A shotgun wedding: Whittingdale’s radical plan to privatise Channel 4

Based on a chapter from the new book What Price Channel 4?, Raymond Snoddy reveals details about a radical, but failed plan concocted by the Secretary for Culture, Media and Sport.

The Government was seriously considering pushing ahead with an early privatisation of Channel 4 without proper public discussion by having the measure included in the Spring Budget.

The manoeuvre would have meant that the privatisation would have become law through a Money Bill which implements the Government’s financial plans.

As secondary legislation such a bill avoids the need for a White Paper and full Parliamentary scrutiny and becomes law automatically one month after passing the House of Commons, whatever the House of Lords think.

The privatisation of Channel 4 after 33 years as a public corporation would in effect have been “buried” amidst a myriad of budget proposals.

The plan appears to have originated with the Treasury but was reminiscent of the way Culture Secretary John Whittingdale tried without warning to bounce the BBC into taking on immediate responsibility for the £500 million to £600 million cost of free licence fees for the over 75s.

Any “mitigation”, Whittingdale insisted in calls to BBC director-general Lord Tony Hall and Rona Fairhead, chairman of the BBC Trust, would be left until later negotiations on the renewal of the BBC’s Royal Charter.

Then the Government only softened its stance as the row intensified and Chancellor George Osborne took over the negotiations.

The introduction of the charge on the licence fee was phased in over a number of years after the BBC warned of a financial crisis that would mean the early closure of BBC 2, BBC 4, all local radio stations and the national radio news services of Scotland, Wales and Northern Ireland.

Whittingdale’s role in being at least prepared to acquiesce in Treasury proposals for Channel 4 privatisation came not so much from a desire to raise money but out of a combination of ideology and a belief that the measure was needed to guarantee the channel’s future.

John Whittingdale, the Secretary for Culture, Media and Sport

The DCMS worry about Channel 4’s long-term viability was being expressed even though the channel had reserves of £250 million and despite a lack of evidence that it could not continue to fulfil its remit successfully for the foreseeable future.

Claire Enders, founder of research group Enders Analysis, whose work on the economics of Channel 4 privatisation has gone to both Whittingdale and the Treasury, is convinced that the Budget route – “a shotgun wedding” was a serious policy option.

The plan was live with the Treasury as late as last July.

“What we [Enders Analysis] have achieved so far is that a shotgun wedding on the wrong basis – that Channel 4 was unsustainable – that was going to be shuffled through in this Budget through a Money Bill and therefore secondary legislation, has been kicked down the road,” says Enders.

[advert position=”left”]

“The Budget route was definitely Plan A,” Enders argues.

David Abraham, chief executive of Channel 4, was sufficiently worried about the Plan A thesis that he asked Channel 4 lawyers to look into its plausibility.

Abraham suspected that there was not the necessary unity between Whittingdale and Business Secretary Sajid Javid on one side and Chancellor Osborne on the other for it to happen.

The Channel 4 lawyers thought the Money Bill route would have been perfectly plausible if the proposal had been in the Conservative manifesto.

“If something isn’t in the manifesto, and if there is something so big and noisy as Channel 4 to stage it in this way would piss off a lot of people,” Abraham was told.

“Quite a lot of Tories would get very angry if they weren’t given the opportunity to have a proper discussion. It would be regarded as railroading,” the Channel 4 chief executive said.

Any chance of privatisation via the Budget, probably always a long shot in the real world, died in September when a document peeping out of the briefcase of a civil servant was photographed as he walked into Downing Street.

It spoke of extracting greater public value from Channel 4 “focusing on the privatisation option in particular.”

The document was prepared in the Department of Culture, Media and Sport even though Whittingdale had been claiming in public that such a privatisation was not even under discussion.

After the debacle Whittingdale was given permission by the Cabinet to review the position of Channel 4.

Meanwhile Abraham was more than a little surprised by those emerging as supporters, or potential supporters, of privatisation – Lord Grade, former chief executive of Channel 4 and Luke Johnson its former chairman.

Both had vehemently opposed privatisation when in office.

Abraham took each of them separately to lunch to see where they were coming from.

“In Michael’s case he is very clever and very charming but the bottom line of the lunch was ‘listen dear boy the game is up. You really ought to throw your lot in with an IPO (initial public offering) and you could do very well out of it’,” says Abraham.

“I spent the lunch telling him why that couldn’t work and that personally I wasn’t interested,” he added.

Lord Grade then wrote a letter thanking Abraham for lunch and repeating his argument that it would be better for Channel 4 to be in private hands.

Abraham only decided to go public after Lord Grade “chose to blab his mouth off” at a Broadcasting Press Guild lunch at Pinewood studios and told journalists that Abraham’s position defied commercial logic.

Over lunch Johnson accused Abraham of trying to close down debate over privatisation even though the Channel 4 chief executive pointed out it would be the Government which will ultimately decide.

Johnson replied that the politicians definitely wanted to look at privatisation.

It was against the background of the two lunches that Abraham denounced Grade and Johnson as “the flip and flop of British broadcasting.”

What happens next on Channel 4 privatisation?

It’s impossible to know for certain, although Channel 4 continues to hear rumours that George Osborne’s calculation is that “the pain against the gain is simply not worth it” even though the idea may have originated with Treasury mandarins.

It’s unclear whether John Whittingdale, influenced by former Channel 5 chief executive David Elstein, and Ray Gallagher his special advisor who spent 15 years as Rupert Murdoch’s director of public affairs at Sky, has given up on the idea.

Meanwhile David Abraham believes Whittingdale, one of the “gang of seven” Brexit supporters in the Cabinet, is causing great damage to the channel by refusing to say one way or the other what Government plans are.

Matters could become much clearer after 23 June if the UK votes to stay in the European Union.

Former Conservative Heritage Secretary David Mellor who knows the ways of the Conservative Party has no doubt what would then happen.

“There will be a night of the long knives. It’s perfectly obvious that a lot of Cameron’s people in Downing Street are thirsting for blood. There will be people too big to get rid of. John Whittingdale is not one of them,” predicts Mellor.

This article has been modified to reflect new information that the privatisation may have come more from the Treasury than from John Whittingdale. It is based on a chapter of ‘What Price Channel 4?’ published by Abramis in June 2016, £19.95 and edited by John Mair, Fiona Chesteron, David Lloyd and Richard Tate with Ian Reeves.