Phonographic Performance Ltd

Debate between Baroness Ritchie of Downpatrick and Mike Weatherley

Wednesday 6th July 2011 Westminster Hall

[Ms Ritchie]

I thank the hon. Gentleman for his welcome intervention. I recognise that in another life he was a musician, and is a member of a popular Celtic folk band in Scotland, which has played in Northern Ireland on several occasions. I recognise the musicians’ plight, and that they and the music industry are an integral part of small businesses. I am reflecting on the position of small and medium-sized enterprises in Northern Ireland, where we have a predominantly public sector-led economy, and are trying to grow our economy and encourage small businesses. Any additional taxation or fees simply imperil their financial situation.

[Mike Weatherley (Hove) (Con)]

Does the hon. Lady agree that it is a blunt instrument to use the arbitrary definition of small businesses as being those with fewer than 50 people, when radio usage in small companies is often higher than in large companies?

[Ms Ritchie]

I thank the hon. Gentleman for his intervention, but I am simply using the definitions proposed by the European Union. I accept his point, but perhaps I could continue my speech.

It is likely that many firms with fewer than four employees are unaware of the exemption, and more should be done to ensure that they are not paying excessive amounts. That brings me to a related issue: the cost of referring a case or complaint to the Copyright Tribunal can be prohibitive. As Consumer Focus highlighted, that is especially likely to be the case for small and medium-sized businesses, and even for a trade association, such as the Federation of Small Businesses. We must be especially aware of such concerns given the relative monopoly held by the collection organisations. Businesses have no alternative within the market.

In contrast with most other European countries and the US, the UK does not provide in law for the regulation of licensing collection bodies, and no authority is charged with their ongoing supervision, except in relation to the ad hoc resolution of complaints through the Copyright Tribunal. Given that somewhat unbalanced field of play, it is important to consider the charges that companies face. With reference to the PPL charges, businesses defined by the European Commission as small enterprises —including, for example, a hair salon with more than four employees and with more than five treatment or stylist chairs—that use a radio, CD player or MP3 player will have to pay PRS £169 and PPL £121 a year. An office or factory with 135 employees will pay PRS £1,142.03, plus VAT, and PPL from £113 depending on square metres. A small café seating up to 30 people will be charged for television, radio and CD. The PRS fee will be £440.72 and the PPL fee will be from £113, depending on square metres.

Set against that, I note that the PPL’s total licence fee income grew 10.7% to £143.5 million from £129.6 million the previous year. It boasts of a revenue growth from public performance of 2%, and claims that that is noteworthy. Its last press release around 8 June stated that

“it was achieved despite...extremely difficult trading conditions for many of the company’s customers and licensees.”

The fact that so many businesses are complaining about the high cost of the licences and the undue strain that it is placing on their finances indicates that there is a more draconian approach to compliance. It is vital—I say this advisedly—that PPL works closely with such businesses, and that the relationship is symbiotic rather than confrontational. Proclaiming their own revenue growth at a time of difficulty for the businesses that purchase their licences is not a step in the right direction.

As well as considering the level of charges, it is important at this stage to consider the sort of businesses that are most likely to be affected by the current arrangements. In my constituency, which is on the east coast of Northern Ireland, a large proportion of the economy revolves around the tourism and hospitality industry. The complexity and cost of requiring two separate licences, combined with an aggressive compliance regime, can put undue pressure on the bars, hotels and restaurants that form the background and backbone of our tourism industry. If those establishments are forced to cease playing music, business will suffer, customers may leave and the public’s exposure to artists’ music will be greatly decreased. As highlighted in a recent report by Consumer Focus, the European Commission commented, in reference to competition, copyright and collective rights management, that

“no other sector operates such complex licensing arrangements.”

Before concluding, I wish to raise an associated and relevant concern that relates specifically to businesses that play radio stations. Although the radio station will have paid a royalty fee for playing the music, the small or medium-sized enterprise effectively has to pay that fee again, which I consider amounts to double taxation. In a similar manner, an hotel may be faced with a double cost for playing music in separate areas. That overly severe and inflexible approach damages small businesses. If those businesses are forced to stop playing music, it will hurt not only the businesses but those artists who, as the hon. Member for Perth and North Perthshire (Pete Wishart) pointed out, may live off a small wage and rely on being played on the radio for exposure. In summary, the licensing arrangements, which in some instances comprise many different tariffs, are cumbersome and cost-prohibitive for many owners of small and medium-sized businesses.

[Mike Weatherley]

I wonder whether the hon. Lady will expand on one aspect of that argument. If music is a necessity and part of the raw material required to provide a service in a café, for example, how does it differ from any other products offered by that café, such as coffee? Does the hon. Lady suggest that the Government should subsidise all other services offered by that business?

[Ms Ritchie]

If I may, I will say with a degree of temerity that there is a major difference between paying two licence fees, and paying for coffee and other services offered by a café. I am sure that we could elaborate further in the margins of the debate.

The licensing arrangements, combined with what is perceived to be an increasingly draconian compliance regime, is putting businesses under pressure. If we recognise that, we must find a solution that protects our valuable music industry, of which small businesses form an integral part. I urge the Government to take steps to create a simpler and more effective licensing regime. It is vital that licensing requirements and costs do not disproportionately impact on small and medium-sized businesses at a time when many already face a challenging economic climate.

In Northern Ireland, all parties are collectively trying to rebalance the economy and change it from being 77% public sector-led, to a system that puts greater emphasis on the private sector and will provide opportunities for people to develop business ideas. Given the degree of compliance involved in the licensing system, and the fees that are charged in such a cumbersome way, the charges need to be streamlined so that people and businesses can enjoy greater comfort. People should be able to enjoy the music without facing difficult charges. It is vital that the licensing requirements be streamlined and reviewed as a matter of urgency, and on behalf of small to medium-sized enterprises throughout Britain and Northern Ireland, I ask the Minister to take those views on board. I recognise that we have devolved arrangements in Northern Ireland, but the responsibility for licensing lies in London.