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Lord Donoughue: My Lords, I wish to speak briefly but strongly in favour of what my noble friend Lord Thomson said. When we discussed the matter previously it was striking that what the Minister described was the hypothetical "legalese" position of satellite. What the noble Lord, Lord Thomson described is the reality that this is a major UK television performer. In terms of fair fiscality, it should be treated accordingly.

I was also pleased to hear the figures from the noble Lord, Lord Thomson. Those quoted by the Minister recently immediately created astonishment on this side and incredulity as well as astonishment in the outside broadcasting world. I wish to give the maximum support to my noble friend.

Lord Inglewood: My Lords, the noble Lord, Lord Thomson, set out his reasons for the amendment when it was debated in Committee. I must tell him at the outset that the Government's position has not changed since then. I appreciate that it is not one which the noble Lord accepts, but I am grateful for his helpful comments about programming, on which I shall reflect further.

I wish briefly to reiterate the Government's position. As I made clear in Committee, BSkyB does not operate on a frequency which is allocated by international agreement to United Kingdom control. The Astra satellite on which BSkyB broadcasts uses spectrum allocated to Luxembourg and it is for the Luxembourg authorities to determine the payments for the use of that spectrum. As I made clear, it is our understanding that payments are made to the Luxembourg Government by the owners of the Astra satellite. We are sure that the payments will be reflected in the payments BSkyB makes for the use of the Astra satellite.

The noble Lord, Lord Thomson, explained in Committee and reiterated this afternoon that the ITV companies and BSkyB function--BSkyB not entirely, but principally--in the domestic market place. He argued that therefore they should receive equality of taxation. However, as companies operating in this country they work under identical rules applied by the Inland Revenue and Her Majesty's Customs and Excise. The government amendments, accepted on Tuesday, equalised the level of fines which the ITC can levy on all its licensees for breaching those licences. That will enable the ITC to treat all its licensees, including non-domestic satellite services, on an equal footing.

The sole difference between ITV and non-domestic satellite operators is the simple fact that--I do not believe that it is hypothetical, as the noble Lord, Lord Donoughue, tried to suggest--Channel 3 licensees

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pay moneys to the Exchequer for their franchises which reflect the use they are given of a scarce UK resource; that is, the UK spectrum from which they profit. It is not a tax on their operation; it is a fee for the use of the spectrum. Non-domestic satellite operators, by definition, do not use UK spectrum and so the UK Government are not in a position to charge a fee for the use of that spectrum. I hope that that makes the Government's position on the matter quite clear.

4.30 p.m.

Lord Desai: My Lords, before the Minister sits down, perhaps he will be kind enough to clarify one matter. BSB used to operate on a domestic spectrum but when Sky bought BSB out it sold that domestic spectrum to foreign broadcasters. Therefore, while BSkyB broadcasts from Luxembourg, is it not a fact that it owns property in frequencies which it sells to foreign broadcasters? That means that the difference between domestic and non-domestic is not as sharp as outlined by the Minister.

Lord Inglewood: My Lords, with the leave of the House I shall respond to the noble Lord. The noble Lord is obviously familiar with the detail of the matter but, on the basis that he described, it seems to me that one of the component elements which formed BSkyB--BSB--had some UK spectrum. If anyone has the rights to UK spectrum and then sells that spectrum, to use the words of the noble Lord, it must follow that he ceases to have any property in that particular spectrum. If you divest yourself of something, you then cease to have any property in the item which you have disposed of. I do not think that the proposition as advanced by the noble Lord takes the argument any further in the direction that he desires.

Lord Thomson of Monifieth: My Lords, I am grateful for the intervention of the noble Lord, Lord Desai, and was much interested in it. When the matter is examined, I believe that it will be discovered that the noble Lord is factually absolutely right. The original BSB operation did not depend on domestic frequencies; it depended on satellite frequencies for a British geo-stationary satellite on the position in the stratosphere that had been allocated to the British Government by international agreement.

In that sense, the loophole that Sky television has been able to take advantage of on the basis of the ingenuity of its predecessors was to go to another bit of the international spectrum, so to speak. That is the reality of the situation. The remarks of the noble Lord, Lord Desai, greatly undermine what the noble Lord, Lord Donoughue, called the hypothetical basis--although I believe that he partly meant theoretical--of the Government's proposition. Indeed, the noble Lord, Lord Desai, has greatly weakened the base of the Government's argument.

I retabled the amendment today as a matter of principle. I did not expect the Government to reveal any change of position on the matter, and I do not wish to take up any more time on the issue. However, I can assure the Minister without any rancour that it will not go away. I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

Clause 67 [Funding of Sianel Pedwar Cymru]:

Lord Prys-Davies moved Amendment No. 156A:

Page 58, leave out lines 36 to 39 and insert--
("(1) The Secretary of State shall, for the year 1998 and each subsequent year, pay to the Welsh Authority at the beginning of the relevant year an amount representing the prescribed amount as increased by the appropriate percentage.").

The noble Lord said: My Lords, in moving the above amendment I shall, with the leave of the House, speak also to Amendments Nos. 158 to 161. It will take me just a few minutes to try to do justice to these five important amendments which deal with the future funding mechanism of S4C, which is, if I may say so, fundamentally altered by Clause 67. I should point out that in tabling the amendments I rely heavily on advice from the S4C officers and those who advise them. They have also had valuable consultations with the Minister's department. If the Minister cannot agree to the five amendments this evening, I very much hope that he will take them away and consult with his advisers.

There are three main elements in the group. The first is to be found in Amendment No. 156A which would merely remove any doubt that there may be as to the date when the payment is to be made: it is to be made "at the beginning" of the year. Without those words, the payment could be made in instalments during the passage of the year. I am advised that there is a precedent for that wording in Section 61(2) of the 1990 Act. I hope that the department will look graciously at the amendment.

The second element is to be found in Amendment No. 158. It provides that the right starting point is the sum of £73.3 million. That figure is to be found in the published estimates of the department for 1997. Obviously that would be indexed, but the knowledge that that is the starting point would give S4C a reliable basis for planning its future. The officers of S4C have a sound confidence in that figure.

The third element is to be found in Amendment No. 160. Its purpose is to include in the funding during the transitional period the cost to be incurred by S4C of promoting the new digital service. S4C believe that there should be such an additional provision. I shall briefly explain the reasons for it.

The multiplex operator may decide, understandably, not to give the highest priority to promoting a digital service to 500,000 Welsh speakers, three-quarters of whom live outside the heavily populated south-east corner of Wales often in the poorer parts of Wales, and many of whom are elderly. I believe that it is prudent to fear that the needs of that audience may not rank high in the priorities of the multiplex operator.

The second reason for Amendment No. 160 is that S4C, not unnaturally being a Welsh language television service, wants to ensure that the promotion of the digital service to Welsh speakers is undertaken through the medium of the Welsh language. S4C considers that to

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be of paramount importance. I believe that the concerns of S4C which are reflected in Amendment No. 160, and which I have sought to express, are entirely legitimate.

Finally, if Amendment No. 158 were accepted, obviously subsection (3) of the clause would become redundant and Amendment No. 161 would be consequential. I very much hope that the Minister will say that he is prepared, once again, to give careful consideration to the amendments. I beg to move.

Lord Aberdare: My Lords, it gives me great pleasure to support the amendment so clearly moved by the noble Lord, Lord Prys-Davies. I shall try not to go over the ground that the noble Lord covered but, although they are grouped together, the amendments fall fundamentally into two groups. The first three amendments relate to the so-called "prescribed amount" for 1997 upon which the future funding of S4C entirely depends. The Bill provides for that prescribed amount in subsequent years to be increased in line with the retail prices index. Hitherto, S4C's funding has been geared to total terrestrial advertising revenue and past experience suggests that that is likely to rise more rapidly in the future than the RPI. That is the reason for S4C's fear that it will receive less funding in the future than it does under the present system.

The noble Lord clearly explained what lies behind the first three amendments; namely, to insert a figure of £73.3 million as the prescribed amount for 1997. That is the figure that appears in the department's own published spending estimates. That figure would then form the basis of the prescribed amount for 1998. I should emphasise the concern expressed by the noble Lord that it is most important that the department should stick to its present practice and pay the amount due each year on 1st January--that would be 1st January 1998 and subsequent years. That would enable S4C to earn some interest on deposit which would go some way to help it maintain its present analogue service.

Amendments Nos. 160 and 161 relate to the Secretary of State's power under the Bill to increase the prescribed amount if he is satisfied that it is appropriate to do so having regard to the cost of transmitting a new digital service. The amendments would give him power, in addition, to have regard to the cost of promoting the new service to S4C's viewers in Wales and encouraging them to invest in the required equipment. The noble Lord, Lord Prys-Davies, has given two compelling reasons why this is so important, especially for S4C, and I shall not repeat them. I think we must be working from the same Welsh text. My noble friend Lord Inglewood has shown great sympathy towards S4C throughout our discussions. I hope that he will look favourably on these amendments.

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