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Private Ownership, Public Benefit – Privatising Channel 4

This week The Rt Hon Nadine Dorries MP, as Culture Secretary, ruled out the plan floated by a member of Channel 4’s news team, to ring fence its news section from the proposed privatisation. Here Clive Thorne considers the reasons for privatisation and welcomes the move by a government which stood in 2019 on free-market principles.

The recent announcement by Nadine Dorries, Secretary of State for Culture Media and Sport that the Government intends to privatise Channel 4 has attracted criticism, much of it unjustified, not least from within the Conservative Party.

However, pressure to privatise has existed since Channel 4 was created by Mrs Thatcher’s government in 1982. Perhaps more surprising is the fact that Mrs Thatcher strongly propounded its creation as a public corporation at a time when privatisation was highly fashionable. The chief reason was that she regarded Channel 4 as an independent bastion against the monopolistic BBC. It was also a means of supporting the UK independent film and television production sector, delivering varied and risk-taking content, as well as contributing to the variety of public sector broadcasting generally. It was to be publicly owned but commercially funded.

Channel 4 is publicly owned and was created by Statute. Originally it was a subsidiary of the Independent Broadcasting Authority. Now it is operated by the publicly owned Channel Four Television Corporation responsible to the DCMS. It is funded from advertising revenue with no history of state subsidy.

Commercially it has been successful as was recognised by the DCMS in seeking responses to a public consultation (which led to 60,000 submissions) on its future in July 2021:

Channel 4 has successfully delivered on its remit, aims and objectives since it began broadcasting almost 40 years ago. It has also effectively managed the uncertainty in the market over the last few years as it has advanced its digital strategy. However, the evolving media landscape poses material challenges to Chanel 4’s future success and sustainability under its current ownership model and remit.”

In the current financial year its turnover will exceed £1.2billion with a notional ‘profit’ surplus of over £100 million.

Privatisation of Channel 4 is not a novel concept. Independently Tony Blair and David Cameron seriously considered privatisation. David Cameron’s then Secretary of State for CMS, John Whittingdale was a firm proponent. In February 2022 Sir Christopher Chope MP proposed a Private Members Bill to provide for privatisation.

Channel 4 and particularly Channel 4 News under Jon Snow has been criticised for a left-wing bias. That is probably now less so as is shown by Andrew Neil’s Sunday night political show. Political bias is arguably not a major concern in considering its future. It does not fall into the same category of public service broadcasting as, for example, the BBC with its strict Charter obligations.

The main expressed reason why the Government is proposing privatisation is commercial, so as to permit Channel 4 to attract considerably greater investment and funding than is possible as a publicly owned corporation and to enable it to compete effectively in an increasingly competitive industry. Nadine Dorries indicated that the status quo holds back Channel 4 from competing against streaming sites such as Netflix and Amazon. Further detail is to be set out in a forthcoming White Paper.

Channel 4 is probably too small currently to compete with the likes of Netflix or Amazon but the investment opportunities that privatisation will provide will give it an opportunity to increase its funding in a way in which state ownership cannot. The point is that once free of the shackles of public ownership, the market will provide such an opportunity and open commercial opportunities.

The Secretary of State also indicated, which ought to be welcomed by the media industry, it is intended that the proceeds of sale will be utilised for investment in independent production and creative skills throughout the UK benefitting a currently vibrant film production industry.

It has been mooted that Discovery Channel which is merging with Warner Bros might be a willing purchaser or possibly ITV which has been lobbying for a ‘national champion’ or even a private equity consortium. It has even been suggested that the government might wish to engineer or ‘encourage’ a sale to the BBC’s commercial arm so as to increase significantly the BBC’s income and permit an early abolition of its unsustainable licence fee funding. This might take place even as a precursor to what is increasingly being regarded as desirable and publicly beneficial: full BBC privatisation.

Whatever the motive, privatisation of Channel 4 would mark an ideological return to the full blown and successful privatisations of the Thatcher government. It would show that the Johnson administration has not fully deserted the free-market principles upon which it was elected in December 2019. In 2017 Theresa May’s Culture Secretary, Karen Bradley, ruled out privatisation citing (the traditional Labour Party mantra) that Channel 4 was a “precious public asset” to be continued to be owned by the country. It is to be hoped that the privatisation will now proceed apace before a possible change of government in 2024.

Clive Thorne

Clive Thorne is Vice Chairman of Lawyers for Britain and a specialist in intellectual property and administrative law.

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