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Lord Peyton of Yeovil: What a suggestion, and from what a source. Indeed, how should you spell source? The noble Lord has excelled himself. I am in an opposite camp to the noble Lord, as he reminds me. The noble Lord tends to favour pumping up already large Bills to make them even more obese and gross. I am thoroughly against him in that regard. It is a very respectable point of view. If the noble Lord, Lord McNally, makes a point of rebuking me, I shall hand back those rebukes with interest.

Lord Brooke of Sutton Mandeville: Before the amendment is withdrawn, I intervene extremely briefly. I shall not talk about ownership, as the Minister advised us in relation to Thursday or possibly the small hours of this morning. My noble friend Lord Wakeham, who chaired the relevant Cabinet committee in 1993–94, will recall that, as the Minister, in making propositions I was in exactly the same position as the noble Baroness, Lady Blackstone, and the noble Lord, Lord Davies, in having only one ally in the forum in which we discussed matters. The noble Lord, Lord Peyton, was not on the committee. Had he been, no doubt he would have been my ally.

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My noble friend Lord Renton of Mount Harry will not be present on Thursday. I was, in some senses, the godparent of Channel 5 in that, as is probably reasonably well known, there was what I shall neutrally call a debate between the DTI and what was then the DNH on whether Channel 5 ought to be brought into existence in line with the pledge that the party had previously given. It was determined that it should be brought into being. Much credit should go to my then special adviser, who now runs a venture capital company in the media field. As the godparent, I have a great deal of sympathy with the thoughts that underlie the relevant parts of the amendments proposed by my noble friend.

Viscount Falkland: We all love the noble Lord, Lord Peyton of Yeovil, no less than the noble Lord, Lord Davies of Oldham. I agree in general terms with what the noble Lord, Lord Peyton, said. But we are all human beings, and, human nature being as it is, we all favour our own amendments. We hope—vainly, often—to have our proposals included in the Bill. It would be unnatural of me not to think that the Bill should specifically improve the prospect of Ofcom's job being simpler, not more complicated.

I understand from the reply of the noble Lord, Lord Davies, that there are already provisions in the Bill to deal with the very particular points about Channel 5 and the prospect of an increase in audience share. I am sure that, if I had not raised those points in my amendment, I would have been viewed as very remiss by the executives of Channel 3 and Channel 4, to name but two broadcasters. There are distinct fears that a situation such as the one that I described will introduce great problems and complications to the television industry. After all, radical concepts have been introduced by the Government in this Bill—for example, widening ownership opportunities. The noble Lord, Lord Renton of Mount Harry, has introduced a very interesting, practical idea. I share with him the view that there may be a need to include in the Bill an indication to potential purchasers of such channels the public service obligations that they will face in certain circumstances.

Having said that, it has been a very interesting debate. I thank all those who have taken part. I suspect that several of the points made will stimulate interest outside the Committee. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 274 agreed to.

[Amendment No. 200 not moved.]

Clause 275 agreed to.

Clause 276 [Appointed news providers for Channel 3]:

Baroness Buscombe moved Amendment No. 202:

    Page 249, line 11, leave out paragraphs (a) and (b).

The noble Baroness said: I shall speak also to Amendments Nos. 203 to 206 and to the Question that Clause 343 stand part of the Bill. As many Members of the Committee are aware, Clauses 276 and 277 deal with establishment of the system requiring Channel 3

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to appoint a nominated news provider. Clause 343 proposes ownership restrictions on that nominated supplier. The combined effect of the amendments in the names of the noble Lords, Lord McNally and Lord Gordon of Strathblane, and myself would be to amend the current system requiring the Channel 3 news supplier to be selected only from those companies granted nominated status by the ITC and to do away with ownership restrictions on the Channel 3 news supplier.

Like the Government, we recognise the importance of a high-quality news supplier on Channel 3 that is able to compete with the BBC and Sky. That is why we support retention of the content aspects of Clause 276. Amendment Nos. 202, 203 and 206 leave in place the obligation on Channel 3 to supply a national news service that can compete with those of other national operators. They also retain the obligation on the individual ITV companies to come together to appoint a single supplier. In addition, we accept the new requirements contained in the Bill that give Ofcom the power to ensure that the Channel 3 news supplier is properly resourced to fulfil its functions and to give it the final right of approval of the terms of any contract. Taken together with Clause 275, those are powerful conditions designed to maintain quality and competition in news supply on the UK's terrestrial broadcasters, and we support them.

The introduction of new powers in Clause 276(3)(d) giving Ofcom final approval of the Channel 3 news contract obviates the need for the regulator to grant nominated news status to bidders. Under the current system, suppliers seek nominated status prior to bidding, and the regulator is able to check their financial bona fides at that point. However, they have no say over whether the terms of the final contract are likely to deliver the quality of service that Parliament expects of Channel 3. The shortcomings of the system were exploited to the full in the previous Channel 3 news bidding round by a competitor consortium to ITN, which consisted of Sky News, UTV, CBS and Bloomberg. That competitor consortium, having been granted nominated status by the ITC, bid very low for the contract. As a result ITN was forced to bid very low and the price of the contract was considerably reduced. The ITC had no final say over the terms of the contract.

However, the Government have now introduced measures in the Bill which will prevent that situation recurring. Ofcom will issue guidance on what it believes to be appropriate terms for the contract and will have final approval of the contract. As such, retention of the requirements on Ofcom to consider applications for nominated status is unnecessary.

At the time of the next bidding round, Ofcom could find itself considering applications for nominated status from three or four consortia. What is the point of obliging it to go through the painstaking progress of examining whether or not to award nominated status to each one, including ITN, when Parliament has granted it the power to examine and approve the terms of any contract struck between Channel 3 and its chosen supplier? This, we believe, is a pointless,

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regulatory burden for a regulator that already faces an in-tray of epic proportions. Our amendments would sensibly do away with it.

Amendments Nos. 204 and 205 propose that the Secretary of State should not only have the power to repeal Clause 276 by order but also to modify it. At present, the Bill proposes that the Secretary of State may repeal Clause 276 in its entirety. This seems to us to be something of a nuclear option. As I pointed out, there are content elements of the clause that Ofcom may wish to retain for some time.

I turn now to the main issue: the question of ownership of Channel 3 news supplier and our opposition to Clause 343 standing part of the Bill. This amendment would remove the Government's current proposal to limit any company's shareholding in ITN to 40 per cent. We oppose this clause because we believe that its effect is to inflict significant damage on ITN and in particular its ability to secure investment. It is also in complete contradiction of the Government's general policy, which we on these Benches support, of liberalising ownership where possible and where there are strong content rules and a strong competition law regime in place.

There are detailed provisions in the Bill which safeguard the quality of ITV's news output, whoever owns its supplier. These rules are so extensive that even the joint scrutiny committee, not generally a friend of much of the Government's ownership liberalisation, concluded that,

    "we are not convinced that the retention of the nominated news provider provisions for Channel 3 provides a safeguard for the quality and impartiality of news on ITV that could not be provided by licensing and networking arrangements".

The committee went on to recommend an early review by Ofcom of the ownership aspects of this issue.

I know that for many of Members of the Committee this may seem something of an esoteric issue, but for ITN and its employees it is one with hard edged and very real consequences. The imposition of a fragmented ownership structure makes it more difficult to secure shareholder agreement and investment. Perhaps this can be best illustrated by reference to the example of the ITV News Channel. This 24-hour news channel was originally named the ITN News Channel. It was set up by ITN shareholders as a competitor service to Sky News and BBC News 24. However, as noble Lords may imagine, the 24-hour news market is not a very profitable one and after a relatively short period of time a number of the news channel's shareholders wanted the service to close down. However, Carlton and Granada, the main shareholders in ITV and ITN's biggest client, could see a real value in keeping the service on air. So they increased their shareholding in the channel to keep it afloat.

In the wake of the recent war, the wisdom of this decision has been borne out. ITN has been able to maximise the value of its coverage of the war by screening full 24-hour coverage on the ITV News Channel. This has been good for its staff and correspondents who have had increased opportunities

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to get their material on air. It has been good for viewers who have had greater access to exclusive ITN reporting and a wider choice of 24-hour news channels; and it has been good for the quality of news in the United Kingdom in general as it has increased competition with Sky News and BBC News 24.

As this example demonstrates, allowing businesses the freedom to alter their shareholdings in order to maximise investment can be the difference between success and failure. In an increasingly competitive media market, the Government's proposal to limit the maximum shareholding in ITN of any single company to 40 per cent is likely to be to the company's detriment. That is clearly the view of ITN, whose chairman, Mark Wood, wrote in a recent Westminster media forum publication that the ownership cap,

    "could undermine ITN's future commercial development, hampering the company's ability to forge new partnerships and closing off the potential that all other commercial media companies have to merge with other companies or for shareholders to increase their stake".

If the Government are prepared to rely elsewhere on content rules as the safeguard for liberalisation of media ownership, there is no reason why they should treat this area any differently, especially as the content rules on Channel 3 news in this Bill are more explicit and tougher than those currently in place.

On these Benches we share the Government's commitment to retaining competition in the news supply market in the UK but disagree profoundly with the way in which they propose to achieve it. Restricting ITN with burdensome ownership rules that will hamper its ability to secure investment will weaken competition in the news supply market and ultimately be to the detriment of viewers and democracy as a whole.

In another place, the Minister, Dr Howells, intimated that the Government would be relaxed about Ofcom reviewing this matter as an early priority. Indeed, the Government have introduced a sunset clause at Clause 277 which would allow repeal of the current system. However, given the extremely heavy workload that Ofcom already faces, I urge Ministers not to pass the buck for this one but to have the courage of their convictions on media ownership and support change now. I commend these amendments to the Committee. I beg to move.

6.45 p.m.

Lord McNally: We on these Benches are very supportive of the amendments and the way in which the noble Baroness put them forward. As she emphasised, they are positively "Peytonite" in their intent. Although the noble Lord is not in his place, I am sure that he hears the praise. I feel him with us now.

I make two brief points. First, without a doubt, when ITV was brought in in the mid-1950s its two greatest achievements were its regional reach and ITN. ITN transformed the way in which television news was presented. In particular, "News at Ten" became the great, popular flagship news programme for almost 20 years. The noble Lord, Lord Renton of Mount Harry, indicated mea culpa about the 1990 Act. One of its

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most disastrous effects was the change of ownership of ITN and the way that ITN related to ITV. I cannot understand why the Government do not follow through the logic that a single ITV would nurture its own news programmes just as Sky nurtures Sky News and the BBC nurtures BBC News. To insert these fiddling restrictions is beyond comprehension.

To have BBC with its 24-hour news channel support, Sky with its 24-hour news channel support and ITN with its 24-hour news channel support would give us good, competitive programming. But, as it is now structured, ITN will be at a permanent disadvantage. As the noble Baroness indicated, at the time of the Iraq war, when the owners injected more money into the service, it demonstrated again that the basic spirit of ITN is still there. I believe that if the Government were to accept the amendments and to allow ITN freely to link up with ITV in a productive way, ITN would quickly recapture all its old glories. We strongly support the amendments.

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