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Lord Lipsey: We do accept them. However, Professor Whish's terms of reference precluded him from looking at whether the policies have worked in practice, and that is the problem that I have raised this morning.

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Baroness Blackstone: I believe that the evidence shows that they are working in practice. I say to my noble friends Lord Lipsey and Lord Gordon of Strathblane that the OFT has negotiated undertakings with the BBC which regulate the BBC's ability, for example, to promote magazines on both BBC1 and BBC2. Those undertakings have now been in operation for more than 10 years.

The BBC also reports against its performance in its annual report. Of course I accept that the issue of BBC cross-promotion is an important and sensitive one. None the less, the Government's judgment on balance is that the current approach is the right one. We believe that the BBC's position is best handled on the basis of clear commitments by the BBC itself—and enforced by the governors—that licence-fee funded services will not be used to promote the corporation's commercial activities, such commitments being set firmly within the overall framework of UK and EU competition law.

I was extremely interested in what the noble Baroness, Lady Noakes, said about the conscientious and fair way in which the BBC approached this issue and in the remarks of my noble friend Lady Cohen. I hope that in the light of what I have said the noble Baroness, Lady Buscombe, will feel able to withdraw her amendment.

Baroness Buscombe: I thank the Minister for her response. I also thank the noble Lords, Lord Lipsey and Lord Gordon of Strathblane, and my noble friend Lady Noakes for their support for the amendments. I was somewhat disappointed by the inference from the noble Lord, Lord McNally, that we are somehow seeking to cut the BBC down to size. I do not actually know what that means. I hope that he listened to what I said in my opening remarks. I sometimes feel—I certainly felt it in last Thursday's debate—that no one has listened to a word that I said in speaking to an amendment. Last Thursday noble Lords seemed to have their speeches on the amendments ready and there was no deviation from them.

We are not seeking to cut anyone down to size. We are seeking to underpin the success of the BBC and to instil and entrench public confidence in the BBC to the greatest possible extent. The BBC is enormously successful. It is a unique animal. As the noble Baroness, Lady Cohen, has made absolutely clear, and she is absolutely right, a commercial company would not even attempt to dream up ways of deciding whether it has been completely fair with others; it would perhaps largely care less about it. The BBC is indeed a very different animal.

The BBC has a very successful commercial arm, so much so that we are pleased to report that that activity has provided additional funding to the BBC's publicly funded activities of 106 million. That is great. However, the BBC also has an input of 2.5 billion of taxpayers' money as well. In newspaper articles in recent weeks the BBC has openly and freely admitted

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that it feels that there is a problem with cross-promotion, for example, as viewers are beginning to ask, "What do we have here? Is it a commercial business? Why are we paying a licence fee?"

I accept that there is an annual report which is extraordinarily helpful. I agree entirely with my noble friend Lady Noakes that the BBC has become much more open and transparent. We applaud it for that. However, most viewers do not read annual reports. They do not understand what they see as a breakdown in delineation between what they are paying for and what they are receiving. Most people assume when they pay their licence fee that they will not get any commercials. But they are getting commercials—for the BBC.

A number of very helpful points have been made. The noble Lord, Lord Gordon of Strathblane, made it absolutely clear that we seek to allow the BBC to prosper. We accept that the BBC is allowed to prosper in a way that it would find impossible in the commercial sector. All we seek is some external scrutiny of the fair trading commitment under the umbrella of Ofcom.

I thank my noble friend Lady Noakes for her helpful contribution. I believe that all Members of the Committee appreciate the input of someone with practical experience of auditing the fair trading commitment. As my noble friend said, these issues are complex and involve a certain amount of subjectivity. As my noble friend also said, we are asking for extra external scrutiny which would act as a valuable safeguard. That is a very important point.

I shall not press the amendment at this stage but before I withdraw it, I ask the Minister for advice. The BBC Agreement is about to be amended. The draft amendments can be examined. But will we in Parliament have the opportunity to debate those draft amendments to the BBC Agreement or will they simply be decided and agreed between the BBC and the executive? I ask the question because, following on from what I said on Thursday—which I shall keep repeating so long as we debate any aspects of the BBC—Her Majesty's Opposition are very keen to ensure that there is independence from government on the part of the BBC. We want to make sure that the BBC remains as independent from government as possible. That is why we have tabled the amendments that we are discussing. We want to help the BBC to remain independent from the executive. That is why we are very keen that any scrutiny should come under the wing of Ofcom as opposed to the executive. For now I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 147 and 148 not moved.]

12.15 p.m.

Baroness Buscombe moved Amendment No. 149:

    Page 176, line 15, at end insert—

"(10) It shall be the function of OFCOM to oversee the terms of trade between the producers of independent radio and the BBC.

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(11) In subsection (10), a reference to the producers of independent radio is a reference to such producers as the Secretary of State may by order specify."

The noble Baroness said: The noble Viscount, Lord Astor, is unable to be here this morning to move Amendment No. 149. I agreed to move it on his behalf.

The BBC is required to commission at least 25 per cent of its television programming from the independent sector yet there is no such requirement for radio. The BBC operates a 10 per cent voluntary target for analogue radio. In a statement last year it said:

    "We remain fully committed to our voluntary pledge that 10 per cent of eligible hours on our national analogue network will be made by independents. We also wish publicly to emphasise that we will continue to view this 10 per cent commitment as a floor not a ceiling".

There is no logical reason for the discrepancy in the treatment between BBC TV and BBC radio. As the Secretary of State, Tessa Jowell, said, the licence fee is the venture capital for creativity in this country. The ITC backed that up arguing that the licence fee was not just designed to create public networks but was also aimed at ploughing significant moneys into indigenous production. Yet in radio, unlike television, the BBC has complete discretion as to how it invests this money.

The Government have so far rejected calls for a statutory independent production quota for BBC radio. The noble Lords, Lord Alli and Lord Lipsey, have tabled an amendment that would introduce such a quota. That is supported by my noble friend Lord Astor. My noble friend's amendment would help to boost the independent radio production sector in the absence of a statutory quota on BBC radio. It would give Ofcom the power to regulate the terms of trade between the BBC and independent radio producers, preventing the BBC, therefore, from using its dominant position—it controls over 50 per cent of all radio listening in the United Kingdom—to dictate terms of trade that disadvantage its suppliers.

Unlike television the independent radio production sector is characterised by a single commissioner—the BBC. The BBC is far more dominant in radio than it is in television. Most independent producers are faced with a monopolistic—that is, a single—buyer of their services. What is more, that buyer is able to source products internally. That puts the BBC in an enormously powerful position vis-a-vis independent radio producers and means that it can effectively determine the terms on which it trades. Independent scrutiny is essential to ensure that the BBC does not abuse its dominant position.

The amendment would give Ofcom a duty to review and regulate if necessary the terms of trade between the BBC and independent radio producers. It has the support of a number of independent radio producers including UBC Media, Somethin' Else, Neon and Smooth Operations. My noble friend states that the BBC has nothing to fear from the amendment. Indeed, it should welcome the transparency and openness that it would inject into its negotiations with independent producers. Only last month the BBC said:

    "We will work to open up commissions where appropriate to independent producers in order to develop the United Kingdom production sector".

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My noble friend says that the amendment would do just that. I beg to move.

Baroness Jay of Paddington: Later we may have a similar debate on the amendment in the name of my noble friend Lord Alli, to which the noble Baroness, Lady Buscombe, referred. However, at this stage it is worth making several points about the difference in the nature of television production as opposed to radio production and about why it is more appropriate to stick with the present voluntary commitment of the BBC to 10 per cent of independent radio production.

The point that has been made to me, and which I certainly recognise as an old-time radio producer, is that 70 per cent of radio production—I believe that it rises to 90 per cent on some of the BBC radio channels—is live production. That is a very different situation from television production where most of the programmes are what is called in the jargon "built"; that is, they are recorded or prepared beforehand or are in some way already on the stocks when they are transmitted to the television audience. It is obviously more difficult to plan programmes that are concerned primarily with news, live music and recorded live music—if one can use such an expression—as many of the radio stations do.

As the noble Baroness, Lady Buscombe, said, the present situation in which the BBC has a voluntary target of a 10 per cent figure with regard to independent radio programming works well. As she also said, the BBC regards that as a floor and not a ceiling. I understand that more recently the figure has risen to 14 per cent.

Commercial radio does not share that ambition and, therefore, has no commitment either voluntary or otherwise to independent production. Although I agree that it is obviously important that local independent radio is as vibrant as it can be, it is also worth noting that more than 30 per cent of the BBC network production spend is now devoted to production outside London. Small production units are involved with BBC radio. That is a success both from their point of view and that of the listeners.

I understand that the BBC management regard the 10 per cent figure as the floor not the ceiling of independent radio programming. As I say, that figure has risen recently to 14 per cent. But we must recognise the very different nature of television programming which, as I say, is often "built" in the sense of being pre-recorded. In the case of live radio, commissioning independent production is more complicated.

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