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Lord Lipsey: I support Amendment No. 152, which stands in my name and that of the noble Baroness, Lady Buscombe. I sat as quiet as a mouse through the first four days of the Committee's proceedings—rising only briefly to squeak when unutterably provoked—but I am afraid that noble Lords will hear rather too much of me today because there are three successive amendments standing in my name. I apologise in advance if I bore the Committee. I declare an interest as a non-executive director of London Weekend Television.

The philosophy of the Bill is clear in that the BBC will be half-in and half-out of Ofcom. It will be in for tier one and tier two and, broadly speaking, in for competition issues. The public service remit of the BBC is outside Ofcom—rightly in the view of some, wrongly in the view of others—but commercially it is within Ofcom.

There is a problem in the Bill, as the noble Baroness, Lady Buscombe, described very well, about the fair trading commitment and its implementation. Let me first clear up the confusion that bedevils our discussions on fair trading.

Sometimes when people talk about the BBC trading unfairly, they mean something very broad. They mean something like, "We have 'Sky News' and the BBC comes along with 'News 24'; the BBC is paid for by a licence fee while we have to earn our living. That is unfair". That is an arguable proposition; we could argue both sides of it and no doubt the Committee will return to it.

But that is not what this is about. This is about a much narrower concept of unfair trading: whether the BBC, an organisation with public service and commercial sectors, is appropriately treating those two activities as arms-length activities and not cheating in its commercial activities by cross-subsidisation from its non-commercial activities, or other forms of cheating.

The fair trading rules laid down by the BBC are governed by a code of internal practice of extraordinary complexity and detail. It is hard to argue with it. I am pleased to say that those rules are independently audited by somebody other than the BBC's auditors, and that is all to the good. However, there is still concern, not so much about the rules as about how they are implemented by the BBC. This has

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rung true in various reports. The noble Lord, Lord Gordon, who sat with me on the Davies committee on the licence fee, chaired by Gavyn Davies, will remember that we said:

"Despite the BBC's efforts to put in place procedures intended to achieve transparency and separation of public service and commercial operations, these procedures have not yet inspired public confidence".

We went on to say:

"We do not consider this is possible without some form of external scrutiny".

That is relevant to the BBC's internal reviews. There has been some scrutiny since by Professor Whish, and, like me, he cannot find fault with the rules, but this is outside his terms of reference. Professor Whish, who conducted the review for the Government, went on to say:

"A commitment to fair trading must be supplemented by adequate measures to ensure that compliance is maintained".

I do not know whether or not compliance is maintained, but one hears so many traveller's tales from people in the independent sector and the BBC's competitors, who I accept have an interest, about what the BBC gets up to. I heard from the head of the History Channel the other day. It wanted some film released by the BBC for a programme it was making—no dice. Was that a fair editorial decision to protect the public service or was it an attempt to shackle a channel that was competing with one of the BBC's? Is the BBC asking for fair value for its library items? Is it bundling together things that it wishes to sell in an unsatisfactory way so that people have to purchase things they do not want in order to get the things they want? I raise these questions as they are raised with us and with every noble Lord in this House who is available to hear them.

In conclusion, this is not an anti-BBC amendment—far from it. If everything is fine in the current set-up, independent scrutiny by Ofcom will find it to be fine. Ofcom will find these tales to be exaggerated or invented, the BBC can go ahead with its set of rules, and there is no problem. That would be a huge gain for the BBC—it would not be sniped at and attacked all the time, in this House and elsewhere, for its behaviour. I simply do not understand why the BBC does not enthusiastically endorse an Ofcom role as part of a sensible solution which would allow it to be free to conduct its public service broadcasting without fear that it is using that unfairly to subsidise its commercial activities.

11.45 a.m.

Lord McNally: I accept that the noble Lord, Lord Lipsey, has intervened only with the benefit of the BBC in mind. Only in Britain could we have a public enterprise body that is a market leader and a world success, and then spend so much time working out how we can cut it down to size. If some other public enterprises performed with the excellence of the BBC, the Prime Minister would probably sleep a lot easier at night.

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It is worth putting this into context. Of course the BBC has been aggressively commercial. That was part of the deal for the last licence settlement. The BBC was told then that it could not just sit complacently on its archives and its assets—it had to work them and sweat them. Therefore, it is a little unfair to say, when it is carrying out its part of the agreement with the Government, "You should not be doing it like this". I am a little worried that we will tie the BBC down like Gulliver with a thousand different strings. I am also worried that Ofcom—which, my goodness, has to keep an eye on some other customers that I trust a lot less than the BBC—will have to face what I would describe as the whine of the week from the commercial sector about what the BBC is or is not doing. I have explained before that I want to see the commercial side of broadcasting as successful as it possibly can be, as long as they understand that it is the will of the British people and the will of this Parliament that we have a strong, aggressive, successful, public sector broadcaster called the BBC. That is an absolute distortion of the market as far as the purists are concerned. That is what we, the British people, want. We want a distorted market in our broadcasting because it allows us to have a public sector broadcaster that can influence our democracy, our culture and the overall standing of our broadcasting.

Baroness Buscombe: I am grateful to the noble Lord for allowing me to intervene. Could he explain how these amendments would in any way destroy or undermine the success of the BBC? That has nothing to do with the amendments. We are talking about proper external scrutiny of the commercial arm. We are here to underpin the success of a strong, commercial activity which we wholeheartedly support.

Lord McNally: I have heard the noble Baroness promising to support the BBC before. Indeed, I look forward to Mr. David Elstein's report on the BBC for the Conservative Party. That is like asking Count Dracula to look after the blood transfusion service.

The noble Baroness and the noble Lord, Lord Lipsey, referred to the concerns about the BBC's aggressive commercial activity, and there is a case to answer. I will be listening very carefully to the Government's assessment of these amendments. We are only at Committee stage.

I hope that the BBC listens to some of these concerns and loses some of its macho commercial attitudes, because they weaken its friends' defence of it. But I will not sign up to restriction after restriction, thin thread after thin thread which, in the end, will lead the BBC hog-tied and weakened, like Gulliver. It is a question of an overall judgment. I probably will not intervene as often as the noble Lord, Lord Lipsey, as this speech-fest on the BBC unfolds, but we on these Benches will look at the overall picture to see what it does. We will not simply be responding to commercial pressures from those who do not like a successful BBC.

Lord Gordon of Strathblane: I had not intended intervening in this area of the debate, but I am

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prompted to make a brief contribution in the hope that it illuminates what the amendments are trying to do and the market distortion that is being left totally undisturbed.

The major market distortion in this country, fully endorsed—I agree with the noble Lord, Lord McNally—by everyone in the House, comes from the fact that the BBC is allowed to run many more television channels and radio services than any commercial operator. It is also allowed to cross-promote from one into another in a way that is impossible in the commercial sector because companies are under separate ownership. If I asked people from Scottish television to promote Scottish radio, they would rightly look for some money. The BBC is also allowed to intervene in the market place for magazines. Some BBC magazines are top sellers because the programmes they mirror are very popular.

That whole area is being left wholly undisturbed—a major market distortion. There is very little we can do about it if it is our decision—a decision I would endorse—that the BBC should be able to do all those things. The amendments address the question at a much lower level and do not affect the major position.

Lord McNally: I thank the noble Lord for his intervention. I conclude with one point on cross-promotion, which illustrates that the BBC simply cannot win, as when it fulfils its commitment to maximise its resources and is then accused of commercialisation. Unless the BBC uses its power to sponsor and promote free digital, we will not get digital switchover. Therefore, when the BBC is accused of using its power to promote free-to-air digital, it is carrying out a national interest and a government policy. It is totally unfair to say that it is abusing its power when it is simply responding to that interest.

I shall not intervene on every amendment of this sort, but when we reach Report stage we must take an overall view instead of hearing these reasonable cases for yet another silken thread to be spun over the BBC.

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