T Y N W A L D C O U R T O F F I C I A L R E P O R T
R E C O R T Y S O I K O I L Q U A I Y L T I N V A A L
P R O C E E D I N G S
D A A L T Y N
S E L E C T C O M M I T T E E O F T Y N W A L D O N P U B L I C S E R V I C E B R O A D C A S T I N G
B I N G E R L H E H T I N V A A L E R S C A A L H E A N E Y S H I R V E I S H H E A Y A G H
HANSARD
Douglas, Thursday, 23rd May 2013
PP122/13 PSB, No. 1
All published Official Reports can be found on the Tynwald website www.tynwald.org.im/Official Papers/Hansards/Please select a year:
Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, Isle of Man, IM1 3PW. © High Court of Tynwald, 2013 SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Members Present:
Chairman: Mr R A Ronan MHK Hon. S C Rodan SHK Mr Z Hall MHK
Clerk: Mr J D C King
Business Transacted Page
Procedural ...... 3
Evidence of Mr D North, Chairman, Manx Radio and Mr A Pugh, Managing Director, Manx Radio ...... 3
The Committee adjourned at 4.47 p.m.
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Select Committee of Tynwald on Public Service Broadcasting
The Committee sat in public at 2.34 p.m. in the Legislative Council Chamber, Legislative Buildings, Douglas
[MR RONAN in the Chair]
Procedural
The Chairman (Mr Ronan): Welcome to this oral hearing of the Select Committee on Public Service Broadcasting. I am Richard Ronan MHK, Chair of the Committee. The other Members are Mr Speaker and Mr Hall. Please turn your mobile phones off. They need to be off, not just silent, because otherwise they 5 will interfere with our recording equipment. Also for the purpose of Hansard, I will be making sure we do not have more than one person speaking at once. This applies to the Committee and to the witnesses. We were established in December 2012 with a remit to examine the policy, delivery, cost and scope of public service broadcasting. We issued a call for evidence. A number of members of the 10 public responded, and we are very grateful to them for this.
EVIDENCE OF MR D NORTH AND MR A PUGH 15 Q1. The Chairman: Today, we are starting our oral hearings with Manx Radio and I would like to start by asking each of you to state your name and your role within Manx Radio.
Mr North: David North, Chairman of Radio Manx Ltd. 20 Mr Pugh: Anthony Pugh, Managing Director of Manx Radio.
The Chairman: Thank you.
25 Mr North: If we may, Mr Chairman, I have a statement which I would like to make, if that is in agreement with the Committee, and followed through from Mr Pugh.
The Chairman: Yes, of course.
30 Mr North: Good. Thank you. Mr Chairman, members of the Select Committee, thank you, and I hope you found that our detailed submissions, together with the appendices, were useful. The extensive information, both financial and operational, does take a lot of digesting, but there is one question that I should like to pose, which in my opinion is fundamental to the entire 35 situation in which, roughly every 10 years, Manx Radio keeps finding itself. The question I should like to pose is a simple one: is Manx Radio a public service broadcaster, or are we a state broadcaster? In other words, are we like the BBC in structure, or are we more like perhaps Syrian Radio, which is nothing more than a government mouthpiece? Editorially, we have always thought of ourselves as a public service broadcaster, but in my 40 opinion and that the board, and against all the good intentions of Tynwald to guard against such a position, regrettably we have become a state broadcaster, incapable of determining our own future by virtue of our structure. Quite clearly, it is also the quandary that the board realises lies at the root of the difficulties faced by Radio Manx Ltd. As is well documented, on a cyclical basis, we
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have had sufficient funds to meet the terms of our licence or deliver a capital programme, and we 45 do not even operate our transmission network. The majority of the public and the business community believe we are an essential part of the fabric, and indeed an integral part of the infrastructure of the Isle of Man. Next year is our 50th birthday, and as a valuable national asset we are proud to have become part of and immersed in, of course, the very culture we promote on air. 50 For instance, during the recent snowstorms, the public relied on us for information – just as they do for our general and local authority elections, major international sporting events like the Commonwealth Youth Games, the TT, the Classic TT, the Guild coverage and numerous other community programmes – and I believe we have demonstrated we are a competent organisation, having established an enviable position in our community, as well as further afield. 55 At Manx Radio, we put the interests of our listeners and our community at the heart of our activities. Consequently, by doing so, we ensure our community has its own voice and a national identity. Recent independent audio research shows there is a listener demand for Manx Radio and there is a listener satisfaction. Some people might ask why is Manx Radio being scrutinised so closely yet again. The plain 60 fact is that the basic structure of the organisation is still not right. Over the years, numerous reports have been written about Manx Radio – the Cole Report, the Darwin Report, the Value for money Report, and the recent Treasury Internal Audit Report. Broadly, they have all come to the same conclusions: that we are underfunded and do have not the necessary independence from Government. 65 Why, you may also ask, is this still the case after so many reports and Tynwald debates about Manx Radio? In my opinion, the prime reason is that the Reports have never been firmly implemented. Following the Darwin Report, Tynwald set out three primary aims: that the public service broadcaster should be independent from Government; second, that a robust funding formula be implemented and subject to predetermined review; and third, the public service 70 broadcaster should be differentiated by a longer licence term to its commercial competitors. Mr Chairman, the introduction of the Purpose Trust and the Enforcer went some way to achieving the first objective – that is independence from Government. The second objective, a robust funding formula through the Value for Money Report, was thought to be a big funding solution and implemented by Tynwald in 2006, but had by 2010 been ditched. Surprisingly, in the 75 third objective, an omission to the Broadcasting (Amendment) Act 2007 has meant that the planned introduction of a 30-year licence cannot be implemented. So, none of these three aims have actually been achieved. The Purpose Trust has put in a great deal of time and effort in carrying out their specified role, but the independence from Government that the Council of Europe insists upon – namely, to have 80 an effective public service broadcaster, has not been implemented. Therefore, as a result, the Treasury not only remains our shareholder but is effectively our paymaster. Is this a conflict of interest? The Value for Money Report of 2006 recommended that the subvention should be sufficient to provide stability and independence. Also, it expected funding to be provided to enable a capital 85 expenditure programme to be planned. It recognised that, without this, there could be no sustainability of Radio Manx Ltd. As the Select Committee will be probably well aware, our subvention is, at present, around about £328,000 less than the figure set by the agreed formula I mentioned previously. To make matters worse, due to the licensing of two new commercial radio stations in the Island, Manx 90 Radio’s commercial revenues have fallen from £1 million in 2001 to £880,000 in 2012. Taking inflation into account, this is a drop of around 45%. The Internal Audit Report clearly shows how our incomes have been eroded. Manx Radio has sustained its programme output by seeking efficiencies, reducing staff and cutting programming, and consequently we firmly believe we are an efficiently operated 95 organisation. Furthermore, importantly, the directors believe further cuts would fundamentally change the nature of the station’s output and jeopardise the terms of our public service broadcasting licence, with which we are obliged to comply. The directors believe Manx Radio plays such an important part in the life of this Island that we 100 wanted to initiate an informed debate about the future of the station before irreversible cuts were implemented. So, Mr Chairman, where are we now? Tynwald has (a) reaffirmed its commitment to public service broadcasting in the Isle of Man, and (b) recognised Manx Radio as the Isle of Man’s national broadcaster. ______4 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
105 When this Select Committee reports back to Tynwald, Mr Chairman – hopefully with recommendations as to how it can sustain public service broadcasting here in the Isle of Man – we hope that our submissions and thoughts will have been of assistance to you. This, as you can imagine, is a topic Manx Radio has considered at length. Indeed, in our submission, we have identified a number of potential solutions, and I would ask, if I may, at this 110 stage, to bring in Mr Anthony Pugh to detail some of those proposals which we think might provide a clear solution to the conundrum that we have identified: how do we cease being a state broadcaster and become a truly independent public service broadcaster, as defined internationally? Thank you, Mr Chairman.
115 Q2. The Chairman: Thank you very much, Mr North. We have had written submissions from you with all the proposals you are obviously going to go through again today – is that right?
Mr Pugh: No, I was not going in detail about all of them, just about one of them. 120 Mr North: I think our submission was in January, and of course a lot has happened and we have had time to have a lot more thinking since then.
The Chairman: I am just conscious of the time, but yes. 125 Mr Pugh: Manx Radio is unable to determine its own future in five key operational areas. Firstly, we traditionally only receive notice of our forthcoming year’s subvention some two-to- three months prior to the start of the financial year, and currently there is no formal process of negotiation with Treasury. The need for a transparent funding formula is essential to enable us to 130 run the company efficiently and not to lurch from crisis to crisis. Secondly, the company does not own its own transmitter network, so we cannot update the network to meet the changing needs of listeners without DHA concurrence and without their funding. We are also not resourced to provide for a programme of capital renewal, and therefore we 135 cannot make any long-term infrastructure plans. Fourthly, we end each year with an overdraft of around £150,000 and it is only with an annual letter of support from Treasury that our auditors have the confidence to sign us off as a going concern. Finally, the fifth point, our programming output is under-resourced to meet the terms of our 140 licence. The Council of Europe and the European Parliament have identified exactly the same issues as the nucleus of common features that face public service broadcasters and which the Council say that countries embracing public service broadcasting should undertake. I quote:
145 ‘provide the legal, political, financial, technical and other means necessary to ensure genuine editorial independence and institutional autonomy of public service broadcasting organisations, so as to remove any risk of political or economic interference.’
The Isle of Man is not unique in having to reconsider the structure of public service 150 broadcasters. Close to home in Wales, S4C – the Welsh language television channel – provides unique parallels with Manx Radio’s situation, as not only do they provide a public service for a local community but they are also commercial. S4C has recently changed its funding and governance models and now demonstrates how new innovative and sustainable solutions can be found to meet the Council’s underlying principles. 155 Manx Radio has never had its status and objectives as the Island’s public service broadcaster confirmed in primary legislation. We suggest it would be the natural step to secure public service broadcasting for the future in the Isle of Man, and I understand that the Communications Commission also have a similar view. Radio Manx Ltd – the existing national broadcasting organisation – could be transformed into 160 an independent non-profit public service broadcasting organisation with a right to self- administration. It would adopt internal statutes and byelaws in accordance with the provisions of this law and be set up with the appropriate structures and governance to deliver the services in the most cost-effective way possible. This is exactly how S4C is structured and they also demonstrate a funding model that could 165 well be suited to the Isle of Man, in that it provides for a reduction in Government support – in
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their case, from the Department of Culture, Media and Sport; income support through commercial activities, including sponsorship and advertising; and BBC funding. Is it so ridiculous to expect the BBC to co-fund Manx Radio? The Isle of Man currently contributes £5 million a year in licence fees and around £650,000 for free licences for the over- 170 75s. However, the Welsh have their own national service, as do the Scottish and the people of Northern Ireland. There are 40 regions of the British Isles that have their own local radio station, including Jersey, and all with programming budgets that dwarf Manx Radio’s entire budget, and now S4C receives around £76 million each year directly from the BBC, plus 10 hours of Welsh 175 language programming per week, valued at £22 million a year. BBC subsidy from the licence fee is not a new idea. The Darwin Report recommended it, as did the recent Select Committee looking into the BBC licence fee here on the Island. The future of the Island’s public service broadcaster could be secured by a formula such as this, which mirrors S4C’s: Government’s subvention support of £550,000 plus RPI, or its GDP 180 formula… that is down £300,000 from the current £850,000 per annum; secondly, BBC support of around £650,000 per annum plus RPI – and that only represents about 11.5% of the Island’s total contribution to the BBC; our commercial revenues of around about £950,000. A formula like this one, following the completion of the current capital programme at Manx Radio, would, we believe, not only allow for appropriate programme funding but provide the 185 ability for Manx Radio to run its own transmission platforms, provide its own future capital funding and allow the company to trade without the need for any significant ongoing overdraft. Finally, Sir Jon Shortridge, who was the former Permanent Secretary to the Welsh Assembly, was asked to review the corporate governance of S4C and to advise on a model of best practice and accountability for the broadcaster. Again, this report provides a blueprint that would be 190 eminently suitable for Manx Radio and the Isle of Man, and I have passed a copy to the Committee for your consideration. Thank you.
Mr North: May I just finish off, Mr Chairman? 195 The Chairman: Yes, quickly, please.
Mr North: Yes, it is very brief. This solution that Mr Pugh has just expounded I am sure is worth looking at and would allow 200 Manx Radio, the national public broadcaster, to function independently across all its operations and to remain sustainable, exactly as prescribed by the Council of Europe. We are both extremely happy, in fact, to try and answer any questions you may have, but I would be grateful if you would allow me to remind you that broadcasting is a many-faceted business and that Manx Radio has, of necessity, staff who specialise in programming, commercial 205 business and the technological matters, as well as a non-executive director who chairs the audit committee –
The Chairman: I am aware of all this.
210 Mr North: – and, Mr Chairman, I would urge the Committee also to take up our invitation offer to visit the station, as I believe it would provide some useful background knowledge and clarity, and I would look forward to meeting you there and taking you round the station. Thank you.
215 Q3. The Chairman: Yes, of course we will consider anything you say there. To move on, really, and just ask you a question – who are you accountable to?
Mr North: Who are we accountable to: we are accountable to our licence, to the Communications Commission; we are accountable to the Purpose Trust, who represent the public; 220 and of course we are accountable, in many ways, to the Treasury, in terms of financial regulations.
The Chairman: Mr Hall.
Q4. Mr Hall: Yes, you say, obviously, who you are accountable to, but do you not think 225 you… Are you accountable to parliament? You did not mention...
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Mr North: Yes, absolutely. Parliament decides on the whole formula of how Manx Radio operates – absolutely – and that is the point that was made, I think, in the debate that you had in Tynwald. Several Members, I think, made the point that, of course, it is not the executive 230 Government that controls, or should control, Manx Radio; it is parliament that controls Manx Radio, the public service broadcaster.
Q5. The Speaker: Just following on from that then, Mr North, the Purpose Trust: can you just explain what it is supposed to do? I am not at all clear. It appears to have played no role in the 235 interface between the board at Manx Radio and Treasury, and yet it was set up, was it not, to create that necessary arm’s-length relationship between the radio station and Government? So what does it do, the Purpose Trust?
Mr North: Do you want to answer that? 240 Mr Pugh: Yes, if I may. The Purpose Trust is there to ensure that the purpose, which is also placed in our licence, is adhered to. They do not look after the management of the station, they do not get given detailed financial 245 information, but they are there to ensure that the voice of the public is heard and that they keep the directors, the board and the station to… They are there to ensure that we deliver the purpose which is enshrined in the Trust document.
Q6. The Speaker: Your ability to deliver the purpose depends on having adequate funding to 250 support public service broadcasting. (Mr North: That’s right.) So, given that that is the purpose, how can they not be intimately involved with yourselves in securing that funding from Treasury?
Mr Pugh: Because Treasury was seen to have the final scrutiny – and therein lies the problem that we have just explained a few moments ago. 255 Public service broadcasting is for the people, to be paid for by the people and to be run by the people, and what it is not is also equally important. It is not for a parliament, it is not for a government, it is not for a political party or a President, not for a church or a trade union body; it is there for the people, and the role of a public service broadcaster is to scrutinise the elected representatives. So, to be closely tied in with a Government Department flies in the face of 260 everything that the Council of Europe suggests is the formula –
Q7. The Speaker: Yes, well, forgive me, but that is my point: the Purpose Trust exists to bridge the interests of Government with the radio station. It performs the function of the national interest, representing the people, as you have just described. 265 So why are they not engaged in fighting your corner with Treasury, as representatives of the people? Why are you engaging directly with Treasury?
Mr Pugh: Because the purpose does not include that involvement. The purpose is purely looking after the editorial output of Manx Radio. 270 Mr North: The financial side is not in.
Q8. The Speaker: It includes, does it not, though, that you are delivering your remit of public service broadcasting? 275 Mr Pugh: That is right.
Mr North: Yes.
280 The Speaker: And to do it – to repeat my question – requires funding, (Mr Pugh: Yes.) so how can you not be involved in the funding situation?
Mr Pugh: Well, I think therein lies the issue, in that the structure is totally inappropriate.
285 Q9. The Speaker: So you have not used the Purpose Trust effectively?
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Mr Pugh: No, I do not think the Purpose Trust is set up in a way that it allows us to use it in the way that you describe.
290 The Speaker: Thank you.
The Chairman: Mr Hall.
Q10. Mr Hall: Yes, just going around that, obviously in your opening statements today you 295 were talking about independence, and of course independence is one of the key principles of public service broadcasting. You suggested that you may have limited independence, but certainly you do not have independence, and the very fact that one of those key principles within public service broadcasting is not there… therefore public service broadcasting does not really exist, because one of those key principles is not there. 300 Would you like to comment on that?
Mr Pugh: I think you are absolutely right.
Mr North: We agree with you. 305 Mr Pugh: Totally agree with you.
Mr North: That is absolutely right.
310 Mr Hall: That, effectively, public service broadcasting, as it is, has never existed?
Mr Pugh: I think we would argue, as Mr North mentioned earlier, editorially I would disagree with you. I believe that we have structures in place to ensure that we are editorially independent. However, money is what drives total independence, isn’t it, and we do not have that independence. 315 Q11. Mr Hall: You are absolutely certain then, that there is no political influence editorially in Manx Radio?
Mr North: No. 320 Mr Pugh: No.
Q12. The Clerk: Sorry, does that mean ‘No, we’re not certain,’ or –
325 Mr North: Well, we are certain, yes: there is not, period.
Q13. The Chairman: Okay. How does the Communications fit it?
330 Mr North: The Communications Commission?
The Chairman: Yes.
Mr Pugh: The Communications Commission offers the opportunity for people to apply for a 335 licence. We have a licence. They also issue the broadcasting codes and the advertising and sponsorship codes, and they monitor our output, monitor complaints that go directly to them, and interact with us accordingly to ensure that we meet the terms of our licence with them.
Q14. The Chairman: Do you have much to do with them at all? Do you have much 340 correspondence with them?
Mr Pugh: Not a great deal.
Q15. The Chairman: Should you? 345 Mr Pugh: I did, for example, receive some correspondence this morning. You will note, in our annual report every year, that we publish a statement of compliance, and they issued one to me ______8 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
today for insertion in the forthcoming report. Again, it says that they received no complaints about Manx Radio. 350 The Chairman: Thank you.
Q16. The Speaker: Is the Purpose Trust any more effective than the Bare Trust that was set up following the Cole Report in 1995 in order to hold the shares on behalf of Government? 355 Mr Pugh: Yes, I believe it is.
The Speaker: Is the Purpose Trust working any better?
360 Mr Pugh: I believe it is, in that the purpose is clear. However, from your earlier questioning, the definition of clarity I can see is one that we could spend some time talking about. I think there is now an understanding with Treasury and with the Purpose Trust and with Manx Radio as to what their role is, and their role is there as an editorial arm’s length between us and parliament, but not in terms of the finances. 365 Q17. The Speaker: Yes, okay. So you have made it clear they have no role in ensuring Manx Radio are physically able to deliver the purpose of public service broadcasting on behalf of the public. (Mr Pugh: Yes.) They have no role in that. Their role, you are saying, is confined to ensuring that you, as a station, represent the interests 370 of the listening public. (Mr Pugh: Yes.) How do they assess the views of the listening public, and do they produce reports to you in that regard?
Mr Pugh: They publish... again, within our annual report... The Trust send us a report, which 375 we just replicate; we do not, obviously, amend. We publish that within this. But in terms of them giving us audience feedback, it tends to be via letters from the public to the Trust. They have no finance: they cannot go out and commission surveys, or anything like that.
Q18. The Chairman: Does that make them more ineffective, do you think, not having a – 380 Mr Pugh: Sorry, did you say ineffective or effective?
The Chairman: Ineffective.
385 Mr Pugh: I think it comes down... I would not blame the –
Q19. The Chairman: Should they?
Mr Pugh: No, I do not blame the Trust. I think the Trust operate within the parameters that are 390 set for them; are very diligent about what they do. However, I think it comes back to what we talked about earlier, which is that the whole make- up is wrong. It is not the right make-up. It should be something like the authority for S4C or, as was suggested at the time of the Darwin Report... What Tynwald wanted, back in 2002, was a charter for Manx Radio akin to the BBC charter. By ‘the charter’ they meant the independence. 395 What happened then was that when the working party started looking into all this, they discovered that on the Isle of Man you cannot have a charter because we are a Crown dependency; and so they started looking at alternative mechanisms. Out of that mechanism came the Purpose Trust, but what Tynwald had asked for was an independence, and I would argue that that independence is more akin to Manx Radio being 400 enshrined within the statutes as the public service broadcaster for the Island.
Mr North: Just to give you some… We meet with the Trust four times a year, and they come up to Manx Radio following our board meeting. They do fire some pertinent questions on things they might not be happy with, that they think we should be doing differently, that they have had 405 feedback from the public on. But they just do not get involved, as we have said, in the financial side at all.
Q20. The Speaker: So, really, it is a bit of a waste of time? ______9 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
410 Mr North: Well, they are a watchdog and that is what they were set up for, and of course there is the Enforcer.
Q21. The Speaker: And what does the Enforcer do?
415 Mr Pugh: Ensures that the Trust meet their purpose. (Mr North: Yes.) He has never had to be… We have never had any disagreements. We have always found solutions to the issues that have been raised.
Mr North: We do not see him, do not hear from him, and it is just there as a… Well… 420 Q22. The Speaker: Obviously, Chairman, we would be probably well advised to pursue with the Purpose Trust itself and the Enforcer what they see their role as being, (Mr North: Yes.) but you have said that it is better than the Bare Trust that preceded it, not as good as having a statutory body, as was represented; and yet it has no finance to engage with the public, it has no mechanism 425 to represent the views of the listening public authoritatively, but it meets with you four times a year and it has no role in engaging on your behalf with Government. (Mr North: No, correct.) So it seems that its role is somewhat limited.
Mr Pugh: Well, I think, as Mr North mentioned earlier, that Tynwald set up three aims and 430 none of them have been achieved. They went part of the way with the Purpose Trust, but the reality was… I think, with hindsight, it was not thought out that carefully.
Q23. The Chairman: Can I ask who appointed both of you?
435 Mr North: I was appointed by the board when I retired from Tynwald. I had been retired, I think, about six months or something like that, and I was asked by the chairman of the board. The board had obviously had a meeting, and said would I join the board. I agreed and I joined the board, and then, about two years, three years later, I suppose – four years, maybe – the chairman retired. Every year, the chairman is elected, and the chairman retired and I was... In fact, 440 somebody else was asked to be chairman, who did not want to take it, and I was then asked to be chairman, and I agreed to take it on. I have to say the board of Radio Manx Ltd… I am not an expert on radio, by any means. I chair what is a group of very experienced and professional people who take their role as a director, Mr Chairman, very seriously. 445 We have Mrs Alison Jones, who is is a fellow of the... chartered accountant, and she chairs the audit committee and is a... the hours that she puts in and the conscientious work that she does is tremendous.
Mr Pugh: I was appointed by the chairman – not by this chairman, by his predecessor. 450 Q24. The Speaker: Does the Purpose Trust play any role in any of these appointments?
Mr North: No.
455 Mr Pugh: No.
The Chairman: Jonathan.
Q25. The Clerk: Thanks, Mr Chairman. 460 Could I ask just a little bit more about this company structure, because working normally scrutinising the executive, I am not familiar with some of the terminology in company structures (Mr North: Yes, right.) and company law. I understand that Radio Manx Ltd is a company, and Mr North, you announced yourself as Chairman of Radio Manx Ltd, (Mr North: Yes.) but you have now said that you are chairman of 465 the board of directors.
Mr North: Yes, of Radio Manx Ltd.
The Clerk: So, who – 470 ______10 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr Pugh: Manx Radio is a trading name of Radio Manx Ltd.
Mr North: The actual commercial... the company under – I think it still is the Company Act 1934, is it? – which it was established is a commercial company called Radio Manx Ltd, and 475 then –
Q26. The Clerk: Who are the members of the company?
Mr North: Who are members of the company? The directors. The sole shareholder is the 480 Treasury and the directors are appointed by the board, the existing board, and –
Q27. The Clerk: Is that normal?
Mr North: Yes. 485 Q28. The Clerk: Is it normal for a company –
Mr North: Yes.
490 Q29. The Clerk: What is normally the relationship between shareholders and directors?
Mr North: Well, the shareholders, every annual meeting, come and they actually approve the directors, and there are lots of cases at the moment in the press where there has been a vote against by shareholders attending the meeting for the appointment of, or the re-appointment of a director 495 and where they have been turned down. It does not happen very often.
Q30. The Clerk: When was the last annual general meeting?
Mr North: We have one – 500 Mr Pugh: Every September.
Mr North: Every September, we have an annual general meeting –
505 The Clerk: And does the shareholder –
Mr North: – attended by the Treasury as the shareholder, yes.
Q31. The Clerk: Does the shareholder have the right to approve or not the appointment of 510 directors?
Mr North: Yes, I would have thought so. Yes, they do, as in any company.
Q32. The Clerk: So, although you describe yourselves as being appointed by the previous 515 directors, your appointment is in the gift of the Treasury.
Mr North: Yes, I would say so.
The Clerk: Both of you? 520 Mr North: Yes. Well, yours is a contract –
Mr Pugh: Well, as a director. 525 Mr North: – as a director. Of course, going back to when it was set up, Tynwald evidently decided there should be four non-executive directors, and there were, up until fairly recently – until about a year, two years ago – three executive directors, and we have now got four, but the chairman, of course, has the casting 530 vote, and the reason that Tynwald put in four non-execs was so that a majority on the board could
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have control of the company – and acting, of course, for the shareholder, the Treasury. So there are eight – there are four executive and four non-executive – directors.
Q33. The Clerk: What influence, in theory or in practice, does the Treasury therefore have 535 over the day-to-day operation of the station?
Mr North: The day-to-day operation… If they wanted to, they could have total control of it, but we do follow financial regulations, and the Treasury – a representative of the cherry… of the Treasury – a Freudian slip! – does actually attend every audit committee, which I do not attend. 540 Under corporate governance, the chairman of a company would not normally sit on, and certainly not chair, the audit committee. So the audit committee… We have a chairman of the audit committee, Mrs Jones, who chairs it, and Treasury attend the audit committee.
The Chairman: Mr Hall. 545 Q34. Mr Hall: Yes. You said there that obviously the Treasury could have total control over the day-to-day. Do you find that concerning, that effectively the executive Government could have, if they wanted, total control over the day-to-day operations?
550 Mr North: Yes, that is right.
Q35. Mr Hall: And then, when we are talking about independence of the station, effectively, indirectly, the very fact of having discretion about what level of funding you have from year to year, that affects the quality of the programming? 555 Mr North: Correct.
Mr Pugh: I think you have hit the nail on the head.
560 Mr North: That is exactly what happened, yes.
Mr Pugh: I think there are two issues here. One, you can look at it as it is advantageous in this way, in that Treasury retains a watching brief over finances. In our introduction, we argued against that, but you could see why that might be the case. But in terms of disadvantages to the listener, 565 Treasury has intervened and overruled Tynwald agreement on funding formulas, and the company is also affected by the personal views of the Treasury Minister – Ministers. So that is the negative side. There is one example. The Value for Money Report came to Tynwald in 2006 and was agreed. Three weeks later, I was called into Treasury to be told that I would have to contribute an 570 additional 9.8% towards the company pension scheme. We have no issues about paying the full requirement for the pension scheme, but Treasury knew, when Tynwald was taking that vote, that they were about to ask us for (Mr North: £83,000.) £83,000 a year back.
Mr North: Having just fixed our budget. 575 The Chairman: Mr Speaker.
Q36. The Speaker: Can I just move on to what you had to say about the broadcasting models – you referred to it a few moments ago and also in your written evidence. The BBC cannot have a 580 Royal Charter in the Isle of Man, so that is not a good model. RTE, the Irish public service broadcaster, could form the basis of a new Isle of Man Act, which you have suggested, but it is the Channel 4 for Wales, the Welsh language television service, that you hold out as the model to be followed in the Isle of Man. I think you said that this afternoon and you say it quite clearly in your written evidence: 585 ‘The benefit of this type of arrangement is that S4C retains its corporate identity, although it is primarily funded by the BBC through the BBC licence, and this type of arrangement could work exceptionally well in the Isle of Man.’
You went on to say that Government’s subvention of support could be reduced to £550,000, 590 but that is predicated on BBC support of £650,000.
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Mr North: Yes, that is right.
Q37. The Speaker: You will have no doubt read the Select Committee Report into the BBC 595 licence. What makes you think that we will be able to negotiate with the BBC to get funding of £650,000 a year? It is a pipe dream, is it not?
Mr Pugh: I can give you two concrete examples of success. When the Delivering Quality First agreement was introduced by the former Director-General of the BBC, local radio in the UK was 600 to lose £40 million in funding. It was not implemented quite like that – about £20 million is what was actually reduced at the end of the day. But during that period, there were two areas which received additional funding, and they both came about through political influence. One is the Isle of Man. The BBC allocated an additional £100,000 for video reports here in the Island. It has not come to fruition as yet – they said it was 605 over a three-year period and I guess we are somewhere around about halfway through that three- year period – but they announced that the Isle of Man would get an extra £100,000. The other area was Dorchester. Oliver Letwin pressurised the government and the BBC Trust, and they received £200,000 per annum just to produce a breakfast show from Dorchester. So there are two recent examples of when political pressure has influenced the BBC. 610 Q38. The Speaker: So it will be contingent on political pressure on the BBC. Clearly, in the case of Wales, there was considerable political pressure and it was a political decision by the Department of Culture over there, (Mr North: That is right.) (Mr Pugh: Yes.) but there is absolutely no evidence that the BBC are prepared to entertain any discussion, as you can see from 615 that Report – they virtually said that: that there will be no funding. They are willing to help improve the website and all that sort of thing, but to give £650,000 per annum to run Manx Radio, they are not going to do that, are they?
Mr Pugh: As an external observer, I would say that the issue with the Select Committee 620 Report was that it did not recommend what the money was to be spent on, so there was… If I remember rightly, was there a recommendation that £1 million should be refunded to the Isle of Man? I think the big difference is if Tynwald believes that what I am suggesting, or what Manx Radio is suggesting is a sensible way forward, then I believe a vote within Tynwald would send a very, very strong message to the BBC that this is what the Isle of Man wanted from its licence fee. 625 Q39. The Chairman: You say quite clearly this is the way forward – £550,000 from the Isle of Man Government, £650,000 from the BBC, and £950,000 by the commercial... If, for example, we went down that route and we took a vote in Tynwald and it failed, then what?
630 Mr Pugh: We put forward, I think, three or four difference scenarios. Scenario 1 is Manx Radio becomes a commercial radio station with no Government support. It is because that is an option that we wanted this debate to take place. What has been happening is that over the last… since 2009-10, our subvention has reduced by, off the top of my head, 27.5%, thereabouts.
635 The Chairman: You said 45%.
Mr Pugh: No, 45% was the commercial revenue. The subvention –
Mr North: It has gone down by… It is £328,000 less than we should have been getting as 640 approved by Tynwald – and this is the point that Mr Hall was making. Absolutely right. Tynwald decided that was the formula, but within two years that formula had been ditched, but not by Tynwald: by executive Government.
Mr Pugh: So that is 27.9% down on what the formula said it should be at this stage. 645 Manx Radio is not to be ring-fenced, but the point is if it is that the Isle of Man wants public service broadcasting of the type that Manx Radio currently delivers, it has to be funded. Manx Radio has reduced its full-time staff from 35 to 20 over the last four years. We have looked at every possible way in which we can save money. The whole purpose of the Internal Audit Report was that we knew that people would not believe it if we said that we have exhausted 650 all the mechanisms.
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Q40. The Speaker: Can we just come back, before… We are going to ask you about what you have just said, but just reverting again… The S4C model, which would involve an element of BBC licence fee – in your written evidence, where you talk about alternative funding scenarios for 655 Manx Radio, and you clearly conclude that a licence fee in line with the European models that are recommended is the way forward… In the event that we do not get licence fee via BBC funding, would you be in favour of a separate licence fee for Manx Radio levied in the Isle of Man?
Mr North: I think that would be politically unachievable, myself. 660 Q41. The Speaker: Why would it be politically unachievable?
Mr North: Again, because the public – some of the public, and we have… What is it, 53% of the Island use Manx Radio, but the other part that do not, of course there would be a vociferous 665 lobby against any licence fee in addition; and in fact, when you look that they are already paying the BBC – the people of the Isle of Man pay the BBC £5 million per year for the licence fee – there is, in my opinion, a very good argument politically, to the BBC and to the the UK government, that we should receive a proportion of that, which I think was –
670 The Speaker: I am talking about in the event that we lose that argument –
Mr North: Yes, alright, well –
The Speaker: – then licence funding direct in the Isle of Man, you are saying, is not going to 675 be politically palatable to the public, but the public are already paying £900,000-odd subvention (Mr North: Yes.) –
The Chairman: On top of the BBC.
680 The Speaker: – on top of the BBC.
Mr Pugh: Yes, on top of the BBC.
The Speaker: They are paying it anyway, but they are not – 685 Mr North: This is just my own opinion, but pragmatically, and in terms of politically –
The Speaker: They are not conscious of paying it, because the decisions are being… [Inaudible] 690 Mr North: That is right. It is… whatever it is – 11p a week, I think it is, or something like that, but if you were to come with a separate licence fee just for a public service broadcaster, I… politically… We get… I was going to say ‘slagged off’, but maybe that is the wrong term.
695 Q42. The Speaker: It is just so that the Committee fully understands that your preferred European funding option, which involves a licence fee, (Mr North: Yes.) because that separates the spending from the state itself and from Government (Mr North: Yes.) and removes all this business that we are hearing about Treasury holding the shares, turning up at the AGM, theoretically being able to sack the directors, but in fact you know it does not happen... and a 700 Purpose Trust, which is somewhere in the middle but which does none of that, (Mr North: Yes.) but just to understand that when you recommend licence fee funding as on the European model, which you stress at some length it is predicated that that licence fee funding be via the BBC.
Mr Pugh: Yes. I think, to go back to the crux of your question, the European model says that 705 even though the licence fee system is flawed, especially in this day and age, when not everybody gets their pictures via a TV… However, it cannot identify a more appropriate method. So, my thoughts are – not taking account of the political views that David has – that that should be the mechanism. So, if it means two licence fees, well yes, that is what I would argue. However, I am very aware of the points that David raises, which I am sure you are also aware of. 710 The Chairman: Shall we move on? Are you okay, Mr Hall?
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Q43. Mr Hall: You talk about funding models, but what would you describe as being... We have talked about the licence fee, and other countries use other different formats – to even go as 715 far as, in some European countries I believe they put it onto electricity bills (Laughter) – but whatever model it actually is, what would you say is the key ingredient for success of any funding model? One example: medium-term stability, I would have thought is one thing, which at the moment you do not really have, because yours is dictated by Treasury on an annual basis at their discretion. 720 So, in the medium term, would you agree, one thing is you need to have medium-term stability; and what other things do you think, generally speaking, of any successful funding model? What should it be? What other things?
Mr Pugh: Transparent. I think everybody should know how it works and how it is going to be 725 renegotiated at the end of its five-year or 10-year term – five years, I imagine, is probably as long as practical. I think transparency is the other thing, so that we know. What has happened in the past is that Treasury know that they have to have Tynwald approval to change Manx Radio’s subvention, but it is done as part of the budget process and it is never even discussed. So yes, they have met the actual criteria, but there has not been any transparency 730 in what has been done – and the issue that we find is that, yes, you can cut – and yes, of course we should be looking for efficiencies every day of our operating lives – but there comes a time when you cannot deliver the public service. So, I think as you describe, but transparency is the additional –
735 Q44. Mr Hall: You mention a very good area there, talking about transparency. I note from when you report your accounts there is no separation of accounting systems between public service and non-public service – unlike other countries, which actually clearly separate the two in their accounts, so they have non-public service and public service. Why don’t you do that?
740 Mr Pugh: A few reasons. First of all, if you look at RTE, who do do exactly as you describe, that is a company which, off the top of my head, takes in about £150 million a year and has a number of divisions. Each of the divisions reports its commercial activities and what it spends on public service, but the commercial element of what they spend is small in comparison to the state funding. 745 If you look at S4C – the £76 million and the £20 million and the £7 million from the DCMS – only £2 million is commercial revenue. They report separately. At Manx Radio, we could not survive without the commercial revenue – 55% of our revenues are commercial revenues. Public –
750 The Chairman: But that was not the question, was it? The question was –
Mr Pugh: So, why don’t...? Because we cannot differentiate. Public service broadcasting in the Isle of Man could not exist without the commercial support.
755 Q45. Mr Hall: Is it possible for you, if –
Mr Pugh: I do not think it is.
Mr Hall: Is it possible? Could you separate your accounts between public service and non- 760 public service, such as they do in other countries?
Mr Pugh: No, because –
Mr Hall: Is it possible, or not? 765 Mr Pugh: You may have seen in our annual report we break down every year our output by genre. The very first year I did this report, which was 2003, I think – I now call this ‘remaining output’ – I put in non-public service broadcasting, because that is what it... The Communications Commission came to me and said, ‘Why have you used that term? 770 Everything you do is public service broadcasting.’ And of course it is, because all I put down here are the genres – religion and things like that. So it becomes very difficult. We are such a small company. We are a £2 million-a-year company. We have our own accountant, we have our audit committee, we have an annual audit carried out by PWC. We are ______15 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
very transparent in what we do. I think if we were to break down our funds any more, all we 775 would be doing would be incurring additional costs with no actual benefit to the taxpayer.
Q46. The Chairman: You said the Communications Commission said... that why you break it down is because everything you do is public service broadcasting, but the RAJAR figures clearly show that the Manx element to Manx Radio is very, very popular, and when the Manx element 780 stops, the figures show that basically your radio station is on a par with the… certainly 3FM and Energy. So, basically, what those figures are saying – which are relatively accurate, I think – is that people in the Isle of Man want a Manx element to its programming. So, really, what we are saying is that the other part is not really a Manx element, and that is not what the people want. 785 Mr Pugh: The Alex Brindley afternoon show – just four hours, from two o’clock until 6 p.m. Monday to Friday – falls into my ‘remaining output’, but Alex has things that are relevant to the Island. If there are weather issues, his show changes to reflect the weather and to report the weather. He has interviews from people across and from people on the Island who are talking 790 about things which we believe are relevant to the Isle of Man.
Q47. The Chairman: Is that the only programme that does that?
Mr Pugh: Chris Kinley in the morning, from 9.30 to 12 o’clock, plays greatest hits from 795 previous years, but he is incorporating calls from listeners and interacting with the community throughout. The RAJAR figures that you quote – you have to remember that RAJAR is a quantitative bit of research. We did some qualitative research, which I think you have got a copy of, which came through from Research Offshore, which shows very different information, but the RAJAR 800 research only shows the number of people who are listening at particular times. It will tell us their sex, it will tell us their age, it will tell us who they were listening to before and who they leave us to go and listen to. So it gives us some important information. Also, you could deduce from that that Manx Radio has its highest audience at 8 a.m. in the morning, Monday to Friday. We have 10,000-12,000 people. However, every radio station has its 805 peak at about 8 a.m. in the morning, irrespective of whether or not they are doing local content, or whatever they are doing.
The Chairman: Mr Speaker.
810 Q48. The Speaker: Thank you, Chairman. I just want to ask you a bit more as to the problems in separating out the costs of the radio station that are attributable to public service broadcasting, compared with generic broadcasting. Obviously, any radio station needs staff, it needs equipment, transmission facilities and all the rest of it. Would it not only be more transparent, but actually more helpful to your case, in arguing 815 for protection of the public service element of what you do, if you were able to clearly identify in your spending and in your accounts the costs attributable to the public service element, the speech programming? Surely, that must be possible. Well, we know it is possible, because RTE do it, but my question is would it not help your case if you were able to answer the question – ‘Well, look, if you freeze 820 our subvention or you reduce it, this is what it currently goes on, this is what is going to stop’ – because the other elements of the radio station, the music, for which you need transmitters and so on, will carry on anyway?
Mr Pugh: Well, that is not quite true, but I get the gist of what you are saying. 825 We produced a document, which specified what you wanted, for Treasury. It tells us that news bulletins and current affairs cost the taxpayer £3.36 per head of population, and the total annual cost was £476,000. We looked at sport. The cost to the taxpayer was 31 pence per head of population per annum, and the total annual cost was £44,000. And I can go on through the other genres. The Committee can have a look at it. 830 But the issue is this took weeks of work, because it is not how Manx Radio’s finances are prepared. We produce probably the most detailed management accounts of any £2 million company that you can imagine, and that is because not only do the management team scrutinise them on a monthly basis, as do the board, as does Treasury, as does the audit committee, and certainly our auditors do... So we are highly scrutinised, and that scrutiny costs us... I would not ______16 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
835 want to be tied to this figure, but I would say, off the top of my head, that probably costs me about £30,000 a year to produce. I could produce those other details, or I could spend the money on public service broadcasting. I can do whatever is asked of me.
840 Q49. The Speaker: Those figures you quoted presumably correspond with... in the Audit Report:
‘The estimates provided by Manx Radio indicate that the cost of news production, including overheads, is £1,080 per hour. This is on the basis of 416 hours per annum, eight hours per week. This compares with the cost of its other 845 production, estimated at £104 an hour.’
So speech programming, the actual cost, you can identify?
Mr North: Yes. 850 Mr Pugh: Well, we can, but just... I feel, if we refer to the RTE accounts, it is full of caveats that they have averaged, and that is exactly how we have come to those figures. I could not tell you what a particular programme costs, because... If you take ‘Mandate’ in the morning as a very good example, if it is that there is a public meeting in Ramsey and we decide to 855 send somebody to that public meeting, they will travel for half an hour; they will spend half an hour setting up; they will record the meeting, which will take two, two-and-a-half hours; they will then probably do interviews with two or three key people afterwards for half an hour; travel back; they will then edit the programme, edit their recording, which might take them two hours – and we will end up with three minutes of air time. 860 To do that particular example is hugely expensive. However, if one of you gentlemen comes to the studio for an interview and we spend five minutes doing an interview with you, it obviously does not cost the same amount per hour, but it is an average of those extremes of costs.
Q50. The Speaker: So, in terms of average, what part of your output is funded by the public 865 service broadcasting subvention, would you say?
Mr North: Forty-five.
Mr Pugh: Well, 45% of it, but I could not tell you which 45%, because we put all our money 870 into one pot and look at finding the most efficient ways of utilising the funds.
Mr North: I think the simple answer, Mr Speaker, is yes, those figures can be produced. I think what Anthony is trying to say is that what we actually achieve by doing that, because of the amount of work and expense involved over and above what we already do... what do you actually 875 achieve by getting those figures? I suppose that maybe if you did it for one year and then –
Q51. The Chairman: I think, really, what you have said is that your figures actually are not accurate regarding public service broadcasting, because you are saying that there is more in that 880 other area of your pie chart. So, really, as Mr Speaker said, wouldn’t it benefit your case to do it?
Mr North: It would, yes.
885 The Chairman: Maybe you are doing yourself a disjustice.
Mr North: Maybe.
Mr Pugh: Although we have done a report, which is available. 890 The Chairman: Mr Hall.
Q52. Mr Hall: When we talk about this – again, this transparency and separation of accounts – just for the record, do you use the public service… the funds that you receive, to cross-subsidise 895 the non-public service? Is that used?
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Mr Pugh: I do not believe that we do any non-public service broadcasting. The ethos of Manx Radio is to serve the listeners. I strongly believe that Manx Radio is the heartbeat of the Island. We tell people when football practice is not happening; we tell people when roads are closed; we 900 tell people when there is a cake stall in such and such a… This is public service broadcasting.
Q53. The Chairman: I have got to dispute that, because RTE Radio 2 is funded by its commercial activities. RTE Radio 2 also has elements of what you are saying Chris Kinley and Alex Brindley do, so it does not think that, because it funds it by its commercial activity. 905 Mr Pugh: Well, Manx Radio could be funded purely by its commercial activities.
The Chairman: Their argument is… They have said that this shall be funded by its commercial activity, and it also delivers music, as you say, which is obviously popular, and also 910 an element of community information as well.
Mr Pugh: I think we have to look, really, at RTE Radio 2: €8.3 million, two years ago, that it spent. We spent, on programming... In rough terms, £650,000 a year is what we spend on our programming. We cannot... You also have to remember why do clients spend money on Manx 915 Radio. It is because they have a problem and they believe that we are able to solve their problem: they want to sell something; they want to tell people about a name change, or whatever.
Mr North: And the evidence is that we do.
920 Mr Pugh: Yes. So we have to be very careful about putting things into little... compartmentalising things.
Q54. The Speaker: In that case, what you are saying is that the £950,000 a year you get, as a subvention for the purpose of public service broadcasting, you cannot account for that £950,000 925 other than it supports the operation of a radio station generally which does public service broadcasting. You are not able to attribute that – that is ring-fenced for the public service broadcasting element of what we do.
Mr Pugh: It is not ring-fenced, because I believe, contrary to the view that you said – ‘Well, 930 the music just sort of feeds itself,’ which it does not; there are some very significant costs associated with playing music – I do not believe that the subvention... Sorry, I am just losing track of what I was saying there. I think it is hugely important that Manx Radio is a flexible enough radio station to deliver appropriate programming for the audience of a public service ilk at the time that situations 935 demand, and by that... we cannot just… The scenario that you are painting is... Let’s say that we had a three-hour afternoon of commercial activities: could we interrupt those to bring news of a major incident on the Island and to turn it into a full news programme? Because that is the sort of thing that Manx Radio does. We react to the situations.
940 Q55. Mr Hall: I think – and correct me, if I am wrong – you said that you are involved… your view being that everything you do is public service broadcast, but you are involved in commercial non-public service activities within the radio station. Isn’t that correct?
Mr Pugh: Yes. 945 Mr Hall: Right, okay.
Mr Pugh: In terms of advertising, you mean?
950 Mr Hall: In terms of… yes, and other stuff, yes.
Mr Pugh: Yes.
Q56. Mr Hall: The other thing, when you were saying about... You mentioned that there 955 would be no benefit if you were... separation of accounting systems, but do you not think there would be a benefit to the taxpayer to see exactly where the money is going, so it can be accounted and it can be seen? Is that not a benefit? In other words, it is transparent? ______18 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr Pugh: I think the theory is absolutely right; however, I would argue very strongly that the 960 sums of money that are involved here are so relatively small. When we look at a BBC radio station, a local radio station... You cannot find these figures out, because they do not publish them, they group them all together, but we have been told by somebody who runs a similar-size area that their programming budget alone is £2 million. Our programme budget is £650,000. So, we then have to... We bring in round about... Last year, it was 965 £880,000 of commercial revenues. There are costs associated with those. Even our commercial team, whose role is to deliver commercial revenues, quite often are working with clients to deliver public service broadcasting. We did exactly that last Saturday when we were in Ramsey, where we were dealing with a commercial client, who is a vet; but by doing that broadcast with them, we brought people into the town. The veterinary practice put on a 970 number of stalls –
The Chairman: I saw it. I was there.
Mr Pugh: I know, it was pouring down with rain, which was unfortunate, but how would you 975 differentiate those things? It is very difficult.
Q57. The Speaker: If I could just come back, because I am trying to understand what it is… I hear what you say and I fully accept that, in the radio landscape that we have, it is essential that the Isle of Man has a public service broadcaster. There are two other radio stations, that do not get 980 any public subvention, which claim to do... the news reporting, for example, falls within the definition of public service broadcasting, but they are primarily music stations. A lot of your output is music. Would it be fair to say that, as a radio station, you need the music to be the vehicle for the speech programming? Clearly, you cannot have hours and hours of nothing but speech. 985 Mr Pugh: We could have nothing but speech, but we could not afford to do nothing but speech. We play the music... There are two reasons. If you think of daytime programmes where we do play music, we are playing music because that is all we can afford. I will give you one very clear example. We have ‘Talking Heads’, which runs from 12 until 990 two, Monday to Friday. Before the last subvention reduction, we were doing two to three featured items per programme. Since the reductions, we now do one feature in the first hour and we have an open ‘Mannin Line’-type phone-in the second hour, and we bolster the programming with music. That is only because we have less money available to spend on programming, so we use music. The music is not cheap. We spend around about £60,000 a year on PRS and PPL alone, so 995 we are paying for that. So you could save that money just by having speech, but our costs would soar. There are also specialist music programmes – things like the brass bands, which are music- based programmes. Yes, they play music from outside the Island, but they heavily feature the Island’s musicians. I think there is music which is public service: we bring musicians into our 1000 studios and record them. We utilise that as part of our programming.
Q58. The Speaker: So just to conclude the point, would you then say that the £900,000-odd received for public service broadcast, and the public money which runs the radio station in its totality and is devoted not necessarily solely for speech programming but for the music 1005 programming as well – that that is the public service broadcasting being fully funded? The funding is going for public service broadcasting, albeit that it is paying, inevitably, for music programming and the generic costs of a radio station?
Mr Pugh: I know what you are trying to say there, and I do in some ways agree with you, but 1010 you have to bear in mind that our public service subvention, which is currently £850,000 only represents 45% of our income. The additional 55% is through commercial activities.
Q59. The Speaker: Yes, but you cannot say that therefore 45% is public service broadcasting?
1015 Mr Pugh: No.
The Speaker: You cannot?
Mr Pugh: I would say – 1020 ______19 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr North: Not without the separate figures that you are talking about.
Mr Pugh: Both we and the Communications Commission believe that all our broadcasting is public service, which takes me back to the first part of your question, where you asked, ‘But surely 1025 3FM or Energy are doing news…’
The Chairman: It is not the same.
Mr Pugh: It is not the same. It is very different, and here is the crux of the difference in my 1030 opinion: a public service broadcaster is here to scrutinise. I hear no scrutiny on 3FM, nor on Energy.
The Chairman: Okay. Mr Hall.
1035 Q60. Mr Hall: I would just like to go back to when we touched on the accountability on which a thought came to mind, being that you alluded that you are accountable to various different parties, but do you not think that there is a risk insofar as where you are trying to satisfy everyone, where you almost become no longer accountable for anything? Would you like to comment on that? 1040 Mr Pugh: I think I would equate this to the licence fee discussion we had earlier. A licence fee needs to be universal; however, I would be the first one to put my hand up and say that not everybody listens to Manx Radio. However, what we do is provide public service broadcasting so that when there is an incident or there is a time of your life when it is appropriate, you can, if you 1045 chose to, get public service broadcasting, and that is what we do. If listening to Tynwald is important to you, it is there – we provide it. If you have decided you are joining a sports club and you want to know how other sports clubs – be they football, hockey, rugby, whatever – are doing, you turn to Manx Radio. It is the primary source of that information, of timely source of that information on the Island. 1050 That is the way in which I would try and answer your question.
Q61. The Chairman: Do you think you are being all things to all people?
Mr Pugh: We are. That is what we have to be. 1055 Q62. The Chairman: Do you think you have to be that?
Mr Pugh: I do believe it, and perhaps I can just show you something which will answer whether or not we believe we are successful or not. Sorry, there are so many little bits of paper 1060 here, but as soon as I find the tab I will show you this. It is a little bit of RAJAR research. Manx Radio, we believe, needs to focus on the whole community. Here we are. Oh, my goodness me, I have got an empty...
Q63. Mr Hall: Do you think that the funding of it has any bearing over the public perception 1065 of Manx Radio? Does that affect the funding models?
Mr Pugh: No, I do not think so.
Mr North: Can I just take it from another angle here, just slightly, but all relevant to this? 1070 The RAJAR figures that Manx Radio has... The recent one that has just come in has gone up 2% and it is 53% now, and this is all relative to what else... but it is the second highest reach within the British Isles and we have had lots of awards for the content of the radio station. The fact that we have actually got 53% and it is the second highest in the British Isles surely counts and says, ‘Hang on, they are doing something right.’ 1075 An angle that we have not really covered at all, which I could construe as public service broadcasting, is if you are starting a new business on the Isle of Man – and we have lots of evidence of this – you have the newspapers, which do a perfectly good job and fulfil it, but Manx Radio is used by commercial people on the Island, small companies, and on Manx Radio... I do not want to try and sell you any ads, but it is relatively cheap to advertise – a lot cheaper on radio 1080 than it is in the newspapers, and smaller new businesses starting up rely on us to actually get them going, and they have done for many, many years – as long as I can remember. ______20 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Without that commercial side for new companies – and existing companies on the Island, who have got a special on or whatever – it really does... they rely on Manx Radio. Without it, I would suspect that the Chamber of Commerce might have something to say, because all the research and 1085 evidence that we get back from commercial companies, the results they get – and Anthony can rattle off some, I am sure, in terms of quantities of replies that we get, and e-mails and all this sort of thing, to adverts – are amazing. It is just something that is not fully realised within the commercial sector of the Isle of Man.
1090 Q64. The Speaker: So the value to the commercial sector of the Isle of Man is having an advertising medium.
Mr North: At a reasonable cost.
1095 Mr Pugh: It is a route to market. There are very few routes to market on the Island.
Q65. The Speaker: I think we take that point. Can I ask you, if you had to survive solely on the subvention as it now stands, what would you do as a station? 1100 Mr Pugh: Providing public service broadcasting?
The Speaker: Yes, what would you do if you did not have that commercial income? Let’s say commercial advertising were to be confined to the other two commercial stations. 1105 Mr Pugh: Oh, I see. Alright then, but –
The Speaker: No commercial income and you only had to survive on (Mr Pugh: Subvention.) the subvention. 1110 Mr Pugh: Are we not talking of it staying at the same figure; we are talking of it just being funded by subvention?
The Speaker: Purely funded by the subvention at its present level. 1115 Mr Pugh: I think that it solves many problems on the Island, but it does leave one problem. From Manx Radio’s perspective it would be the ideal scenario. We could plan our programmes. We are very good at managing costs. What is more difficult is determining income. So, if we were a public service broadcaster without any commercial remit, we could deliver 1120 exactly what we are doing and it would be a more secure footing for us.
The Chairman: Mr Speaker, what you said is on £850,000.
The Speaker: Yes. 1125 Mr Pugh: Oh, sorry, on £850,000?
The Speaker: Yes. If you had to survive solely on the subvention, what would you do? What would you not do? 1130 Mr Pugh: Well, I would not need my commercial department, so I could save costs of about £300,000 from my £2 million – that is £1.7-ish. I have all my establishment costs. I still have all my PRS and all those sort of costs to pay because I would still need those, although I would be funded in a different manner. I would have to pay them in a different manner. At the moment I am 1135 charged dependent on my commercial income. I would not be able to deliver the vast majority of the programming that I am doing now.
Q66. The Speaker: So what would go?
1140 Mr Pugh: Well, first of all, we certainly would not be providing dual programming. In other words, we would not be providing alternative programming on AM, such as Tynwald, such as the TT, the Southern 100. ______21 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
The Speaker: These would go? 1145 Mr Pugh: Yes, although that would not save us money; it would save the DHA money. So that is not part of our money. There would be no saving to us. Any saving would be in the manning of these alternate programmes. I cannot tell you off the top of my head because I have not done that figure, but at £850,000... 1150 We have such high fixed costs of establishment, of administration, and that administration would include insurance and things that you cannot do without. There would be hardly any money left to spend on programming, and I would be amazed if I could employ any people to do it.
1155 Q67. The Speaker: It would be basically a music station, would it?
Mr Pugh: Yes, but then it would not be a public service broadcaster, so I would turn to you and say, ‘Don’t give me the money.’ It would be better to run as a commercial station without taking the public service money. 1160 The Chairman: Okay, can I –
Q68. The Clerk: Sorry, may I just –
1165 The Chairman: Yes, of course, Mr King.
The Clerk: – follow up very briefly? The split was 45/55, I think you said, of your income at the moment – 45% comes from the subvention. You said that if you only had that you would not be able to meet your fixed costs and 1170 you would not be able to operate, I think.
Mr Pugh: Off the top of my head I do not know exactly. I have not done the –
The Clerk: You have not done a scenario for that, you have not thought it through, but 1175 probably, you are saying, it would be very difficult to operate. But then you said it would be better to be purely commercial.
Mr Pugh: Yes.
1180 The Clerk: That would only be marginally more income.
Mr Pugh: It is not the marginally more income; it is what you would expect me to do. As a public service broadcaster, you would expect speech-based programme from me. I could not afford to deliver that. I could be a... 1185 I will give you one example. TT 365, which was the TT archive service that we delivered, 99% of it was computer driven. It did not have anybody involved. Other than the setting up of it, it ran by itself. That is what Energy and 3FM are, in the majority – they are jukeboxes.
The Clerk: Let me follow on that... Sorry, Chairman, can I just follow very briefly on that 1190 one?
The Chairman: Yes, of course.
Q69. The Clerk: Supposing you were only a commercial broadcaster, and a public authority – 1195 maybe executive Government, maybe some other public authority – came to you and said, ‘We have got £850,000 to spend: what can you do for us?’
Mr Pugh: As a commercial…? (The Clerk: Yes.) Well, we could tell them what it would do, but I assume that we would still have our commercial income then, we have the foundations. What 1200 I –
The Clerk: If they said, ‘We have got £85,000: what can you do for us next week?’ Could you operate on a commissioning model for particular services?
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1205 Mr Pugh: Well, you can do, but then what happens when they decide that they have run out of money or they do not want to renew it? Do we just have silence on air at that time? The whole thing about radio is that it is in every room at home when you, and you, and you and I want to listen to it. We can turn it on and it is there and it is providing something for us. If we were only on for two hours in the morning and an hour at lunchtime, for example, people are 1210 going to go off elsewhere. The whole point... The reason we have a high RAJAR is because we provide a service for when people wake up in the morning and when they go to bed. So, in the main, people leave their radios tuned to Manx Radio, and that is hugely important because the higher the audience we get, the easier it is to drive commercial revenues – 1215 Q70. The Speaker: How many people are listening late at night?
Mr Pugh: We have a peak, at about 11 o’clock, of about 3,000 people, which is only marginally smaller than 3FM has at its peak audience. 1220 Q71. The Speaker: So you are saying if you were obliged to cut all that out, people would not leave their radio switched on for the morning to Manx Radio?
Mr North: Correct, yes. 1225 The Speaker: But the vast majority of people are not listening to Manx Radio in the evening, are they, but they are –
Mr Pugh: No, but their radios remain tuned because they know, if they switch it on, they can 1230 get a service.
The Speaker: Yes, but it would be left tuned to Manx Radio, surely, when they start watching television at night?
1235 Mr Pugh: No, but if they switch on at night, wanting to listen to radio – and as I said, we have about 3,000 people listening to Manx Radio at bedtime.
Mr North: I think most of the people have gone to bed and switched off the television.
1240 Q72. The Speaker: Are you saying the public in the Isle of Man, if they want the news in the morning, will not retune their radios to it?
Mr Pugh: Most people say that one of the biggest problems with radio listening is having to retune. In a car it is very simple, but most people at home do not have the same functionality. They 1245 have a knob and it is more difficult to tune.
The Speaker: Chairman, I find this quite hard to understand –
Mr Pugh: Well, this is very – 1250 The Speaker: If somebody wants to listen to the news locally in the morning, they have got three choices, (Mr Pugh: Yes.) three radio stations, which they have now. Are you saying that if they have not left it tuned to Manx Radio from the previous day, they are not going to retune to ‘Mandate’ in the morning? 1255 Mr Pugh: Research – not our research, but research done by the Radio Centre, which is the body for the commercial radio organisation – shows that if you can retain people tuned to your station, you are more likely to keep your audience levels high, and that research that that was done by Research Offshore shows that people on the Island do listen to more than one radio station. The 1260 fact that we have 53% reach and that 3FM has 40% reach does not mean that there is 93% –
The Speaker: They would want the station giving news in depth, and that is Manx Radio. If people want that, they will tune to it.
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1265 Mr Pugh: There is a huge reluctance, especially by the older generation, in retuning radios – that is what the research shows.
The Chairman: Mr Hall.
1270 Q73. Mr Hall: We mentioned the RAJAR figures and where you come in on that, but are they accurate? Is that accurate for the RAJAR, because I –
Mr Pugh: I think it is as accurate as it can be.
1275 Mr North: We hope so. We paid a lot of money for it.
Mr Hall: I understand, and correct me if I am wrong, but I understand that they are rather subjective in what they actually conclude.
1280 Mr Pugh: I do not think it is subjective. How accurate are they? I would say there is fluctuation and I think they would also admit that. However, it is interesting that – I will give you one bit of research – according to RAJAR the percentage of the population who listen to radio on the Isle of Man is 96% and it has stayed at that figure for two or three years. The research that we commissioned Research Offshore to do said that 95% of people listened 1285 to radio on the Isle of Man and so it is in the same ball park.
Q74. Mr Hall: When we are talking about different programmes, do you think that your sort of mixture, your ecology of programmes, are the right ecology of programmes and are they effectively diverse to all sections of society and all ages? 1290 Mr North: We certainly try to.
Mr Pugh: Yes. The graph I was going to show you, which I have not brought with me, is a very simple one. It had the six age groups – 25-34, 35-44 etc, going up. We peak round about the 1295 middle, which is exactly where you would expect us to, but we have significant audience at the young age, and at the over 75s slightly more in that area, as I think you would expect for our basis. 3FM, for example, have their highest audiences at the lower age group, which is what you would expect it to; but what that research shows you is that we are being consumed from cradle to grave on the Island. I am sorry I have not got that to show you, but I could certainly submit it, if 1300 needs be.
Mr North: Although the methods of receiving are changing – what, with smart phones and everything else, that is changing all the time – the basis of radio is still going to be that you have to produce a programme that people want to listen to. 1305 Anybody can produce music and put tapes on, but to actually have public service broadcasting that people are actually interested in and want to listen to, particularly if there is a snowstorm on, or if there is an accident or whatever, a national crisis on the Island... but the forms that they are going to listen to it in and receive it in have been changing for the last 10 years dramatically, but you have still got to have the basis and produce programmes that people want to listen to. 1310 Q75. Mr Hall: Do you think that is one of the challenges with broadcasting?
Mr North: Absolutely.
1315 Mr Hall: It almost creates an... [Inaudible] (Mr North: It is.) where one person effectively likes it, another person who is offended by it dislikes it, (Mr North: Absolutely right.) and that is one of the challenges that you have.
Mr North: Absolutely. 1320 Mr Pugh: I think what we have to do is make sure there is diversity in our programmes. I would not say that our programmes schedule is ideal. I have had to introduce cuts just over a year ago. We have reduced our five o’clock news by a quarter of an hour. I do not think that is ideal. There are other things that we have had to take off.
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1325 What is so frustrating for me is the difference that £50,000 would make. It really would make a huge difference to our output. We are not talking of large extra sums. I just think we have fallen below a critical mass.
Q76. Mr Hall: Do you think that public service broadcasting is still relevant, just as relevant in 1330 the age of the internet and the digital world?
Mr North: Absolutely.
Mr Pugh: Yes, and I think that Research Offshore... It compared the three stations – the use of 1335 Facebook – and Manx Radio was by far the highest user of Facebook, and you would not expect that, but it is because we do push people there to use it. We have digital apps. We make it easy for people to consume.
Q77. Mr Hall: How are you responding to the change in technology, and what is your 1340 response to that?
Mr North: We are responding in many, many ways. We are on Facebook and we are on Twitter, and as Anthony has said, the results that we get are amazing, particularly when there is a function on, or TT or other sports games. 1345 But the interesting one, I think, Mr Chairman, if I may – and Mr Hall, through you, Mr Chairman – is that about... I think Anthony mentioned, about seven or eight years ago, I think it was, when we suddenly had another bill for £83,000 to pay for the pension contribution from Manx Radio into the Government pension fund – just literally out of the blue. Two weeks, three weeks, we have done our budgets: we have to find another £83,000. 1350 If I remember rightly – correct me if I am wrong – what went was we were planning to have a webmaster and actually develop the website far more, which others are now doing, and we just had to scrub that move forward, which we had been planning for two to three years to find the money for it, and suddenly it is scrubbed because we suddenly have to find another £83,000.
1355 Mr Pugh: But we have, for example, over 20,000 people subscribing to our apps.
Q78. The Chairman: Yes, okay. We will just move on. You mentioned the 30-year licence before. How would that help you, if you were to get a 30-year licence? 1360 Mr North: Well, Anthony can come in, but continuity basically, I think.
Mr Pugh: Yes. I think you have to remember why was that suggested by Tynwald. It was suggested so that the public service broadcaster could be differentiated from other broadcasters in 1365 the landscape. Would it make a difference to us? Yes, it would. I can give you an example which is highly current. You may have heard it has been a very difficult negotiation we have had for our TT contract this year. We had put forward a plan that we would get six years’ worth of rights, and the rationale behind that was because the technical infrastructure delivering the TT is so out of date 1370 that we keep our fingers crossed that it is going to work. It needs investment in it and our plan was ‘Give us a six-year contact and we will invest over that period.’ The Minister at DED said, ‘Because the Select Committee is sitting and because we do not know what the future of Manx Radio is, I will give you a two-year contract. So we will not investing in the infrastructure.’ 1375 Mr North: And he offered one year to start with, and that is only... a month ago?
Mr Pugh: Yes. Those are the sort of examples that are factual examples which make the difference; but that is the same for any company isn’t it? When you have got a longer-term 1380 horizon, you can plan accordingly.
Q79. The Speaker: The current licence is a 10-year licence, of course, and it was issued on 1st April 2005, and am I right in saying that you received a request from our Clerk in March to submit a copy of the licence and you replied on 9th April, attaching a draft licence? 1385 ______25 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr Pugh: Yes, that is purely because that was the only electronic copy I have, but it is identical to the current licence.
Q80. The Speaker: Yes, okay. Just looking at what you sent to us, character of service is set 1390 out in the Manx Radio station format. I am just quoting from what the licence that you sent us has to say:
‘Local news will run hourly during daytime. UK and international news will feature at other times. Manx Radio will promote the Isle of Man and doing business in the Isle of Man. Locally produced and presented speech will not 1395 normally fall below one quarter of daytime output.’
Mr Pugh: That particular last sentence you read is the one change and... my apologies. I have a copy of the current station format, which forms the front page of the licence, and it says here that locally produced and presented speech will normally form a significant part of daytime output. It 1400 is what the licence actually says.
Q81. The Chairman: How do you define ‘significant’?
Q82. The Speaker: Was that change made from a quarter of daytime output? 1405 Mr Pugh: It was before my time. I do not know the answer.
Mr North: I cannot remember.
1410 The Speaker: In 2005.
Mr Pugh: Oh, sorry, 2005? I beg your pardon.
Mr North: You must have been there. 1415 Mr Pugh: I must have been there.
The Speaker: You were there at the time.
1420 Mr Pugh: Well, I cannot remember, I am sorry. It is my time.
The Speaker: Because a quarter of daytime output is a very precise measure (Mr North: Yes.) of an important part of the public service element. It has changed from a quarter to (Mr North: Significantly.) a significant… ‘normally form a significant part of daytime output’ – we were just 1425 curious why you changed this.
Mr North: I cannot remember whether we... Did you ask for it to be changed, or did they change it?
1430 Mr Pugh: I genuinely cannot remember.
Q83. The Chairman: With hindsight, do you think it is the right thing to put in?
Mr Pugh: I think specifics are far easier to measure – there is no doubt about that. 1435 Mr North: ‘Significant’: how do you measure it?
Mr Pugh: But you have to bear this in mind: let’s say that we are broadcasting Tynwald, for example – 1440 The Chairman: It must have been changed for a reason and this is what we are saying.
Mr Pugh: Yes. I do not know what the reason was. I genuinely cannot remember. But if we take this month’s Tynwald, for example, we had scheduled and we had staff prepared 1445 for three days of Tynwald, but it finished after one. So what do we do, in terms of our licence? Do we cut other programmes if we have more Tynwald one month?
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I think there are dangers in quotas which are exact like that. Please, I am not suggesting that we would do that; I am just using it as an example. From the best – 1450 Q84. The Chairman: Is it a problem to you, doing Tynwald, because of that?
Mr Pugh: No, but there are additional costs. We have to allocate staff. About four years ago, we spent about £30,000 in automating our Tynwald coverage. We can 1455 now do that with one person from the Chamber and he can switch the transmitters on directly. So we are doing it now in the most efficient way; however, we were doing it through a studio at Broadcasting House and whenever it has sat, we have had to man a studio as well.
Q85. The Chairman: So that is not necessary now? 1460 Mr Pugh: It is not necessary. We invested about £30,000 –
Q86. The Chairman: Technology advancement, is it?
1465 Mr Pugh: Yes.
Mr North: Yes, absolutely.
Q87. The Speaker: Can I go on, Chairman? 1470 It is just the character of service goes on to say that the detailed positive programming requirements for the station will be determined by the trustees of Manx Radio Limited and may be varied from time to time by them. How did they do that, the trustees?
Mr Pugh: Well, we actually have it here. It is published every year in our annual report and it 1475 is the last report on page 22. Also, within the Internal Audit Report, there an analysis over about five years as to how it has amended. As a management team, we look at our budget and we look at what we can afford. Our aim is to deliver the best public service we can. We take our proposals to the Trust and we have a robust discussion as to what it is we are going to do, and we agree that before the commencement of the 1480 financial year.
The Speaker: So this schedule here is agreed by them. Well, that is perfectly clear. Thank you very much.
1485 Q88. The Chairman: I move on now to the other radio stations and the models. What is your view of the Berry proposal?
Mr Pugh: Thanks for the opportunity to respond to that.
1490 Q89. The Chairman: Did you sigh?
Mr Pugh: No. One of the issues that has surprised me out of this is the number of contacts I have had from MHKs who tell me about the lobbying that is going on and their concerns about the proposal, its 1495 lack of substance and that, in their view, there is no benefit to taxpayers. They also say that, as it was not scrutinised in between the two debates between October and December last year, they hope this Committee is going to scrutinise that. So that is the view I get from them. One of the things I did was to personally ask a Government officer, who normally scrutinises such documents, what their view was. They said three things: they did not feel the document paid 1500 any heed to Government financial regulations; they could not see any benefits to the taxpayer; and they could not understand how 3FM and Energy were planning to take profits, but not bring in any money to the party. So that was an unofficial view from a Government officer. You remember, as well, Mr Berry presented this plan at a PAG meeting, and Manx Radio had two of its reporters at that meeting and they came back to me reporting that the audience was 1505 concerned about this plan if it was to be implemented and that they were rather underwhelmed – those were the two views that they reported back to me.
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The Manx Radio view is we believe the proposal does not stand up to scrutiny on so many fronts and draws numerous erroneous conclusions and it flies in the face of what a public service broadcaster is charged to deliver. 1510 I am sure you have seen in our submissions there is a detailed response that we have got there, but perhaps you will allow me just to elaborate on a few of those.
The Chairman: Would you, please.
1515 Mr Pugh: Three loss-making stations, it is proposed, are going to become a profitable station. They propose three shareholders – so that is Treasury, Energy and 3FM – but only one making a contribution, and that is Treasury, but all three taking out a dividend or profit at the year end. There are very significant fixed costs that are not included in that plan. There are no admin costs, there is no insurance, there is no audit, there is no HR, there is no redundancy payment and I 1520 saw nothing there for any digital media – that is the web, the apps and various things. Manx Radio, they propose, will be operated by the Manx Broadcasting Corporation and, in particular, by the directors of 3FM and Energy. So even though they say the board of Manx Radio remains, there is no role for the board because it has got nothing to operate, and that means there are no safeguards for the taxpayer, no audit committee and no annual audit, according to the plan. 1525 I would also ask what due diligence has been carried out. You may know, or may not know, that Manx Radio did look in a detailed way about buying Energy... about three years ago, was it?
Mr North: Three years ago... four.
1530 Mr Pugh: We have studied their accounts and we decided as a Board that we could not afford to pay their valuation of the company.
Q90. The Chairman: Of which company?
1535 Mr Pugh: Energy.
Q91. The Chairman: Have you ever offered to buy 3FM?
Mr North: No. 1540 Mr Pugh: When Ron Berry presented to the board, at the very end we said, ‘Surely the way this will work is if we bought it.’ That is as far as we have ever gone.
Mr North: And it was a throw-away remark, I think... from John Marsom, was it? 1545 Mr Pugh: I think it was, yes.
Mr North: But otherwise, no, we would not consider it. (Mr Pugh: No.)
1550 The Clerk: Sorry, can you just say the name again?
Mr North and Mr Pugh: John Marsom.
Mr Pugh: Our business director. 1555 Mr North: Our business director, who was at the meeting, at the presentation.
The Clerk: Thanks.
1560 Q92. The Chairman: You are saying it was a throw-away remark?
Mr North: I think it was. Well, I took it as a spurious remark that was made at the end of the meeting.
1565 Q93. The Chairman: Did it go any further than that?
Mr North: No. ______28 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr Pugh: No. We never had any other conversation about it in any way, shape or form. 1570 Q94. The Chairman: So, the concept of the Manx Broadcasting Company, do you think it has any substance? Whether this does not stand up to scrutiny... do you believe a new model has any substance, whether it be that called something else? Do you think another model like that could work? 1575 Mr North: It is moving a long way from public service broadcasting, a long way. To be controlled by a commercial outfit and I just… again, looking politically, it just does not –
The Chairman: They would still be a commercial outlet under this, as you say. 1580 Mr Pugh: Well, perhaps, can I –
Q95. The Chairman: Would the rules not change because of the Government’s subvention into it? 1585 Mr Pugh: Why would a Government fund a commercial radio station? There is no precedent for this, in my view. Government supports public service broadcasting, and we talked earlier about whether or not we agreed with not –
1590 The Chairman: I suppose one of the other arguments is that Government is competing against the private sector in the advertising market.
Mr North: I have heard that.
1595 Mr Pugh: But they knew the situation when they decided to apply for a licence. Nothing has changed.
Mr North: But even if you look at the newspapers, certainly when they built their new building, was there a Government grant there? How much have the newspapers had over the last 1600 20 years in staff vacancy advertising, which could not be done… you would have to change primary legislation, but could be done quite easily on gov.im for a big saving. In my opinion – and they would disagree – it is a subsidy to the newspaper.
Q96. Mr Hall: I would just be interested to know your view, if you could comment, do you 1605 think… Isn’t what the other two radio stations on the Isle of Man do a kind of a form of public service broadcasting, insofar as they are informing, they are educating and entertaining?
Mr Pugh: I do not believe they are doing any of those. I will say what I said earlier: one of the keys roles of a public service broadcaster is to scrutinise the elected representatives of the people. 1610 That does not happen on 3FM. They provide some news, but if I was running a commercial station, I would also provide news, and the reason I provide it is to stop people trying to tune to another station for news.
Q97. The Chairman: So basically what you are saying is that they are everything, in a lot of 1615 respects – what you do in regard to your music shows, which you mentioned – with the public service element in it, without the scrutiny. Is that what you are saying?
Mr Pugh: I believe so, yes. That is what I am saying.
1620 The Chairman: If they scrutinised more –
Mr Pugh: If they scrutinise more – but scrutiny is what costs the money. You need people. People need to research.
1625 Q98. The Chairman: Is scrutiny really for 3FM –
Mr Pugh: Sorry, I did not quite catch that.
The Chairman: We are suggesting a bit more scrutiny for 3FM and Energy. 1630 ______29 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr Pugh: But they are a commercial broadcaster. Their aim is to maximise the return for their investors. A public service broadcaster is about putting any profits back into making better programmes.
1635 The Chairman: I suppose they could argue the fact that you are 55% commercial.
Mr Pugh: But that is how Tynwald set us up.
The Chairman: Okay. 1640 Mr North: We knew that when they started –
Mr Pugh: Yes, that is –
1645 Mr North: – when I granted the first licence – I was Minister at the DTI at the time – for Energy.
The Chairman: Mr Speaker.
1650 Q99. The Speaker: Can I ask you, are you saying that there is no merit in the idea that three existing radio stations in a small listening market of the Isle of Man... that there is no scope for reducing fixed costs by sharing costs, studios, equipment and staff? Is there no merit in that idea at all?
1655 Mr Pugh: You raise a lot of issues. The first one I would like to say is that the plan suggests three radio stations and Energy targeting the 25s to 35s. Do you know how many 25 to 35-year-olds there are on this Island? According to the last census, it was 9,800. Why would you set up a radio station to target 9,800 people? The economy – 1660 The Chairman: The income to –
Mr Pugh: Yes, but I have seen the accounts, and according to the Berry plan, it is bringing in £100,000. 1665 I have also seen the submission for its new licence, and it says it has got 16 staff. How does that stack up? I am paying £60,000 for PRS and PPL alone.
The Chairman: Maybe they are getting people to work for –
1670 Mr Pugh: Nothing?
The Chairman: Nothing. Maybe, perhaps volunteers?
Mr North: Voluntary perhaps. 1675 The Chairman: Volunteers, now there is an idea. Is that –
Mr North: A lot of our freelancers, when I hear what they are paid sometimes, quite honestly, it embarrasses me how little we actually pay them – 1680 Mr Pugh: And Manx Radio –
Mr North: – but they enjoy it.
1685 The Chairman: Maybe the volunteers in Energy FM enjoy it.
Mr North: Yes, could be.
Mr Pugh: Yes, perhaps they do; however, £100,000 is what they are saying. I cannot 1690 understand how they can run a station on £100,000 when I know what my fixed costs are.
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Q100. The Speaker: My question, Chairman, was is there no merit, or is there no scope, in reducing costs by sharing facilities, equipment, studio and all that?
1695 Mr Pugh: The Darwin Report suggested that there should be one news provider on the Island. It should be Manx Radio. The Communications Commission said that there should be plurality and that that was not to happen. So there could be scope and we could share costs, but the Communications Commission say no; the Darwin Report and Tynwald said yes.
1700 The Chairman: Mr Hall.
Q101. Mr Hall: Yes, touching on whether sharing facilities could be done, would you be prepared to share facilities with Energy and 3FM?
1705 Mr Pugh: Well, I think here we have to be careful what we mean by this. Certainly we could not run either Energy or 3FM from the existing facilities we have. The facilities we have are sufficient for Manx Radio to deliver what we currently deliver.
The Chairman: They are saying they can. 1710 Mr Pugh: In which physical studios are they suggesting? They do not make any… We have the right amount of floor space for our staff and the three BBC people, and we have the studios that we require to provide the sort of broadcasting that we do. If you increase the surface area and you increase the facilities, then yes, we could do something. I am not saying that 1715 we would need two new studios, but you would certainly need one, and so there is that problem. Then you look at the sales. Perhaps we could look at sharing sales. It is madness that there are three sales teams going around the Island. However, you talked at length earlier about how we keep public funds away from commercial funds and I think you have got a real problem by bringing the sales together of these organisations. 1720 The Chairman: Okay.
Mr Pugh: Could I just make one or two other points about this?
1725 The Chairman: Of course.
Mr Pugh: If you are looking in terms of the listener, neither Energy nor 3FM plan to amend their programming according to that plan. It is only Manx Radio’s programming that is to be altered to provide a tabloid rolling news service. So all the savings are to come from Manx Radio, 1730 and my interpretation is that there would be 15 redundancies at Manx Radio out of the 20.
The Chairman: How many, sorry?
Mr Pugh: Fifteen is what I – 1735 The Chairman: Fifteen?
Mr Pugh: Fifteen out of the 20 full-time staff, by my calculations. It does not say that in the report, but that is my deduction. 1740 Also, what evidence is there to show that the structure they present is a structure that is required, because they are proposing that you make all your savings from Manx Radio, and yet that research that was carried out, that qualitative research that was carried out shows that Manx Radio is the most important station for the Island. It shows that it is Manx Radio that people tune to for its news and current affairs and specialist programmes and those are exactly the programmes 1745 that the Berry plan proposes to eliminate. I think you have to ask yourselves one question. There are three loss-making stations on this Island. We are targeting a population of 84,500 and that relates to a total survey area, in terms of 15-pluses, of 71,000. I defy you to show me a commercial radio station that is successful in a TSA of less than 120,000, and we have three. So if it is that public money is to be used to prop up the 1750 other radio stations, I think a lot of work needs to be done in terms of what does the public actually want.
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Q102. The Speaker: I have two or three more specific questions before we run out of time. In your 2011-12 Annual Report, on page 26, you say that the newsroom now operates at a 1755 minimum staffing level and further cuts will lead to a severely reduced public service broadcast capability. Well, as we know, the subvention is down in 2013 to £850,000 from the £900,000-plus when that was written, so what do you mean by that statement?
Mr Pugh: Manx Radio currently employs 7.2 staff in its newsroom. We believe that is the 1760 absolute minimum to provide the service that we think meets the terms of the licence. We have no cover for illness. We have no ability to send reporters to long court cases – for example, when the Douglas East court case stood, we had a huge dilemma in that we could not send people to every hearing. The court kept writing to us saying that unless we were there continuously we should not be reporting. We do not have enough staff to send to select committees – and I do not know if we 1765 do… yes, we actually do have one at this select committee. There you are, but perhaps nobody is ill and perhaps there is nobody on holiday. But of those seven members of staff, each of those people are entitled to five weeks’ holiday a year and there are two weeks’ public holidays – that is seven weeks per person. Seven sevens are 49. There is always somebody on holiday and so we have six members of our staff preparing our 1770 17 news bulletins a day, I think it is two hours of current affairs per day, sports programming… It is one heck of a toll. And the ‘Mandate’ programme in the morning, I am very proud of the programme but I am highly... concerned, probably, about the pressure I put the presenter of that programme under. I have an article there, which I will not bore you with, but it is a Guardian article of a reporter 1775 who went to the ‘Today’ programme at BBC Radio 4. He talks, I think, of 15 members of staff that he saw whilst he was there. A BBC local radio station will not run a breakfast show – and I mean a music show, a current affairs-type show – with less than seven people. We run it with one person in the studio and one person in the newsroom. It means that if the technology does not work, that person cannot turn to 1780 music and they are put in a highly embarrassing position with no support at all. It is not the way to run the flagship programme.
The Chairman: Okay. Mr Speaker. 1785 Q103. The Speaker: You made it very clear then that you are operating at the absolute limit of your ability to deliver an effective news service – that is what you are saying (Mr Pugh: Yes.) – and that there is no scope for reduction further. So if the subvention does not reflect that or do anything about that, you are going to have to look for costs and efficiencies within the station in 1790 other ways. Would you say that technology has been fully exploited to minimise the number of people who have to be present during the broadcast of a programme? Do you need people present in the building all times the station is broadcasting, for example?
1795 Mr Pugh: There are seven and a half hours a day that we broadcast with nobody in the station and it will be interesting to note that those are the times when our audiences are at the lowest.
The Speaker: What, sorry?
1800 Mr Pugh: Our audience is at its lowest.
The Chairman: Probably because they are asleep.
Q104. The Clerk: Which way is the causality, in your contention? 1805 Mr Pugh: Both ways: (a) we can do it –
The Clerk: [Inaudible]... because there are no doctors, or are there no doctors because... [Inaudible]? 1810 Mr Pugh: Well, perhaps if we put on a compelling programme people might listen to it, but we know that we are competing with television and things in the evening. You are not going to get our peak audiences in the evening, so if we are going to do automated programming, we can do it. ______32 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
We have invested a great deal in technology. I genuinely do not believe that, with the 1815 exception of the internet, there is any other investment that we could make which would save personnel. The internal auditor spent 12 hours in our studios. It is not in his report, but he told me... he said, ‘The new technology has not brought you cost savings, has it? What it has brought you is the opportunity to do more.’ 1820 What you are seeing is that people are feeding stories to the website. They are getting more calls directly into the studio because we have technology which brings it all in. SMS text messages come in on a computer screen. We have got all those sort of things, but they are not saving; what they are doing is giving people more opportunities to interact with the station. So, to answer your question, I do not believe that investment in technology would save us any 1825 more staff. I think we have gone beyond that point.
The Chairman: Mr Hall.
Q105. Mr Hall: Yes, just moving on to... One of my last points is if you can just give us a 1830 brief... the management structure. Do you think that the management structure is top heavy? Is it the right...? Is it structured correctly? Could it be improved in any way?
Mr Pugh: The management structure we have got is, in essence, what the Darwin Report suggested that we should actually have. 1835 You have to remember that Manx Radio is three discrete businesses. It is engineering. We have a director of technology. He not only climbs masts and is on call for a quarter of the 24-hour period every day, but he also designs our studios, he designs our transmission infrastructure, the capital works that have been done – he has been in charge of all of those, and he has three support staff. We could not do without an individual doing those. Where you call him a manager or a 1840 director or something else, that role would have to be done. We then have business. We have a team now which is three... When I first joined, there were five sales executives. We currently have two, although we have a vacancy. We would ideally like three. We have a business director. His role is to develop new products; to train the staff, and he does this to a very high standard. There are KPIs on every aspect of their daily work. He monitors 1845 the number of calls they make, the number of calls that turn into calls, the number of calls that turn into business. We can analyse and we can tell you who is the most efficient member of staff, who is more effective in one area, and this is only done because we have got a manager who is such a dynamic individual that we would not be bringing as much... the business contribution would not be as high without that individual. 1850 Q106. Mr Hall: You mentioned there talking about making calls. Do they actually go out meeting face to face; and is that just on-Island, or does it include off Island as well?
Mr Pugh: It does not include off Island. We have stopped doing what we call ‘national 1855 advertising’ because national advertising is paid for on a cost-per-thousand basis. Manx Radio never has many thousands listening to it – our peak is 12,000. So what happened was that people, motor dealers for example, could get the manufacturer to go to our sales agency in the UK and buy air time on a cost-per-thousand basis, which was about £2.50. So they were reducing the yield per advertisement. By stopping that and concentrating purely on the Island, we have brought our yield 1860 up to £12.50 per advertisement.
Q107. The Chairman: So the reason why Marks and Spencer and Tesco do not advertise is because it is too –
1865 Mr Pugh: Exactly, right. They do not pay the going rate. They will not pay –
The Chairman: Those stores do not pay the going rate?
Mr Pugh: No, correct. 1870 Q108. The Chairman: So it is not even worth pursuing them?
Mr Pugh: No.
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1875 Mr North: Correct. Actually, it is a waste of money.
The Chairman: You have answered a question I have always wondered about. (Laughter)
Q109. Mr Hall: When you talk about the management structure, if I can just go on from that 1880 there, you say the management structure is as per what was recommended.
Mr Pugh: No, it isn’t. No, it isn’t.
Mr Hall: It is marked up on the Report. 1885 Mr Pugh: No. I actually have got that Report, which I can show you.
Mr North: I think if you finish off with the...
1890 Mr Pugh: Sorry, if I can just talk to you about the third person, who is the programming director.
The Chairman: We need to wind up soon, (Mr Pugh and Mr North: Yes.) so as quick as you can. 1895 Mr Pugh: What I can tell you is that of the recommendation, we have five fewer managers than the Darwin Report recommended. We have a very flat management structure: myself, as the managing director; and three other directors. I cannot see how a business, which has three such different parts of the business – sales, 1900 technology and programming – could operate. Those individuals could not do two of those jobs. They are far too diverse and too specialised.
The Chairman: Okay. Mr Speaker. 1905 Q110. The Speaker: Just a final point, really. You refer to technology and how it has created opportunities for you, new options, but not reduced your costs and overheads. We have seen in recent times, haven’t we, not just the radio stations but very good innovations in television – Greenlight Television and Manx Television – and a growing number of the public 1910 are very interested in that. Does that not represent an opportunity for you? Do you see that as an opportunity or a threat to Manx Radio?
Mr Pugh: It is both. We saw it as an opportunity.
1915 Mr North: Seven years ago.
Mr Pugh: Always wanted to be going there –
Mr North: Did not have the money to do it. 1920 Mr Pugh: – but we always... The point is we are licensed to deliver a particular service. If we put money… Again, the Berry plan tells us exactly what it is costing him: £150,000 plus £75,000 in editing costs per year, and so about £¼ million, roughly speaking.
1925 Q111. The Speaker: So some of these very good news services are operated virtually on a shoe string?
Mr Pugh: No, they are not. No, because at the end of the day, it is people that cost the money. The technology is not expensive. Off the top of my head, for £30,000 to £40,000 I could equip 1930 ourselves to do that. We have the website, we have our apps and we could distribute it, but it is people going out of the room and doing it. Video production does take longer. We can see both 3FM through its TV service and Paul Moulton through Manx Telecom, they produce good services; but there is a big difference in what they are doing. They are doing reportage. They are not doing, in my view… they are not scrutinising people. They are not getting 1935 two people there and having debates. They are actually just doing single interviews. ______34 PSB SELECT COMMITTEE, THURSDAY, 23rd MAY 2013
Mr North: The Manx Telecom… it is really thanks to the individual who does it, who I think you all know, and the amount of production he does, from one person, is amazing.
1940 The Speaker: That is what I meant by a shoe string.
Mr North: It is, yes. But I hope he earns… and he was around earlier on, but I hope that he does… Oh, there he is! I would hope that he gets suitably recompensed for the amount of dashing around he does. 1945 Mr Pugh: But I would also say that the hours that that individual works are certainly not… What he achieves is not... It is not just eight hours.
Mr North: He is obviously not married! 1950 Mr Pugh: It is not eight-hours-a-day’s-worth of work. There is a balance, isn’t there: we need people to work efficiently, but also we have a duty of care that people are given the right amount of work.
1955 The Speaker: Thank you.
Q112. The Chairman: I think it is time we probably draw this to a close now. Just one of the recommendations of the Internal Audit Report of July 2012 was to engage a specialist consultant to help identify options for the future. I would just like to let you know that 1960 we do intend to do this. Someone will be coming over to have a close look at the radio station sometime in the next few months.
Mr Pugh: Good.
1965 The Chairman: I take it we will have your co-operation?
Mr North: Absolutely. Yes.
Mr Pugh: Absolutely. 1970 The Chairman: Just to finish, I would like to thank you for your participation today. It has been enjoyable. We will be hearing from other witness, obviously. When we have done so, we may want to hear from you again.
1975 Mr North: We would be delighted to come back and help at any time.
The Chairman: Thank you.
The Committee adjourned at 4.47 p.m.
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