Editorial: Transparency sure to keep TVNZ honest

COMMENT


The state television company, TVNZ, reports that it paid the Government a dividend of $37.6 million last year and received $28.3 million in programme subsidies and other forms of public funding. Chief executive Ian Fraser thinks this is a pointless money-go-round and that the dividend would be better reinvested in programming to meet the company's charter. This is a repeat of a well-worn argument and like most tired reruns it probably retains a certain appeal. Why not simply reinvest all TVNZ's profit in programming and let the Government keep the funds it would otherwise contribute for charter programmes? Mr Fraser does not quite offer to forego the subsidies but the implication is clear.

So why not avoid the "money-go-round"? Visibility, in a word. Visibility is a quality that should not need to be explained to anyone in television. Visibility in accountancy is not much different from tuning a moving picture. The various components need to be starkly differentiated. TVNZ is obliged to pay a dividend because it is a commercial asset that competes with other broadcasting companies and wider media, indeed with all other activities in the economy, for revenue, labour, capital, energy - all the resources available to the economy. It is in our collective interest that those resources are used for maximum value.

Profits and dividends are the usual measure of the return a company is making with the resources it is consuming, resources that might otherwise be put to more valuable use. If TVNZ was entrusted to simply reinvest all its profit in programme production, as Mr Fraser suggests, we would lose that measure of its resource use. There is no reason to distinguish its investment in production from other costs and there would be no way of comparing the value of its resources with other commercial operations competing for them.

Commercial value, of course, is not the only measure of television's worth, which is the reason the Government subsidises some programming. TVNZ, like any other broadcaster, can apply for public funds to make programmes that are considered to be of social or cultural value even though they are unlikely to attract a sufficient audience to enable them to pay their way.

Enthusiasts of non-commercial programming should be the first to oppose any suggestion that TVNZ should simply plough its dividend back into productions instead of receiving a visible subsidy. If the broadcaster did not have to account for its finances in the normal commercial way, two things would happen: its internal costs would quickly absorb the dividend and the programmes it makes would have to cover those costs; and it would be most unlikely to invest any surplus earnings in programmes that could not pay their way.

It is a common mistake, often made by the present Government, to treat profit as money that would otherwise be put to more productive purposes. In funding public services the Government prefers to deal with "not for profit" organisations, believing more of its outlay will reach those who need the service. It is not necessarily so. There are many more ways for an organisation to feather its own nest than by declaring a profit and paying a return on its capital. And the other ways are much less visible.

Money poured into nonprofit organisations can easily be absorbed in more generous working arrangements, pleasant accommodation, careless and wasteful expenses of myriad kinds. To avoid that, and try to match the transparency of commercial performance, governments require a great deal of paperwork from not-for-profit agencies. The paper trails are probably as costly to the public purse as any profit that would be taken by those who own and oversee an efficient company.

TVNZ operates like an ordinary company, albeit with a dual-purpose charter. It is obliged to account for its performance with an annual report. It is time it ceased using the occasion to promote a self-serving recipe for financial confusion.