(Part 1 of 2) The regulatory framework for public service television broadcasters, such as the BBC and Channel 4, contains a unique provision which requires them to produce part of their programming outside of London. How this works, how it is policed by Ofcom, and how the broadcasters respond to it, provide an insight into the serious structural problems with the government and economy of the UK, in particular the English regions.
Every year, the UK media regulator, Ofcom, publishes a set of data which receives far less attention than it deserves. This is the annual ‘Made outside of London‘ register, a list of television programmes produced outside the capital by, or on behalf of, the UK’s four public service broadcasters (the PSBs – BBC, ITV3, Channel 4 and Channel 5).
Two things are surprising about this document. The first is that it exists at all. Regulatory bodies typically have no interest in whether, or to what extent, their regulated sectors contribute to economic activity in the UK’s constituent nations and regions. The second (which explains the first) is that Ofcom compiles the data to monitor compliance with duties imposed by Parliament. Each PSB is under a legal obligation to ensure that part of its programming is produced somewhere other than London.
This represents an exceptional, in fact unique, example of the law being used to require a measure of decentralisation in a major sector of the UK economy.
The data would merit scrutiny if only because they were so unusual. On examination, it turns out that they also offer a stark illustration of the underlying structural defects in the government and economy of England.
The Law
ITV3, Channel 4, Channel 5
When Parliament passed the Communications Act 2003, it provided (at sections 286 – 288) that a ‘suitable proportion‘ of the television programmes broadcast by ITV3, Channel 4 and Channel 5 should be made outside Greater London (defined as the area bounded by the M25 orbital motorway). The ‘proportion‘ was to be measured both in terms of the number of hours of programming (quantity) and the cost of its production (value). The question of what was ‘suitable‘ was left to Ofcom.
Ofcom sets the required proportion by including it in an annex to the broadcast licence of each PSB. Currently, by both quantity and value, it stands at 35% for ITV3 and Channel 4, and 10% for Channel 5. How these numbers were arrived at, and what makes them a ‘suitable proportion‘, is far from clear.
The most recent ‘Made outside of London’ register reveals that each of these three PSBs exceeded their obligations during 2017 – Channel 4 comfortably so; Channel 5 (as usual) doing little more than it had to do; and ITV3 on a downward trajectory, its out-of-London programming at a five year low.
However, this only presents half the story. A longer-term perspective offers a better view.
By 2009, ITV3 had failed to hit its (then) 50% quota for two years running. In response, Ofcom reduced it to the current 35%, where it has remained ever since. In other words, the regulatory reaction to a persistent failure to broadcast sufficient programmes made outside the capital was to relax the requirement so there was no risk of it being breached again. No provision was made for the target to be reinstated to its former level.
In effect, Ofcom allowed ITV to dictate the obligation to which it was subject by re-setting the quota to a level that the company was prepared to live with.
Indeed, in practice, Ofcom appears to have set all of the targets to reflect only what the broadcasters were already doing or intending to do. It imposes no requirement for progressive decentralisation. And Channel 5, a significant outlier, is not required to do anything to bring itself in line with the other PSBs. The effect of this is that the ‘targets’ function not as objectives to be met, but only as a snapshot of the status quo.
BBC
Until recently, Ofcom collected data on the out-of-London production of the BBC, but did not have the power to set or enforce targets. The BBC had its own pseudo-regulator, the BBC Trust, which agreed undemanding quotas (25% by quantity, 30% by value) that could reliably be exceeded each year.
However, a new BBC Charter and Framework Agreement were introduced on 1 January 2017. Following related changes under the Digital Economy Act 2017 (section 88), Ofcom became the first external regulator of the BBC, and issued the Corporation with its new Operating Licence.
Under the Charter (Article 6), the BBC has five public purposes, the fourth of which is:
‘To reflect, represent and serve the diverse communities of all of the United Kingdom’s nations and regions and, in doing so, support the creative economy across the United Kingdom’.
In the Operating Licence, Ofcom claims to give effect to this purpose by requiring the BBC to produce 50% of its network programmes (by both quantity and value) outside of London.
In 2017, the first full year in which the quota was legally enforceable, the BBC marginally exceeded it. However, Ofcom has again set it at a level reflecting what the Corporation was already intending to do. As in the case of the other PSBs, it makes no provision for the target to be adjusted upwards over time.
How the Data are Calculated
All statistics need to be treated with caution, and Ofcom’s data offer no exception. The methodology used by the regulator to compile regional programming figures is distinctly unsophisticated.
There are three relevant criteria, but a programme is classed as made out-of-London if it meets any two of them – (1) the production company has a ‘substantive‘ base outside the M25 (i.e. some senior staff are based there), (2) 70% or more of the production budget is spent outside the M25 (but the significant cost of on-screen ‘talent’, mostly London-based, is excluded from the calculation), (3) at least 50% of the wages of the production team is spent on staff generally employed outside the M25.
Once any two of these generously-defined boxes have been ticked, the entire value of the production is treated as having been incurred out-of-London. So there is ample scope in the statistics for significant activity in the capital to be treated as taking place outside it. In all probability, the data materially overstate the amount of production that takes place beyond the M25.
But since there is very little evidence that Ofcom takes the business of setting the targets seriously, it is not surprising that its statistical method lacks rigour. A regulator with a commitment to the policy purpose of the Communications Act would develop a formula for defining what a ‘suitable proportion‘ means. In fact, since the out-of-London quotas of the PSBs so conveniently match their existing activities, Ofcom seems to have considered this unnecessary. In practice, that substantially undermines the policy of the Act.
However, it would be unfair to burden Ofcom with sole responsibility for this outcome. The underlying failure rests with Parliament, which delegated the role of setting socio-economic quotas to an independent regulator whose qualifications and remit make it ill-suited to the task.
The targets are inherently political in nature. So the legislation should have placed a duty on ministers to draft a target-setting statutory instrument and lay it before both Houses of Parliament for approval. Instead, by kicking the issue into the long grass of regulation, Parliament nodded in the direction of the policy, and then abdicated all responsibility for its effective implementation.
What the Data Reveal
Even making full allowance for the legislative failings, there are two fundamental flaws in the underlying policy which Ofcom, although having the power to do so when setting broadcast licence conditions, has done almost nothing to correct.
They are neatly exemplified by considering the activities of the BBC and Channel 4.
Taxation without Representation – the BBC
The purpose of the provisions in the Communications Act 2003, according to Ofcom, is to ‘buttress and strengthen regional production in the UK‘.
However, Parliament’s approach to this issue was rudimentary. In the version of the UK envisaged by the Act, programme production is binary. It occurs either in London, or in a place that is not-London.
In fairness, the Act also requires that programme-making takes place in ‘a suitable range of [out-of-London] production centres‘ (sections 286 and 288). Whatever else this means, it at least disqualifies the obvious tactic of a PSB relying on a single production facility just beyond the M25. But as to where these centres should be located, or what a ‘suitable range‘ might be, it has nothing to say.
Scotland, Wales, Northern Ireland
Over time, Ofcom has found it impossible to hold to the line that everywhere which is not-London is the undifferentiated terra incognita envisaged by the Act. In particular, it has been obliged to acknowledge Scotland, Wales and Northern Ireland as cases worthy of special treatment.
Channel 4’s broadcast licence now requires that at least 3% of its programme production (rising to 9% by 2020) must take place outside of England.
The BBC’s operating licence is more specific. The BBC must ensure that at least: 8% of its production (by both quantity and value) occurs in Scotland; 4% by quantity (rising to 5% in 2022) and 5% by value in Wales; 2% by quantity (rising to 3% in 2022) and 3% by value in Northern Ireland.
Apart from demonstrating that Ofcom can, when it wishes, set targets designed to drive progressive decentralisation, these quotas also show a grasp of basic concepts of fairness in resource allocation.
The BBC is of course a public corporation, uniquely funded by the ‘licence fee’, a form of flat rate taxation required to be paid by all households that watch television. The BBC’s targets in Scotland, Wales and Northern Ireland reflect their shares of the national population or, to put it another way, their respective contributions towards BBC funds.
By setting these targets, Ofcom tacitly acknowledges that areas in which this regressive tax is raised should expect the funds to be spent on them and for their benefit.
Or at least it acknowledges that principle for everywhere other than England.
England
What the BBC calls its Midlands region (and Ofcom calls ‘Midlands and East’) is the wide swathe of central England that stretches from the Welsh border to the Norfolk coast. One quarter of the population of the UK lives here. The region is under-served by all the PSBs, as even a brief glance at the out-of-London register reveals. But even within this general picture of neglect, the BBC stands out for its almost complete lack of interest in making programmes in this part of the country.
As a simple function of population size, the BBC raises around 25% of its licence income from the Midlands region. But in 2017, according to its latest Annual Report and Accounts, it spent only 1.9% of its network television budget there. And this was by no means an unusual year. In 2016 the figure was 1.6% .
In other words, the BBC licence fee constitutes, for the residents of central England, a tax transfer to support the creative economies of London, Greater Manchester and the other parts of the UK where the Corporation chooses (or is required) to produce programmes.
In the long run, if the BBC wants to retain its current funding model – the case for which gets more difficult to make over time – this might be considered unwise. But in the short run, the questions it raises revolve mainly around regulation and regulatory decision-making.
Put in its starkest form the outcome of the current regulatory system amounts to this: the BBC is required by Ofcom to spend far more in Northern Ireland – an area with less than a tenth of the population, contributing less than a tenth of the licence fee – than it does in central England.
The Devolution Effect
Why does Ofcom impose quotas requiring the BBC to ensure that the licence fees raised in Scotland, Wales and Northern Ireland are spent there, while being entirely indifferent as to whether the same outcome occurs in the regions of England?
The answer is simple. Scotland, Wales and (if Stormont is sitting) Northern Ireland have institutions of devolved government which, with the authority of a democratic mandate, are empowered to give voice to their residents’ interests and to hold Ofcom to account. For these reasons, Ofcom finds it necessary to maintain offices and advisory committees in all three places. For England, in contrast, it is satisfied that everything can comfortably be run from London, and maintains no presence outside the capital.
In other words, Ofcom’s approach to the BBC’s quotas mirrors its own internal structure, which in turn mirrors the lopsided devolution arrangements of the UK constitution. Who speaks for the English regions with the political authority to challenge this state of affairs and insist that the ‘nations and regions‘ referred to in the BBC Charter should be treated equally? In the UK’s constitutional system, no-one does.
The consequences of this are both political and economic. When the BBC (or any other PSB) produces programmes in part of the UK, it generates jobs and promotes the creative economy of that area. It sustains a skill base which can attract wider private investment. And it supports a community of media professionals who contribute to ensuring that the place will be better ‘represented’ in the national conversation, providing it with a public profile and a voice in political debate that it would otherwise lack.
This is how constitutional arrangements drive both political and economic outcomes.
London Calling – Channel 4
Ofcom’s production quotas are concerned only with the quantity of programming rather than its nature or quality. One hour of television is treated as equivalent to any other hour, regardless of subject-matter. The only measure of value which counts is monetary.
Regulating the News
However, if a function of out-of-London production is to ensure greater representation for the diverse communities of the entire UK, not all programmes have an equal effect. An hour of Bargain Hunt has economic benefits for the place in which it is made. But the location of news and current affairs production is a political as well as economic matter. Television news dictates the political agenda more than any other form of programming, and therefore remains the most significant function of each of the PSBs.
Unsurprisingly, the significance of news programming finds expression in the regulatory regime. The licences of ITV3, Channel 4 and Channel 5 all contain requirements for ‘high quality‘ national and international news output. In the case of the BBC, the importance of news and current affairs is even more fundamental, being represented as a part of the Corporation’s DNA. Its first purpose under the Charter is:
‘To provide impartial news and information to help people understand and engage with the world around them‘.*
* According to the supporting text this includes: ‘…to build people’s understanding of all parts of the United Kingdom…so that all audiences can engage fully with major local, regional, national…issues and participate in the democratic process, at all levels, as active and informed citizens.’
The Metropolitan Narrative
In spite of this, Ofcom casually accepts that ‘it would be impractical to expect network news operations to be based outside of London‘ – Methodology para 10 (news programmes are, consequently, excluded from its out-of-London calculations.)
This is not only a complacent assumption, but factually incorrect. It also has important implications for the content of news and current affairs programming.
Inevitably, the news reflects the perspective of those who report on it. In the UK, under the current regulatory regime, news programming therefore remains as metrocentric as the journalists and production teams who make it.
For all PSBs, ‘the provinces’ are functionally invisible to news and current affairs, except when extreme events (crimes, weather, natural or human disasters) occur; their complex social, political, economic, and cultural lives remain largely ignored. In contrast, things that could never be more than minor items of London local news – a vacant plinth in a large square, a proposed bridge with trees on it, a tall clock silenced for maintenance – are presented as matters of national importance.
Only Scotland with its vigorous national politics, and Northern Ireland with its history of violence, offer occasional exceptions to this rule.
National television news in the hands of the PSBs therefore operates both to reflect and reinforce the centripetal tendencies of the UK state, a deeply entrenched structural flaw for which it plays the important role of manufacturing consent.
Pace Ofcom, there is nothing natural, or inevitable, about this state of affairs.
Channel 4
Among other things, Channel 4 has a highly regarded news operation, run on its behalf by ITN. (Channel 4 commissions programmes but has no production facilities of its own.)
Although the company is funded by commercial revenues, it is a public corporation, and therefore has the same legal status as the BBC. This in large part accounts for its special treatment by Ofcom in relation to production in Scotland, Wales and Northern Ireland. It also underpins the policy of the current government, expressed in a Conservative Party Manifesto commitment during the 2017 election that ‘Channel 4 will…be relocated out of London‘.
This was one element of a wider policy, authored by the prime minister’s then joint chief-of-staff, Nick Timothy, that ‘For our civil service and major cultural bodies to claim to be UK institutions, they need to represent and be present across our whole United Kingdom’. Timothy probably thought he was on safe ground naming Channel 4 as the forerunner in a policy of shifting government and cultural activity out of the capital. As a state-owned entity, it must be open to the elected government of the day to tell the company where to put its headquarters?
But this was to underestimate both the strength the metropolitan bias in London-based institutions, and their inherent disregard for the rest of the country. As it happens, the management of Channel 4 made little attempt to conceal these facts. It fought a robust, and very public, rearguard action against relocation. In oral evidence given to the House of Commons Select Committee for Digital, Culture, Media and Sport, David Abraham, Channel 4’s then Chief Executive, said that he found the idea of being based anywhere other than London ‘a deeply disturbing prospect‘.
Timothy did not survive in his post long enough to participate in this battle, which at one stage even saw the government threatening to legislate, if that was what it took, to force Channel 4 to move. But he would have appreciated that Channel 4’s attitude to ‘the provinces’ was an artefact of its embedded cultural and economic elitism. As research by Sam Friedman, an Associate Professor in Sociology at the LSE, has shown, only 9% of the company’s staff come from a working class background (Channel 4 is Britain’s Poshest Broadcaster). Diversity data as bad as these are plainly no accident. It is a characteristic of British public life that metrocentrism and class prejudice are closely related.
The outcome of the argument between Channel 4 and its notional masters in government was a very British compromise. The company, under the umbrella of a new ‘4 All the UK‘ policy, agreed to relocate some activity outside of London in return for being able to keep its main headquarters precisely where it is. Among other things Channel 4 committed itself to an out-of-London programming quota of 50%, to create a ‘second headquarters’ in the regions together with two smaller ‘creative hubs’, and (in conjunction with ITN) to establish three ‘news bureaux’ outside the capital, one of which will incorporate a studio and serve as a ‘major hub’ for news reporting (presumably to the surprise of Ofcom that such a thing is possible).
It is a measure of the desperation of the nations and regions of the UK to attract public institutions and new economic investment that even this severely degraded second prize was the the subject of fierce competition and elicited over 30 bids, including from each of the eight largest English cities outside the capital.
Channel 4 eventually announced Leeds as the location for its ‘second headquarters’. The genuine enthusiasm with which this news was met in Yorkshire speaks volumes for the extent to which even partial relocations of national institutions outside the capital – in this case involving perhaps no more than 200 jobs – has the potential to change the narrative for the regions and makes a significant contribution to their regeneration.
The Symptom not the Problem
Neither the BBC’s systematic disregard of large areas of England, nor Ofcom’s complete indifference to that fact, nor Channel 4’s grudging and reluctant shift of some jobs out of the capital, are features unique to the UK’s over-centralised broadcast media landscape.
On the contrary, they are merely symptomatic of a deeper malaise which, especially in the light of the challenges posed by Brexit, now verges on an existential problem for the UK’s status as a major world economy.
Helpfully, the landscape of media regulation also provides the glimmer of an indication of how that problem can be solved.
This is considered further in the next posting – The UK Productivity Puzzle, the English Regions and the Law.
Public Law & Regulation 