David Cairns: Deregulation could save STV and local news bulletins

WHETHER or not STV's founder Lord Thompson actually coined the phrase "a licence to print money", he might as well have.

In those pre-Lottery days there was no quicker way to get rich than to hold a commercial TV licence when the only competition, the BBC, did not show adverts. In return for engorging themselves on advertisers' cash the licence holder had to comply with a few regulatory obligations. Show a bit of politics. Some religion. A few educational programmes. And, most important of all, local news.

Those days are no more. ITV is facing a huge challenge to keep local news on the air and the new Tory-Liberal government has just blown its first chance to take practical action to help.

STV, which once went on a Fred Goodwin-esque dash for global dominance (by milking its television cash-cow to near death), is a fraction of its former self. Where previously it enjoyed an advertising monopoly, it now faces voracious competition from hungry digital TV channels and ravenous internet behemoths like Google. As if that were not enough, the advertising industry has just gone through one of the worst recessions in living memory.

In response to this deteriorating state of affairs the Labour government came up with the proposal to subsidise local news on ITV. The plan was to use money set aside – but not spent – on digital switchover, to fund pilot projects to help sustain local news. In Scotland STV entered the competition for the cash against a consortium comprised of newspapers, including The Scotsman's owners, and a TV production company. Most insiders expected STV to win comfortably and were dumbfounded when the newspaper guys triumphed.

The Tories opposed this plan on the grounds that money not used for digital switchover should be given back to the licence fee payer, so it was no surprise that in his first speech Culture Secretary Jeremy Hunt pronounced the death of subsidised local news.

More alarming was the complete lack of any practical action that could be taken now to prevent companies like STV from immediately cutting back on their local news output and sacking journalists.

Instead Mr Hunt now promises another review. He repeated his favourite clich about Birmingham, Alabama having eight TV stations while Birmingham, England has none. TV news in the US is terrible. Whether local, national or international it is vapid, soft-focus, parochial and endlessly repetitive.

He believes that scores of local TV stations can achieve what the current regional stations cannot: produce high-quality, mass audience, local news without losing millions of pounds in the process. How, exactly? Mr Hunt did not tell us. That task will fall to an investment banker who is to head up the review.

If the coalition doesn't like Labour's plan, then there is an alternative, and it is based on a principle that Mr Hunt should have no problem with – deregulation. The government should scrap the outdated restrictions that cap what ITV can charge its advertisers. The market is established, the restrictions can go. They should relax the rules for allocating advertising minutes and speed up the introduction of limited product placement.

These reforms would bring in significant new revenues to ITV who should then be obliged to spend it on keeping regional and local news on the air. By prevaricating, Mr Hunt may well have sounded the death knell for news on STV as we know it.

• David Cairns, Labour MP for Inverclyde, is a former Scotland Office minister.