Channel 4’s last ditch effort to dodge privatization ‘posed a risk to the taxpayer’
A last-ditch effort by Channel 4 to avoid privatization has been rejected by ministers after being told it posed an unacceptable risk to taxpayers.
The station’s offer to invest an additional £200m a year in UK programming over the next decade through a joint venture with a private funder was a ‘downside risk’, according to the official advice to the government, while reforms could be implemented more quickly through privatization. .
Channel 4 made the investment offer as part of an eleventh-hour attempt to prevent Culture Secretary Nadine Dorries from offloading the broadcaster into private hands.
Alex Mahon, its chief executive, has also tried to tap into the government’s upgrade program by creating 600 new roles outside London and increasing the proportion of shows commissioned from beyond the capital from 35 to 50 per cent.
However, the body overseeing government ownership of Channel 4 said there were “significant execution risks” to the proposals.
Documents sent to ministers by UK Government Investments (UKGI) stated: “The [intellectual property joint venture] is a new structure and involves a significant risk of being classified in the public sector, thus entering the [the government’s] balance sheet as well as the debt it plans to raise. This may make it unacceptable to the government.
“The question arises whether the public/taxpayer sector is best placed to bear these risks when many of the targeted outcomes could arguably also be achieved under private ownership, potentially at a higher rate and scale with reduced risk.
“Should [the] reform plans under public scrutiny fail to deliver, in whole or in part, [the Government] would continue to bear the downside risk.”
Officials from the Department for Digital, Culture, Media and Sport are also drawing up plans in conjunction with JP Morgan to list Channel 4 in London if a viable offer does not arise, the Sunday Times reported.
Channel 4 is state-owned and operates on a not-for-profit model with programs funded by advertising sales.
The privatization process is set to begin next year, with a sale expected to close by early 2024 at a price of around £1bn. However, the government faces a major political backlash from opposition parties and its own backbenchers. The House of Lords is expected to try to delay the sale until the next election.
ITV is believed to be exploring a bid for the broadcaster, amid speculation that Sky, Discovery and Channel 5 owner Paramount could also strike a deal.
Enders Analysis, the independent media consultancy, estimates Channel 4 could be sold for between £600m and £1.5bn depending on how much of its tenure is protected under the deal.
Channel 4 declined to comment.