contribution that the BBC would otherwise have made to S4C.

Contrary to what some others have said, I think this last point is enlightening and reassuring. It sets out the principle that S4C's part of the licence fee does not belong to the BBC, and will not revert to the BBC if this proposed funding model breaks down. Elsewhere, the agreement says this:

•  Under the partnership, funding for S4C in future will come from three sources: the licence fee, a continued but reduced subvention from the Government, and commercial income

So it seems quite clear that S4C will continue to exist as an entity in its own right; but that, after a transition period, it will receive the bulk of its income from the licence fee (note that the agreement does not say "from the BBC") and will continue to receive a much smaller sum from the government, as well as its commercial income. Therefore, so far as the principle of the proposal to revise S4C's sources of funding is concerned, I don't have a problem with it. There are other things to fight about, but in my opinion we should not fight about this.
 

The Detail

However there are two points of detail about funding that should cause us considerable concern.

The first is about the the actual sums of money involved. It is not reasonable to expect S4C to be treated in a worse fashion than the BBC. So we should fight to make sure that it is not, and fully expect to win that fight.

The situation is not helped by a certain lack of objectivity, optimism, or simple spin coming from some quarters. In the video of the Westminster hall debate on Wednesday, Alun Cairns had the audacity to call this proposed funding settlement "generous" to S4C. And in this post on his blog, Glyn Davies said that the only organization "with a genuine grouse that has real credibility" is the BBC. I'm sorry to say that neither of these assertions stands up to scrutiny.

As the BBC/DCMS agreement makes clear, the additional responsibilities that the BBC have agreed to take on are equivalent to a reduction in income of 16%. However the cuts proposed for S4C result in a loss of DCMS funding of 24%. I think we have a good case to fight for the reduction of funding form the DCMS to be 16% rather than 24%.

Now there are a number of ways of doing the maths, particularly when commercial activities are taken into account. But the difference is likely to be less than £10m. In terms of the DCMS budget of over £2bn and the BBC's budget of maybe £3.5bn this is peanuts, but £10m is a much more significant amount for S4C.

The second detail yet to be worked out is how to safeguard S4C's funding in future years, as this Comprehensive Spending Review only covers four years, and the TV licence fee is only set for six. In my view, the most equitable way of solving the problem is for S4C to receive a fixed proportion of the TV licence fee each time it is renegotiated. If it goes up, so will S4C's income from this source; if it goes down, so will S4C's income ... but it will mean that these two public service broadcasters are treated equally. The bottom line is that each round of licence fee negotiations in future must clearly define the sum that is to be paid to S4C. We must ensure that this is built into the new legislation now.

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In discussing funding, my basic premise has been that it really doesn't matter to S4C whether it gets the bulk of its income by direct subvention from government or from the TV licence fee. Money is just money. We should accept that there needs to be a cut because everything else is being cut, but we should not expect S4C to suffer more of a cut than the BBC. A small adjustment of less than £10m per year should ensure this.

But the management of S4C is another matter entirely.

S4C needs to remain as an independent entity, and we must fight tooth and nail to make sure that its management structure and editorial independence is not subsumed into the BBC. This post is long enough, so I'll say more on that subject in the next.