Oral evidence: Creative Industries in Scotland, HC 332Wednesday 18 November 2015

Oral evidence, 18 November 2015.

Witnesses

Mr Edward Vaizey, MP, Minister of State for Culture and the Digital Economy, DCMS and BIS, and Baroness Neville-Rolfe DBE CMG, Parliamentary Under-Secretary of State and Minister for Intellectual Property, DCMS and BIS, gave evidence.

Chair

You are more than welcome. Thank you, Ministers, for turning up to this session today. This is our last evidence session inquiring into the creative industries. We have two UK Ministers; what a perfect way to end this particular session. Baroness Neville-Rolfe, I understand that there may be Divisions in the Lords. We will keep a watching brief on that for you.

Baroness Neville-Rolfe

Thank you.

Chair

If the Minister of State is happy to answer on your behalf we might continue, but let us know if that is going to be suitable and if that is an arrangement that you are happy with. Could you give us an indication of when this is likely to happen?

Baroness Neville-Rolfe

I am afraid I have no idea. It is on the referendum Bill and we do not know how long colleagues will talk for in the other place. It is thought to be between 4 pm and 5 pm but, you never know, it may not happen until after that.

Chair

That remains a mystery to this Committee.

Mr Vaizey

We have one at 4.15 pm.

Baroness Neville-Rolfe

My colleague, Rosa, from the IPO is here as well, as an official, so she can—

Mr Vaizey

We could go and put our officials up here.

Chair

Sometimes when we are having these inquiries we think that is—

Mr Vaizey

Although for 15 minutes, there would be no one to ask some questions.

Chair

For this Committee, that is probably just as useful.

Mr Vaizey

That is right; I suspect more useful.

Chair

But we have a deuce of Ministers this afternoon. Perhaps, just for the record, you could say who you are and what you represent. Please make any opening statement you have, bearing in mind that we have a Division in the Commons in 10 minutes’ time.

Mr Vaizey

I am the Minister for Culture and the Digital Economy. I welcome this inquiry; Scotland obviously plays a crucial role in the success of the creative industries through the UK. It is worth noting that the creative industries have grown three times faster than the economy as a whole. They are a very important part of our economy and they deserve to be highlighted by policy makers wherever possible, which is why it is a good thing that we are having this inquiry.

Chair

We are grateful for that, Minister.

Baroness Neville-Rolfe

I am Minister for Intellectual Property. I serve both in the Business Department and in the Culture Department and lead on a number of issues in the House of Lords. I think my goal is to make Britain—obviously that includes Scotland—the best in Europe for setting up and growing a business. I have a personal passion for IP, although I have only been doing it for 15 months. We seek to work collaboratively with Scottish partners to build IP awareness. One of my very first visits was indeed to Scotland, for the wonderful Commonwealth Games, which was also a good showcase for Scottish creativity.

Chair

Great. Thank you both very much for that. One of the things we are interested in is the scale and the range of the footprint for the creative industries in Scotland. We are finding that very, very difficult to determine and understand because of the variety of different methodologies that seem to be engaged in trying to assess the size of the sector. We know that DCMS uses particular criteria and definitions when it comes to assessing the contribution of the creative industries and what constitutes the creative industries, and this is totally different from what Scotland uses in terms of trying to define what the creative industries are. Do you believe that we could regularise this and come to some sort of agreed position so that we could get a real sense of what the size of the sector is? I think one of the difficulties and challenges is trying to see if it is growing or shrinking, because it is very difficult to know what we are talking about. Are there any particular views that either of you have on that?

Mr Vaizey

I have a range of views, which is probably unhelpful, but I will throw them out there anyway and hope that the Committee can turn them into something in its report. First of all, my understanding is that, in terms of gross value added, on the actual value of the creative industries to the UK, because of the way statistics are calculated, we cannot separate out Scotland’s contribution in economic terms from the overall value to the UK as a whole. As I understand it, we can separate out jobs, so we know—I will correct these figures if they are wrong by letter—that of the 1.8 million jobs we say are in the creative industries, about one in 10 of those, or 174,000, are in Scotland. That is issue No. 1, which I think is important: how do we give a proper economic value to the creative industries in Scotland? The second thing is what is a creative industry? We know that, when he was the Labour Secretary of State, Chris Smith effectively defined the creative industries as 13 different sectors. First of all, we took out software, and then we added it back in. There was a huge hullaballoo on both sides, and there were certain elements in the software industry that did not want to be part of the creative industries, but we put them in anyway because they underpin a lot of the tech that goes on, so there was some debate about it. The third point I would make is that I myself have torn my hair out in frustration in terms of how you define particular sectors and how those statistics are collected. The pushback I get on that issue is obviously that these are international statistics, so it is hard. If we went out on a limb in terms of how we define a particular sector or how we collect data on it, it would not correlate with how our European colleagues—and indeed international colleagues—measure their own creative industries. I certainly had pushback from different sectors, frankly, about the way we calculate statistics. If you take a small example like the contemporary art market, which is probably worth hundreds of millions to the UK economy, we have a very anachronistic definition of the arts and antiques market, which I do not think necessarily reflects their contribution. Those are the kind of three issues. I would certainly be up for seeing whether we could come up with a survey that perhaps better reflects the complexity and sophistication of the creative industries. Do you include new industries like the sharing economy, for example, or the whole app industry? Apple will regularly publish annually the value of the app economy in the UK, which are some pretty staggering statistics. As a layman, I would put those into the creative industries. I do think it is worth a robust discussion and I certainly would not rule out—although my officials would have a heart attack—having a separate survey that was done effectively by the industry, in conjunction with the Government, better to reflect what I think is a much more interesting economy than perhaps the official statistics show.

Chair

Do you have any figures at all, or any statistics that would be of use to this Committee, that suggest the proportion of activity when it comes to the creative industries for Scotland vis-a-vis the rest of the United Kingdom? Over here, about the Northern powerhouse, are there figures relating to the north of England and to London, for example? Is there any sort of regional breakdown that you have within your Department that would help us to get a sense of the range of the creative industries across the United Kingdom, including Scotland?

Mr Vaizey

As you know, we put the estimate for the value of creative industries at about £77 billion. We are able to say—as I did indeed say in my opening remarks—that on that basis we are able to measure their growth, and we talk about growth of 10%, as opposed to roughly 3% of the economy as a whole. We are able to break down, as I say, the job figures. As you know, the Scottish Government have come up with their own estimate of approaching £4 billion as the value of the creative industries in Scotland, which is a 24% increase—a much higher increase than the UK as a whole. I certainly think it is a perfectly legitimate exercise to sit down with the Scottish Government and say, “How did you come to your estimate? How do we come to our estimate? Is there a way we can meet in the middle?” I certainly also take on board what I think was implied by your remark that a regional analysis is useful. For example, we have the Tech City organisation, which I think does very good work in identifying clusters of tech companies. Whether you are talking about a country like Scotland or a region in England such as the north of England, everyone wants to be able to say what activity is going on in their area as a way of attracting inward investment and specialisation, so if you are able to say, for example, that there is a games cluster in Scotland or a health cluster in Leeds and Bradford, those are good things to talk about. There are all sorts of different surveys and I think a good kind of desktop exercise is to look at the different surveys that come out. I am thinking out loud, and this only occurred to me when I was answering your question, but I go every year to launch Apple’s app economy survey and I do not even think we take that into account when we are looking at all those things. It would be quite useful to have a desktop survey that said, “These are all the kind of surveys that impinge on this sector and is there a way of coming to some kind of overall conclusion?”

Chair

We are grateful for that. We are now having the Division, so may I suspend this sitting for 10 minutes? I think there is only one Division just now, so if everybody could be back in 10 minutes’ time, we would be very grateful. Sitting suspended for a Division in the House. On resuming—

Chair

Thank you for everybody getting back so quickly and conveniently; we will move on if that is all right. We have a couple of questions on the relationship and co-ordination between the UK and Scottish Government.

Maggie Throup

What mechanisms are there for the Scottish Government to feed into development of UK Government policies that will affect the creative industries in Scotland?

Mr Vaizey

I think I have a pretty good relationship with the Scottish Government Culture Minister, Fiona Hyslop. We regularly exchange correspondence and we meet relatively regularly. I think at the last meeting she met the Secretary of State, John Whittingdale, during the Edinburgh Festival in August. As you know, we have the Creative Industries Council, where there is a standing invitation to all the devolved Administrations to attend to feed in policy views, and Janet Archer from Creative Scotland also attends that on a regular basis. I think there is a pretty porous relationship. I am very interested, for example, in what the Scottish Government did with Creative Scotland in putting together culture and the creative industries. I thought that was an innovative move and it is interesting to see how that establishes itself. Clearly, on a whole range of issues, whether it is the lottery, tax credits and so on, we would want to hear the views of the Scottish Government. As far as the BBC is concerned, there is obviously a memorandum of understanding that means the Scottish Government will be consulted on any changes to the charter. Scotland has a representative on Ofcom, so I think the links are pretty strong across the piece.

Baroness Neville-Rolfe

Shall I add on IP in particular?

Mr Vaizey

Yes, I think you should.

Baroness Neville-Rolfe

We have very good links with Scottish Enterprise and, again, we have a MOU with it that was agreed in 2013, so that is relatively new. The IPO is training general business advisers in Scotland to ensure that the opportunity message of IP creative is getting out to your entrepreneurs and small businesses. We work very closely with the Scottish patent libraries. There are some absolutely excellent libraries. One is in Aberdeen, and you will be interested to know that the other is in Glasgow. They obviously have online as well so that people from across Scotland can get that advice. I find those libraries an absolutely marvellous source of all the different sorts of IP: brands that will affect something like whisky; obviously copyright, which is more relevant today because of music and video games and all the rest of it; and also design, trade secrets and patents. We try to make sure that, although this is a reserved issue, we work very closely with the relevant business delivery vehicles in Scotland and, of course, we do work on education and enforcement, which we could talk about separately.

Maggie Throup

Obviously culture skills and economic development are devolved matters, as you just said. Scottish agencies including Creative Scotland, which you have already talked about, and Scottish Enterprise in particular lead our support in the creative industries in Scotland. To what extent does DCMS engage with Scottish agencies in relation to promoting the UK’s creative industries as a whole?

Mr Vaizey

As I say, I think we have a close relationship with Creative Scotland. I probably see Janet Archer at least once a year and am also obviously available to hear her any time she wants to make any points, and the same goes for Fiona Hyslop. It is also important to add to what I said earlier, in the sense that there are still UK-wide organisations that work across the UK. The British Film Institute, which I know you have just taken evidence from, will obviously have a strong presence in Scotland and engage with Scottish policy makers on what they think are the appropriate ways to support the Scottish film industry. Similarly the Heritage Lottery Fund, which again will have a Scottish representative on it, will obviously take account of what Scottish policy makers want to see in terms of heritage policy. I think on devolved matters like culture, with different arts councils, there will be relationships at that level. On non-devolved matters or—to put it more accurately—national bodies that still exist across the nations, like the BFI and the Heritage Lottery Fund, there will be Scottish representatives on those boards, as well as, obviously, a very clear mindset within those organisations to take account of unique Scottish issues.

Baroness Neville-Rolfe

It might be worth mentioning the EU side as well because, as I am sure you will know, there is an important committee that shares at ministerial level what is going on in Brussels with the other parts of the home nations. I think that is very important and certainly I am always very careful to make sure that where we get a new proposal—I spend a lot of time on the single market in Brussels—we have good links in to Scotland in particular.

Chair

Thank you.

Mr Chope

There are several UK-wide funds that are available to creative industries in Scotland. How are the needs of the creative industries in Scotland taken into account when these funds are set up?

Mr Vaizey

We take the view that UK-wide funds are available to all UK organisations. We would not necessarily say within those that they should go particularly to Scottish, Welsh or Northern Irish, or indeed northern, companies. If I take an example—something we announced quite recently—the UK Games Fund is a prototype fund run out of Dundee by Abertay University, which is regarded as one of the leading universities in supporting games development and training. It is a relatively small fund. It is a £4 million fund, but it was the university’s idea. We ran it in the last Parliament and it was very, very successful. We are now running it again, at its instigation, because we were so impressed with what it did. That would be open to all UK companies but, to turn that around, there would obviously be no barrier to any Scottish company accessing that fund. That would go across the piece in terms of the other national funds, like the Heritage Lottery Fund and, clearly, in terms of whether you call it a fund, there are the tax credits that are, in effect, a fund that people can access when they are making a film or television. I was personally delighted that the first production to take advantage of the television tax credit was filmed in Scotland—“Outlander”. I think Sony Pictures Television was doing it and has been absolutely delighted with their experience. Several major international movies have been made in Scotland recently, such as “World War Z”. My understanding is that the Scottish Government are now looking very, very hard at the infrastructure to support the making of film and television in Scotland. To me, that is a symptom of the success of a national scheme that has had a major impact in Scotland. Now, because of the demand levels, the Scottish Government are saying, “How do we support this more?” and I think that is a great thing.

Mr Chope

Thank you, Minister, for giving us those examples. Is there any comprehensive data on how these funds benefit different parts of the United Kingdom?

Mr Vaizey

Again, it goes back to the Chairman’s first question, and I think it is a challenge to me that I should take up. I know you have heard from the British Film Institute. It is my error not to ask the British Film Institute for data in terms of, for example, where films that receive certification and tax credits are being made. I think it will be a very useful thing when we take away what I now regard as a work programme from the Chairman, in terms of taking a comprehensive look at the creative industries’ data and speaking to each of the organisations that have a national remit, such as the HLF. Again, this is me not having the figures in front of me, but I am sure—we all know as MPs that we get letters from the HLF telling us what it funded in our own constituency—that the HLF will clearly have data about what it funds in Scotland. I am sure the BFI will also have data on what films are made in Scotland. It has seamlessly moved on to certifying and television tax credits as well, so it will have data on what television production is made in Scotland. You have given me the opportunity to think more creatively about how we publish that data to show not only how Scotland benefits, but how other parts of the United Kingdom benefit from these national schemes.

Mr Chope

Thank you very much indeed for that helpful response. Would you be prepared to extend your work programme to cover the area of tax reliefs and how they operate in different parts of the United Kingdom?

Mr Vaizey

Yes, I would.

Mr Chope

Thank you very much. When the creative industries tax reliefs were drawn up, what consideration was given to the differential benefit they might have across the United Kingdom?

Mr Vaizey

We drew them up as a national scheme, but we were aware, for example, that with the television tax credits, to a certain extent, we had Northern Ireland to thank, even though Scotland was the first part of the United Kingdom to benefit. The making of “Game of Thrones”—of which I am sure obviously all members of the Committee are devoted fans; if I was a fan of “Game of Thrones”, I would make lots of analogies about its leading characters, but I have not seen it—has been so successful in transforming the creative economy in Northern Ireland and effectively creating a television ecosystem in Northern Ireland. It was one of the factors that led us to say that we wanted to support. High-end television production is now on a par with high-end film production so, in that sense, that was a factor in our thinking, as was, obviously, the commitment of the Scottish Government and Scotland to film and television production.

Mr Chope

Has any consideration been given to varying the rates of relief available in different parts of the United Kingdom, particularly, for example, everywhere outside the M25?

Mr Vaizey

No.

Mr Chope

Do you think it would be a good idea to do that?

Mr Vaizey

I am happy to entertain the idea. At the moment every part of the United Kingdom to a certain extent stands on its own two feet, so you get different things from different areas. It is obvious that London is the first port of call for a lot of film and television production. That is partly to do with facilities, such as obviously having Pinewood, but you can also spread out through a city, so that is issue No. 1. Different areas of the country will be proactive in trying to attract this investment. Screen Yorkshire is a very good example of a regional film agency that has been very proactive in securing production. Similarly with Scotland, you would have seen “World War Z”. The city of Glasgow would have been very proactive in trying to attract that investment, and Film London—which is a slight misnomer because we have given it the responsibility to support inward investment throughout the United Kingdom—had experience of working with film companies that wanted to film in London. We did not want to reinvent the wheel, so it now does that all over the country. You would get individual cities or councils working with film production companies to make life as easy as possible for them, and Glasgow is a very good example of a city that is able to do that.

Chair

This Committee has had evidence from PACT and John McVay talked about the impact of tax credits in Scotland. He did not use the word “negligible”, but there is a big differential because of the fact that although we have these splendid location shots, there is no studio. Is there any sense that you could recalibrate the way you look at tax credits and perhaps recognise the different and distinct requirements of Scotland when it comes to distributing them?

Mr Vaizey

No, because I think that is an infrastructure issue. I was alluding to what the Scottish Government are looking at and I know it is a very live debate in Scotland. Certainly when I was up in Scotland in August, very much part of that debate was providing the kind of facilities that high-end television and film production need, which include studios. But we have not given Pinewood or any other film studio location in England a particular break; it is just that that is where the facilities are. In fact, Pinewood would have a wry smile because it had a nightmare trying to get its planning through to expand, which it is now successfully doing. I would encourage the Scottish Government to work with developers or to build these kinds of facilities, because my sense is that the film tax credit is not going away. Certainly while we are in government, it will stay as it is. The film and television industry now regards it as a highly stable, easy to understand and very well-run process, thanks to the BFI. Therefore, I think it is a good bet for the Scottish Government to get behind supporting a film production facility near Glasgow or Edinburgh.

Chris Law

I am glad you have fixed on video games. I am the MP for Dundee, so it is great to celebrate that, and I want to focus again on tax relief, particularly in the video games industry. I have been learning about this global games industry, which is now set to be worth £63 billion by 2018, an increase from £45 billion in 2013. You will obviously agree that we must all do what we can to capture a bigger share of that growing market. I would also like particularly to welcome what you have just touched upon, which is the £4 million games prototype fund that Paul Durrant is currently administering from Dundee, which has become a centre of excellence for video games. My question, however, relates naturally to video games, on which my colleague, Joe FitzPatrick MSP, has successfully campaigned over a number of years. I would like to ask whether an analysis has been carried out of those companies that have benefitted from video games tax relief since it was introduced in August 2014. Can the Minister offer an assurance that the funds have been evenly spread across the UK and, in particular, can there be a guarantee that cities like Dundee, with their world-class skills and experience, are receiving their fair share?

Mr Vaizey

As I say, it is a demand-led tax credit, like the other tax credits, so we rely on companies to come forward with appropriate games that would qualify for the tax credit. I am sure that Creative Scotland is doing a fantastic job alongside the BFI in attracting investment. I think it is important that we reflect, for example, if you think about all the moving parts in this, that there is a role for UK Trade and Investment in going out and banging the drum for the UK as a place to invest for video games, so it is important that UKTI has a comprehensive understanding of what opportunities are available in Scotland. If I came back to you in a year’s time and said, for the sake of argument, that 90% of the tax relief had gone to England and 10% to Scotland, you might, given Scotland’s expertise in games, raise an eyebrow. If I then said that that was because we rely on people to come forward and say, “Can we have a tax credit?” I don’t think that would be good enough. We should also then drill down and say, “Well, is UKTI doing enough when it is going on trade missions to take Scottish companies with them? Is it doing enough to tell potential investors about the opportunities to base themselves in, say, Dundee? Are the BFI, Film London and others doing enough to flag up Scotland? Are the relationships between those organisations and Creative Scotland strong enough to ensure that that is the case?” That would be where the challenge would lie.

Chris Law

There is one other question I want to ask regarding tax relief. I know that both Christopher and Peter have been asking, but I also want to ask whether you would consider having a cost-benefit analysis of the merits of varying the rate of relief in different parts of the UK to ensure that cities such as Dundee can compete like the likes of London.

Mr Vaizey

I am certainly happy to take away that thought. What I would counsel the Committee about is that, as I said earlier, the great thing about tax credits—the reason why I think they are so effective—is that they are very simple and clear to understand. My initial instinct would be that if we want to spread the impact of tax credits, it is up to the individual organisations, such as UKTI and the BFI, to make sure that they are doing a job to represent all parts of the United Kingdom. If we went down the road of trying to vary the tax credit, it could end up causing an element of confusion. I do understand the point about differential reliefs. If you were able to get an extra x% as a tax credit if you decided to make your film in Glasgow as opposed to London, I could understand why that might skew demand towards areas that may or may not be underrepresented.

Chair

This would be more a matter for the Treasury, but is there a view in DCMS that given the success of tax credits, as you have quite rightly stated, they could be extended? We heard from UK Music that there was perhaps a case for extending them to music production, for example. Is that something that DCMS would be prepared to look at and perhaps suggest to the Treasury?

Mr Vaizey

Yes. I think the Chancellor is rather a fan of tax credits. I started my ministerial career with his first Budget when he ruled out the video games tax credit as badly targeted and the wrong solution but, thankfully, he did keep the film tax credit. Then by 2012 we started on a roll and went on to television. Then we went to animation and then we went to video games. Now we have gone to orchestras and theatres—who knows where it is going to stop?

Chair

That is a very helpful response.

Chris Law

With regards to immigration, over the last few months we have been repeatedly told that current immigration rules act as a barrier to attracting international talent. Only few weeks ago, at the Committee’s meeting in Dundee, renowned Dundee technology developer Chris van der Kuyl warned that foreign students who come to study video games development are “fairly heavily leant on to get out of the country after graduating”. Can you assure this Committee that the UK Government will be careful to avoid adopting what might be seen as a hostile approach towards migration which, of course, could help to grow the sector in cities like Dundee, and create local employment and boost local economies?

Mr Vaizey

Obviously, I think the whole issue of immigration is seen in the wider political context of the much wider debate about immigration in general. We are still part of the single market and free movement of people, so obviously UK companies can tap into a pool of talent throughout Europe. I am sure it is your experience as much as mine that, when you visit a video games company, you will have pretty international experience in terms of the range of people employed there. We certainly do try to work through organisations like Tech City, for example, in keeping immigration policy up to date in terms of skilled immigration, in terms of shortage occupations and in terms of tier 2 visas, and I personally want to keep doing that. In terms of the student issue, that again plays into a much wider political debate about how we measure the level of immigration. There are certainly two sides to that argument: in terms of the overall number, as opposed to some people arguing that, clearly, if people are going to come and be educated in this country, there is some merit in keeping them so that they start contributing in other ways to our economy once they have a qualification.

Chair

We have heard so much in the evidence about immigration concerns. Particularly in the higher education sector, we seem to be responsible for training some of these students who are going into the creative industries. We are training them to a high standard and educating them to the best of our ability only just to throw them out so that they have no opportunity to contribute to our economy or to take part in these growing dynamic sectors. Do you hear that in the DCMS and do you make representations on behalf of the sector to the Home Secretary when it comes to those sorts of issues?

Mr Vaizey

Yes, we have a close working relationship with the Home Office and we work quite closely with the Migration Advisory Committee. I was seeing a representative from the creative industries last week and we talked about her concerns on immigration and getting in skilled workers. I personally find that the Home Office is pretty open to representations. I think that the Migration Advisory Committee is due to report in December on some of these issues. It does make strong representations on behalf of the sectors we represent, because we want them to access the skills they need to grow companies in the UK.

Chair

A useful response again, Minister.

Mr Vaizey

Thank you.

Chris Law

I want to turn to the BBC. We took some evidence recently after looking at their annual review. BBC Scotland’s analysis from audience councils and focus groups found that only 48% of people in Scotland thought the BBC was good at representing their lives in news and current affairs, compared with 61% in England and Northern Ireland and 55% in Wales. For example, at this Committee’s recent meeting in Dundee, BBC Scotland’s director, Ken MacQuarrie, conceded that the BBC had made some mistakes in its coverage of the independence referendum, which is something that I am corresponding with him about just now. I wonder if you may like to hazard a guess as to what those mistakes might have been, and if you can give an assurance that as the BBC charter renewal process continues, there will be a relentless focus on ensuring that the BBC’s political coverage is fair and balanced, and that it reflects the breadth of opinion across Scotland and, of course, the UK?

Mr Vaizey

I don’t think it is my place to hazard a guess as to what mistakes the BBC made, and I think the BBC probably would like as little political interference as possible. Clearly, as the nation’s favourite television station, the BBC is a matter of considerable debate up and down the country. Having moved on from the Scottish referendum that put BBC political reporting in the spotlight, we are now moving on to the European referendum, when those with strong views about Europe will obviously be keeping the BBC under careful watch to make sure it reports on the European referendum in an objective fashion. If I could speak out of turn and on a personal level, I always found the BBC’s coverage to be very balanced and fair. I always found that because, if every single person of every political complexion complains about the BBC being biased, it is probably doing something right.

Chris Law

I want to follow on from that and ask you what consideration has been given to a Scottish governance proposal for a more federal structure for the BBC. Does not the charter renewal process provide an ideal opportunity to look seriously at devolving the powers of a broadcaster to Scotland to ensure that the BBC meets the needs and aspirations of the people of Scotland?

Mr Vaizey

We obviously want to consult closely with the Scottish Government. We have a memorandum of understanding that requires us to consult, and also for the draft charter to be laid before and debated by the Scottish Parliament, but it is not our intention to devolve the BBC. We want to keep the BBC as a national broadcaster and as a reserved matter.

Chris Law

Broadcasting is the only part of the creative architecture in Scotland that remains defiantly reserved and, as a result, Scotland has gone down from second after London and the south-east to fourth in terms of productions and with outputs we are now behind Manchester. We are behind the Cardiff-Bristol city region when it comes to these things. Surely, in light of all this, there must be more that the UK Government can do to help to stimulate the sector when it comes to broadcasting. I hear you clearly that the devolution of broadcasting is not something to be considered, but what more could be done to ensure that our sector could be boosted and to claw back some of that competitive advantage, which we have apparently lost over the course of the last decade?

Mr Vaizey

If you are speaking about BBC spending, my understanding is that since 2008, spending from the BBC has doubled in Scotland. Also, for the first time in its history, the BBC is spending more outside London than it has before. Clearly in terms of where the BBC has a presence, whether it is Cardiff, whether it is Salford or whether it is Glasgow, it has, I think, a major impact on the wider broadcasting ecology in those areas. I would obviously encourage and support the BBC in moving productions to different parts of the country. I took part in a very lively debate with Midlands MPs, who want more spending in Birmingham, and there was a recent announcement from the BBC about some of the facilities—I don’t think it is technical production—that it is moving to Birmingham. Certainly Tony Hall is very alive to the BBC being a national broadcaster and, therefore, being represented in all parts of the country, but obviously if there is more the BBC can do, I would encourage the Scottish Government and other Scottish policy makers to make representations to it.

Chair

Thank you.

Kirsty Blackman

The floor that was introduced previously for out-of-London production is appreciated, but some of the evidence we have taken has suggested it has not worked as well as it could have done in terms of what it was supposed to achieve. I also appreciate the devolution in terms of what the Scottish Government are going to be able to do in terms of the BBC. That is useful and appreciated. In terms of the specific problem that Chris Law raised—people in Scotland feel the BBC does not adequately represent them and they cannot see people like them on the TV—I understand that the BBC needs to be a national broadcaster, but there is maybe a specific issue there that is not replicated in the midlands in terms of the surveys the BBC has done. Whether that is about more spend in Scotland or whether that is about shifting the focus of some of the stuff that the BBC does around Scotland, it would be useful for the UK Government to have an eye on that. That is not really a question, I am sorry.

Mr Vaizey

Would you like me to answer it even though it is not a question?

Kirsty Blackman

If you could that would be great.

Mr Vaizey

I agree with you in the sense of the principle that I took from what you were saying: the BBC, like other broadcasters, needs to look very carefully at whether its programmes, programme makers and commissioners reflect the UK population. That includes people living in different regions, whether it is the south-west, the north or the midlands. It includes people living in the nations, whether that is Wales, Scotland or Northern Ireland. It also includes, of course, people with disabilities, and it includes black and minority ethnic. We are a multicultural society now. All those issues need to be represented, and I think a perfectly fair point to challenge broadcasters on is whether or not the different voices in the United Kingdom are being heard in programmes or, indeed, are commissioned as programmes.

Mr Chope

I am sure the Minister does not have a closed mind on the issue of BBC bias, but in order to make sure that his mind is opened even more, may I commend to him the report by Professor John Robertson of the University of the West of Scotland into systematic bias in the run-up to the Scottish referendum? He was suggesting that there were many more reports in favour of the status quo than in favour of separation. He identified in his report a lot of subtle ways in which a different message can be delivered by the broadcasters that superficially might appear to be even-handed but, when subject to detailed analysis, shows inherent bias.

Mr Vaizey

I will certainly read that report. I would be interested to see a similar report on Sky News and on ITV to see what bias they had. I reflect on what it must be like to work in BBC News and the amount of grief you get from politicians. They probably thought they had it bad when Alistair Campbell was in charge but, certainly, it does not seem to be letting up and it must be a very difficult tightrope to walk. Of course, when we are listening to “Any Questions” or “Question Time”, we all probably think sitting at home, depending on which political party we support, “I cannot believe the entire audience is made up of members of—” fill in the blank.

Chris Law

I want to follow up on Chris’s point. It is not about us as politicians, is it? It is about audience satisfaction, and to have 48% of people in support of BBC News current affairs in Scotland is, quite frankly, deplorable. I want to ask—going back to my initial point about charter renewal—can we look at a way to make sure it is more robust in how it is measured, and how it can be brought up in terms of its quality so that it reflects the whole voice? To go back to Professor John Robertson’s work, which I am also happy to pass on, he did a more recent report about the general election in Scotland and included in that STV. He found that almost 5:1 STV was more balanced than the BBC in the coverage of the general election, so I wonder what your thoughts are on that.

Mr Vaizey

I think I am beginning to get myself into a bit of trouble with my temptation to make flippant remarks. Clearly, whatever the BBC was doing during the Scottish election, either it was just carrying wall-to-wall SNP coverage or it did not have any impact on the election, given the election result for the SNP. If the news in Scotland carried by the BBC was biased, it is hard to know what the impact was, considering your tremendous election result. I think that the BBC takes the issue of bias very, very seriously. I think it reflects very deeply on it. It goes without saying that the BBC has made some terribly serious mistakes on a whole range of different news issues, some of which were purely political and some of which were not purely political, but I do think the BBC does its best to try to reflect all sides of the argument.

Chair

You are quite welcome to make any remarks that you want, Minister, when you are in front of this Committee. We will perhaps move on from that—thank you for the answers on the BBC—to Baroness Neville-Rolfe, because obviously intellectual property is another issue that is exclusively reserved to Westminster. Obviously, as a Minister, we have not had a chance to see you in the House of Commons because you are in the House of Lords. Scottish Members of Parliament, obviously—the vast majority of us now—don’t take places in the House of Lords, so we have not had an opportunity to question you about the operation of the Intellectual Property Office, which is a great disappointment to me and I know to several of our Scottish colleagues. Basically, you have this UK-wide responsibility. How do you discharge that responsibility in Scotland and how would we be aware of the work of you as a Minister in the operation of the IPO in Scotland? How is it visible to us?

Baroness Neville-Rolfe

I tried in my opening answer to your earlier question to talk through some of the IPO work in Scotland. The IPO conducts policy and administration for me in the intellectual property area; it links in Wales. As I have already stated, we value hugely, to be honest, the creative contribution that is made by the Scottish industry. IP is about knowledge and knowledge-intensive industries, and the creative industries are one of the very largest chunks of that. On games, I understand that 25% of UK video games companies are in Scotland, which I thought was interesting.

Chair

Could I suggest—this is just a personal observation as someone who has an interest in intellectual property issues—that it seems remote, is my view, with regard to the IPO, and certainly the way this Government have discharged their responsibilities for intellectual property? I think we struggle to garner interest in IP-related issues and what you must be thinking about doing is engaging a bit more and doing a bit more visible work within Scotland. I would like to hear a couple of suggestions about how we may be able to achieve that in Scotland.

Baroness Neville-Rolfe

I completely agree with you. I think it is an issue of intellectual property more generally—not just intellectual property in Scotland—and people think of it as a rather nerdish subject. They do not understand that knowledge-intensive industries contribute such a lot to the economy. Obviously I am sure we could do more in Scotland. Indeed in the new year we are planning some roundtables on the aspects of the digital single market related to IP, which is going to be very important, and the copyright proposals coming through in Brussels that we expect in December. That will be a good example, it seems to me. I come from business, as you possibly know. I even used to be chairman of Dobbies Garden Centres in Scotland.

Mr Vaizey

Were you? I did not know that.

Baroness Neville-Rolfe

Yes, so I have some links.

Chair

No planted questions now.

Mr Vaizey

So you know all about growth?

Baroness Neville-Rolfe

I know a little bit about growth in Scotland of a green kind. It seems to me that, in addition to the administrative arrangements, which I described through the civil service and through the splendid patent libraries, we probably need to do a bit more to engage. As my colleague was saying, the actual bodies tend to be UK-wide. There was a good report, Creative industries—route to finance that came up and, when looking at it in preparation for today, I was so struck by how many Scottish interests were mentioned in it. We are working, for example, on trying to get IP reflected in the balance sheet—that strategic work—because data and IP are not properly reflected in the balance sheet now and that means that people cannot borrow as much money as a start-up as they need to. That sort of cross-cutting work is really important to you in Scotland—to us in Scotland.

Chair

Thank you for that. We have also secured a number of concerns about the digital single market and the UK Government’s approach to engaging with Europe on behalf of the Scottish creative industries and the IP-rich industries that we have in Scotland. A number of issues have been raised by the audio visual sector because of their concerns about where we are going with things like portability and territoriality. Are you aware of these particular concerns and issues, and what are the UK Government doing to make sure that particularly the audio visual sector, but the rest of the creative industries sector, are being properly looked after in the negotiations?

Baroness Neville-Rolfe

We are aware of the concerns, although obviously the roundtables will help us. If I could just say on portability and territoriality, I think we see an opportunity from the digital single market. It is a potential 500 million people across the EU. We have strong creative industries; that is an opportunity. On portability, we see value in having a facility to travel with your iPad, so you can pick up your football or your BBC or ITV. We want that to happen through the digital single market. Of course we are passionate about the creative industries, as the Minister has explained so well, so what we are worried about is individual features of regulations that might cool the endeavour or hit our creative industries. It is a little bit different in Scotland, but I think a lot of the issues are very similar.

Chair

What we have heard, particularly from the film industry and the film sector in Scotland, is about the funding and structural arrangements for film, which are based on licensing arrangements in different territories, and the bigger impact that this is therefore having when we are regularising the market across Europe on UK content. Are you as a team doing all you can to ensure that Scottish film particularly, but film right throughout the United Kingdom, has been properly looked after and represented in those discussions and conversations that you have with European colleagues?

Baroness Neville-Rolfe

I think there is a broader question that Mr Vaizey may want to comment on, but I would say that we work very closely together across DCMS, trying to bring in the experience of BIS, which has a lot of experience on EU negotiations—I myself have done EU stuff for about 40 years—to make sure that the concerns of the audio visual sector, in particular, are protected.

Mr Vaizey

Your question, Chairman, is about territoriality, and we support territoriality. We do not want a top-down system of European licensing—we would resist that. We want the industry to make its own arrangements in order to get the right financing that it needs. We do support portability and I think that the industry has come with us on that. I have been particularly pleased, for example, with the progress that companies like Sky have made in terms of providing portability. I think the role of policy makers to a certain extent is—bizarrely, people think politicians are out of touch—to represent the interests of the consumer and to say, “This is what the average person wants. If they buy content legitimately in one territory, they should be able to download and access it another territory”. That is what we want to achieve, but we do not want to undermine the licensing model. I also think that the fact that Baroness Neville-Rolfe is now a joint Minister with DCMS is an important move. As you know full well, our Secretary of State at DCMS is passionate about intellectual property. He was very vocal on the issue when he was Chairman of the Culture, Media and Sport Committee, and it is partly at his instigation that Baroness Neville-Rolfe is now a joint Minister, because he recognises the need for the creative industries to work as closely as possible on the agenda of intellectual property. In terms of the IPO’s presence, I think that it is a good point to say that Governments are not very good, frankly, at engaging on consumer issues. The IPO was set up to do a particular job. We do know that the industry itself is financing the Creative Content campaign to encourage people not to download illegally and to show them the impact of that, but it is important that we consider how best to take what are sometimes quite complex issues and make them as mainstream as possible and engage. Hearing what Baroness Neville-Rolfe is planning to do, in terms of roundtables and so on, is a good thing, and I think the different moving parts—not just the IPO, but other organisations, whether that is Creative Scotland or indeed UKTI—can become part of that conversation as well.

Chair

Thank you for that. We are of course due to get the devolution of copyright tribunals, which is not without difficulties and issues, and we have received quite a bit of evidence on this. UK Music raised concerns that this might create difficulties. Are you aware of what is happening with the devolution of the copyright tribunals? How do you see this working and what are both of you, as Ministers, doing to ensure that we get the successful devolution of this and that it is made to work, given that the whole rest of the infrastructure with copyright and intellectual property remains reserved? How will this all work itself out?

Baroness Neville-Rolfe

I can see what the industry said, but I think this is our delivery on the Smith Commission. It is absolutely right that the Scots should decide how they want to run the copyright tribunals and also how to link in, so that there is a sort of consistency between the UK and Scotland. Scottish law is different, so it is also entirely logical that the tribunal should be separate for that reason. I have to say, when I go around the world, people are very jealous of us having the IPO, because the IPO brings together all these different bits of IP and is therefore able to be a co-ordinator in these important areas. My own view is that I look forward to the copyright tribunal working, and hopefully in a way that is pretty similar to the UK, because there are no boundaries for IP, especially in the digital world. It is really a global issue, increasingly.

Kirsty Blackman

Just on that, was consideration given to devolving all of IP policy or just copyright tribunals, because that is what was said?

Baroness Neville-Rolfe

We felt that the logic of the question was should there be a separate IPO, but intellectual property matters are increasingly, if anything, European issues. The European Patent Office is becoming more important. I was in Spain recently, and it does not make a lot of sense on these highly technical, internationalised issues to have lots of individual agencies, although that might have attractions. What you obviously have to do is to make sure that you link in well and I think the sort of questions that you have asked today are on the money on that. You can obviously see that we are planning more, as part of more outreach on intellectual property. It sounds from today as though it should start in Scotland and I look forward of that. As I am a Lords Minister, I do not get the opportunity to talk to you so often, so obviously it is good to get the introduction.

Chair

Indeed. Dave Anderson has a couple of questions about rurality and broadband.

Mr Anderson

The issue—an obvious issue, given the nature of Scotland itself—is about access to broadband across the country and the huge needs of small numbers of people. It is quite clear to us that if this is not addressed properly, it is not just going to have an impact on people in terms of jobs and their day-to-day living, but the social fabric of them all, particularly on the islands. We have information that shows that in terms of the investment into broadband, particularly super-fast broadband, while there has been a 40% business contribution to development in Scotland as a whole, there is only a 13% business contribution towards development in the islands and highlands. The responsibility lies with the UK Government for this, so how are we are going to make sure that between us we up our game on this? It is a huge issue for the place. Somebody said to us that this as important as water and electricity. Now, we are probably exaggerating this piece, but I do not think they are a million miles away from being right on this.

Mr Vaizey

We agree with you, Mr Anderson, and that is why the Prime Minister has introduced the universal service obligation, which we are going to work towards over the next two years. He said in his remarks, I think, that people regard their broadband as being as important as electricity and water although, interestingly, not everyone has access to electricity and water, or indeed gas. We work very closely with the Scottish Government on broadband delivery, however. We have made £120 million available and that has been matched by the Scottish Government, and there is additional money from BT as well, obviously. The programme is run by the Scottish Government and, as you know, we have increased our targets. We originally had a 90% target and now we are going to 95%. The Scottish Government will no doubt get similar grief to what I get, which is that, by definition, some people will not be in the programme and they will quite rightly express their concerns forcefully about that. The reason why we have effectively devolved the implementation is because we understand the Scottish Government will know much better where the best places are to spend the money most effectively to get to the most people. I think more than 500,000 premises will benefit at the end of the programme, and almost 300,000 have already benefited out of that total of 500,000-plus. The first phase will complete roughly this time next year, so I think it is going very well, but obviously if you are in a remote community and you kind of know you are at the end of the line, it is very, very frustrating. There have been some amazing engineering projects. For example, getting to the Hebrides with the undersea cable that was put in to get there was a pretty substantial and very successful engineering project, which perhaps we do not shout enough about. When I say that the USO is going to take two years, it is because it is potentially a big imposition on telecoms companies and we have to consult on it and so on. But when it is in place, what it means is that anyone in the country can demand a fast broadband speed and they will get it, so that is good news.

Mr Anderson

Can we quote you on that?

Mr Vaizey

I have no doubt at all that will be quoted back at me ad infinitum.

Mr Anderson

How did you come to the breakdown of who would fund what? My understanding is that the UK Government put in about £100 million—these might be older figures—and the Scottish Government put in their contributions and then there are local councils. How was that decision reached?

Mr Vaizey

We had a sum of money and we allocated it around the country. It was based on need, in the sense that, first of all, the money could not go to cities because of state aid, so we could not give £50 million to London, because London would not get state aid for broadband, but I am pleased that BT is now firing up a lot of London that has been left behind. We would look at somewhere like Scotland which—I hope I am not speaking out of turn here—I think had more money allocated to it than would have been the case if it had just been purely on per head of population, because obviously Scotland’s needs, to a certain extent, are greater, because there is a much more rural element there. It was based on how far is commercial broadband rolled out in any given area—in the south-west, the north-east, Scotland and Wales—and how much money would therefore be needed to reach the 90% target, and would that be matched by the local authority or the devolved Administration?

Mr Anderson

One quick one at the end then: we are told that modern apprenticeships are run by Skills Development Scotland, but the apprenticeship levy has gone up on a UK-wide base. Can you tell us how that is going to work in Scotland and will the levies raised go towards Scottish apprenticeships, or will they go into a central pot?

Mr Vaizey

I am afraid I cannot tell you off the top of my head. It is the Skills Minister, Nick Boles, who is responsible for that area of policy. I think we are still consulting on the apprenticeship levy. Are you—

Baroness Neville-Rolfe

We are, yes.

Mr Vaizey

It is certainly my experience in engaging with business on the apprenticeship levy that people are keen that the levy that is raised from them—whether it is a country like Scotland or a large business—is spent in their area, and no doubt Nick Boles will be receiving those kind of representations when he is considering the final shape of the levy.

Chair

This is an issue that has come up quite a bit in terms of evidence. I think what the Committee might do is write to the BIS Minister to see how this is going to be resolved if there is not a view from DCMS and obviously not from IPO. But I think this is something that we do need to get resolved, because there is a real sense of feeling like we might lose out when it comes what looks like quite a generous scheme, so that is something that we have to have a further look at. Can I just ask just one last question about the Creative Industries Council? I have been involved in creative industries issues. I have taken a great interest for my 14 years as Member of Parliament and yet I know very little about this body. Apparently it has a huge remit, in which it looks after all the Arts Councils of England, but there is no Scottish membership on this. I know Janet Archer attends as an observer, but the Creative Industries Council touches on many reserved issues, particularly the area covered by Baroness Neville-Rolfe when it comes to intellectual property, and also other issues to do with creative industries. Why is there no Scottish representation on the Creative Industries Council?

Mr Vaizey

I think it is a fair point. I have just reduced the membership of the council quite substantially because, as you can imagine, the creative industries has a hugely wide remit, so we had about 50 people turning up and it was even more unwieldy than the Cabinet. The other problem was they were not split, so one suggestion was that maybe you have the Screen Industries Council and a Service Sector Council, like for advertising and so on, but they all want to stay together. That is a good thing. We have invited the devolved Administrations to come as observers and we obviously asked Janet Archer to come as an observer. I am prepared to countenance formal representation provided you do not ask to co-chair it because at the moment there are three chairs of the council and, if we end up with six chairs, we might as well close it down.

Chair

Again, that is a very helpful answer. This is something that has emerged and we know that Creative Scotland would be interested in ensuring that it had proper membership when it came to this body because, as you have identified, it does cover a range of the reserved issues. I know that Scotland is looking carefully at what is happening in the Creative Industries Council, and it is certainly an issue that has arisen much now in our evidence. Unless my colleagues have any further questions or anything has been missed, I want to thank both of you for coming along today, particularly the Minister of State, who has been very helpful in some of his responses, which I think have been well noted by this Committee. This is the last of our evidence sessions, so we are grateful that we have ended on what seems to be quite an encouraging note. Thank you both for coming along this afternoon. If there is nothing else that you want to say, we will bid you a good afternoon and thank you.