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How do you solve a problem like the PCC?

If the press falls under statutory control, newspapers will have no one to blame but themselves.

It says much about the veracity of recent inquiry into Britain's press excesses that an A-list actor wearing a listening device down a pub in Dover sheds more light on illegality within tabloids in one hour than the police, House of Commons and Press Complaints Commission manage in five years.

Hugh Grant may hold a bigger grudge against newspapers than most, although he admits occasional blows to his public image have done little to diminish a successful Hollywood career. Others haven't been so lucky. Take Chris Jefferies, the landlord of Bristol murder victim Joanna Yeates.

Amid the maelstrom of media hysteria over the death of a pretty, young, white woman last Christmas, Jefferies, a retired schoolmaster, was arrested – and before the cuffs had clinked shut the tabloid press deigned him guilty, describing him as a "creepy oddball" with potentially paedophilic tendencies. Not a campaign of wicked whispers; they screamed it from their front pages.

He was later released without charge. His name was cleared, yet his reputation for eternity left in tatters.

If Hugh Grant had been Joanna Yeates's landlord, the same never would have happened. Grant would have called in the legal cavalry of Carter Ruck and Fleet Street would have taken heed. Unfortunately Chris Jefferies, lacking the same means, was forced to seek solace in the bosom of the Press Complaints Commission. Six weeks later he was selling his home and moving far away.

The PCC calls itself the police of Britain's press industry, meting out divine punishment on code of practice miscreants. Yet the truth is that it inspires about as much authoritarian fear among reporters as a stripper wearing a Toys'R'Us helmet and carrying a plastic truncheon. I know because until last month I was one of the worst offenders, a Daily Star hack with a rap sheet of dubious journalism stretching halfway down Fleet Street.

Story of no glory

I've experienced the censure of gruff legal warnings on behalf of celebrities like David Beckham and Amir Khan, but a PCC complaint was always just something to be folded tightly and used to fix a wobbling chair.

It is the greatest lie ever disseminated by the British newspaper industry (and there've been a few) that the public has nothing to fear from press power because of the shackles of the PCC. But look closely and you'll see those shackles are merely furry handcuffs hanging next to the bed they share with certain newspaper groups, namely Associated Press and News International.

The current phone-hacking scandal has been just as humiliating for the PCC as the News of the World. Unwilling and unable to either investigate or punish the red top, it has stood slack-jawed on the sidelines, spluttering its meatiest rebuke in the direction of the Guardian newspaper for daring to open such a can of worms in the first place.

Earlier this week the MP John Whittingdale, chairman of the House of Commons culture, media and sport select committee, accused the PCC of being in "the thrall" of the newspaper industry, adding: "I don't think they've covered themselves in glory."

But the PCC has never sought glory; quite the opposite. For over 20 years it has quietly conducted a smoke-and-mirrors game of paying lip-service to public outrage while keeping at bay those demanding tighter regulations of the newspaper industry.

Section one of the PCC editor's code of practice states: "The press must take care not to publish inaccurate, misleading or distorted information."

Yet open any red top or mid-market title, and you will find misrepresentation, or even downright lies, are rife. The internet is awash with fantastic bloggers exemplifying this very fact.

Last year there were just over 7,000 complaints made to the PCC, yet it addressed just 1,687. One-quarter. The rest were tossed back in the sea of discontent as "outside our remit". These crucially include any complaint made by a "third party"; anyone the PCC judges not "directly affected" by a story.

Mind your language

To cite an example, on 3 February this year the Daily Express wrote a story beneath the headline: "A mere 37 per cent of NHS doctors are white British". It was a lie. The self-appointed "Greatest Newspaper in the World" maliciously lumped the 25 per cent of respondents to a General Medical Council survey who didn't specify their ethnicity into the "non-white" category to help cook the stats.

The second paragraph of the story ran: "Experts last night said they feared the tide of foreign-trained medics could put patients' lives at risk because some may have poor English language skills."

Yet the survey looked merely at the ethnicity of doctors, not their nationality, so the assertion that many are "foreign" and therefore have "poor English language skills" is a fabrication of the most offensive and debased kind.

But were I an ethnic-minority doctor complaining to the PCC that such lies not only misrepresented my profession but risked worsening racism towards staff on hospital wards, I would be given short shrift. Outside our remit, sir, you're not "directly affected".

What the PCC doesn't want you to know is that newspapers are free to say anything they want about Muslims or gypsies or immigrants without the slightest fear of censure. The PCC Code is totally irrelevant in such cases. In my opinion, this is a greater scandal than phone-hacking, one that tears at the seams of our whole society, and I am deeply ashamed to have been part of it.

Following my resignation from the Daily Star over its endemic anti-Islamic bias, a letter demanding an investigation was sent to the chair of the PCC, Baroness Buscombe, by the campaign group One Society Many Cultures, signed by the likes of Diane Abbott MP and Claude Moraes MEP.

I am sad to say they wasted their time.

Beyond the PCC's intrinsic lack of authority over such matters as demonising whole ethnic groups, Richard Desmond this year pulled his media titles out of the regulatory body after deciding that it "no longer suited his business needs". One of Britain's biggest publishers went rogue, and all the PCC has done is bluster over this ignominy with grey statements about a "funding dispute" that it "hopes to resolve soon".

Dragged under and gagged

Perversely, Desmond's grand snub to the PCC may be his greatest, many would say only, gift to the canon of British journalism. For with all publications no longer singing from the same hymn sheet, the music must surely stop. Self-regulation has been fatally undermined.

You'll see few tears from tabloid journalists themselves. Contrary to popular belief, hacks don't enjoy peddling lies for a living, or trawling through people's voicemails. It's their paymasters who deem that an inciteful, sensationalist and obfuscating editorial agenda is the best, and cheapest, manner to prop up flagging circulation.

Andy Coulson and Rebekah Brooks stood before the Commons media select committee in 2009 and stated: "The threat of a complaint being upheld by the PCC is what terrifies editors – not particularly a financial sanction; it is the actual adjudication. It carries an enormous amount of weight and carries far more significance than a fine."

If the committee members had listened hard enough, they would have heard exactly what Fleet Street has known for a long time. It is precisely the spectre of financial punishment that terrifies editors. It's the clammy nightmares about a day when printing a false story is more than a simple calculation about the subject's means to sue versus the potential spike in circulation: when printing demonstrable lies becomes more expensive than hiring an adequate number of reporters and letting them do their jobs properly.

I'm no fan of a free press being dragged under the wing of statutory control, but if it comes to pass, newspapers will have no one to blame but themselves. Certain publishers can quite rightly complain that self-regulation and the flexibility of the PCC Code has allowed them to chase and expose scandals that undermine our democracy and shape foreign policy. Sadly, an equal number of publishers have chosen to betray that code both in spirit and practice, purely for the purpose of celebrity rubbernecking and social divisiveness.

But what stands in the way of reform is the appetite of the government. It always has done. Which prime minister of the past few decades has felt secure enough in power to bite his or her thumb in the direction of Rupert Murdoch or Paul Dacre? The idea that newspapers win elections, true or not, still echoes around Westminster, and no one yet is brave enough to test the theory.

And yet, if promises still count for anything in politics, the coalition would do well to cast its mind back to 1990 when the Calcutt report, commissioned following the collapse in confidence in the Press Council, concluded that a voluntary body should be formed with "18 months to prove its effectiveness", or the industry would face legal imposition.

I wonder what Sir David Calcutt would be saying were he here today.

Richard Peppiatt is a former reporter for the Daily Star.