Holding to account

Aiming subsidies on jobs is always difficult. Look at how the praise heaped on novice Chancellor Rishi Sunak was quickly superseded by the news that the head of HMRC had warned him against his £9.4billion job retention bonus scheme, and by a complaint by the Institute for Fiscal Studies that it was badly timed and poorly targeted. Subsidies, as any first-year economics student will tell you, create loopholes, distortions, inappropriate incentives and waste.

So why do governments and public bodies continue to use them? The reason is generally an assumption that the good will outweigh the bad. More of the money will create benefits than do harm. And indeed, subsidies are often used to support “public goods”: services that many individuals can share and benefit from without paying for. That is why government subsidises environmentally friendly farming, measles vaccinations, or the BBC World Service.

When I wrote The Cairncross Review: a sustainable future for journalism last year, I realised that a part of the problem was that the journalism that most justified any form of public support – what the Review called “public-interest journalism” – was often the coverage of the behaviour of public bodies at a local level. Some evidence suggested that the mere presence of a professional reporter at a local council meeting resulted, over time, in more financially appropriate decisions. But now that news organisations can see who looks at which stories and for how long, it is all too obvious that the numbers may not justify the cost of a journalist’s time.

As the Review put it: “Here are activities which are important public goods, essential to the preservation of an accountable democracy, with poor market incentives for supply (and limited demand), but which it would be inappropriate for the state to finance directly.”

Many countries are wrestling with this problem of a public good provided in a market run by private institutions. Britain has developed a partial solution, in the shape of the Local Democracy Reporting Service (LDRS). But the Rishi Sunak difficulty intrudes: devising a precisely targeted jobs subsidy is difficult. It is not always easy to make sure that the money ends up in the right places, and put to the right use. The Review made three suggestions for the future of the LDRS. First, there is a continuing need to subsidise local public-interest news – which argues for some expansion of the scheme. Second, that should be accompanied by an independent evaluation of the scheme: there were complaints that the money was badly targeted and sometimes allowed big publishers to replace a fully financed journalist with a subsidised one. And third, the management of the scheme should move away from the BBC and come under the sway of a new Institute for Public Interest News.

This body, which might in time evolve into something resembling the Arts Council in scale, reach and perhaps budget, could take over the administration of the LDRS, or run it in partnership with the BBC. However, the government’s immediate response to the Review was to announce that there would be no institute of the kind envisaged. “Government does not wish to have a role in defining what is ‘public-interest’ news as this risks interference with the freedom of the press,” said ministers.

Such political squeamishness is understandable but leaves a gap. The LDRS, paid for from the licence fee, is the most important single subsidy to local news. It might be time for a public review of where the money goes and whether it is better targeted than some of the Sunak subsidies appear to be.

Frances Cairncross