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Lord Alli: My Lords, I want to speak to Amendment No. 224A, which is grouped with this set of government amendments. Before doing so, I should tell the Minister that, although I did not understand everything that he said on the amendments, I felt a sense of reassurance, particularly when it came to the financing of Ofcom.

Amendment No. 224A has two purposes. First, it welcomes Clause 394 and the obligation that it places on Ofcom. Secondly, it ensures that the objectives of the clause are achieved as early as possible in the life of what will then be the Act.

Noble Lords will appreciate that Clause 394 sets out a principle which has worked successfully in broadcasting. It is that Ofcom's function of collecting, on behalf of the Treasury, the economic rent from the use of the airwaves should be separate from the process of funding Ofcom itself. Once the system envisaged by that clause comes into effect, it will allow Ofcom to retain that part of the sums paid to it for use of the spectrum, which is required to cover Ofcom's costs of carrying out the functions relating to the use of the airwaves. To do that, Ofcom will be required to publish a statement of principles authorising the retention of the sums paid to it.

When in operation, Clause 394 will therefore reinforce the independent status of Ofcom, and free it from the need for direct government funding for the purposes of activities relating to the use of the spectrum. The clause as drafted, however, is silent about when all that must start to happen. I am keen to ensure that Clause 394 is brought into operation speedily, to establish the independence of Ofcom. The proposed amendment seeks to ensure that Ofcom institutes the new arrangements as early as possible. I hope that the noble Lord can reassure me that, if he cannot accept Amendment No. 244A, he will try to make such provisions go through.

Lord Puttnam: My Lords, I thank the Minister. It is an extraordinarily generous and full decision by the Government to address what were very real problems. The noble Lord, Lord Crickhowell, first raised them in Committee more than a year ago, and has gnawed away at the bone. I find it quite interesting that, with no sound and fury, we are about to pass what may end up as the most important single amendment for the future life of Ofcom. It is a relatively small child entering a very big playground with a lot of tough kids in it. That the Government have been prepared to put their arm around that child and see it through to maturity is a very important step. Were I the noble Lord, Lord Currie, I would regard this as the most significant concession that the Government have given. I am truly grateful.

Lord McNally: My Lords, I am quite sure that the noble Lord, Lord Currie, will welcome the concession. I want to highlight and welcome the more general

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point that the Minister made about the funding of Ofcom. He will recall that, when Ofcom was set up, there was a general assumption that the bringing together of five regulators into one would bring savings with it, and that Ofcom would be a leaner beast. I understand that, during the Bill's passage through Parliament, 53 new responsibilities have been given to Ofcom. All that I ask the Minister is to keep an eye on his colleagues in the Treasury, and make sure that they do not go candle-end saving. We want an Ofcom that works, and Parliament is willing to pay for that.

Lord McIntosh of Haringey: My Lords, if the noble Lord, Lord McNally, would refrain from placing more obligations on Ofcom and undertake to do that during the remainder of the passage of the Bill, both the Treasury and I would be very happy. I am grateful for what has been said, especially by the noble Lord, Lord Puttnam, but I need also to respond to the noble Lord, Lord Alli, and the point is slightly complex.

Let me explain the system for Ofcom recovering the cost of carrying out its spectrum functions. Spectrum payments are made for the use of a scarce national resource, and prices are generally set using either auctions or by reference to spectrum management considerations, not in relation to the cost of regulation. Payments can be regarded as fair recompense for a resource that is a public asset and is, rightly, income for the Exchequer.

Clause 393 requires amounts received by Ofcom under the Wireless Telegraphy Act to be paid to the Consolidated Fund. In practice, an administrative arrangement will be put in place between Ofcom and the Treasury to allow the requisite amount needed to meet the cost of Ofcom carrying out its spectrum functions to be taken out of those moneys and appropriated to Ofcom. So that Ofcom can have similar arrangements for each of its main income streams, Ofcom has indicated that it would eventually like to move to a new system in which it could retain sufficient amounts from the payments made under the Wireless Telegraphy Act to meet the costs of carrying out its spectrum functions. Under the new arrangement, Ofcom would make a statement of principles, which would be approved by the Treasury, setting out the basis on which it would calculate the costs of carrying out its spectrum functions and retain the necessary amounts. Clause 394 would therefore allow those new arrangements to be put in place.

Ofcom intends to move to the new regime as soon as practicable but, realistically, it is unlikely to be able to do so before 2005. There will be further discussion between Ofcom and the Treasury to settle the detail of how the system would work before it was possible for it to be introduced. Indeed, Clause 394(10) requires the Treasury to give its consent before a statement of principles, which is required under the clause, can be made, revised or withdrawn.

Clause 394 provides the legal mechanism for bringing the new system into force. When that further work has been done, I am sure that Ofcom will want to start the discussions as soon as it can but I do not

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believe that it would be appropriate to place a deadline on it. I hope that the noble Lord, Lord Alli, will therefore not press the amendment.

4.30 p.m.

Lord Alli: My Lords, before the Minister concludes, I am grateful for that reply, which I will study carefully. If he could use his good offices to ensure that that is done as quickly as possible, I should certainly be content.

Lord McIntosh of Haringey: My Lords, it is in everyone's interest that that should be done. I hope that the amendment will be agreed to.

On Question, amendment agreed to.

Lord Puttnam moved Amendment No. 189:

    Before Clause 340, insert the following new clause—

(1) Section 58 of the Enterprise Act 2002 (c. 40) (specified considerations) shall be amended as follows.
(2) After subsection (2B) (which is inserted by section 368 of this Act) there shall be inserted—
"(2C) The public interest in the promotion and maintenance—
(a) of a plurality of media owners committed to a balanced and impartial presentation of news and to a balanced presentation of comment, and
(b) of a wide range of voices such as to satisfy a variety of tastes and interests
is specified in this section."
(3) In subsection (3), after the words "any consideration", there shall be inserted "(other than the consideration specified in subsection (2C))"."

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 190, 191, 192, 199A, 222B and 222C.

I know that I speak for all members of the Joint Scrutiny Committee in this House and another place. I received this morning an Early-Day Motion signed by all six Commons members of that committee supporting the amendment. More particularly, I spoke this morning to the noble Lord, Lord Hussey, who I always felt was the conscience of our committee. He asked me to apologise to the House for the fact that he is unable to join us, having only just returned home from hospital. I know that the House will join me in wishing the noble Lord a speedy recovery.

Noble Lords: Hear, hear.

Lord Puttnam: My Lords, when we completed our report, the noble Lord, Lord Hussey, made it clear that he regarded the "public interest plurality test" as the most important and far-reaching of all our recommendations. During our telephone conversation this morning, he asked me to tell the House that, having had almost a year in which to reflect and review dispassionately developments in the media, he has slightly changed his mind. He now regards the amendment as twice as important as he did then!

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In the statement accompanying the publication of our report on Wednesday, 31st July 2002, the Joint Scrutiny Committee said:

    "At the heart of our conclusions and recommendations about media ownership is the proposal for a new plurality test to be used in connection with mergers and takeovers across all media. We hope that this recommendation will stimulate an important and timely debate".

Little did we know how right we were.

For us, the legislation rested on three vital pillars. The first was that the citizens' interests were paramount in respect of the provision of content and information; we dealt with that last Monday, when the House made its view overwhelmingly clear. The second was that Ofcom was sufficiently well resourced to withstand attack from the biggest beasts in the jungle and was able to slug it out on equal terms in respect of firepower and expertise. We dealt with that a few moments ago. The third was that a plurality test should be introduced that was sufficient to look across all media and make determinations in the best interests of the citizen. Those were, if you like, the three non-negotiables.

In Committee, the noble Lord, Lord Borrie, made the most interesting and concrete contribution to our discussions on the plurality test. I will repeat some of his comments. He said:

    "I believe that the same sort of consideration which influenced people concerned with democracy in the 1960s in relation to the press now justifies a stricter control over cross-media mergers that is applicable to other goods and services. Amendment No. 280A"—

now renumbered as Amendment No. 189—

    "proposes a reporting role by the Office of Fair Trading. It proposes that by amending the Enterprise Act, the Competition Commission, when faced with a reference concerning cross-media ownership, would be concerned not just with economic matters but with the much wider concern for plurality and diversity in the media.

    "The Government claim . . . that a Competition Commission involvement in such cross-media mergers would lead to uncertainty. Indeed it would. One cannot deny that during a period of a reference there must be uncertainty as to the outcome—otherwise what would be the point of the reference? However, I would suggest that that is a small price to pay for ensuring a free and diverse media. Once ownership is changed, it is exceedingly difficult to revert to square one; the damage may have been done".—[Official Report, 5/6/03; col. 1437.]

I have nothing to add to the thoroughness of those remarks, beyond saying that they possibly lay the ghost once and for all that the provision of information within the media is anything but the sale of widgets.

There has been a terrifying situation for a number of years in which the media are seen as just another business. They are not just another business. There has been a great deal of confusion, which I will illustrate. The honourable Member of Parliament for Maldon and Chelmsford East said in today's Financial Times that,

    "the plurality test undermined the government's desire to relax the laws governing the media.

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    "The whole thrust of the communications bill is to liberalise the rules on ownership. A plurality test erects another obstacle in the way of takeovers within the media sector".

I am puzzled by that because in last Friday's Guardian, the honourable gentleman was quoted as saying:

    "My view is that a plurality test has some merit, but it is very difficult to define. I would rather the test applied across the board, however, than just to certain companies".

It is absolutely clear that the test is designed specifically to apply across the board; otherwise, frankly, there would be very little point in pressing the amendment.

It has been possible at times during the endless discussions surrounding the clause to believe that the Bill is something of a "luvvies' charter", as it was put to me. During the earlier and noisier stages of an orchestrated appeal to the hearts and minds, we were lured on by the promise of access to high-quality US programming. The same six or seven titles were trotted out—always, I found, starting and ending with "The West Wing".

It is interesting to note that at last week's congressional hearings on media ownership, one Congressman typified the current output of programming from America's commercial media as "The Axis of Drivel", referring to the preponderance of look-alike reality programmes on so many broadcast and cable channels, and so little substance in news reporting and public interest programming. The truth is that television in this country has always enjoyed a greater variety and diversity of output than has ever been genuinely available in the United States. It is rather odd that in recent years, modesty seems not to have allowed us to trumpet that fact!

Another Member of Congress at the same session, Mr Byron Dorgan of North Dakota, was thoroughly unimpressed when a broadcast lobbyist, testifying before his committee, insisted that there was no need for regulations regarding ownership because there were, after all, in America more choices, more channels and more voices in the media landscape than ever before. "Yes", Mr Dorgan replied,

    "more voices but only one ventriloquist".

Much has been made in the past few weeks of the underlying rationale of the amendment. I have heard it referred to as the "Murdoch clause"; it has even been described as something that attempts to demonise sections of the media. That is not and never has been the case. The Secretary of State was entirely right in insisting that the Bill and the amendment were entirely "proprietor neutral". It is more to do, as I see it, with attempting to make our democracy proprietor neutral.

In view of the change occurring today in the presidency of the European Union, it seems entirely appropriate to look at what we are trying to protect against in that context. It is what I see as a drift in media ownership and a drift in the relationship between media ownership and, as it were, a census of power. We have spoken at length about the Bill being "future-proof", because the situation that we face is not current. I can well envisage a time, 10 years from

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now, when I, among others, may say, "Come back, Rupert, all is forgiven", and we shall look upon today as the golden age of media plurality.

I want to talk about something a little more serious. In Prospect magazine of January 2003, John Lloyd wrote briefly about the government of Silvio Berlusconi. He said that it is,

    "an affront to the democratic values which the nations of the European Union affirm as their most precious heritage. It ruthlessly manipulates the large majority it gained in both Houses of Parliament in the election of spring 2001 to pass legislation tailored for the Prime Minister's commercial benefit. It controls almost all of the nation's television channels. It is, in many respects, comparable with governments of post-Soviet states. Most worryingly, Berlusconi's form of politics may be showing us our own future.

    Italy has often been in the vanguard of history. Berlusconi has brought to democratic government another novelty—a populist videocracy. Berlusconi symbolises the logic of modern media politics. He focuses on the present and on presentation. Contradictions disappear down a memory hole. It is a kind of soft version of 1984, where everything that is asserted now is true, and is capable at any time in the future of being declared false—or just forgotten.

    The vast and delusive power of television is now linked to a politician who has shown that he has few scruples in its use. It may also be prompting other would-be tribunes of the people to think that they too can, with impunity, unite media and political power into one party or one person. Berlusconi in power is a danger to a great country, a danger to Europe's proclaimed ideas and a danger to a world in which the media have 'wrapped themselves around public life', and may, in the end, strangle it".

That is what the amendment attempts to achieve. It is a move towards making the "Berlusconi-isation" of British democracy an impossibility. That is what the issue over our future-proofing of the Bill is all about. The amendment is no luvvies' charter—far from it. Achieving a rigorous public interest plurality test is something that this House as a whole can, in my judgment, be very proud of.

In moving the amendment, I must put the following to the Minister. If the Government indicate today their intention to move amendments at Third Reading to extend the relevant Enterprise Act provisions to cover media plurality, I hope that my noble friend will be able to answer the following specific questions. First, can he give the House an assurance that such provisions will be brought into force before, or at the same time as, the lifting of restrictions on media ownership contained in the Bill? Secondly, can he indicate whether or not it is intended that the Secretary of State's powers of intervention under Sections 59 to 66 of the Enterprise Act will extend to the media plurality provisions, and, if not, why not? With my heart very slightly in my mouth, but full of hope, I beg to move.

4.45 p.m.

Lord McIntosh of Haringey: My Lords, a number of people have suggested to me that it would help the House if I intervened now. I have no wish to curtail debate and certainly, with the leave of the House, I wish to respond before my noble friend Lord Puttnam concludes the debate. But I have things to say which I hope will be found helpful.

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I want to deal, first, with the amendments before us and then make it clear that, although we cannot accept them in their current form, we nevertheless accept the principle behind them. I then want to outline our own plans to bring forward amendments for consideration at Third Reading.

I shall start with the amendments that we are discussing. We are supportive of the principle behind them that essentially we should safeguard plurality and diversity, or "the public voice", as my noble friend Lord Puttnam described it. But I have to be negative for a moment and say that we have grave doubts about the way that the drafting does not appear to distinguish adequately between broadcast media and newspapers.

We fear that the amendments would blur the distinction between the two in a way that would be damaging to both. For example, Amendment No. 189 refers to the need for "a wide range of voices". The word "voices" is further defined as,

    "views and opinions represented to a significant degree in the media",

rather than any sense of diversity as such. That confuses broadcast media, where there is already strong content regulation, with the print media, where there is none. The concept of "views and opinions" is completely alien to broadcast media. All licensed broadcasters are already required by law to ensure that news—I quote from Clause 312 of the Bill—is "presented with due impartiality" and "reported with due accuracy". Furthermore, all broadcasters must exclude from their programmes—I quote from the Broadcasting Act 1990—

    "all expressions of the views and opinions of the person providing the service on matters . . . which are of political or industrial controversy or relate to current public policy".

Broadcast media services, therefore, do not, and should not, have "views and opinions" in the same way as newspapers, quite rightly, have an editorial stance. Taken to one possible logical conclusion, the text of the amendment could have the effect of stopping broadcasters from being impartial and allowing them to have "views and opinions". I cannot believe, and would not want to argue, that that is the intention behind the amendments. But they would introduce uncertainty into the proper functions and role of broadcasters. That could be absolutely catastrophic for the integrity of British broadcasting.

The amendments would also seem to encourage the introduction of content regulation into newspapers. A free press is a cornerstone of democracy, and we tamper with it at our peril. That may not be the intention behind the amendments—indeed, knowing my noble friend Lord Puttnam as I do, I am sure that it is not—but it is how the need for,

    "a balanced presentation of comment",

for example, could be interpreted. For those reasons, we cannot accept the amendments as they stand.

With the technical points aside, I can be far more positive. I now want to turn to the subject of media ownership and plurality. Media plurality is important for a healthy and informed democratic society. The

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underlying principle is that it would be dangerous for any one person to control too much of the media because of his or her ability to influence opinions and set the political agenda. It is therefore essential to set limits on concentrations of ownership. Competition law will do that to some degree and may, in fact, be all that is needed in many cases. But there is no guarantee that that will always be so.

That is particularly true in the case of cross-media concentrations, where the competition authorities may well take the view that the markets are separate and that consequently there is no effect on competition. That is a completely proper conclusion as regards competition but it may not be sufficient to safeguard the appropriate level of plurality. That is why we have specific restrictions on media ownership which are additional to competition rules.

Plurality is a very subjective notion. It is not susceptible to the same kind of economic analysis as competition issues. It is very much a matter of judgment of what "feels" right. For this Bill, our approach has been to examine each media audience, including cross-media audiences, and to judge the level of plurality that we consider necessary. It is important to recognise that setting artificial limits on markets can make them economically less efficient. But we need to protect plurality and recognise that there is a minimum level of plurality below which we must never go.

However, it is important to recognise that more is not always better. A very fragmented industry is certainly a very plural industry, but small, weak players may not have the necessary resources or skills to produce high-quality programming. Greater consolidation which does not threaten plurality should improve services to viewers and listeners. High-quality, really memorable TV programmes are usually only possible because we have TV companies with the necessary resources to make them.

The purpose of the amendments before us is to introduce an additional level of protection to plurality by extending the public interest test in the Enterprise Act to enable a media plurality test to be carried out in the event of a qualifying media merger. A qualifying merger is one where enterprises cease to be distinct and either the United Kingdom turnover of the acquired enterprise exceeds 70 million or the new entity has at least a 25 per cent share of supply of goods or services of any description in the UK or in a substantial part of the UK.

We originally proposed the idea of a plurality test in the consultation document on media ownership, which we published in November 2001. The responses were generally unenthusiastic as it was felt that the test introduced an unhelpful degree of uncertainty into media mergers. However, the world has moved on since then and a number of our policies have changed and developed. We are now proposing a more liberal ownership regime for local radio. We are proposing removing the restrictions on foreign ownership and allowing a major national newspaper to own Channel

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5. We have also listened carefully to the points made in this House and elsewhere. Indeed, no reader of the broadsheet press can have avoided this debate.

Two main arguments have been used in favour of a plurality test, both essentially about the need to "future-proof" the Bill. First, it is argued that a plurality test allows for the gradual dismantling of media ownership rules over time. As we move towards a digital, multi-channel future, the degree of choice available to us will make it increasingly difficult for any one person to have a dominant position in the media and may remove, or reduce, the need for ownership rules. Under these circumstances, a plurality test may be a sufficient safeguard of plurality.

Secondly, circumstances may change. We took the view that there were many good reasons for removing the restrictions on a major newspaper owning or controlling Channel 5. I shall not repeat the arguments now. However, it is possible that over time Channel 5 may become much more similar in size and reach to Channel 3. It is impossible to predict whether this will happen but, given the possibility, we must have a plurality regime flexible enough to react to changing circumstances.

I add a third argument in favour of a plurality test. I have already mentioned the rule which prevents a national newspaper with more than 20 per cent of the market, or a body in which such a paper has more than a 20 per cent interest, from holding a Channel 3 licence—sometimes referred to as the 20:20 rule. This rule has served us well, but it has a "cliff-edge", all or nothing, element to it. On the one hand, it makes an absolute distinction between a national newspaper with 19.9 per cent of the market and one with 20.1 per cent—a kind of Mr Micawber distinction. On the other hand, it makes no distinction between a newspaper with 20.1 per cent of the market and one with 35 per cent or 40 per cent or more. The rule is therefore somewhat arbitrary in its effect. A plurality test would, in principle, allow the Secretary of State to make a judgment on media mergers, based on the particular circumstances of the case. The Government are therefore persuaded that we should accept the principle behind these amendments, and bring forward government amendments at Third Reading to introduce a plurality test.

Let me outline how we think such a test would operate. We propose to extend the scope of the Enterprise Act so that qualifying mergers could be subject to a media plurality test. In these cases the Secretary of State will be able to intervene where she believes the merger would have a damaging effect on plurality. The test would not be, "Does the merger lessen plurality?". Any merger, by definition, reduces plurality to some extent. It will be for Ministers to determine whether the merger causes sufficient plurality concerns for it to be blocked, or for conditions to be attached. Similarly, the test must also recognise that there is a minimum level of plurality which must be maintained.

We propose that the power be wide enough to capture all media mergers, including cross-media mergers. We would intend as a matter of policy

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normally to apply the test in practice only to those areas where the current rules are being removed completely. This means that, usually, the Secretary of State would consider intervening on plurality grounds only in the following areas: national newspapers with more than 20 per cent of the market/Channel 5; national newspapers with more than 20 per cent of the market/national radio service, Channel 3; Channel 3/national radio; Channel 5/national radio; and national radio/national radio.

The noble Lord, Lord Puttnam, asked whether this test would "effectively rule out" a major national newspaper owning Channel 5. The answer is that the test will ensure that the Secretary of State can investigate any merger which threatens plurality. It will clearly prevent unacceptable levels of cross-media dominance. But it is inherent in the nature of a test that one cannot predict the outcome in advance in any individual case. It will be necessary to analyse and consider all the relevant circumstances at the time on a case-by-case basis.

This, of course, is in the nature of merger legislation. It is exactly the same approach as would have to be taken if the amendments tabled by the noble Lord, Lord Puttnam, were agreed. I do not believe that it would normally be sensible or desirable to intervene and apply the test to areas where there have never been media ownership restrictions, or to areas where there continue to be ownership rules, as the continuing rules will protect plurality.

In order to give the media industry some degree of certainty, the Government will publish guidance setting out in more detail the areas where the test will generally be applied and the factors that will be considered. It is not the Government's intention that the test should apply more widely. However, guidance obviously cannot fetter the Secretary of State's discretion or her ability to respond to changing market circumstances and we would not rule out its wider use in an extreme and rare case.

I believe that the plurality test should consider the number of owners in the relevant market. That will have resonance if one looks at the amendments before the House. The market would be a single medium or, in the case of a cross-media merger, a number of media markets. The test will also address—and again I ask noble Lords to look back at the test of the amendment before us—the need for a wide range of high-quality broadcasting calculated to appeal to a wide variety of tastes and interests, and the need for a genuine commitment to the issues covered in Ofcom's standards code set out in Clause 312 of the Bill, including the need for impartiality and accurate presentation of news. The plurality test would sit alongside the special newspaper regime, which would continue to consider newspaper-only mergers.

The noble Lord, Lord Puttnam, asked for an assurance that such plurality provisions will be brought into force before or at the same time as the lifting of restrictions on media ownership contained in the Bill. The answer is yes, I give him that assurance. He also asked whether it is intended that the Secretary

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of State's powers of intervention under Sections 59 to 66 of the Enterprise Act will extend to the media plurality provisions. The answer again is yes.

I hope that the assurances I have given about our intention to introduce a media plurality test, and my detailed explanation of how the test would operate, will persuade the House not to press the amendment before us. I shall be tabling government amendments for consideration at Third Reading before the end of the week. I shall also circulate the text of our amendments to every noble Lord who has expressed interest in the issue.

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