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Lord Inglewood moved Amendments Nos. 72 to 76:

Page 51, line 2, leave out ("two years") and insert ("one year").
Page 51, line 9, leave out from beginning to ("3") in line 11 and insert ("shall not exceed whichever is the greater of--
(a) £50,000, and
(b) the amount determined under subsection (2A).
(2A) The amount referred to in subsection (2)(b) is--

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(a) in a case where a penalty under this section has not previously been imposed on the holder of the digital sound programme licence during any period for which his licence has been in force,").
Page 51, line 15, leave out ("shall, in any other case, not exceed") and insert ("in any other case").
Page 51, line 17, leave out ("(2)") and insert ("(2A)").
Page 51, line 32, leave out subsection (7).

On Question, amendments agreed to.

Clause 60 [Enforcement of digital additional services licences]:

Lord Inglewood moved Amendments Nos. 77 to 80:

Page 53, line 25, leave out ("two years") and insert ("one year").
Page 53, line 32, leave out from beginning to ("3") in line 34 and insert ("shall not exceed whichever is the greater of--
(a) £50,000, and
(b) the amount determined under subsection (2A).
(2A) The amount referred to in subsection (2)(b) is--
(a) in a case where a penalty under this section has not previously been imposed on the holder of the digital additional services licence during any period for which his licence has been in force,").
Page 53, line 38, leave out ("shall, in any other case, not exceed") and insert ("in any other case").
Page 53, line 44, leave out ("(2)") and insert ("(2A)").

On Question, amendments agreed to.

Clause 61 [Promotion of equal opportunities]:

[Amendment No. 81 not moved.]

Lord Inglewood moved Amendment No. 82:

After Clause 61, insert the following new clause--

Power to vary amount of financial penalties

(".--(1) The Secretary of State may by order amend any of the provisions specified in subsection (2) by substituting a different sum for the sum for the time being specified there.
(2) The provisions referred to in subsection (1) are--
section 47(5)(a) and (b)(i);
section 53(2)(a);
section 56(2)(a) and (4); and
section 60(2)(a) and (3).
(3) An order under subsection (1) shall be subject to annulment in pursuance of a resolution of either House of Parliament.").

The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

9.30 p.m.

Lord Thompson of Monifieth moved Amendment No. 83:

Before Clause 65, insert the following new clause--

Duration and renewal of Channel 3 licences

(".--(1) Section 20 of the 1990 Act (Duration and renewal of Channel 3 licences) is amended as follows.
(2) In subsection (2) for "four" there is substituted "five".
(3) Subsection (3) is omitted.").

The noble Lord said: My Lords, this is the same amendment that was tabled at Committee stage, unlike the previous amendment of the noble Lord, Lord Colwyn, whom I congratulate on having introduced new material into our proceedings. I should not have brought

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forward the amendment again in the same terms if I had not been encouraged by the tone of your Lordships' Chamber when this matter was discussed at an earlier stage and by the not unsympathetic response of the Minister at the end of that discussion.

I do not wish to take up much time at this stage but this is a very important amendment in terms of the Bill's consequences for the overall financial relationships within independent television. We shall certainly want to try to come to a conclusion on this matter before our proceedings ultimately end.

It is sufficient to say that the amendment reflects the fact that one of the many anomalies of the 1990 Broadcasting Act was to lay down a different timetable for the financial arrangements in relation to Channel 4 from the financial arrangements in relation to the bids that the ITV companies had made for their contracts. I am very happy to see the noble Lord, Lord Crickhowell, in his place. I know that he feels strongly about this matter. He has some direct personal knowledge of the problems created by it.

Before we leave the subject this evening, I remind the Minister that this Bill gives a very important opportunity to the Government to put British broadcasting generally on a more sensible and even base for the challenges of digital technology that lie ahead and to correct some of the major unfortunate consequences of the 1990 Act. Two things went wrong. One was that the bidding system produced results which, even by the standard of Treasury hopes at the time, must have seemed totally grotesque. In the Yorkshire area, which is a prosperous region of the country, there was a bid around the £30 million plus mark; in the neighbouring central region around Birmingham there was a bid of £2,000; and there was a bid in Scotland for £2,000. The most grotesque anomalies arose.

The second major mistake in the 1990 Act occurred with the Channel 4 formula, which was well intentioned and meant to sustain Channel 4 on an independent basis of selling its own advertising with a possibility of a subsidy if it became necessary to enable it to fulfil its remit. In our Alice in Wonderland world that formula has been stood on its head. Channel 4 has been heavily subsidising ITV companies, including some very prosperous and profitable ones.

The general point that I wish to make to the Minister is that there is an opportunity in this Bill to deal with those anomalies and try to obtain a timetable for a change in the Channel 4 arrangements which coincides with a timetable for a change in the ITV arrangements. It is a nonsense that they should be on different timetables. If the Channel 4 formula is altered in a way that reduces the payments from Channel 4 to ITV, there should be a year's gap so that the ITV companies have the possibility of seeking in some cases to renegotiate their arrangements.

The Minister has been understanding and sympathetic about this matter. I have no complaint about that. I recognise the difficulties. But those grotesque mistakes--that is the proper description of them--have produced a certain financial result which affects the

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Treasury. Trying to put right those mistakes may very well reduce, if only marginally--I do not know the figures--the return to the Treasury. I know very well from my own experience long in the past that anything which affects the return to the Treasury produces the deepest resistance for all Ministers, however understanding they are of the sense and basis of principle of a proposed change.

I do not ask tonight for a response from the Minister of the kind that I hoped for when I tabled the amendment. I know the difficulties. I know that he recognises the strength of the case and indeed the strong views on all sides of the House. For instance, the noble Lord, Lord Peyton, spoke of this in Committee.

We will need to come back to the issue; but I beg the Minister, in whatever he feels able to say to me tonight, not to close the door on the matter. I say that not merely because of this amendment, but also because it is in the interests of the Government, if they wish to produce a Broadcasting Act 1996 that will correct the great mistakes of the Broadcasting Act 1990, to leave the door open to bring about the necessary changes. I beg to move.

Lord Crickhowell: My Lords, I speak in very much the same spirit as the noble Lord, Lord Thomson of Monifieth. Again, I declare an interest as a director of HTV.

As I shall indicate, Amendment No. 83 has considerable significance for HTV and for other Channel 3 companies. There are not many who now defend the Broadcasting Act 1990 as being fault-free legislation. But whatever its shortcomings, it was the foundation on which business plans and bids were based by those who won and those who lost in the somewhat bizarre bid process. My company had to make a relatively high bid to retain the franchise, though not as high as some others. We pitched it about right. If it had been much lower we would have been beaten and, after a difficult period in which we had to fight literally for survival, by improving efficiency and widening the market for our products we have been able to announce a good result for our shareholders while maintaining the outstanding regional programmes which are both a licence obligation and a subject of which we are justifiably proud.

In putting together those bids, companies looked at the prospectus as a whole--pluses and minuses; obligations and opportunities. Those pluses and minuses included the Channel 4 funding formula and the possibility of--in the event the actual--loss of net advertising revenue (NAR) to the new channel.

Channel 4 complained loudly and with great effect about the consequences of the funding formula. Practically every day I drive past its splendid new palace and see its great advertising hoarding proclaiming the iniquities of the system. Among other things, Channel 4 argued that the sums it pays deprive it of money that would otherwise be spent on UK productions. One can argue about the extent to which money would be spent in that way; no doubt the amounts would be quite large. However, much of the same money is at present being

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spent by Channel 3 companies on their existing production in the UK and specifically on regional programme making.

It was suggested by some at Committee stage that the sums were pretty marginal for Channel 3 companies. They are certainly not marginal for Yorkshire Tyne-Tees and HTV, to take just two companies. If the Channel 4 rebate were to end in 1998 without other adjustments, I would guess that my company would either see about 40 per cent. off the bottom line or, because there would have to be a combination of effects, less would be spent on regional programme making and UK programme making, which would have to be squeezed to offset the consequences. As any change in the funding formula has a variety of consequences, and not just for one channel--the noble Lord, Lord Thomson of Monifieth, referred to the Treasury as well--I am certain that the Government are right to think that it should not be written into the Bill now but should be the subject of detailed review and analysis in 1997 before final conclusions are reached. However, I think it not unlikely that the result of that review will be either the ending of the formula or a substantial dilution of it. If that is so, there must be a parallel examination of the consequences for Channel 3, which will be very great, and for the Treasury, and of any other impacts there will be.

The trouble with the 1990 Act is that it does not make that parallel consideration possible. Under the existing rules, the Channel 3 companies cannot go to the ITC until a year later to ask for their bids and their licences to be reviewed. That is an absurd anomaly which must be corrected. Furthermore, if they ask for their licences to be reviewed there is no obligation on the ITC to carry out that review immediately or indeed at any time until the end of the licence period. It is those faults that the amendment seeks to correct. The case is overwhelming. The amendment does not seek to impose a solution on the ITC or on the Government. It seeks to bring into line the two reviews that ought to take place at the same time and to allow for the possibility that the potentially very severe consequences for Channel 3 companies should be adequately considered.

On Thursday, when regrettably I shall not be able to be in the House--I have to chair the final board meeting of the National Rivers Authority on that day and I decided that it had a prior claim on my time--another series of amendments will be considered about regional programming. We have been delighted to hear the commitment made by noble friend the Minister to strengthening the clauses already written into the Bill to protect regional programming. That is an indication of the importance the Government attach to regional programming. In a debate on an earlier amendment we considered Welsh language broadcasting and the impact of changes to digital. I have to say that the abolition of the present funding arrangements for Channel 4, without any parallel changes in the arrangements for the Channel 3 companies, will have adverse consequences--more severe consequences--for a far larger number of people in Wales than the consequences debated a few minutes ago of digital on Welsh language broadcasting.

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This is a very important matter. It affects a crucial aspect of broadcasting. Like the noble Lord, Lord Thomson of Monifieth, I do not expect to get a definitive answer from my noble friend tonight. I know that he has to argue a case elsewhere with the Treasury and I know that he is giving most careful and sympathetic consideration to the case. But I do not want to leave him in any doubt of the importance which I, too, attach to this matter and of my determination, along with the noble Lord, Lord Thomson, to return to the matter later in order to find a satisfactory way forward.

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