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Lord Thomson of Monifieth: These Benches strongly support what the noble Lord, Lord Puttnam, has just said. The noble Lord, my noble friend Lord McNally and others were part of the House's team dealing with the pre-legislative scrutiny.

I was fascinated to hear the noble Lord say that in preparing his remarks, even after all his experience of the pre-legislative process, he found some difficulty in running to earth exactly where in this vast Bill the financial buck stops if Ofcom is to do service to the public interest. As a newcomer to this great Bill, I certainly found it an extraordinary experience to go through it to try to find out exactly what are the financial arrangements for funding.

This series of new clauses is vitally important at the very heart of this new Bill if the Ofcom operation is to be successful. Therefore, for my part, I congratulate the members of the pre-legislative Joint Committee on this series of new clauses. As a very long retired regulator of broadcasting, I am glad that I lived in simpler times.

Both the Government and Ofcom face a massive challenge in converting five regulators into one and regulating the combined interests of the telecommunications and broadcasting industries in a global economy which is itself in a state of rapid change. The Government should feel relieved that the five regulatory bodies to be merged into one super-regulator in a multi-merger exercise have been able to do so in a remarkable spirit of co-operation. It is important for the Government to appreciate how fortunate they are in that.

Like the noble Lord, Lord Puttnam, I read with some dismay the Government's response to the Joint Committee report. Like the noble Lord, I was rather taken aback to see that, despite all the years that the Bill has been before us in one form or another, the Government are still currently considering funding issues. I find myself totally astonished that that should be the position today.

However, on page 10 of the Government's response, in reply to the recommendation made by the Joint

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Committee on the merger of the regulators and the question of the likely costs of having a single regulator instead of five, they say:

"We expect OFCOM to be efficiently and effectively run and will not countenance waste or inefficiency. But we also expect OFCOM to be a world class regulator with highly skilled, professional personnel capable of delivering quality regulation".

The noble Lord, Lord Puttnam, mentioned the fact that the Government's weakness in their whole presentation of what are truly momentous issues in the Bill is that, while they are extremely strong on rhetoric, they are a good deal weaker on the will to follow it through. In carrying through a merger of five separate regulatory organisations, we know that individual interests will be expressed and that the merger should be completed as efficiently and with as little waste as possible. However, one must face the inevitable fact that, during the transitional period, rather than enjoying cost-savings, some additional costs will have to be met.

The absolutely critical issue here is that Ofcom itself should be adequately funded in order to perform its role as, to use the Government's own words,

"a world class regulator . . . delivering quality regulation".

I pay tribute to those who have produced the series of new clauses before us. In itself that must have been a formidable task. The clauses provide a road map—to employ the current rather over-used cliche—to achieve the Government's aim, if they have the will to do so. They make it clear that if the Government want Ofcom to defend the national interest effectively in a world of global telecommunications and broadcasting, then the Exchequer will have to be the final funder. That is the heart of the issue. It is on that point that we want a positive response from the Government. If we do not get it today, then we will demand it under different circumstances at a later stage in the Bill.

The Government appear ready to expose commercial television in Britain to the winds of global competition in a way that neither the United States Government nor the governments of our European neighbours have even begun to contemplate. That is the situation into which this Bill will put the British broadcasting and telecommunications industries. As the noble Lord, Lord Puttnam, remarked, the giants of the global media world will not lack money and resources. They will use the most expensive lawyers and experts to fight their corner. In this country, we should not allow Ofcom to be outgunned. We have a world-class public broadcasting system and great economic interests vested in our telecommunications industry. We should ensure that Ofcom is adequately funded so that it can look after the national interest.

Baroness Buscombe: I should like to support Amendments Nos. 87, 88 and 90, and to raise one or two questions in relation to Amendments Nos. 89 and 91. As has already been said so eloquently by the noble Lord, Lord Puttnam, one of the criticisms that can be made about the Bill is that it is not clear how Ofcom is to be funded. It is important for all concerned that

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Ofcom is properly funded. The Ofcom pump will need to be primed. A watchdog needs its meat. So, too, does Ofcom if it is to discharge its functions efficiently.

Amendment No. 87 proposes a new clause setting out the various principles underlying the administrative charges to be fixed by Ofcom in respect of certain functions that it undertakes. The new clause limits the charges to the annual cost of carrying out the relevant function. That seems to make good sense: the user pays. We therefore support the amendment.

On Amendments Nos. 88 and 90, we agree that Ofcom's competition law functions and central functions should be funded by the Exchequer. As regards Ofcom's competition law functions, it is difficult to identify the user who should pay. Those who would benefit from Ofcom's competition law function would be everyone in the relevant market. It would be difficult to impose any specific charges on any one or more of those in the market. In those circumstances, it seems obvious that the Exchequer should pay for those functions, which are for the common good.

Ofcom's central functions are defined in the new clause as,

"functions relating to the administration, management and policy of OFCOM",

excluding functions on which provision is made elsewhere in the Bill. Here the difficulty is identifying how much of those charges should be paid by the user. If the central function were funded by the user, there would be almost impossible problems as to how to apportion the expense among the users of the relevant functions. Any error would result in some users paying more than they should—that should be avoided. We therefore support the clause proposed in Amendment No. 90, which provides for the Exchequer to provide those funds.

We are concerned about how Amendment No. 91 would work in practice. We can entirely see the purpose: to ensure that legal costs are paid. However, what will happen if an order for costs is made against Ofcom, and the Secretary of State does not make a grant under the new clause? I should be grateful, therefore, if the noble Lord, Lord Puttnam, could clarify that point.

5.45 p.m.

Lord McIntosh of Haringey: I fully recognise the importance of the subject and the strength of feeling about it in the Joint Committee. The Government's general approach as between sectoral regulation and general regulation is that the costs of sectoral regulation should be borne by those who are regulated. Therefore, Ofcom will be funded in the main by a mixture of fees and charges levied on the industries that it will regulate. We intend that Ofcom's charges will, in general, be proportionate and related to the sectors to which they apply.

However, we must also recognise the constraints that apply to the separate sectors and the limitations placed on charges that can be imposed on providers of networks and services and users of spectrum, which do

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not apply to the other sectors for which Ofcom is responsible. The Joint Committee expressed concern that the costs of carrying on Oxfam's—sorry, Ofcom's—central functions could be loaded, unfairly, on to the broadcasters. That point has been made very eloquently today.

Amendment No. 87 would require Ofcom to fix administrative charges for any functions undertaken in relation to broadcasting in accordance with a statement of principles. The basis on which fees are charged for broadcasting licences is set out in the 1990 and 1996 Broadcasting Acts. Those provisions will be retained within the regime that Ofcom will operate. They provide for a clear split between licence fees, which any licence-holder may be asked to pay, and the additional payments that holders of certain radio and television licences must pay. The licence fee element is intended to cover the cost of regulating licensed services. Under the provisions of the Broadcasting Acts, in setting the fees for broadcasting licences, Ofcom must publish tariffs of its charges. As we told the Joint Committee, the Government have sympathy for the argument that there should be transparency in how Ofcom fixes its administrative charge under the broadcasting regime.

I can, therefore, undertake to the noble Lord, Lord Puttnam, that we will consider the amendment further to ensure that the different sectors that Ofcom regulates will be treated fairly. He makes the perfectly valid point that, so far as concerns telecommunications, Clauses 35 to 39, which implement the authorisation directive, provide for telecommunications the exact provision that he seeks for broadcasting. He said, "So far, so good". It is that exact point that I am now undertaking to consider between now and Report stage. It seems to be a legitimate point.

The noble Lord, Lord Puttnam, read out at length the Government's response to the Joint Committee's recommendations. I acknowledge that the response did not go as far as I have been able to go today, as the Government were not able to do so at the time. We have gone further in discussions between the Treasury and Ofcom to settle the overall funding regime of Ofcom. That is why we are now prepared to consider a statement of charging principles for broadcasting comparable to that for telecommunications.

We recognise that there is a problem. I do not know yet what the solution is with regard to what we might call "orphan costs"—in other words, the costs, to which everybody has referred, that are the responsibility of Ofcom but are difficult to assign to broadcasters or to anybody in the industry sector. Again, the question of how to cover those costs, whether it is done by grants from the Secretary of State or in some other way, must be considered, and I undertake to consider it before Report.

I can deal more briefly with the other amendments in the group. With regard to Amendment No. 88, we agree that it is important to ensure that Ofcom's functions under Part 5 are adequately resourced. It is possible for the costs of exercising powers under the

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Broadcasting Acts to ensure fair and effective competition to be met from licence fee revenue, and applicants for consent to newspaper transfers pay a set fee according to the circulation figures of the titles concerned. We can see no reason why that should not continue with Ofcom, but we recognise that, mainly because of the restrictions imposed by the electronic communications directives, there will be competition functions under Part 5 for which Ofcom is unable to levy a charge. I shall return to that matter.

I shall deal with Amendments Nos. 89 and 90 together. They concern the central functions and the alternative means by which they might be funded. As I said, we accept that there are central functions that cannot be funded from a levy. The best example of that is the costs of, for example, work on media literacy. We have recognised throughout that there will be orphan costs. We accept that, where it is genuinely impossible for such costs to be met through charges, some provision will need to be made from the Exchequer. We do not intend that Ofcom should levy a charge to cover those costs, as Amendment No. 89 would require. Indeed, the Office of Communications Act 2002 contains specific provision to enable the Secretary of State to make payments of grant to Ofcom. If that happens, Ofcom should set out clearly the functions for which it seeks the grant and the reasons why they cannot be supported in other ways. We see no reason for specific statements applying to those costs, as Amendment No. 90 would require. Amendments Nos. 89 and 90 are unnecessary.

The final amendment, Amendment No. 91, reflects the fact that, as my noble friend Lord Puttnam, said, it is a rough old world. As the noble Lord, Lord Thomson of Monifieth, said, well funded people could sue Ofcom, and the money must be found from somewhere. That is true of any aspect of government. We could have another BSE crisis, and we have just had substantial expenditure on an Iraqi war, which could not have been anticipated and for which the Treasury had to make special provision.

We recognise the risks that, if Ofcom loses a legal case, it may find that the costs of the other parties are awarded against it, and that could be a lot of money. Ofcom has looked into the possibility of obtaining commercial cover against that, but I do not think that that will be possible, especially when there might be a statutory duty to undertake the legal action in the first place. If that were the case, it would be necessary for Ofcom to make a case for costs to be met from grant payments. The Office of Communications Act 2002 already allows the Secretary of State to pay grant to Ofcom from money provided for such purposes.

I am sorry to have taken so long, but I recognise the importance attached to the issues. I hope that my response, particularly that on Amendment No. 87, was helpful.

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