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Gordon Brown was right. Free Channel 4 from the State

    Yesterday evening, I attended a pre-screening of episode one of the new series of Channel 4’s documentary ‘Skint’. The series, which covers the lives of people living in quite difficult conditions in Grimsby, is due to air on Monday night and I heartily recommend watching it. Indeed, Channel 4 has produced a number of programmes recently which examine areas of serious deprivation across the country. Fraser Nelson’s excellent Dispatches programme, “How the Rich get Richer” and of course Benefits Street from earlier this year are two such examples.

    The truth is that despite some howlers (How rich are you was not particularly balanced), Channel 4 makes programmes which other channels don’t really want to cover and which attract good audience shares. Its culture and output make it quite distinct from other channels and it is creative and ambitious enough to succeed as an independent entity freed from the constraints of being a state owned organisation.

    Two decades ago, Channel 4 was valued at about £1 billion and given its turnover in 2013 was £908 million, any sale now would command a higher price. The money which would be raised could in part be pumped back into the channel as Policy Exchange once proposed and the rest could be used to help reduce our still large budget deficit.

    Whilst it is true that at least part of the management of Channel 4 has historically been opposed to privatisation, it has been far from uniform. The former chairman, Luke Johnson for example indicated his preference for privatisation in 2009 when compared to other options such as merging with Channel 5.

    Moreover, Channel 4 is already subject to market forces. Whilst it is non-profit, it has to balance its books by raising revenue. This revenue comes overwhelmingly from advertising which of course generally rises with the number of viewers. Channel 4 faces most of the competitive pressures that other private institutions face because frankly, if it didn’t make programmes that people want to watch, then it would not raise the revenue necessary to be remain solvent.

    It is unlikely that a sale of Channel 4 would lead to a massive change in overarching and seemingly successful strategy of appealing to a younger audience. Moreover, a sale could well see new programming and further innovation as tends to happen after most privatisations. What’s more, private ownership still leaves Channel 4 free to cross-subsidise more niche programmes which can be funded from the revenues of more mass market programmes as happens currently.

    Privatisation is not just the preserve of the Right and the potentially huge benefits to the employees of Channel 4 (as with the Royal Mail) should certainly allay any fears. On a number of occasions when he was Chancellor and Prime Minister, Gordon Brown proposed moving Channel 4 into the private sector. He was certainly right about that. 

    Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

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