Page:S4C Funding IA 8 Dec 2011.pdf/6

 Benefits under do nothing option

There are positive spillovers resulting from S4C’s existing service, particularly through the public good and merit good nature of their broadcasts. S4C plays an important role within the culture and heritage of Wales. S4C also increases plurality in the Welsh television sector, providing an alternative to other public and private sector broadcasts; and commissioning programmes from the Welsh Independent Production sector.

S4C does not produce programmes in house, but commissions work from Welsh independent producers. According to the S4C Economic Report 2010, S4C spends about 75% of its budget on the Welsh Independent Production sector which in turn spends money in the Welsh economy. S4C spend on independent productions accounts for about 60% of the sector’s revenue. According to the report, in 2010 the impact of S4C on the Welsh economy is estimated to be £88m, indirectly supporting about 2,000 jobs.

Costs under preferred option

The Secretary of State will exercise the duty to secure sufficient funding for S4C by making payments himself or entering into an agreement with another person to do so. In practice, this will mean that S4C would be funded by the government through the Department for Culture, Media and Sports (DCMS) for the 2011/12 and 2012/13 financial years. The government will continue to provide some funding until 2014/15, but the majority will be provided by the BBC.

Table 2: Preferred option for S4C funding (£m nominal)

Table 3: Change in S4C funding sources under preferred option 2011/12 to 2014/15 (£m nominal)

The Secretary of State has committed to a review of S4C's strategy and finances to be concluded in good time before the end of the spending review period.

Total S4C funding over the spending review period will be £339m under the preferred option. This is a reduction of approximately £110m (£105m in constant prices) over the spending review period compared to the projected baseline under the do nothing option.

The impact of the reduction in funding will depend upon decisions made by S4C. Evidence given at the House of Commons Welsh Affairs Select Committee on S4C indicated that up to 40 jobs will be lost at S4C over the next 2 years as a result of the reduction in funding. S4C currently employs about 160 FTE staff. These job losses have not been monetised because they are subject to decisions made by S4C on how their budget is spent.

In addition there may be some transitional costs as S4C adapt to closer working with the BBC, but the scale of these costs is very uncertain at this stage and will depend upon decisions made by S4C and the BBC. The transitional costs purely from the change in funding arrangement alone are not expected to be substantial.