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Details of Dáil Public Accounts Committee Report on RTÉ
11 Jul 2018 : Nathan Griffin
The Dáil Public Accounts Committee has released the findings of its enquiry into Ireland’s public service broadcaster, RTÉ.

The report touched upon a number of important topics in relation to the broadcaster including: the TV licence fee evasion rate; which is now said to be 15% (the highest in Europe), the cost of indigenous content creation compared to foreign content imports, top earners set up as private limited companies to avoid paying personal income tax, results of the Eversheds Sutherland Review, as well as the land sale that took place in Donneybrook.

RTÉ FINANCIAL POSITION

RTÉ is a public service media organisation, funded by the Department and commercial revenue. In 2016, public funding accounted for €179.3 million, and commercial revenue amounted to €158.2 million. RTÉ’s public funding is television license fee revenue that it receives from the Department. Its commercial revenue includes the sale of advertising and sponsorship, and the publication of the RTÉ Guide.

The Director-General of RTÉ, Ms. Dee Forbes, stated that RTÉ is facing “urgent and substantial financial challenges”. Its 2016 income was 23% (€104 million) less than in 2008, and RTÉ posted net operating deficits in 2015, 2016, and will do so again in 2017. She highlighted the challenges RTÉ faces with the advent of digital media, a rapidly evolving media landscape, and the requirement to provide additional services, and meet its obligations as a public service broadcaster under the Broadcasting Act 2009. The advertising market has also changed, with digital advertising becoming more prominent, and increased competition for advertising revenue from over 40 nonindigenous channels.

TELEVISION LICENSE FEE EVASION

The Department is responsible for collecting television license fees. It passes 79% of each €160 license fee to RTÉ as grant-in-aid. However, evasion rates currently stand at 15%, and RTÉ asserts that this results in an annual loss of approximately €37 million. The following table compares Ireland’s license fee evasion rates to that of its European counterparts.

When compared with licence fee evasion rates in other EU countries, Ireland’s 15% fairs very poorly and is conclusively the worst in Europe. There is over a 5% gap between Ireland and Denmark, the second worst European nation. Other European nations that make up the highest evasion rates are: Switzerland; 8.5%, Norway; 6.8%, United Kingdom; 6.5%, Austria; 4%, and Germany; 2%.

There are also a significant number of homes availing of what RTÉ refer to as “outdated TV exemptions”. Associated losses are in the region of €24 million annually. The director-general stated that, when combined with the loss of approximately €37 million resulting from the 15% evasion rate, over €60 million is lost every year due to the inefficiency of the license fee system.

INDIGENOUS INDUSTRY AND CONTENT COST

The Director-General stated that, as a national broadcaster, RTÉ has an obligation to nurture and develop creative talent in Ireland. However, its investment in the Irish independent sector has fallen from €79.5 million in 2007, to just under €40 million in 2016. The Director-General expressed concern that the sector is under-developing, and that Irish talent is emigrating to find employment.

RTÉ stated that a lack of investment in the sector also affects indigenous programming including the arts, culture, children’s, drama, and Irish language programming. Mr. Jim Jennings, RTÉ’s Director of Content, stated that he does not believe RTÉ is fulfilling its remit in terms of Irish language programming. He stated that this is one of the areas that RTÉ seeks to address in its five year strategy document entitled RTÉ: Strategy 2018 – 2022 Renewing RTÉ for the next generation. Following consideration by the PAC Periodic Report No.3, January – May 2018 83 Broadcasting Authority of Ireland (RTÉ’s regulator), the strategy will go to the Minister for Communications, Climate Action, and Environment for approval.

The Committee questioned the costs of the various programming content RTÉ airs. The Director-General stated that some of the most inexpensive content is content bought in from abroad, while the most expensive content is indigenous drama. Comparing acquired and indigenous soap operas for example, Neighbours can be acquired for €2,000 or €3,000 per hour, while Fair City costs in the region of €53,000 per hour. Committee members were surprised at the level of differential in content cost.

RTÉ’s Director of Content noted that while indigenous content is expensive, there are a number of associated benefits. It can be sold internationally, and it creates employment for a range of professions including actors, directors, writers, camera crews, and production crews.

TOP EARNERS

Of the 472 contracts for services, 81 are with incorporated limited companies. After deductions such as the Universal Social Charge (USC), and Pay Related Social Insurance (PRSI), all income earned by these companies is taxed at the Corporation Tax rate of 12.5%, rather than the higher rates of personal Income Tax (20% and 40%). This has given rise to the perception that these arrangements are used by RTÉ’s top earners to maximise their income. In 2015, all five of RTÉ’s five highest earners were paid through limited companies, with fees ranging between €295,000 and €495,000.

Committee members questioned whether the services provided by RTÉ’s top earners justified the fees paid, and whether they represented value for money for the taxpayer. It was also suggested that the exorbitant fees give the impression that RTÉ has significant funds at its disposal. The Director-General stated that the payments to RTÉ’s top ten earners represent 1% of its total cost base, that the market for the services of the top earners is competitive, and that her predecessor, Mr. Noel Curran, had overseen the reduction of the fees by 30% - 40%.

EVERSHEDS SUTHERLAND REVIEW

In 2017, RTÉ agreed to undertake a review of services provided to the organisation through contracts for services. Eversheds Sutherland was engaged to produce the report, which has now been completed. The Committee understands that, of the 433 contract arrangements reviewed, 276 contractors were appropriately engaged, 106 contractors were found to have “attributes akin to employment”, and 51 contractors were found to have “attributes akin to both employment and self-employment.”

The report’s recommendations include introducing a policy for engaging freelancers, and clear guidelines on how it determines employee or contract status. RTÉ has stated that once these are in place, individual contract reviews will commence (these will not be necessary in the case of the 276 contractors that were identified as being appropriately engaged).

RTÉ‘s Director of Human Resources, Eimear Cusack, said:

“RTÉ accepts the Eversheds Sutherlands recommendations in full. RTÉ hopes to have its policy and guidelines in place by September, and to complete the review of the individual contracts by the end of 2018.”

 

THE SALE OF LAND IN DONNYBROOK

A 2015 report by NewERA recommended that RTÉ consider selling some of its assets. This resulted in the sale of about nine acres of land on RTÉ’s campus in Donnybrook. The land was sold to Cairn Homes for €107.5 million. Committee members questioned the witnesses as to how the proceeds of the sale would be used.

The Director-General stated that the proceeds of the sale of the land had to be set out as part of the process to obtain consent for the sale from the Department of Communications, Climate Action, and Environment, and the Department of Public Expenditure and Reform. The proceeds will be used to fund capital investment (€30 - €40 million), paying down €10 million of RTÉ’s €53 million of debt, and to fund an ongoing voluntary severance scheme aimed at reducing the organisation’s cost base. It was asserted that State aid rules prohibit the use of the funds for operational purposes.

Ms. Breda O’Keeffe, RTÉ’s Chief Financial Officer noted that there is a significant tax bill of 25% to be paid on the sale of the land, and that there are a number of costs associated with the transaction.

CONCLUSIONS AND RECOMMENDATIONS

The Committee of Public Accounts is of the view that:

The level of TV license evasion (15% in 2016) is contributing to RTÉ’s difficulties in delivering on its obligations as a public service broadcaster. It is also endangering the development of creative Irish talent, and associated independent industries. The Committee recommends that the current television licensing system is reviewed as a matter of urgency with a view to decreasing evasion rates.

The Eversheds Sutherland report into the use of contracts for services by RTÉ has recommended that RTÉ introduce a clear policy and guidelines regarding the use of contracts for services, and that it reviews 157 of the 433 contracts examined by Eversheds Sutherland. The Committee welcomes the fact that RTÉ has accepted the report’s recommendations, and it is the intention of the Committee to seek updates on their implementation.




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