7 September 2020 tbs.pm/71027

From The (Newcastle) Journal for 20 January 1970

BORDER Television, smallest mainland commercial television company in Britain, is in a grave financial plight, as spotlighted in last night’s Commons debate.

Short of a miracle, shareholders will probably be told at the 10th annual meeting next summer that the company is deeply in the red. And it would be no surprise if this enterprising and friendly little station, one of the last to open up, was also the first one to fold.

The reason for this situation, which has developed with catastrophic suddenness over the past months, is easy to define. Primarily, though not exclusively, It centres around the crippling Treasury levy on advertising applied to Border since last July.

Before then, Border Television, and one or two other small independent companies, did not have to pay the levy for the simple reason that their revenue from advertising fell under the magic figure of £1,500,000 [£25m in 2020, allowing for inflation] (In fact, Border’s revenue in recent years has hovered around £650,000 [£11m])

In his last Budget, however, Mr Jenkins took the step that now looks like assassinating the tiny company. He lowered the “liability limit” to £500,000 [£8.5m], and ordered a 7 per cent. levy to be applied to all income between this and £1m. Border was suddenly faced with an annual bill of around £20,000 [£333,000], payable from July 1, 1969.

Dwindling

Of course, in itself, £20,000 is not a devastatingly large sum of money for a company, even one as small as Border, to find each year. It is only twice as much as the salary of Border’s Managing Director. But other factors have to be taken into consideration – the dwindling amount of advertising and the enormous cost of the switch-over to colour. When these are put into the equation, the alarming picture becomes apparent.

The number of advertising “spots” sold by Border – and by all other independent companies — has tumbled dramatically in recent months. A comparison between the first week of 1969 and of 1970 shows that the number of peak-time “spots” has fallen by very nearly 25 per cent.

The third factor that has brought the Carlisle company to this sorry impasse is the huge expenditure on “going colour.” In his last report, Mr John Burgess, the company’s chairman, said that he was going to have to spend “rather more than the total issued capital” on colour equipment – more, that is, than £125,000 [£2m] and that spread over slightly more than two years.

They have salted away reserves for colour, but in spite of this… the grim arithmetic now becomes clear. Last year’s pre-tax profit was £96,000 [£1.6m]. This year, without a doubt, it will be reduced considerably both by the fall-off in revenue and the expenditure of, say, £40,000 [£666,000] on colour. It could be slashed to £20,000 [£333,000] or less.

Revenue

Tax would take more than half of this and the levy (bearing in mind that it is a sum assessed on revenue and not on profits) would finally wipe out all vestige of a profit that might remain.

What, then, can be done? Lord Aylestone, ITA’s chairman, has recently been to see Mr. Stonehouse, Minister of Posts and Telecommunications about the levy’s effect on the smaller firms; in some circles there is the feeling that, if only as a pre-election gesture, the Chancellor might be persuaded to ease the levy burden.

Failing this, then Border will have to do what Tyne Tees has been forced to do on the other side of the Pennines. It will have to diversify its investments. (It has begun to do this: an office block, which Border intends to let out, is soon to rise beside the studios).

The worst that can happen is that the company will throw in the towel by handing the licence back to the ITA. Granada and Scottish Television would then be able to share the spoils between them, and one of the country’s most valuable regional assets, in social and cultural terms, would be tragically lost.

Excerpts from the 19 January 1970 debate in the House of Commons

Ronald Lewis (Labour, Carlisle):

Is my right hon. Friend aware that some of the smaller television companies, like Border, which operates most efficiently in my constituency, will not be able to go in for full colour programmes unless the levy is halved or taken off? That would deprive my constituents and those in the Border area of an efficient, up-to-date television service. Will my right hon. Friend speed matters up in the interests of the smaller companies?

John Stonehouse (Labour, Wednesbury), Minister of Posts and Telecommunications:

I am dealing with the question as quickly as I can. I received the report on Friday and spent the weekend with it. I am conscious that the smaller companies are adversely affected, but they are also adversely affected by increasing costs and the fact that the income from advertising has not been as great as was expected.

Ian Gilmour (Conservative, Central Norfolk):

In view of the right hon. Gentleman’s extreme dilatoriness over this matter, which has been becoming increasingly evident over the past few months, will he undertake both to publish the Cooper Brothers’ report when he receives it and to act upon it immediately?

Stonehouse:

I cannot understand what the hon. Gentleman means by that supplementary question. I was told by the I.T.A. that it would give me the report as soon as it could. As a result of the very full investigations made by the accountants advising the I.T.A., this took longer than expected. I received the report on Friday afternoon last and spent the weekend reading every word of it. It is a very long report, and it is not yet possible for me, with my advisers, to reach any conclusions about it. The suggestion that there is any delay on my part or in my Ministry is absolutely unjustified. The report is confidential and I could not undertake to release the whole of it.

Christopher Meyhew (Labour, Woolwich East):

Is my right hon. Friend aware that some television companies are a great deal less poverty-stricken than others? This crisis will not be solved simply by cutting the levy. Can we be assured that we shall have full information about the finances of these companies, and that this will be followed by a searching examination of the structure of I.T.V. as a whole?

Stonehouse:

It is true that some companies are not as badly off as some of those worst affected by the factors which I described in answer to another supplementary question. I shall see what information I can provide to the House before we move further on decisions that should be made.

John Ellis (Labour, Bristol North West):

Does my right hon. Friend accept that, while many of us believe that it is right to clobber the profits, some of the miserable people running television companies are now lowering the standards on the production side, starving their producers so that they cannot put on decent productions? Will he make arrangements to attack the profits but to allow the companies the money for the productions?

Stonehouse:

As I said in answer to another supplementary question, I am anxious that programme standards should be maintained, but I am not aware that there has been any reduction in them as a result of the Chancellor’s action last year. Programme standards are being maintained, and I have had assurances from the companies that they will continue to maintain them.

❛❛Russ J Graham writes: Border’s net profits for the year ending 30 April 1971, which the article says will be wiped out completely, were £20,310 – £320,000 in today’s money – an increase of £6,715 (£105,000), and shareholders got a 10% dividend, double what they had received in April 1970.

John Burgess, the Chairman of Border Television, put the increase in profits down to increased advertising revenue, although one of the main reasons was the ITA reducing the ‘rental’ paid for Border’s transmitters from £23,000 (£360,000) a year to a token £1,000 (£16,000). Additionally, the ITV network rallied round and vastly reduced the price charged to Border for networked programmes.

With the increased profit, Border was able to spend £70,000 (£1.1m) on colour equipment and increase the budget for their network show Mr & Mrs and their local news operation. The Caldbeck transmitter went colour in September 1971, with Border itself remaining in black and white and just network and imported shows going out in colour. The company estimated that a full colour service would cost it £250,000 (£4m) and the money was eventually found, with the help of a market for secondhand colour equipment becoming available.

Another big help to Border’s finances – and the finances of ITV as a whole – was the change of government in 1970. Out went Labour’s John Stonehouse as Minister of Posts and Telecommunications and in came Christopher Chataway, a man with a long history of involvement in television as a whole and ITV in particular.

Stonehouse had already slightly reduced the levy in April 1970, providing the pre-election boost to ITV The Journal had predicted. Chataway cut the levy in half in February 1971. This was very welcome to Border and ITV but provoked controversy, with not only Labour MPs being shocked but also some Conservatives. However, attempts in the House of Commons to debate or overturn the reduced levy were repeatedly derailed: at the exact time Chataway made this cut, Rupert Murdoch had swooped in on London Weekend, and MPs were far more interested in debating whether that was a good thing or not.