Policy objective
The policy objective is to ensure that S4C continues to offer the best possible Welsh language service to the audience, whilst also helping the Government to reduce the fiscal deficit by reducing the level of funding to S4C by 24.4% in this spending period. The Government proposes achieving this through:
1) Breaking S4C’s funding link to the RPI; and
2) For the Secretary of State to discharge the duty of securing sufficient funding for S4C by making the payments himself or entering into an agreement with another person for that person to do so.
Options
Two options are being considered:
1. Keep the funding the same (do nothing option)
This option is included to serve as a theoretical baseline against which to assess the impact of Option 1, the proposed statutory instrument, which is the Government’s preferred policy option.
2. Option 1: Remove the RPI link (preferred option)
The preferred option involves removing the RPI funding link which will reduce S4C’s funding by approximately 24.4% over the four years of the spending review from 2011/12 to 2014/15. The decision to break the RPI funding link for S4C was agreed as part of the Comprehensive Spending Review as the existing funding arrangements were not considered sustainable in the context of the Government’s deficit reduction strategy. At the same time the Government announced that the BBC and S4C would enter into a partnership arrangement.
Cost-Benefit Analysis
There are direct impacts on S4C, the BBC and the Exchequer from the proposed policy option. There may also be an impact on the service provided by S4C, which will be determined by the extent to which efficiency gains can be made. On the one hand, if S4C and the Welsh Independent Production sector are able to achieve sufficient efficiency savings, then a similar quality and quantity of programs can still be supplied, but with improved value for money to the Exchequer. On the other hand, if S4C and production companies cannot find enough efficiency improvements, then either the quantity or the quality of Welsh language programs broadcast by S4C may be reduced. Hence the overall impact is subject to a degree of trade-off between achieving value for money, and quality or quantity of programs.
Costs under do nothing option
It is estimated that the existing arrangement linking S4C funding to RPI will cost the Exchequer approximately £450m (£430m in constant prices) over the four years of the spending review period. This is based on a funding agreement of £106.4m for 2011-12, trended forward in line with RPI determinants from the Office of Budget Responsibility thereafter, as set out in table 1 below.
Table1: S4C’s projected budget under do nothing option (£m nominal)
| Year | Projected S4C RPI funding* |
|---|---|
| 2011/12 | 106 |
| 2012/13 | 110 |
| 2013/14 | 114 |
| 2014/15 | 118 |
| Total | 449 |
*Figures may not sum due to rounding. These figures provide an update on previous estimates to incorporate RPI determinants published by the OBR in March 2011.
