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Lord Kirkhill moved Amendment No. 170:

Page 57, line 6, leave out from ("is") to end of line 8 and insert ("designed to be of particular interest to and to be first broadcast for--
(a) persons living within the area for which the service is provided (or any part of it), or
(b) in the case of a programme which is produced by or for a body holding the licence in respect of that service and one or two other bodies holding regional Channel 3 licences, persons living within that area and the area or areas for which services under those licences are provided' ").

The noble Lord said: I wish to make a number of remarks relative to Amendment No. 170. The term "regional programme" appeared widely in the Broadcasting Act 1990 and it has been used many times in debate. Everyone has a fair idea of what it means. Yet I suspect that we would probably all offer a slightly different definition. In fact, the whole of Clause 63 is about definitions. What we need to do, if we can, is attempt to define more carefully the question of what is or what is not a regional programme. The clause attempts a definition--I welcome that--but the definition is incomplete.

To find a definition of a regional programme, I turned to the ITC, which issued a very detailed description to TV companies in November 1992. Amendment No. 170 embraces the ITC's definition. As the clause stands, it defines a regional programme as being,

That could apply both to regional programmes, as in subsection (3)(a) of the clause, and to those described in subsection (3)(b)--those other programmes which contribute to the regional character of the service.

I come from an area where angling and hill climbing are very popular. Grampian Television has been mentioned once or twice today, not by me but by other

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Members of the Committee. If I give the example of Grampian it is because I live there. If it were to acquire an angling programme from RTE in Ireland and one about hill climbing from NRK in Norway, those programmes might be of great interest to those of us who live in the North of Scotland but they would nevertheless not be regional programmes. My amendment, by emphasising that the programme is designed for local viewers and is normally to be first broadcast for those viewers, ensures that simple acquisitions from elsewhere are insufficient to qualify as regional programmes.

Paragraph (b) of the amendment allows for the ITC's willingness to accept a very limited number of co-productions among ITV companies as regional programmes in more than one area. For example, in Scotland there is a significantly different pattern of religious worship from that which exists in the rest of the United Kingdom. In recognition of that, both Grampian and Scottish Television work together to produce weekly church services from the Church of Scotland, the Scottish Episcopalian Church, the Free Church of Scotland and so on. The few but legitimate regional co-productions such as these create the need for the second part of this more complete definition; or at least that is my view. In the light of the Minister's co-operative stance in our earlier discussions, I hope that between now and the Report stage he will give some thought to my concept.

The Deputy Chairman of Committees (Lord Brougham and Vaux): I should point out that if Amendment No. 170 is agreed to, I cannot call Amendment No. 171.

Baroness Dean of Thornton-le-Fylde: I wish to speak briefly to Amendments Nos. 170 and 171. I listened to the earlier debate about Grampian. As someone who does not live in Scotland or come from it, I imagined that Grampian covers the whole of Scotland, Scotland being an entity. My noble friend Lord Dubs, who intended to speak on this issue but cannot be with us, said that his mind was finally made up on the thinking behind Amendment No. 171 when, while waiting to take the Skye ferry recently, he bought some petrol. He thought that it was very expensive and said to the petrol attendant, "This is very expensive petrol". The attendant replied, "But it is the same price as everywhere around here. What do you mean that it is expensive?" My noble friend said, "Yesterday I bought some in Glasgow". The attendant said, "Have you not heard of the North-South divide?"

I have a home in the West Country. Devon and Cornwall is covered by West Country TV. People in Devon call a "foreigner"--and that is me, from Cornwall--an "Emit". If one is in Cornwall people from Devon are called "Grockles". Therefore, one may feel that one is talking about a regional area, but one is not. There are individual identities within the region. That is why this Amendment No. 171 at first glance may seem a little nit-picking, but it is not. It is not just within the region but throughout it, as we see it.

Lord Inglewood: Having heard this debate I have concluded that if each of your Lordships were to

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separately draft the clause we are debating each draft would be quite different. As I said in my earlier remarks, we shall consider all these matters with the ITC. We are certainly not convinced that the solution offered here by the amendment of the noble Lord, Lord Kirkhill, will necessarily get to the heart of the issue as we want to. We believe that it is rigid. The amendments proposed by the noble Baroness may in fact be treating a largely imaginary problem.

The reason for that is that the powers to impose new licence conditions in Clause 63--new Section 21A(3)(a) and (4)(a) to the 1990 Act--are designed to cover not just regional programmes as specified by the definition we are now considering, but also other programmes which contribute to the regional character of the service. If either or both of these are felt to be threatened in quality, range or quantity, then the ITC can impose new licence conditions. So to that extent it should not greatly matter whether a programme comes within the expressed definition of "regional".

As I said, we propose to discuss this matter with the ITC and to take into account the debate we have had this evening. It has considerable experience of enforcing licence conditions designed to preserve regional identity. I hope that that will reassure the Committee.

The Earl of Kinnoull: Before the noble Lord withdraws the amendment, perhaps I may ask my noble friend one matter. The statement that the commission put out in November 1992 was a fairly long one and, I imagine, it was issued to all licensees and companies involved. It very much covers the amendment which the noble Lord has moved. I hope that when my noble friend talks with the commission he will take into account the fact that it is already common knowledge what the definition was as they saw it. I hope that it will be expanded into the Bill and make it clearer.

Lord Inglewood: I am grateful to my noble friend for those comments. Unfortunately, I am not in a position to comment specifically on the document to which he referred. As I said, when we debate these matters with the ITC that will be done in the round and in a co-operative spirit, bearing in mind the debate that we have had here this evening.

Lord Kirkhill: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 171, 171A and 172 not moved.]

Clause 63 agreed to.

[Amendments Nos. 173 and 174 not moved.]

Clause 64 [Funding of Sianel Pedwar Cymru]:

9.30 p.m.

Lord Elis-Thomas moved Amendment No. 175:

Page 57, line 25, at end insert ("("the adjusted amount")").

The noble Lord said: We now come to two funding debates, which may take a little time. I do not want to extend the time taken by the Committee, but the funding issue is of importance both to S4C and Channel 4. We shall come to that a little later, but not too late. The

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funding issue is important because television is not only a producer and distributor of programmes, but also an economic activity in its own right. It is a major service industry. Indeed, it is one of the major service industries in the United Kingdom. The role of S4C as a service industry in Wales was described both on Second Reading and earlier in today's debate. I need emphasise only the importance of the authority's ability to be able to invest in programme-making in different centres of production throughout Wales and to be able to sell its product both nationally and internationally. It has production centres in Cardiff, Swansea and Caernafon--I declare an interest as a resident of the Royal Borough of Caernafon--which have created a system of media presentation within Wales which reflects those different communities with their linguistic and community diversity.

It is essential for the future development of the channel and for the maintenance of employment in that service industry of television in all its production centres in Wales that the funding of the channel should be adequate. There is a long history to the funding formula we are discussing. The Bill proposes to change the funding formula from one based on 3.2 per cent. of total advertising revenue to one based on the 1997 level of funding plus RPI with an unspecified amount--that is part of our difficulty--to cover the cost of digital transmission. It is argued that that gives the department and S4C stability for planning purposes. We accept that. I also accept that the existing formula on its current basis presents a public expenditure problem for the department and a certain insecurity in terms of planning for the channel. The problem is that total television revenues have consistently risen at a higher rate than RPI, and that pattern is projected to continue.

The problem that S4C has as an authority is that the formula on the face of the Bill leaves it with less funding than is produced by the existing formula at a time when it has additional expenditure, when the digital service becomes an added expense, and when other channels, such as Channel 4, will be benefiting from increased advertising revenue. The existence of Channel 4 in Wales, which we all welcome, is a matter for debate later. We welcome the proposals in the Bill to extend Channel 4 throughout the United Kingdom, but that may result in an advertising revenue problem for S4C.

The authority is seeking--I know that the matter has been discussed in detail with the department--to retain a link between the funding of the authority and commercial revenues so that the authority can benefit from the rise in terrestrial television advertising revenue. The proposal in this and the two linked amendments is that there should be an adjusted amount, which is the base funding plus RPI, but that the supplemental amount, the increase, should not be greater than 3.2 per cent. of total advertising revenue, thus keeping the current formula. The amendments propose a compromise between the existing formula and the position set out in the Bill.

The funding formula is to change in 1998. That will be the first year of digital transmission. Although the formula gives the authority a more secure footing, as was indicated, it does not enable the authority to have a sufficient base to continue its level of production or to

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be able to fund the additional cost of the digital service. I do not want to go back over the history of the formula. Briefly, it is this. In the early 1980s the formula under the Broadcasting Act 1981 required the IBA to fund what were described as the "reasonable outgoings" of S4C. It was also required to fund Channel 4. Funds for both were obtained from the fourth channel subscription, which was then a levy on the ITV companies. The position at that stage was negotiated by the IBA. The fourth channel subscription was set at 17 per cent. of total commercial revenue (NAR) for the previous year and was shared between Channel 4 and S4C on an 80 per cent./20 per cent. basis so that S4C then received 3.4 per cent.--that is, 20 per cent. of 17 per cent.--of the previous year's NAR, by agreement. I go back to that to indicate the complexity of the original formula that was set out in legislation.

The transmission costs were then paid by the IBA. That system worked well for S4C. Following the 1990 Act, the ITV contractors emphasised that the funding for S4C should come from a different source. At the same time, advertisers were calling for Channel 4 to sell its own airtime. That was introduced with the so-called safety net, to which we shall come later, for Channel 4.

In 1989, the Home Office, the department then responsible for broadcasting, discussed with S4C a different funding scheme, comprising a direct grant from government of 3.2 per cent. of the previous year's NAR which would have allowed S4C to keep the revenue from the sale of its own airtime, but it would have had to pay the transmitter cost out of that total sum. That became, in effect, the position in the 1990 Act.

The period 1989 to 1991 was not a buoyant one for NAR, but ever since there has been real growth. That is what has created the problem and why the Government have felt the need to cap the present funding formula. Our concern is that in the present legislation the proposal that from 1998 S4C funding should continue at the 1997 level in real terms with an RPI link, will mean that for the first time, which is why I have gone over the history, S4C's revenue will not be linked to the ITV Channel 4 commercial advertising revenue, but will be frozen in real terms.

It is important that the department reconsider that decision not to link the S4C funding to operational market forces in this area. It cannot have it both ways. Either S4C is granted further commercial flexibility if it is to be capped in that way, or it has to have its revenue linked to the market movement in the whole media sector that we are discussing.

S4C's own advertising revenue has been buoyant, but as I said earlier there may be competition in future years as Channel 4 becomes available in Wales. So the levelling off of income is coinciding with a period of additional costs because of the need to develop the digital channels. Those are not merely transmission costs. That is why I have proposed in the amendment one formula that maintains a link with the commercial market movement of revenue in terms of income, but also provides flexibility for the department in terms of the way it wishes to control public expenditure in this area.

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I am not pressing this solution as the only one, but I should like assurances from the Minister when he responds that he will look again at the break that has been made between S4C's income and the relative movement of the market in this whole area. There should be particular financial provision for S4C at a period when analogue and digital are being broadcast together to ensure that the channel is not placed in an unfair situation in relation to what is happening in the development of the other broadcasters that we have been discussing during the Bill's progress. I beg to move.

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