Culture, Communications, Welsh Language, Sport, and International Relations Committee

Good morning. Welcome back. We move on to item 3, namely our session with Ofcom. I'll ask our witnesses to introduce themselves for the record. I'll go to Lord Grade first of all, to introduce himself.

Good morning. Michael—[Inaudible.]

Okay. Could you please repeat that, Lord Grade? I think we lost you for a moment.

[Inaudible.]—Grade, chairman of Ofcom.

Thank you very much.

We'll go to Kate.

Lucky you. Michael Grade—.

I'm Kate Biggs, I'm director of public policy at Ofcom.

Thank you.

Eleanor Marks, director of Ofcom in Wales.

Great. We'll move straight to questions, if that's okay. We'll go first of all to Alun Davies.

It's good to see you all here this morning. I think, Mrs Marks, you were appointed in 2018.

I was.

I seem to remember, at the time, you said how excited you were to be joining Ofcom, and that your priorities included

'boosting broadband speeds in rural Wales'

and

'enhancing Welsh representation in UK broadcasting'.

I was wondering how that had gone.

I was very excited. I still am excited to be in Ofcom. It's a great job. I think the representation question, which I'm sure Lord Grade and Kate will come in on as well, is going well, but could always go better. I'm convinced that the reforms that we have and are thinking about, which are underlined by 'Small Screen: Big Debate' and the media Bill, will make a difference, but representation and portrayal is a real priority for Ofcom, and, actually, we can always see more of it.

So tell me where you think you've had your greatest achievements in terms of Welsh representation.

I think the number of programmes that are being made in Wales are really successful. The number of programmes that are going to network—things like the S4C production Y Sŵn—has been brilliant. Dal y Mellt is another good example.

Yes, but sorry, that's S4C. I find it difficult if Ofcom could claim credit for S4C producing Welsh language programmes in Wales.

I take your point. I think Ofcom's job is to create the environment, working within the legislation that we have, to allow freedom for broadcasters to do their work, to do their job in producing—

Sure, but you are also a regulator. So, how has your regulation and your role as a regulator increased Welsh representation in UK broadcasting? You said it was a priority for you, so I'd like to know what you've been doing and what Ofcom have been doing to deliver on that ambition.

I think what we've been doing is the research, and the work that we did into 'Small Screen: Big Debate' was part of that, looking across the whole of broadcasting and what is needed to take it forward and face its challenges in the future. Representation and portrayal is part of that.

Ofcom is very good at writing reports. We're always reading reports from Ofcom. I'm interested in what you're doing as a consequence of that report and that information and that knowledge. What have you been doing? How have you intervened in the market to ensure that Wales, as a country in the UK, is fairly represented in the wider ecology of UK broadcasting? What have you done?

I think what we do is we do report an awful lot. We do the research, we do the context setting and that helps us then in looking at the regulation that we have. And I think we are seeing some of those changes coming through in what will be the media Bill that will help everybody in that space. We are not an operational organisation, we are a regulator—

I didn't suggest that you were, with due respect. What I said was you're a regulator, and that's different, because that means that you have tools where you can intervene in the market in order to ensure that there is fair representation. You've relied on writing reports so far to answer my questions. And I accept that, I've got no issue with that. But surely, the purpose of a report is to illuminate a context, a situation, and then, as a regulator, to take action, or to ask government to take action, if it requires a regulatory change or additional tools.

Might I add a couple of comments to my colleague's remarks? I think we've done a few specific things. We have a role, as you say, in setting obligations on the public service broadcasters. So, we did do a significant review of the BBC's operating licence to ensure that it was still fit for purpose. We made a number of changes through that. We are in the process of renewing the licences for channel 3, Channel 4 and Channel 5. Again, their ability to meet the needs and interests of all audiences, including those audiences here in Wales, is important. We also made very clear recommendations to the Government about the need to reform the PSB regulatory system, because it was entirely based, really, on television broadcasting, traditional tv. And we see audiences' diets have become much more diverse, more and more reliant on online services, and that's particularly true in Wales, where Welsh audiences are watching more and more on-demand and streamed content. So, we want to reform the tools to make sure that we've got the right incentives and the right protections, not just on tv broadcasting but across online as well. And we've worked very closely with the UK Government on the draft Bill, which has obviously now gone through some pre-legislative scrutiny, and we're keen that that's introduced as soon as possible.

I'm grateful to you for that. So, do you think that Wales is currently fairly and properly represented within that broadcast ecology, or do you think that there are improvements to be made, assuming that you've made recommendations for improvements? I assume that you understand there's some failure in the current provision.

I think there's always more than can be done, quite frankly—

Yes, but that's the easy answer, with all due respect.

—but there are some constraints. It is a very competitive market. There are some constraints on both commercial and the public revenues, through the licence fee revenues and the nature of the advertising industry. A couple of things we highlighted in our last review of the BBC were around how well the BBC was serving the lower socioeconomic groups, some of the poorer families—and that includes those in Wales—and disabled audiences. And, so, that was an area of focus for us. We've also acknowledged the BBC's Across the UK plans and the hopes that that will deliver, both on and off screen—better strength and breadth in the production side, but also what audiences see on their screens over the coming years.

Okay. Can I turn to Lord Grade? I'm grateful, Lord Grade, for your time this morning. You were appointed in the spring of this year, I understand, and up until your appointment, you took the Conservative whip in the House of Lords. How can I trust you to ensure that the values of Wales are fairly represented in Ofcom?

We've lost sound.

[Inaudible.]—I'd be more than happy to see if we can get the diaries together.

I took the Conservative whip—[Inaudible.] I was appointed chair of the BBC by a Labour Government. You leave your politics at the door when you come into broadcasting. My whole career, pretty much, has been in broadcasting, and I've never allowed my politics—any politics—to interfere with policy making or my influence.

As far as ensuring the voice of Wales is heard in Ofcom, there are all kinds of Government structures that absolutely ensure that, as we create our policies on a nations and regions-wide basis, specific issues arising for Wales are well heard—[Inaudible.]—appointed by the Welsh Government. I was in Cardiff last week interviewing, helping the Welsh Government to select a candidate to join the board of Ofcom to represent Wales. There are advisory boards. We all make frequent trips to Cardiff to hear on the ground exactly what's going on.

If I could say, from the point of view of a long career in broadcasting, there's so much—[Inaudible.]—the sector is booming in a way that I've never seen before. Production investment is growing. There's very, very much to celebrate in Wales as a centre of excellence and there's a growing media-investment programme going on in Wales. So, I think there's much to celebrate. Yes, it's never perfect.

I'll just pick up on the last point. We don't intervene in markets unless there's—[Inaudible.]

Lord Grade, please forgive me interrupting you. I think there might be a bit of a delay and we're losing some of your sound. I'm not sure if anyone, while you're speaking, would be able to just work on maybe moving the microphone closer to you. Forgive me for interrupting you. Please carry on.

I think he was finishing the answer.

Lord Grade, the reason I asked you the question is because I believe—. Can he hear me? He seems to have frozen.

Yes, I can, yes.

The reason I asked you the question is because values are important. You told the House of Commons culture committee in the spring that you cheer when you hear Laurence Fox on Question Time, and you thought that Laurence Fox was, at last, I quote, 'a voice for us'. I think many of us would consider Laurence Fox not to be 'a voice for us'. Ofcom is currently investigating Laurence Fox. And I'm wondering what integrity and what belief can we have in Ofcom as a regulator when the chair of Ofcom cheers Laurence Fox and believes that he speaks for him.

[Inaudible.]—record to start with. The comment that I made in this instance, and it was made in a podcast to some journalists in a general interview, which was quoted at the select committee, and I accept that—. What I was getting at in that original quote—. Again, I repeat, it was years before the current incident with Laurence Fox, who, incidentally, I have never met in my life. I was cheering for free speech and freedom of expression, and that's at the heart of what Ofcom does. It's at the heart of what we regulate, and I'm grateful if—[Inaudible.]

It's very difficult to conduct scrutiny like this. So, Ofcom and you believe that freedom of speech should enable somebody like Laurence Fox to abuse young female journalists. You think that that's a fair use of freedom of speech. This goes to the heart of our values as a country and society.

We seem to have lost the sound. Might I just say a couple—

No, I want Lord Grade to answer the question.

Sorry, are you hearing me okay?

We can hear you now, yes. There was a delay. We can hear you now.

Thank you. If I may say, that was a gross distortion of what we said and what we thought—

No, I was actually repeating what you just said in the last few minutes.

Sorry, I'm—[Inaudible].

Right. Because we have lost the connection, it seems, to Lord Grade, I am just going to suspend the session temporarily while we try to fix this technological problem. So, we will go into private until this can be fixed. I will wait to hear that we are in private.

Apologies to viewers for that short technical break. We go back to Alun Davies.

My question to Lord Grade was about him being a fan of Laurence Fox. He defended his position—Lord Grade, I'm paraphrasing you before the break, and correct me if I'm wrong, but what you said was that it was an important role of Ofcom to defend free speech. You're currently conducting reviews into GB News and into Laurence Fox's words on GB News the other week. My question to you is: does freedom of speech involve the freedom for people to grotesquely insult young female journalists?

I'm not going to comment on that particular case because it's part of an investigation. It'd be very wrong of me to make any comments prior to our due process being gone through. The way broadcasting regulation has evolved in this country is that the regulator only intervenes after transmission, and broadcasters have very clear statutory and regulatory requirements not to give offence, harm, et cetera, et cetera. And Ofcom will make its judgments after transmission. I don't think anybody in any of the UK nations or regions would want to have a powerful regulator like Ofcom intervening prior to transmission—that would be against everything that we believe in as a free democracy. That means that some people will get some things wrong some of the time, and we will correct them and they will learn from their mistakes, and we have powers so to do.

I've no—

I wouldn't like you to get the impression, because of a remark I made some years ago about an episode of Question Time that included Laurence Fox, which I rather enjoyed as a piece of good television, or regard that, years before the recent incident, as in any way my approval of anything that's happened since.

I recognise that. I recognise that, although you didn't say that you enjoyed the programme. You said, 'At last a voice for us', which is slightly different. I think that's different to just enjoying a bit of television. The problem with having a long career, of course, Lord Grade, is that you've said quite a lot in it. Therefore, we have a view about values, and it's the values that I'm really interested in, because, as chair of an organisation, you have extraordinary influence within that organisation. I'm concerned, from a Welsh perspective, do the values of Ofcom reflect the values that we would want to see as a Welsh society. You described Ofcom, prior to joining Ofcom, of course, as, I think it was, the 'woke brigade', or was it a band of 'woke...apparatchiks' or some other description I think you used? Six months in, I presume that you've changed your mind.

Well, that particular quote was related to a complaint about a nostalgic digital terrestrial television channel that showed programmes from the 1960s and 1970s. Somebody had complained about one of the programmes, and I wanted to defend this mom-and-pop operation that operated out of the front room and was providing a lot of good programming for people of a certain age, and I didn't want to see Ofcom come down on them wrongly. So, I pontificated from afar—

I accept that. I accept that, and you defended your position by explaining that you'd cancelled The Black and White Minstrel Show and a number of other things. I understand the context, but I'm trying to delve a little deeper, Lord Grade, and its values that I'm—. Because there are number of issues here where you see Laurence Fox as a voice for you, you don't like the 'woke brigade'—

No, one incident. One incident several years ago.

Yes, but I'm saying there's the comment about the woke brigade and the Laurence Fox issue. It builds up a picture, and I want you to reassure me, I want you to reassure us in Wales, that we can rely on Ofcom, because, as you've said yourself, Ofcom is an extraordinarily powerful voice and part of our society. I want to believe in Ofcom, and I want to believe that you are standing up for the best interests of my constituents. I want you to convince me of that, because, at the moment, the evidence leaves me feeling quite concerned about the values now leading Ofcom.

First of all, let me say that I've dedicated pretty much my whole career to public service broadcasting. I've done two long stints at the BBC. I've been chief executive of Channel 4, where I was hugely supportive of S4C when I was chief executive for nine years.

You were. I accept that.

I have been executive chairman of ITV. Public service broadcasting and the values of public service broadcasting, which means providing audiences with programmes that they value that are made for them, for the nations and for the regions—. I was hugely supportive, as chairman of the BBC, of the move of the BBC out of London, which I believed, as chairman, was the right thing for the BBC to do. My values are the same as yours, and our values in Ofcom are not informed by my opinions in any way shape or form. They are informed by research, audiences telling us what they like, what they don't like, by the cases that we have to look at. We are evidence led, we are research led. Opinions count for nothing at Ofcom.

I'm not sure I accept that final point, but, look, let me say this: you've appeared in front of a committee—

I'm sorry, may I ask you what's your evidence for not accepting that final point?

I think opinions do count—

Everything we do in Ofcom is based on evidence, process, due process in looking at complaints, finding against licencees, finding for freedom of expression. I don't understand on what basis you can say there's any evidence that suggests that Ofcom is anything other than entirely fair and sticking to its parliamentary remit. I don't understand where the evidence for that—

Okay, Alun, very briefly, please, because we really do need to move on after.

Lord Grade gave evidence to a committee I chaired, I think it's over a decade ago now, when he was at the BBC. I thought the evidence was first class, and I very much enjoyed the session that we had. I read through it, actually, in preparing for this session, and I was very happy with your evidence at the time; I remain happy with it today. This isn't a personal issue. The reason I mention opinion is because the way in which we interpret evidence can be very different. The way I would interpret a report and evidence as a Welsh Labour Member would be very different to the way that Tom Giffard as a Welsh Conservative would interpret the same evidence, and that's perfectly fair and reasonable; it's not a criticism of Tom or necessarily a criticism of me, but we would look at things from different perspectives, which is why I think values are important.

But can I just move on a little bit? One of the concerns that I have is that the United Kingdom is far too London-centric and far too Westminster-centric in terms of its culture and in terms of its news agenda and the rest of it, and I'm just interested in Ofcom's point of view with this. You will remember, from your time in broadcasting, Tony King, I think it was, who wrote an excellent report some years ago about the nature of news broadcasting in the United Kingdom, and he made a number of different recommendations, some of which were taken forward in ways, and others weren't. And I'm interested in the approach that Ofcom takes to news, to reporting, to language, because when I listen to UK broadcasters, they talk about—let's talk about education as an easy example, because it's devolved everywhere in our kingdom—'the education Minister', 'the Government has taken this decision', and of course, it doesn't affect me, it doesn't affect my family, it doesn't affect my 13-year-old son. It affects people just down the road across the border in England, and I'm interested as to whether Ofcom takes a view on whether UK broadcasters are adequately representing a diversity of governance and experience of people in the United Kingdom, and whether you believe that Ofcom has a role to intervene—going back to Tony King's report—to ensure that, for example, the delivery of news programming in its widest sense accurately represents the structure of governance and the culture of governance across the whole of the United Kingdom.

I think there are still too many occasions when the devolved responsibilities of the devolved Parliaments are not accurately recorded or reflected in London news bulletins. I think that's true; I think the BBC recognises that, I think ITN recognises that, and I think Sky News recognises that. The case for an Ofcom intervention on those grounds has to be on the basis that we are required through the licence that—particularly the BBC—we cater for all audiences. And on the basis of complaints, on the basis of audience research, we would have no hesitation in intervening if there was a strong case to spend time and resources in calling for the journalists and the broadcasters to account on that basis. But I do agree with you that it's quite sloppy at times that the responsibilities of the devolved Parliaments are not accurately reflected in the news bulletins.

Okay, thank you for that. I'll just finish on this question; I know other people want to ask questions.

That case that you describe, Lord Grade, can be a single incident—as we discussed, Laurence Fox—or it can be a pattern of behaviour, of course, which extends over a period of time, none of which would involve—the single incidents—would involve an intervention. But, over time a pattern develops, and that would also, that pattern, would create the basis for an intervention. Can I ask you, Mrs Marks, to what extent have you, within Ofcom, looked at these matters about the reporting of Wales and the reporting of news in Wales, and to what extent have you spoken to your colleagues in Ofcom about issues where you believe there may be a pattern that doesn't reflect the governance structure of this country?

We've spoken to policy colleagues in Ofcom about this issue, and Ofcom commissioned a report into what the situation was like across the nations. It was published, an independent report, done by Professor Stephen Cushion in Cardiff University, who looked particularly during the COVID period at the reporting, and—

Mrs Marks, please could you put the microphone a little closer to you?

Yes, of course.

Forgive me; I think that Lord Grade might have been struggling to hear you. Thank you.

Sorry. Would you like me to start again?

No, that's fine.

Okay. That independent report showed that, over time, there had definitely been instances of when the devolved nations' news hadn't been reported accurately or when a reference to a particular subject didn't reference Wales in a particular point, but it did also show that, over time, that had improved. As part of taking the evidence, Professor Cushion talked to senior editors in newsrooms in this space and they were all aware of the need to do better in this area, and the fact that it was very important to develop their staff and their news to take proper account of devolution. It didn't just look at the period during COVID, but that was a particularly tricky period for this because there were times when people could go to the Lake District, but they couldn't travel into Wales, and that was an issue for the reporting. But over time, it has improved, but there's still room for improvement in that space. And I think part of the rationale for commissioning that report was the feedback that we gave through Ofcom Wales to Ofcom.

I'd like to come back on that—[Inaudible.]

Okay. Llyr.

Well, I just wanted to talk about—. Alun, if you want to come back on that, then you'd best do it now, because—

No.

Okay. Well, I just want to ask a few questions about Wales's place within Ofcom and Ofcom's capacity in Wales, because a freedom of information request back in April of this year outlined how many staff were employed in various offices that Ofcom have. Manchester was 74, Baldock 43, Warrington 65, at the time Edinburgh was 68—I understand it's now up to 80 in a new office that can accommodate 150—and in Wales we have 16. So, really, my question is: why is there such disparity?

Is that a question for me? Forgive me, I missed the opening.

It's for whoever wants to answer. Yes, let's start with you, then, Lord Grade.

Okay. Well, I don't think we measure influence by the number of employees. Ofcom used to be entirely in London, but, over recent years, the policy has been to spread the workforce throughout the nations and regions. The Welsh office is economic, it's effective. The key question is: is the Welsh voice being heard by the senior executives and by the board of Ofcom? And you can rest assured that the issues of concern and the issues that need addressing in Wales are well represented at the main board, where it counts. We don't measure influence by the number of employees.

So, are you suggesting that the other offices aren't economic and that, for some reason—

No—

—it takes four times as many people to have their voice heard.

Forgive me for interrupting—I'm sorry. It's quite tricky with the—

No, I was just wondering, if you believe 16 is sufficient—

The answer to that is that we have been expanding dramatically in order to cope with and meet the expectations of the Online Safety Bill and it so happens that that recruitment looked very promising in Scotland in that specific area, which is why Scotland has increased somewhat.

And might I just add to those comments in so much as the public policy teams in Wales, Northern Ireland and Scotland are broadly the same size? In fact, the Welsh office is slightly bigger because of the Welsh language commitment. What you have is additional staff who work in different policy areas or delivery areas. We have spectrum engineers. Baldock is largely a spectrum engineer base, but they are based all around the country. So, that explains some of the differences and why there are not equal numbers in every part of the country. We have set ourselves quite a challenging target about growing our out-of-London base. So, we're aiming for—

Thirty per cent.

Thirty per cent by 20—I'm going to have to double-check the date. We're currently, I think, at around the 23 per cent figure, so, we've still got some way to go. I think we're aiming for 2030, but I'll check with the committee on that. So, we could well see growth in Cardiff. I myself am London based, but because I live in Bristol, I spend quite a lot of time in the Cardiff office, so we also offer that flexibility with staff who can work from any of our offices, but, obviously, you need to have a base contractually.

So, is there any particular reason why Wales hasn't enjoyed the fruit of that expansion in terms of other responsibilities that are clearly reflected in figures elsewhere?

When I started five years ago, there were eight people based there. It's grown slowly. We took the extra space next to the office that we had, which was completed and fitted out the week we went into lockdown, which didn't help us in growing our space. There is more capacity to take more people in Wales and we are in discussion about doing that. As part of Ofcom's commitment to moving people out of London, we would expect to see the Wales office grow.

There we are. Thank you.

Okay. I think Tom wanted to come in on this as well.

Thank you. For Lord Grade, you mentioned that Welsh audiences were represented at Ofcom despite the figures that Llyr read out. For our reassurance, what would you say are the biggest two or three issues facing Welsh audiences from an Ofcom perspective?

I think everybody, throughout the United Kingdom, would like to see more programmes about them and about their communities and about their regions. I think if you asked Welsh audiences if that's what they'd like, I'm sure they would say 'yes', and hopefully broadcasters and creative people who have to come up with the ideas and implement them will respond to that. I think the issues in Wales, which are slightly off territory for today, are more about coverage—mobile coverage, broadband, fibre and those issues. Broadly speaking, I think Welsh audiences enjoy the public service broadcasting that they get. Would they like more great programmes? Absolutely. But I don't see any evidence of any serious breakdown in contact between those who create the programmes and the audiences for whom they are designed.

[Inaudible.]—move to other areas. Alun, you wanted to come back in on something, or would you prefer to do that later?

No, I'm fine.

You'll do that later. Okay. We're going back to Tom, actually, to talk about the channel 3 licence.

Thank you very much. On the channel 3 licence, the current holder—. Obviously, you've mentioned you're going through the process of renewing that channel 3—I think it was three, four and five that you mentioned, in Wales at the moment, but if we can stick with channel 3. Looking at the requirements of the current licence, it requires four hours of news and 90 minutes of non-news per week. How does that compare to other licences issued elsewhere in the UK? Is that about consistent?

Perhaps I could ask Kate to answer that.

Now, can I speak confidently, because there are 15 licences overall, so I think I'd like to just double-check? I wouldn't want to misspeak around the quantity, unless you're aware—.

If there's anything where it would be better for you to write to us with that information, that would be absolutely fine.

We can absolutely do that, because we did make an assessment around all of the current obligations and to what extent we think they may be sustainable over the next 10 years. So, we're very happy to provide the committee with that report and our view on that.

It is worth noting that, obviously, the media Bill, which I mentioned earlier, would improve, I think, the licence in so much as extending obligations over the online services, with the exception of news. It would keep news as a broadcast-specific obligation.

Okay. The reason I ask is because my understanding is that it is a consistent figure, relative to the rest of the UK, and I wonder, in your determination, whether you feel that there is a greater requirement for Wales as compared to some of the other licences elsewhere in the UK. We've already talked, from Alun's line of questioning, about perhaps the lack of coverage of devolved matters from the UK-wide broadcasters, and therefore it places a greater need, I guess, for Welsh-specific content to cover that off. There will be licences that you issue elsewhere that don't have devolved governments, devolved parliaments and so on, so do you not recognise that, perhaps, there is a greater need for a greater requirement in Wales, Scotland and Northern Ireland specifically?

I think that's a really important question, but I think the answer isn't just around the delivery of channel 3 and their news provision, it's about the plurality of news available to audiences in Wales, not just on tv, but also on their radio, in their press and online. And some of our work shows the growing importance of online news and what the role of intermediaries may be in ensuring that you're getting the right news for your area, whether that's locally or at a national level. So, the work we're doing on media plurality—. We have a duty to look at the media ownership rules every three years, but we, on our own initiative, have been doing an ongoing programme of work because we can see the importance of ensuring that all audiences across the UK continue to get a plurality of news. So, I think my answer is that it's not necessarily to increase channel 3's provision, which we think is broadly in the right place in terms of sustainability and delivering to those audiences that do choose to go to ITV Cymru as their first port of call, but also making sure that the wider market is delivering for all audiences, including those who maybe go online first before they go to tv.

I take your point about media plurality and variety of providers, but, obviously, that wouldn't be covered within the channel 3 licence, obviously; the channel 3 licence would just cover that. So, I take it from your remarks so far we are unlikely to see an increase in that four hours of news and 90 minutes of non-news in the issuing of the next channel 3 licence?

I'd also suggest the quota is one regulatory tool we have, and they do go above and beyond that. So, the decision to extend Sharp End to a one-hour programme—that was done on ITV's initiative to better meet the need and demand that was there, and we're very supportive of them strengthening their current affairs offer in Wales. Quotas are a tool, and it's important for us to look across all the channels' delivery and answer slightly more nuanced questions about how they're delivering, rather than just a tick-box quota approach, because that doesn't necessarily get you the impact and the value that audiences deserve.

I appreciate that, and obviously you are issuing a licence to cover a long period of time. I think it's a decade, if I'm right in thinking.

That's correct, yes.

The fact that a broadcaster themselves has identified, as you put it, a need or a demand for that content, rather than that being something that Ofcom has assessed as a need and a requirement, particularly in the context in Wales where, as I say, we have a devolved Government and Parliament that make decisions on people's lives—is that not a failure of Ofcom to recognise that need in the first place and legislate for that need?

I don't believe so, because—[Interruption.]

Sorry, after you, Kate.

Just very quickly. The quota just sets the minimum we expect. We also want to give them the flexibility to respond to changing audience needs, which is what we've seen has been quite dramatic in the last few years. And actually, ITV have been quite front of foot, may I say, in experimenting with how they deliver news in ITVX, and the audiences are really enjoying short-form news stories relevant to their area online. Now, if we'd have set a much higher quota in the licence, would they have had the flexibility to try and experiment and deliver that on ITVX? That's a question for their chief exec and chair. But I think it's important that we set an absolute baseline that is the minimum we expect, but we do then challenge them to evolve and to meet changing audience need. Apology, Lord Grade—do you want to come in?

Not at all, thank you. I think it's important, as I'm sure the committee recognises, that the commercial free-to-air, advertiser-supported sector is facing considerable challenges in the marketplace from online advertising revenue moving online, and it's a very difficult and challenging market, and therefore it becomes more important today that where there is public intervention, which is essentially what a quota and a requirement is, that the public sector can deliver that—in other words, the BBC—and meets its obligations, because it doesn't have that need to compete for funding.

Can I just add a little to that? You're probably aware that, in Wales, the first port of call for most people for news is the BBC, and the second is ITV Cymru Wales. The third, interestingly, is Facebook. So, we are really well aware of the importance of news and that public service broadcasters need to provide that, a trusted news source, and that would be one of the things that we would think about in looking at the quotas for the review period.

Okay. In terms of quotas, just moving on slightly, I've got a quote from Phil Henfrey, who is head of ITV news in Wales. He said that that if people want more public service content,

'and I completely understand why people would want more—then how do you increase the value of that licence to whoever holds it?'

Ofcom looked at that in 2008 and 2009 and didn't find any answers. So, I wonder, in the context of that quote, what is the answer there? How do you increase that value? If it's not going to be done by quota, for the reasons that Lord Grade and others have made, in terms of the commercial consideration, if you like, how do you increase the value of that channel 3 licence?

I think one of the key things in that is the delivery of the media Bill and the new prominence duties, to make sure that ITVX, S4C Clic, are front and centre on smart tvs across the UK, that they're not having to be reliant on solely commercial deals without any regulatory support. I think that's absolutely essential, because the old benefits were spectrum and electronic programme guide prominence. They are of declining value as you move into an increasingly digital age.

Can I ask you, Lord Grade—? When I asked what you thought the biggest challenges facing audiences in Wales were, you mentioned about the importance of programming being commissioned and produced in Wales, for Welsh audiences. In 2022, ITV's UK network spend in Wales had plummeted to close to 0 per cent of their qualifying UK spend. Is that appropriate?

Sorry, which year did you say?

In 2022.

That would probably have been a function of COVID, I would have thought, and lockdown. I don't know for sure; I can check that and respond. But, I think, comparisons with the COVID lockdown years are very, very tricky indeed, and probably not relevant to the ongoing.

What is important is that one of the great success stories of the British isles—financial successes—over the last 10 years has been the growth of the creative industries, which, despite all the market turbulence, and so on, have continued to grow. And I'm thrilled to see that Wales is getting more than its fair share, and it's booming. I had dinner with—. One of the first things I did when I joined Ofcom was go to Cardiff, and I had dinner with a lot of the independent producers. I was staggered at how successful they are, and that's great. That's great for jobs. It's great for inward investment, and it's great for the soft power of Wales, if you like, that big film makers and big television series makers are now—Wales is right up there as a place to make great television.

Thank you for that. You mentioned, obviously, that Wales's voice was being represented at board level in Ofcom, despite the staffing figures we heard earlier from Llyr. I don't understand how that's compatible with your previous answer, where you said you weren't aware that one of the premier broadcasters in the United Kingdom was spending close to 0 per cent. I don't understand how both those statements can—

Forgive me, I don't think I said that. I don't think I responded.

Well, you said you weren't aware that that would happen and you'd have to check. I'm just curious, in the context of your previous comments, where you said that Wales's voice was being represented, how you could not be aware of that. How can both those things be compatible?

We're not in the business of telling broadcast licensees where they have to make their programmes. What we want to ensure is that they're meeting broad audience expectations, and that they're meeting their out-of-London, out-of-the-M25 quotas. It's up to the broadcasters—

But you also said that was the No. 1 issue for Welsh audiences.

No, I said what Welsh audiences would obviously love—as all audiences would—would be to see more programmes about them, their communities, and where they live. That's quite a separate point. That's a creative point. What is important for Wales, it seems to me, is that they have a hugely successful and growing and thriving independent production sector, and, inevitably, out of that, the more it thrives, the more story tellers, producers, writers and directors will find stories that they want to tell that come from Wales. Obviously, Russell T. Davies is a wonderful example of a creative genius who believes in using his power to further the interests of Welsh production. That's great, and, following his example, people are coming into Wales to make programmes now; it's great.

First-run spending increased in 2022 by the PSBs, largely driven by the BBC, but it did include ITV. So, we would like to just write to you with those figures, because we just don't recognise that—

Great. I think it's in the 'Media Nations: Wales 2023' report.

I think the spend was less, but I don't recognise the close to 0. It was less, and it was partly COVID—

It was taken from the 'Media Nations: Wales 2023' report, we believe. So, if you could write to us, that would be very useful.

Yes, indeed.

Diolch. Thank you very much. I think that Alun and Hefin each have a question they'd like to ask on the channel 3 licence. So, I'll go to Alun first, and then to Hefin. Alun.

I'm grateful to you for that. I think the points that Lord Grade has made are very well made, and I think that everybody celebrates the success of the creative industries in Wales, and there is no issue there at all. There's been intervention by Government to help sustain that, and I think everybody enjoys that success. But the channel 3 licence requirements are different, aren't they, because the issue is that ITV serve Wales in broadly the same way as they would serve a region of England. And you allow them to do that.

And the issue we have here, of course, is that, as a country, we have a form of governance and a culture that therefore has to be driven into this English mould. And that, to me, demands a role for regulation to say, 'Actually, the Welsh culture, the fact that Wales is a nation, has all these different things, demands a different approach, and Ministers in Wales should be held to account in the way that UK Ministers are held to account by UK broadcasters.' We've seen great broadcasting from Manchester in the last few days; I'm sure we'll see similar broadcasting from Liverpool in the next few days, holding Ministers to account, and that should happen. There isn't the space for that to happen under the current regulations, and there isn't the space to tell Wales's story under the current regulations, so Wales is very poorly served in that way.

I mean, if you look at the last few years, and I've heard channel 3 licence holders and ITV and whatever tell committees for 20 years that, 'If you ask us to do anything, we'll walk away from the electronic programme guide, and the rest of it; this doesn't make financial sense', but I've never believed that, frankly, and I've told them that on many occasions. I just don't believe it, and I think the media Bill will actually reinforce the economics of that.

So, why doesn't Ofcom stand up for Wales and say, 'Do you know what? These people in Wales demand a broadcaster, have a right to a broadcaster that reflects their culture, reflects their history, reflects their experience of living here, and also reports and holds to account the structures of governance that exist in that country'? I recognise what you're saying about Sharp End, but every single one of us knows that audiences are dropping off after 10 p.m. and when you get past 11 o'clock, that's not mainstream broadcasting, and I'd be surprised if anybody sought to claim that it is.

I'll ask the witnesses—. Forgive me. I'll ask the witnesses—. Lord Grade, if you could respond to Alun's question, and then we'll go to Hefin for his question as well. But, Lord Grade.

I'm sorry. Do you want me to respond?

Please, please.

We had a system in the days of the ITV monopoly where ITV consisted of 15 or 16 individual licensees, each with a monopoly of advertising revenue, upon whom very onerous requirements were placed through the licence in return for that monopoly. That system has failed to sustain, hence the consolidation of ITV, pretty much in London, apart from the Scottish. So, that system, the market has not been able to sustain that system in the face of the digital revolution and the mass of channels and the competition that exists today. So, we can't go back to that.

Fortunately, we have the BBC, with the licence fee, which compensates for that, and the BBC, which used to be London-centric—it was the national broadcaster from London—is now moving more and more out of London, into Wales, into Scotland, into the north, the midlands, the west and so on. So, that's kind of where we are, and we shouldn't pretend that we can buck the market and start imposing all kinds of onerous licence conditions on commercial broadcasters who are in a real struggle to sustain their business models, which are severely challenged.

But this, you see, goes back to my original questions on values: you used the term 'buck the market'—that's what Margaret Thatcher said. I disagree with that because we provide the 103 slot on the EPG, we're going to protect that further through the media Bill, and that has a real value, otherwise you wouldn't do it, and the issue that I have is that Ofcom as a regulator, throughout the last 20 years or so, since you were established, has enabled that process to happen. What you haven't done is to intervene and use regulatory tools to intervene to seek to establish a model of public service broadcasting that actually provides the plurality you described and serves the people of Wales in a way that I think the people of Wales have a right to expect, and that is my concern. I think there is there a difference in actual values about what we want here and, as a regulator, what you are prepared to deliver.

Channel 3 remains today a difficult model of PSB culture versus the market in which they operate, and there is always going to be a tension between those two things, and I think—

I accept that.

—that's an inevitability, and a lot of the things that we used to love and enjoy in the old days of the ITV monopoly have gone forever. What we have managed to preserve, and what the media Bill does quite a bit to help to sustain and look forward, is to try and provide conditions where the imperative of commercial free-to-air broadcasters to invest in British production, wherever it's made—hopefully out of London, but with British audiences in mind—can be sustained in the long term, and that is the most important thing. Now, as I understand it—and I'm sure Kate or Eleanor will correct me if I'm wrong—there are very high levels of appreciation for public service broadcasting from audiences in Wales, for the network programming that they consume. Perhaps one of them could put some flesh on that bone.

Yes. About six in 10 people who watched the PSBs in the last six months were very happy with what they had and felt that they are providing the service that they need, and only one in 10 said that they were dissatisfied with that. So, throughout the Media Nations report, and the graphs in there show, there is high satisfaction from the viewers with the public services that they see.

Could I just add? Our statute—. Parliament gives us a really important duty to ensure that the PSBs collectively deliver on their obligations, and that's including supporting a civil society and democratic values. So, it's not on one particular broadcaster; it is on the system to deliver. And we do those periodic reviews—the last one was Small Screen: Big Debate; the next one will be due in the next year or so—and we take that duty very seriously, and the amount of audience research, not just what people watch, but what they think about it, their levels of trust, appreciation of what they see. So, yes.

Thank you for that. Hefin—thank you for your patience, Hefin—you wanted to come in as well.

Thank you, Chair, yes. I'll try and put it as succinctly as I can. I remember HTV Wales renewed their licence back in the 1990s, and they were talking about, 'Thanks for the future'; they were overjoyed. Thames Television was devastated to lose. The conversations we've had—I've had—with ITV Wales, off-line, have certainly been, more recently, that they're wondering whether they even want the channel 3 licence at all, for some of the reasons that Tom Giffard mentioned. So, what is the future going to hold for the channel 3 licence in 10 years' time? Are we even going to be talking about any channel 3 licence, and what implication would that have for Wales?

I think the media Bill is hugely welcomed by the commercial broadcasting licensees, current licensees. We are hugely supportive; we work with Government on it. The essential thrust of the media Bill is to recognise the fact that audiences these days, in their entirety, don't sit down on the sofa and watch endless linear television. They are watching on different devices, they're catching up, they're watching streaming, they're watching all kinds of things. And the media Bill, which is a very, very important piece of legislation for public service broadcasters, will give them certain advantages in terms of prominence and so on, which they will welcome, and that will help to sustain.

But in the commercial world—and leave the BBC out of it for a second—they're all diversifying and investing in digital outlets: Channel 4 particularly; ITV, ITVX, they've invested a lot of money in ITVX. They're following audiences, they're following what the audience is telling them how they view. What we must not do in this transition is to ignore the fact there'll be a large audience that is watching traditional linear television, and we must not neglect them, and we must make sure they continue to be served through digital terrestrial television.

Diolch. Thank you very much.

Hefin, are you happy? Yes. We'll move on to Llyr Gruffydd.

Yes, thank you. Just picking up on the draft media Bill and the need, or requirement, potentially, for prominence for PSBs on devices, et cetera. We heard from S4C earlier this morning that, as a smaller PSB, maybe, they might need a bit of muscle from Ofcom to support them in those negotiations with various device providers or whatever. I mean, do you stand ready to provide that, or what role do you see for yourselves—

I think—

—in giving them a bit of muscle?

Forgive me. Sorry to interrupt.

That's fine.

The draft media Bill requires prominence and carriage between, let's say, traditional broadcasters—S4C, for example—and the streamers and the internet service providers and so on. If a commercial negotiation between S4C and, let us say, Amazon or whoever it is, Samsung, if that negotiation fails to reach a conclusion, the Bill requires Ofcom to step in and sort it out and make sure there is a deal at the end of the day. So, I think that's covered in the Bill.

Okay. Thank you for that. There is, of course, a requirement that at least 5 per cent of BBC expenditure on UK network programmes has to be spent in Wales. How do you police that, and what do you do to guard against the risk of production companies popping up in Wales, brass-plating, and potentially gaming the system?

Perhaps I could ask Kate to respond on the detail of that.

Yes. So, we do have a definition around what can fall within that definition. So, you need to have a substantive base, you need to have your off-camera, your crew, based in the relevant place, and—. My memory's—

Based here.

Based; I've done substantive base, crew and spend.

And talent costs as well, yes.

And we publish lists around which programmes have been assigned or not. Do you want to come in on that, sorry?

Yes. We are aware of some concerns at the moment in Wales, and we have asked for evidence of them. And once we have evidence, we will look at it, and we will give some thought to whether we shouldn't do some spot checks and things, which we've thought about in the past as well. We're conscious it's live, and we will take a look at it.

And it's worth just mentioning our policy function do come round and talk to production companies—not on a hard evidence base, but to just understand what their experience is, where some of their concerns are. We also have a good relationship with TAC, who are a really important stakeholder to us, just letting us understand how things are being felt in the sector right now.

Because you mention that you publish lists, and the made-outside-London register is available, but, of course, that doesn't scrutinise at the point of commissioning, does it? You publish a register of programmes broadcast the previous year—well, those were commissioned maybe two years before then. So, it's a little bit late to the party in that respect.

But circumstances can change during the life of a production, so I think it is fair—

In what sense, sorry? In what sense? Just for me to understand.

Because the nature of spend may change from the point of commissioning through to the end product. So, I think it is fair that we see actually what was the end result, in terms of—

The legislation allows for both, but we are conscious at the moment that we've heard—the noise from people we talk to—that there are concerns. So, we've asked for some evidence, we've spoken to TAC about it, and we will take a look at that once we've got that evidence back.

And would taking a look at that include maybe potentially considering recommending that the criteria are amended to include maybe a company having been present in Wales for maybe a certain period of time before?

Let's look at the evidence, and not speculate what we'd get out of it. But we—

We have reviewed our guidance and consulted on it before. That is a measure open to us.

I think Lord Grade wanted to—

If I may—. Excuse me—if I may come in there.

Certainly.

I understand the point, and what we have to make sure is that there's no finagling of the figures. I think to impose a condition that production companies had to have been established in Wales for x amount of time is completely anti-innovation and anti-entrepreneurship, which is alive and well in Wales.

Okay. I don't know whether that's—. Yes. Okay. Fine. Although there is a risk that the system can be gamed, which would undermine the integrity of the policy.

Yes. We absolutely recognise that. Our whole thrust in our regulatory responsibility towards the BBC in recent years, and particularly recently, has been increased transparency from the BBC. It's not the most transparent organisation in the world. And all our efforts and all our responsibilities, where we have a locus over the BBC, is to increase their transparency and timely reporting. If we were to find them in breach on any of this, it would be a very, very serious matter.

Okay. Thank you. Very briefly then, if I may just conclude on a slightly different matter, the previous, or our predecessor committee, then, in the last Senedd, called for changes to commercial radio licensing to require Welsh-language content as part of commercial radio licences in Wales, and also to introduce a regulatory category of 'all-Wales news'. And I'm just wondering whether this is something that Ofcom might have discussed as proposals with the UK Government at all.

Kate or Eleanor.

Okay. I'm sure what the discussions are with the UK Government, but in the media Bill there are some around commercial radio. It's a very difficult world in Wales. The spend per head is a lot less for commercial radio, or the profit per head, then—it's £4.99 per capita compared to the UK's over £7. And I think there is a struggle to keep it going in Wales, but we do also recognise the importance of the Welsh language. We like to see them broadcasting in the Welsh language. As it stands at the moment, if the format has included Welsh language, we can regulate that. That may well change with the Bill. But we would support radio stations to come forward and request to come forward to broadcast in Welsh. We would like to see more of that. Part of our raison d’être in Wales is to support the Welsh language.

Okay, but, what, the ecosystem doesn't allow for that to happen? You're saying commercialisation and the deregulatory drift, if you like, because the market is demanding something—. I think it comes back to the point Alun Davies was making about we need to decide what we want here.

Could I just—? The regulatory framework for commercial radio is quite different, and I think there is a matter of consideration by the UK Government about where they want to go with that. There are proposals, obviously, in the draft Bill, which I'm sure you're well aware of, and we operate within that envelope. We do work with DCMS, obviously, and provide them advice around what the spend and audience profiles look like, but ultimately that is a matter for the UK Government about—

Okay, it sounds a bit like if it happens, it happens, if it doesn't, well, tough.

Well, it's a matter for the UK Government.

Yes. Okay.

We'll go finally—.

We'll go finally to Hefin David.

Yes, a very quick question because we've run out of time. Regarding the expert panel's report on a shadow broadcasting authority, is there any point in a shadow broadcasting authority, given all the trends we've identified today? Isn't a shadow broadcasting authority in Wales just answering questions that would have been useful and providing a service that would have been useful 10 years ago? But, in the next 10 years, a shadow broadcasting authority will be swamped and unable to provide the kind of service that we would expect from it.

That's essentially a political question. It's not for Ofcom to have a view one way or another. All I would say in response is that broadcasters, licensees, 'clients' of Ofcom, as it were—I use the word 'clients' in inverted commas—what they require is certainty and what they require is clarity of regulation. So, that's an issue that would have to be considered if there was a political will to move that forward.

So you think a shadow broadcasting authority would dilute clarity.

It's a question that would have to be answered in the debate. We don't have a view. It's absolutely outside our remit. It's a political matter and not for us, but, if we were asked to contribute to that debate, one of the points we would make would be that we would point out the advantages and disadvantages of the current system, such as they are, and it would be for the politicians to take a view.

I don't quite understand why setting up an independent body would be a political act.

It would require primary legislation, so immediately it becomes a political issue.

Okay, fine.

It's also tied up in the devolution settlement.

Okay.

Okay. Happy?

Okay. I wanted to thank all of the witnesses for being flexible and for giving us that extra time, so thank you very much for that. A transcript of what's been said will be sent to you check for accuracy—that it's an accurate record of what was said. There were a number of questions that we didn't have time to reach. With your permission, we will write to you with those questions. I know there were a number of things as well that you said that you would like to follow up with us in writing. So, thank you very much for your evidence this morning. Diolch yn fawr iawn.

Thank you very much.

Diolch yn fawr. Thank you.

And Members, we'll move straight on to papers to note. We have four papers to note. Are you happy for us to note these formally, or does anybody have anything they want to say on the record with regard to these? Happy to note? Okay, happy to note these.

So, I propose in accordance with Standing Order 17.42 to resolve to exclude the public from the remainder of today's meeting? Are you content to agree the motion? So, we'll wait to hear that we're in private session.