TELEVISION (LEVY)

HC Deb 23 March 1970 vol 798 cc1142-69

11.30 p.m.

The Minister of Posts and Telecommunications (Mr. John Stonehouse)

I beg to move, That the Television Act 1964 (Additional Payments) Order 1970, a draft of which was laid before this House on 17th March, be approved. The purpose of the Order is to reduce, by an estimated £6 million in a full year, the amount of the levy of additional payments due from the independent television programme contractors under Section 13(1)(b) of the Television Act, 1964.

It is common ground between both sides of the House that the right means of ensuring that the public purse shares in the income accruing to the programme contractors from their commercial exploitation of an asset at public disposal should be the one that has been adopted. Indeed, the right hon. Gentleman the Leader of the Opposition expressed his support for it as late as 3rd December last year, when we last debated broadcasting. So this will not be the occasion for me to explore the merits of the 1964 Act or this provision in it, but I think it worth while putting on record again the fact that the principle of the levy is not in question.

The facts are that the financial position of the independent television contractors has changed for the worse since this time last year, and to a much worse extent than anybody foresaw at the time when the House decided to approve the increase announced by my right hon. Friend the Chancellor of the Exchequer in his Budget statement on 15th April, 1969. At that time, as the House will recall, the return achieved by the independent television contractors on their investment during the three years ending with 1967–68 had been well over 40 per cent., which is no mean return, considering that some of them had enjoyed an even higher rate of return in the years before that.

We took account last year of the increased costs which the contractors would incur with the introduction of colour programmes and of the fifth major contractor, that is, Yorkshire, which was brought into the network arrangements. But we concluded that, in all the circumstances, the increase of £3 million was reasonable.

The I.T.A. did not agree with the increase on which we decided. However, the scale of the levy under which the amount payable varies with the level of contractors' advertising receipts was arrived at after discussion with the Authority and was accepted by it as the fairest distribution.

Hon. Members will recall that I gave an undertaking when the House debated the 1969 Order—I believe that the undertaking was unprecedented—that we would review the matter and bring another Order before the House if the worst fears of the television contractors were realised. I am glad to bring this Order forward tonight, for it honours that undertaking. The contractors had told me that they foresaw rising costs and a sharp decline in their profits during the current contract year, but, in the event, even the contractors were wrong, because they fared far worse than they could have foreseen on the information available this time last year.

On 19th January this year, the I.T.A. put to me representations that there should be a substantial reduction in the amount being imposed on the contractors. I am satisfied, after full discussion with the Authority, that the companies were faced with sharply increasing costs. We also found—this was a factor which nobody had been able to foresee—that there had been a sharp decline in the contractors' advertising income. During the 12 months ended in April, 1969, total advertising revenues were £101.5 million. However, during the current contract year, ending in July, 1970, the prospects are that the advertising revenues may fall to £93 million. But for some of the smaller companies the experience has been more acute. I have no intention of giving the figures for the experience of the particular companies, and the House will not expect me to give them. However, hon. Members will know of the problems of, especially, Scottish Television and Border Television. Other companies might have been in similar difficulties if we had not decided to act as we are proposing to act.

I am aware—I will no doubt carry the House with me in this—that the industry must make every effort to meet rising costs by improved economies and efficiency. That is why my right hon. Friend the Chief Secretary and I propose to refer the companies' costs and incomes to the P.I.B. That will give the board an opportunity to look at the operations of the programme companies and, if it feels that it would be helpful, to propose changes in the way they do their business.

Mr. Christopher Mayhew (Woolwich, East)

Would my right hon. Friend explain why he is giving this great hand-out to companies, a number of which are already excessively profitable, before sending the matter to the P.I.B.? Would it not have been more sensible to have made this hand-out conditional on some economies being made, and certainly not before the P.I.B. reported?

Mr. Stonehouse

My hon. Friend is under a misapprehension. We are not giving a hand-out. We are taking less from the programme contractors than we announced we would take a year ago. That is not a hand-out. It is simply adjusting the amount that we take from them. To suggest that it is a hand-out implies that the taxpayer is somehow providing them with a subsidy, which is not the case. We are simply reducing the amount we take from them and we are doing this in the light of the situation as we now know it to be. We are doing this in view of rising costs, but, more particularly, because of the reduction in advertising income.

I believe that the House in general agrees with the action that we propose in the light of the factors I have outlined. It is not that we are being soft with these firms. We want to make the right decision and we believe that we are making it. We recognise that they can achieve some increased efficiency and, in the light of the P.I.B.'s report, perhaps they will be able to act more effectively along those lines.

If, as my hon. Friend suggested, we had waited for that report, we might have waited another six or eight months before making this reduction. That would have left a number of programme contractors in a difficult position, particularly in Scotland. The House would not have been in general agreement had we been tardy in the way we dealt with the matter.

We have, therefore, decided on this new scale, which has been tailored to give proportionately greater relief to the smaller and medium-size companies—thus companies whose advertising receipts do not exceed £2 million that is, the four smallest, will, from 15th April next, no longer be liable to pay. Companies earning up to £9 million will pay nearly £600,000 less. Companies whose receipts reach £16 million will pay nearly £800,000 less.

The effect of the new scale is not merely to take away the £3 million increase approved by the House last year; it is to bring the yield of the levy £3 million below the yield which would have been produced by the rates of levy provided in the Act brought in by right hon. and hon. Gentlemen opposite in 1963. Last year we estimated that the new rates then introduced would produce £29 million in a full year instead of the £26 million which the previous scale would have produced. Because of the fall in advertising receipts, the yield of the levy would have been unlikely to exceed £26 million at last year's scale. At the original scale, which operated before last year's increase, it would thus have reached £23 million. On the scale now proposed the estimated yield will be £20 million.

In an editorial comment on 17th March this year, the Financial Times welcomed the decision that I announced. It referred to the circumstances in which the decision had been made; in particular, that advertising income had declined by 1.3 per cent. against an estimated rise of £3 million which had been anticipated last year. It went on to say: In these circumstances the Government's decision should not be regarded as a victory for the companies, or as a change of policy in the face of the industry's criticism. It represents a reasonable reaction to the realisation that the situation in the industry has turned out differently from what was expected 12 months ago. I believe that the House will endorse that view. I therefore invite the House to approve the Order.

11.42 p.m.

Mr. Paul Bryan (Howden)

I shall not make a long speech tonight. I think that everybody will agree that this Order vindicates every speech that was made from this side of the House in the debate on 16th June on the Order imposing the levy, every statement that we have made on the subject since, and every relevant Question that we have asked at many Question Times.

I admire the gallantry with which the Minister has defended the Chancellor's original decision, which, as he knows, was based at the time on a lack of homework.

The Minister said that there has been a great change in factors. Nevertheless, every forecast that we then made has become broadly true. Even the advertising slump has not come as a great surprise to the advertising agencies. So the knowledge was there and the Government must accept the responsibility for yet another blow to the morale of the broadcasting community. Over the last year there have been literally hundreds of employees in I.T.V. who have been in real fear of their jobs.

This levy increase itself has affected the advertising revenue. I think that all are agreed that for a time last year and the year before advertisers lost confidence in I.T.V. as an advertising medium. Everything seemed to be going wrong. First, we had the strike; there was then the general disarray that followed the hand-out of the new franchises; there was the trouble at London Weekend; and, finally, there was this levy, yet another blow to the industry. All these factors added up to a picture of I.T.V. not being quite what it was.

I think that already there is recovery. I.T.V. now attracts 56 per cent. of the viewing audience. Tonight's concession, to give it its due, will be another factor towards reviving confidence in I.T.V. as an advertising medium. On the face of it, I do not see how this industry can complain of its accounts being submitted to the National Board for Prices and Incomes. Many and varied industries have already suffered similar inspection.

Nevertheless, it is debatable whether a highly creative, super-risk-taking industry of this sort—one can hardly say it is not risk-taking when one has to settle for a franchise of only six years—is suitable for Government control, guidance and regulation to this extent. This creative industry is beginninig to be reduced to the status of a public utility or a semi-nationalised industry.

If it is thought that I am overplaying this card, the House has only to look at the situation as it now stands. The level of levy will clearly be fixed in future in accordance with the findings of the N.B.P.I. If the industry wants to put up its advertising rates, it must seek the approval of the Post Office; so in one way or other the profits will be regulated by the State to within a few per cent. The I.T.A. builds up reserves for perfectly legitimate reasons, against anticipated commitments. Even these reserves can be removed by the State quite arbitrarily without notice. I wonder: is this the right background to an industry which is highly risk-taking——

Mr. Mayhew rose— —

Mr. Bryan

Let me finish this passage—not only highly risk-taking, but desirably risk-taking?

The industry should take risks since, to produce good programmes, it must experiment. If profits are over rigidly controlled, companies are moved to play safe and production will suffer. At the moment, the industry is committed to investigation by the N.B.P.I. We must seriously consider for the future whether this produces the sort of climate in which a would-be creative industry gives of its best.

Mr. Mayhew

The hon. Gentleman keeps on referring to the industry as risk-taking. Surely the one thing that is plain is that nine times out of ten if one invests in this industry one makes a profit, and the tenth time, if there is any risk of making a loss, the Government come to its rescue by reducing the taxation.

Mr. Bryan

The hon. Gentleman is out of date. There was a period when industry could hardly help expanding. As the number of television sets increased over the years advertising revenue rose. We have now reached saturation point. An entirely new situation arises and new steps are required.

The Government should therefore consider whether the levy is right in its present form. For the reasons I gave in replying to the intervention by the hon. Member for Woolwich, East (Mr. Mayhew), the levy as we know it was suitable in a situation where the industry was in a state of natural expansion. It is not so suited in today's situation. If a levy is to be continued, should it not be at a level fixed for the duration of the franchise, in the same way as a lease is negotiated for a definite period?

In welcoming the Order, I wish to put in perspective what it does as opposed to what the papers say it does. Clearly, it has rescued smaller companies from extinction. But it does not get I.T.V. out of the wood. Costs are rising. As a simple illustration, I am told that the Mountbatten series cost £350,000, but that if it were produced today it would cost £500,000. The cost of I.T.N. over the last three years has risen by over £1 million. All these costs are soaring. I will not repeat the figures for advertising that the right hon. Gentleman has given us. The total capital cost of colour television is about £25 million. The cost of servicing such a sum is now £2.5 million. The latest figure for working in colour is £5 million, plus £5 million depreciation.

All these factors are simply not met by the net reduction in the levy of £3 million. If he doubts this the right hon. Gentleman has only to put to the present contractors the straight question whether they would accept another contract for the next six years on exactly the terms that are now available.

11.51 p.m.

Mr. Christopher Mayhew (Woolwich, West)

I wish that I could congratulate my hon. Friend on his decision, but I find it an astounding decision to hand out £6 million to I.T.V. shareholders. My right hon. Friend says that he is not handing anything out; he is merely relieving them of an imposition. We are all hoping that the Chancellor will take 6d. or 1s. off income tax in his Budget.

Mr. Hugh Jenkins (Putney)

Not all of us.

Mr. Mayhew

Not all of us—but I am sure that the public is hoping.

I am sure that we shall not hear my right hon. Friend the Chancellor explaining to the public, "I am not giving the taxpayers anything. I am not offering anything. I am simply taking less away from them." This is a hand-out, like any reduction in taxation. It is a hand-out to the most prosperous, influential and least deserving lobby in the country. I am astounded to see a Minister in a Labour Government doing this.

The reason given by the Minister was wholly inadequate. He said that there were two companies in difficulties—Southern and Border, but he could not tell us what the facts were.

Mr. Stonehouse

It was not Southern and Border; it was Scottish and Border.

Mr. Mayhew

I beg pardon—I should have said Scottish and Border.

My right hon. Fiend did not tell us the facts. We have to reduce taxation to practically all I.T.V. companies on hearsay. My right hon. Friend said that it would not be proper for him to tell us any facts about their being in any difficulty. The House has not the right to know, when it is asked to reduce taxation, what is the financial position of the beneficiary. That is an entirely new principle. We have Chancellor after Chancellor reducing or increasing taxation, but always giving the House some idea of the merits of the case. Why should not we know the profitability or otherwise of Border or Scottish Television?

What do we know about them? Are they making profits, or are they making huge losses? Why should the information be private? They are public companies. Is not Scottish Television a public company?

Mr. David Steel (Roxburgh. Selkirk and Peebles)

Will the hon. Gentleman accept that Border Television has never made the exorbitant profits that some of the other companies have made; that it is unique among television companies in succeeding in getting its entirely local coverage into the Top Ten figures for the area, and that it provides a unique local service, which was in jeopardy under the levy system?

Mr. Mayhew

The hon. Member is making a very good point for the local Press on Border Television. I take his word for it. But it is not right simply to take the Minister's word about the financial position of Border in reducing taxation. It is quite intolerable that the House should agree to reduce taxation on the ground that two companies are in difficulties and then not be told in what way they are, and what the profit figures are.

But this is a minor part of the grotesque misjudgment which the Government are making. A much worse aspect of their decision is that, because two companies are in difficulties, they are giving a handout to a dozen which are not. Is Anglia Television in difficulties? Why should we reduce taxation for Anglia or for Tyne-Tees?

The Minister quoted the Financial Times, but he did not quote the rise in the share prices of the television companies after his announcement. Anglia's 5s. shares rose 1 s. 6d. to 20s. This is a company which regularly makes 25 per cent., 32½ per cent., 50 per cent. and 51¾ per cent. on its capital. The Government, who refuse money for good causes like the chronic sick, hospitals or schools, give it a bounty. What have Anglia shareholders done to deserve it?

The shares of A.T.V., which will get a hand-out of £75,000 from the Minister, rose 2s. on his announcement to 25s. 3d. That is a vastly profitable concern. The shares of Tyne-Tees went up 25 per cent. to 4s. 3d. In 1960, that company paid a dividend of 450 per cent. Since then, it has got more profitable still—but not profitable enough, apparently, for the Labour Government, who hand out taxpayers' money to its shareholders. Grampian's shares rose 1s. to 6s., and its record on dividends also ranges from 25 per cent. to over 50 per cent.—still not enough for the Labour Government, who reduce its taxation and give it a handout.

This is one of the most grotesque extravagances and the most grotesque abuse of public funds which I have heard of during my 25 years in the House. I hope that, later, the Government will not ask for economies here and there. If anyone asks me in my election campaign to give an example of wasteful public expenditure, it is handing out millions of pounds to I.T.V. shareholders, who are already excessively rewarded.

Third, the Minister is not solving anything with his hand-out. He is only tinkering with the problem. The hon. Member for Howden (Mr. Bryan) started to lay his finger on the problem, by asking whether it was enough. Suppose advertising revenues fall again. Why does the Minister think that they will remain constant? There is no reason. They might fall, although at the moment they are rising. What happens if they fall? Does the Minister take more off the levy? If they rise, will he increase the levy? This is the most clumsy way of tinkering with the problem.

The fourth reason why this decision is so deplorable is that it is unconditional. This hand-out has been given to these shareholders without laying down any conditions about efficiency, extravagance or programme quality. What assurance has been given that programme standards will now improve? Lord Shawcross wrote in The Times on 8th January. He is the Chairman of Thames Television. He said: I want the shareholders' capital to be sufficiently rewarded to enable and encourage them to spend larger amounts on producing programmes which will not only have public appeal but which will also have high quality. Now that he has his money are we to expect an improved policy of programme on Thames Television? Has the Minister laid down any conditions? Has he got any assurance?

It seems to be extraordinary that this concession should have been made wholly unconditional, and unconditional in regard to the extravagance of I.T.V. because the simplest calculations show that I.T.V. is extravagantly run. The simplest calculation is that the B.B.C. has £58 million in order to produce two channels, whereas I.T.V., under the Minister's new dispensation, will have £60 million to produce one channel. That is to say, I.T.V. is more than twice as extravagant and expensive as B.B.C. 1 or 2.

It shows that there is grotesque extravagance in I.T.V. And the Minister, instead of saying, "Let us have an investigation by the P.I.B. of your costs and profits, and when we see what is happening perhaps we will relax taxation "—or reimpose it, or increase it; instead of that he gives a hand-out, and then says, "We will look at this grotesque extravagance as revealed by these figures." Again, this seems to be a most extraordinary thing to do.

One has only to look at the structure of the I.T.V. to see that it is bound to be extravagant. Take the average regional programme. I looked at the newspaper this evening to see what was on Southern Television. It read: "6–6.20 South Today." Then "As London" until "11.27—News and Weather". That is to say, 20 minutes of Southern Television. And for that one needs, of course a chairman, a board of directors, a planning staff, public relations people to pressure the Minister. This whole grotesque structure might have been constructed to get the maximum number of people earning the maximum amount in order to produce the minimum of television.

Finally, we come to the basic point: why have the Government so quickly and tamely surrendered to this lobby? It is, as I say, the most powerful, the most prosperous and the least deserving lobby in the country. It is the lobby of the I.T.V. shareholders. Why are they so powerful? Why, when they whistle, does the Cabinet run?

First, the I.T.V. shareholders include most of the newspapers. That should never have been the case. The newspapers should always have been jealous of their independence. The power of television and the power of the newspapers should have been such that each could criticise the other. As it is, they are in each ether's pockets, as a result of an issue like this——

Mr. Deputy Speaker (Mr. Sydney Irving)

Order. I think that the hon. Gentleman is going beyond the scope of the Order.

Mr. Mayhew

I absolutely accept your Ruling, Mr. Deputy Speaker. I was trying to indicate the reasons for the Government accepting the pleas of the I.T.V. shareholders' lobby and, conversely, why the House should reject them.

One of the reasons why this lobby is so powerful is that the I.T.V. shareholders include most of the newspapers, and they dispense almost the most coveted patronage in the country, which is the ability to grant or to withhold appearances on television. In the entertainment and the political worlds this is a very great source of influence and power.

If the lobby is so powerful, it is a distressing thought that the value of a Royal Commission to inquire into the future of broadcasting is very doubtful, especially when we think of what is likely to happen to the Royal Commission's recommendations. Will the same thing happen to this new inquiry or Royal Commission report as happened to the Report of the Pilkington Committee? The Pilkington Committee's main recommendation, unanimously agreed——

Mr. Deputy Speaker

Order. I think the hon. Member is now challenging the basis of the original Act. That is not permissible on this Order.

Mr. Mayhew

Perhaps I was straying a little there, Mr. Deputy Speaker.

I urge the Minister to stand up to these pressures, no matter how powerful and important they are, and to look at the point of view of providing money in the interests of the viewer. There has been grotesque squandering of money. This £6 million will simply go into the pockets of some of the most prosperous shareholders in the country, not necessarily the most deserving and certainly not the most risk-taking. It was a naïve point that was made by the hon. Member for Howden.

The argument that there was a risk was their justification for massive profits in the early days when they defended their licence to print money. Now we see the falsity of that argument. Their money was never at risk. There was never the slightest possibility of their making a loss, because the Government ensured that no one would ever make a loss. I hope that this is not the last time the Government will feel the criticism of the mistake they have made. I hope that the Minister will take an early opportunity to rectify that mistake.

When my right hon. Friend winds up the debate, I hope that he will at least give the assurance that when company advertising revenue goes up again—and it is up-turning—he will not allow the harvest to be reaped by all these companies. I hope that he will reinstate the level of taxation to where it was before. Otherwise, this heads-I-win-tails-you-lose attitude will lose the Government much credit in the country.

12.6 a.m.

Mr. Hector Monro (Dumfries)

The hon. Member for Woolwich, East (Mr. Mayhew) has been a little unfair to the smaller companies. In his criticism of what he called the least deserving lobby, he failed to understand in how serious a position the smaller companies find themselves. It was not a matter of more money for shareholders but of a television service or no television service. In constituencies such as mine and that of the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) it is absolutely vital to have entertainment in the remoter areas for our constituents to watch on television.

I am certain that the Minister is aware of the serious situation among the smaller companies; otherwise, he would not have brought in this Order. He has taken steps to relieve the serious situation, not only for smaller companies such as Border, but the medium-sized companies in Scotland such as Grampian and Scottish Television. They were in a very worrying situation. There was certainly not the capital available for colour television which will be the most important feature for the future.

The hon. Member for Woolwich, East said that there was no assurance that this reduction in the levy would improve services. I think that he is wrong. The spur of competition improves services and the money is required so that there can be fair competition between the B.B.C. and I.T.A. in the introduction of colour. Companies such as Border Television have very good regular programmes which are appreciated over a wide area, spreading from the Isle of Man to Berwickshire. They deserve all credit for what they have done in this regard.

My hon. Friend the Member for Howden (Mr. Bryan) rightly said that this situation was foreseen a year ago. We on this side then said that the levy was unreasonable. Our criticism has been justified. The credit squeeze reduced advertising revenue. The unwillingness of many firms to launch new products held back their advertising budgets. Higher costs played their part. All in all, the burden of the advertising levy was just too much for the smaller companies to bear.

I know that it would have delayed the introduction of colour television by Border Television, even if more serious consequences had not resulted. In the area covered by Border Television two programmes are essential—we do not receive B.B.C.2. It is a wide area. The population is large, if the south of Scotland and Cumberland are added together. The possibility of losing Border Television was more than anyone in the area could bear to think of.

I welcome the Order because it will allow the smaller companies to regain the impetus of modernisation and proceed with the introduction of colour and continue the local programmes to which they have always devoted a high proportion of viewing time. I am glad that the Minister did not delay introducing the Order. It is urgent. For the many reasons that my hon. Friends and I have advanced, I hope that the Crder will be agreed to, because it will bring happiness to areas that appreciate their local television stations.

12.13 a.m.

Mr. Hugh Jenkins (Putney)

One would not have thought from listening to the hon. Member for Howden (Mr. Bryan) that we were debating an Order which stems from a proposal introduced by the Tory Party. The hon. Gentleman was very smug about it. What the hon. Gentleman did not make clear was that while we have an absurd situation we are bound to have the sort of situation which exists here. What is wrong is the system which the Tory Party introduced and which places the programme companies in a situation which would try a saint.

The means by which this situation could have been avoided was mentioned by my hon. Friend the Member for Woolwich. East (Mr. Mayhew), but hon. Members opposite would have none of it. They went out of their way to avoid carrying out the recommendations of the Pilkington Committee, which would have done away once and for all with the ludicrous nonsense which we have at the moment and which we shall go on having. We seek by parliamentary action to intervene every now and then, first, to ensure that the operation is not too profitable and then to correct the con- sequences of doing just that. He said that the National Board for Prices and Incomes was to be asked to look at the operations of the programme companies. I wonder what that means.

After the board has looked at them. I take it that it will then come forward with some recommendations. Is the board limited to considering purely financial matters in the narrowest sense, or can it come forward with rather more substantial recommendations, even possibly involving considerable changes in the relationship between the Independent Television Authority and the larger programme companies so that it might be necessary for my right hon. Friend to introduce fresh legislation? Would this be possible? Indeed, is it my right hon. Friend's expectation that something will come out of this P.I.B. recommendation which will make it unnecessary for him to continue considering the introduction of measures which I would have thought he must be somewhat reluctant to introduce? I recognise the limitations which an Order places upon the Minister.

My hon. Friend the Member for Woolwich, East would have preferred the smaller programme companies to receive a larger amount of benefit and the larger companies a smaller amount. I certainly would. Some of the smaller companies are in real difficulty. Several companies have been mentioned, but there are others which have their difficulties. I am sure that Ulster Television has its difficulties; in fact, I am not at all sure that Ulster is not in greater difficulty than some of the other companies which have been mentioned.

The Order provides Ulster Television with relief to the extent of £70,000, but it provides A.T.V. with £750,000—ten times as much for the company that does not need it as is provided for the company which does need it. I should like my right hon. Friend to comment on this, if he is able to catch your eye, Mr. Deputy Speaker. I should like to know whether my right hon. Friend would have preferred not to have done it this way but that he found himself under the necessity of doing so. Is it a fact that he could not have introduced in this Order some of the measures suggested by my hon. Friend the Member for Woolwich, East? Could he have intro- duced a requireement that any relief given under this Order should be spent by the programme companies on programmes?

My hon. Friend said that the companies are extravagant, but they are not extravagant in the amount of money that they spent upon their programmes. Certainly, it seems to be the last thing upon which I.T.A. thinks of spending money. This money, as the Pilkington Committee recommended, should be taken not from the gross advertising revenue, but from the net receipts less the certified programme expenditure. It may be that that cannot be provided under such an Order. If that is so, I hope my right hon. Friend will say so.

I should like to correct my hon. Friend the Member for Woolwich, East on one point. My hon. Friend referred to the levy continually as taxation, which is understandable because the money finishes up in the hands of the Chancellor of the Exchequer. We are inclined to take the view that anything that finishes up there is tax. But the money should not finish up in his hands. It should not be regarded as a tax, because it is a correction of too small a rate being charged for the exclusive right to browse in some pretty lush pastures. Some of the browsing over the years has been pretty rich and ripe, and great benefit has been obtained by people who did not really need the substantial benefit they are acquiring from the relief, particularly as there is no guarantee that the money will be spent where it should be spent, on the programmes.

I believe that the smaller companies did need and do need this relief. They would have been in some difficulty if it had not been provided. I regret, however, that it has been provided in the way in which my right hon. Friend has chosen to provide it. I hope that he will explain to us that he had no alternative but to do it in this way, if I am right in thinking that that is so—being charitable towards him—I hope that he will say that it will be possible, perhaps as a result of the recommendations of the Prices and Incomes Board or for some other reason, such as his own inclination, to look again at the legislation and to try to get it right, because patently it is simply not right now.

12.22 a.m.

Mr. Russell Johnston (Inverness)

I shall seek to emulate the brevity of the hon. Member for Putney (Mr. Hugh Jenkins), who set an example.

Granting the broader references to Pilkington that the hon. Member for Woolwich, East (Mr. Mayhew) made, and admitting, also, the long and honourably consistent record he has, I still felt that to refer to the Order as the most grotesque abuse of public funds he had heard of in 25 years was rather an exaggeration. If it were an accurate description I think that these benches would be packed. In fact, they are not, and here is a voice crying in the wilderness—perhaps not an inappropriate place for the hon. Gentleman to be crying.

We in the Liberal Party welcome the Order and recognise that it represents the fulfilment of a pledge, as the Minister said. We are always happy to see pledges fulfilled, and I did not think that it was necessary for the Minister to produce the editorial from the Financial Times as a prop. It was a very good thing that he fulfilled the pledge.

As several speakers have said, the Order does not solve anything in the long term, though it at least provides the opportunity for certain things to be alleviated in the short term in that, as the hon. Member for Howden (Mr. Bryan) said, certain independent companies have had the real threat of dissolution removed.

The hon. Member for Putney touched on the basic problems more than any other hon. Member. One of them is how exactly we can seek to evaluate independent television, and this problem remains. How do we estimate what the independent companies do or do not need? If there is to be a reference to the Prices and Incomes Board and then, one assumes, some kind of cost-effectiveness evaluation, how do we evaluate such a service in those terms? How do we evaluate a creative industry in public utility terms, to use the words employed by the hon. Member for Howden?

The Charter of the I.T.A. directs it to provide a service. We must not lose sight of that during our discussion of the need to establish a clear indication of financial accountability. I am sure that the hon. Member for Putney would have wished —indeed, he did do so indirectly—to draw attention to Motion No. 106 on the Order Paper, standing in the name of the hon. Member for Billericay (Mr. Moon-man), which calls for a Royal Commission to be set up to consider the communications media as a whole. The hon. Member for Woolwich, East referred to Royal Commissions in general and to Pilkington in particular, commenting that Governments in general are perhaps rather loath sometimes to put Royal Commission reports into effect. But that of itself is not an argument against setting up such a commission in this case. Obviously, in this Order, we are not dealing alone with Independent Television. The whole question of broadcasting is causing concern.

Mr. Hugh Jenkins

I welcome the hon. Gentleman's reference to the possibility of a Royal Commission. Would he agree that a Select Committee of the House might be a good idea?

Mr. Deputy Speaker

Order. I think that both the hon. Member for Inverness (Mr. Russell Johnston) and the hon. Member for Putney (Mr. Hugh Jenkins) are now getting wide of the Order.

Mr. Johnston

It appears that you have precluded me from making a direct response to the question of the hon. Member for Putney, Mr. Deputy Speaker.

It is again worth reminding the House of the meeting last week of the 76 Group, under the chairmanship of my hon. Friend the Member for Cheadle (Dr. Winstanley), which was composed 50 per cent. of people from independent companies. It is not only in the B.B.C., which often gets a greater degree of publicity, that there is turmoil about what the future should be.

In the area I represent, the Order will have the effect of relieving Grampian Television of the obligation to pay the levy. Despite the remarks of the hon. Member for Woolwich, East, it is our experience in the Grampian area that, for a fairly sparsely populated area like the Highlands and the North-East of Scotland—it would be out of order if I referred to the fact that the service is still not as wide as we wish—the importance of having a station concerned with and involved in the interests of the area is very considerable indeed.

The hon. Member for Woolwich, East rightly pointed out that the television companies wield a great deal of power, but I do not think it was quite fair to suggest, as he did gently, that if one speaks up for a particular company one is somehow influenced by the opportunities it presents one. Nor is it really a fair comparison—and this sort of thing is applicable not only to Grampian and Border Television but equally to Scottish Television and some other smaller companies—to pick out 20 minutes in the evening on Southern Television. From my rather remote position in the North of Scotland, I doubt whether Southern Television is particularly distinctive from Thames Television or A.T.V.

Mr. Mayhew

Nevertheless, I wager the hon. Gentleman that, at the peak hour tonight, Grampian Television was showing the Danish "sex fair".

Mr. Johnston

I have not had an opportunity to see what was on. I am not quite sure what the hon. Gentleman would regard as the peak hour, which covers a fair range of time. I would not like to comment on that matter.

Despite the fact that smaller companies show an interest in international matters outwith their local borders, it is nevertheless true that they are capable of the sort of commitment to an area that the B.B.C., for all its regionalisation, is not capable of. The Grampian area for the B.B.C. is a segment of a region, and the B.B.C. is, therefore, not likely to have the same involvement in it. Equally, S.T.V. has been considerably relieved under the Order, and we know, whatever remarks may have been made at one time or another by Lord Thomson in another place, that a series of dramatic programmes, including a dramatic projection of the Scottish Office, had to be postponed, together with several other programmes, on account of the financial crisis.

I go all the way with the hon. Member for Putney. We are likely to decide tonight to relieve the companies of £6 million, and the Minister, therefore, has a clear responsibility to do what he can to ensure that this money is used for maintaining programme standards rather than—as the hon. Member for Woolwich, East suspected—for increasing the profits for the shareholders. As the hon. Member for Woolwich, East has said, there is evidence that if television companies are under financial pressure programmes tend to suffer. While I agree that the Minister has done the right thing, and while I enter the caveats I have made, it is important that the Minister should say what he seeks to do to ensure than the television companies maintain standards in return for the concessions he has given.

12.32 a.m.

Mr. Edwin Brooks (Bebington)

The hon. Member for Inverness (Mr. Russell Johnston) referred to my hon. Friend the Member for Woolwich, East (Mr. Mayhew) as a voice crying in the wilderness. I am not sure whether my hon. Friend feeds on locusts and wild honey, but I am sure that this spartan diet is not the regular fare of independent television companies. Like him, I am astonished at the impression which may have been created in the past few weeks that the Government's help was necessary, and in this particular form, if independent television was to survive. I have listened to the pleas which have been put forward for the smaller companies, and I am sympathetic to the claims of companies which are trying to fulfil a most necessary and valuable regional function in areas where this sort of work should be prosecuted energetically. But the figures to which my hon. Friend the Member for Putney (Mr. Hugh Jenkins) referred bear some repetition and elaboration. They strike at the very basis of the Government's decision.

My right hon. Friend referred to an editorial in the Financial Times, and perhaps I may be forgiven if I quote this newspaper as authoritative. The figures which were given in that newspaper on 18th March showed that Grampian Television, which is one of the companies which is said to be facing difficulties, will have an estimated gain, based on forecasts of 1970 revenue, of a mere £50,000. This compares, for example, with the £700,000 which will go to Granada Television and the magnificent sum of £15,000 which will go to Border Television as a result of the reduction of the levy.

That, as I calculate it, is about one-fiftieth of the amount going to some of the larger companies. Thames Tele- vision, for example, will get £750,000, Harlech £600,000, A.T.V. £750,000. I am never particularly good at mathematics, particularly at this time of the morning, but I calculate that the amount which will go to the three companies specifically mentioned tonight as being in great danger, Border Television, Grampian Television and Ulster Television, will be something like £135,000 and will be little more than 2 per cent. of the total amount of £6 million which we are now making available to the independent television companies.

I regard this as a totally inexplicable justification for what is now being proposed. If there is a case for moneys being made available to these poor, struggling companies—and I mean "poor" literally, not in any derogatory sense—surely a more effective method could have been found. I appreciate that, as my hon. Friend the Member for Putney was explaining to the House earlier, there may be some limitations on the freedom of action available to my right hon. Friend through this Order. I appreciate, too, that there is a scaled relaxation of the levy depending upon the revenue derived from advertising, and this presumably is designed to help the smaller companies with a correspondingly smaller income from advertising.

But when we see figures like those quoted earlier, I feel that the House cannot possibly accept the argument that, to give aid to companies like Border—and I suspect that £15,000 will not make all that much difference—we have to hand out £750,000 to Thames. It is difficult to debate this Order in isolation from the wider issues, but it is surely relevant to ask whether what we are really discussing is aid to the independent companies to finance the massive investment which will clearly be necessary for colour television. Is it designed to help cushion them during the next three or four critical years, when clearly there will not be much hope of gaining any extra income from advertisers on the basis of colour television being available, because the market will be well under the 20 per cent. figure which seems to be regarded as a minimal basis for any increase in advertising? If this is so, the amounts which we are giving to the smaller companies are quite frankly, peanuts—we should not even say "peanuts" in the plural. These sums will hardly enable Border Television, for example, to cope with problems of financing the colour television revolution.

We are facing a much more fundamental problem altogether, but unfortunately we cannot discuss it in detail now. My hon. Friend the Member for Woolwich, East (Mr. Mayhew), although he may have been guilty of some pardonable hyperbole in one or two comments, was quite rightly touching upon it. It has been made clear in a number of comments in authoritative journals that this revenue which the companies are being allowed to receive, which is far better than they might have anticipated a short while ago, will certainly not relieve them of all their problems.

The article I have already quoted by Sheila Black in the Financial Times states that: all in all, the shortage of ready cash is such a problem with most companies that the improvement in the levy will be a relief as far as running costs are concerned, but will not be the remedy most of them need. If this is not the remedy that most of them need, there is some point in the question asked by my hon. Friend the Member for Woolwich, East: before giving out this £6 million, why had we not gained the benefit even of an interim report from the Prices and Incomes Board? There have been precedents for the Board being asked to investigate matters of urgency and to produce interim reports pending any major analysis. That could have been done, for example, last January, when my right hon. Friend's Department issued a Press statement, which at that time was clearly a holding operation. Two months have gone by since then, and we have not had any detailed information given to the House about the financial management of the television companies.

Obviously, we are in difficulty here in saying much about the Order because of the absence of precise information, but one is bound to ask whether companies, which, quite understandably, have the profit motive as their objective as commercial enterprises, should have made massive profits over the years—I should hate to repeat ad nauseam the famous remark of Lord Thomson—and then later on, when they find that the situation has not remained such a bonanza for them, should have some sort of right to go to the Government and say, "Bail us out of our difficulties".

I appreciate that this is an oversimplification. They may argue that the difficulties are, in a sense, created by the framework of taxation policy which the Government impose. But all companies are subject to all sorts of vicissitudes from taxation policy. It does not automatically follow that, the moment a firm runs into difficulties, there should be some sort of reciprocity on the part of the Government to make sure that it does not go to the wall. Are we saying that no television company should be subject to the basic discipline of the market, which is that if it is hopelessly inefficient it goes to the wall? To turn again to the editorial in the Financial Times which my right hon. Friend himself quoted, it was said: The independent television companies have on the whole a poor reputation. In the past they have boasted too much of their profits. Their rates of remuneration at all levels are high in comparison with most other activities, and over-manning is commonplace. I feel that a business enterprise which functions in that way, and is criticised authoritatively here by the Financial Times, should be expected to look to itself for at least part of the remedy for the problems which it now encounters.

Mr. David Steel

Does the hon. Gentleman take that argument to its logical conclusion? In a part of the country like the Borders, there is a small company, and there was no competition for the franchise the last time it came up. If it went to the wall, the simple result would be that that part of the country would be deprived of a television service altogether as a rival to the B.B.C. Surely, that is not the hon. Gentleman's argument.

Mr. Brooks

No, and I think that the hon. Gentleman is right to make that point. But in that case the better argument is to say that in certain parts of the country—there is an analogy here with the provision of railway services in remote areas—there must be a specific and explicit grant given because the commercial circumstances there are such that it will never be possible to make a profit by orthodox accounting methods. In those cases, I should have no objection—indeed, the very opposite—to making a specific grant available.

Mr. Speaker

Order. The hon. Gentleman is usually careful to follow the rules of order. He knows that he cannot ask that the Order be amended.

Mr. Brooks

I respect your rebuke, Mr. Speaker. I was led astray by the Liberal Party—not for the first time. But I am sure that the hon. Gentleman takes my point.

Perhaps the epitaph on this Order—I hesitate to quote a third time—is to be found in the article by Sheila Black in the Financial Times: I telephoned one regional contractor yesterday morning for an estimate of what the levy cut means to his company. 'I will ring you back this afternoon', he said. 'Everyone is at a champagne party right now'.

12.45 a.m.

Mr. Stonehouse

With permission, I will reply briefly to the points made in the debate.

My hon. Friend the Member for Bebington (Mr. Brooks) put his finger on one of the key points in the debate when he said that we were bound by the 1964 Act. I would, therefore, be out of order if I attempted to comment on some of the interesting suggestions which have been made about possible alternative ways of dealing with the position of I.T.V.

I was struck by the debating ingenuity of my hon. Friend the Member for Putney (Mr. Hugh Jenkins), who managed, in an interogatory form, to make a number of points, though he will be aware that the answer was given in his speech on 16th June last when, as reported at column 182 of HANSARD, he said that we were bound by the 1964 Act. That is the position.

Tonight we can only vary the scales. We cannot change the system. We are varying the scales because we are satisfied, after a close examination of, and after having had the advantage of a detailed accountant's report describing the situation in, the firms, that a reduction is required.

It is not only a question of the smaller firms. Border, Grampian, Ulster and Westward will be relieved of any obligation, and the total amount of their relief will be about £270,000. But among the next largest companies, Scottish, Tyne-Tees and Harlech were not having the easiest of times; and it was necessary to give some relief to them as well.

I do not accept that all the larger companies were having such an easy time as my hon. Friend the Member for Woolwich, East (Mr. Mayhew) suggested. Although I appreciate his sincerity in discussing this subject, I believe that he exaggerated even his own case. He said that he was astounded that the relief was wholly unconditional. I assure him that it is not.

We expect the companies, as we expect I.T.A., to keep to the terms of the franchise, which is to continue to provide programmes of quality and to serve the regional requirements so that the districts of England, Wales, Scotland and Northern Ireland can receive a service on the lines that have been described in the debate. If we had continued the scales adopted last year, some of the companies would have been unable to continue to provide that sort of service. We felt that it was important to introduce this relief soon.

We shall, of course, await the results of the P.I.B. investigation and report. We do not know exactly when it will report. However, I wish to make it clear that we are not asking the P.I.B. to investigate the whole I.T.V. system. It will not be concerned with the relationship between the companies and I.T.A. The terms have not been finally decided because there are processes of consultation through which my right hon. Friend and I must go before we decide what they should be.

I believe that the hon. Member for Howden (Mr. Bryan) was preening himself a little too much when he suggested that everything he had said in the 16th June debate had been proven correct. Perhaps there was one correct statement when he said, as reported in column 180 of HANSARD, that the Financial Times could be regarded as a factual newspaper. I am sure, in view of that, that he would approve of the quotation from that newspaper which I made earlier. I read the hon. Gentleman's speech again and again, and I asked my hon. Friend the Member for Ealing, North (Mr. Molloy) to read it in case I had missed something in it. However, there was no reference to advertising income at all. The hon. Gentleman had not anticipated that advertising income would drop. Certainly he did not anticipate that it would drop as disastrously as it did for these firms in the past year. That is the new factor, more than any other, which has persuaded us that it would be reasonable and responsible to ask the House to agree to the reduction that I am proposing.

In addition there has been a considerable increase in costs, and colour conversion is costing these firms more than was at one time anticipated. We are expecting the programme standards to be maintained, if not improved. The companies have a duty and a responsibility put on them, and I have every confidence that they will meet that responsibility.

I am grateful to the House for the way that this Order has been received. I now ask the House to approve it.

Mr. Mayhew

Before my right hon. Friend sits down. When imposing this levy, the Government gave an assurance that if things went wrong for the companies they would look at the matter again. Will my right hon. Friend now give the House an assurance that if, after relaxing the levy, things go unexpectedly right for the companies, he will reconsider the matter in the interests of the taxpayer?

Mr. Stonehouse

I certainly cannot give an assurance that we will do any particular thing in future. But we will study with great interest the report presented by the National Board for Prices and Incomes and judge the situation in future in the light of developments that may ensue. That includes advertising income and the projection of costs. I cannot. however, commit future Ministers to what they should do about I.T.V. It may be out of order, but I must indicate that we are now considering the reducing period up to 1976 when the whole of broadcasting will be subject to review.

Mr. Speaker

Does the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) wish to continue the debate?

Mr. David Steel

With your permission, Mr. Speaker.

Mr. Speaker

It is usual, when the Minister has completed his winding up, for the debate to end.

12.52 a.m.

Mr. David Steel

I will not detain the House long. I should like to mention two points about Scottish and Border Television which have featured largely in the debate.

The hon. Member for Woolwich, East (Mr. Mayhew) and others, who remember only too well the remarks about the licence to print money, have not brought themselves up to date with what has been happening in Scottish Television since that observation was made. It does not seem to be clear to the right hon. Gentleman and others that when the franchise was given again to Scottish Television conditions were attached. When Lord Thomson redistributed the shareholding and left the direct control of Scottish Television, he took a good deal of the capital with him. It has therefore been difficult for Scottish Television to undertaken some of the work that it has undertaken, and I believe that there has been a threat—I do not say that it has yet happened—of a serious decline in programmes. But since then Scottish Television, greatly to its credit, has opened a colour television studio in Edinburgh. For many years the B.B.C. was remiss in not having a television studio in Edinburgh. But S.T.V. has led the way and the B.B.C. has followed suit. This is greatly to be commended.

Concerning Border Television, many parts of the area which it serves do not receive B.B.C.2. If Border Television were unable to continue to provide the I.T.V. service many viewers would be limited to one channel only—B.B.C.1. It is only right that this step should have been taken to relieve companies like Border and Scottish.

Those of us who support what the Government have decided to do must not be taken as supporting the framework of the 1964 Act or of prejudging the future of television. Those who argue against what the Minister has decided to do must bear in mind that, if the situation had been allowed to deteriorate further, there would have been a grave temptation in the minds of the directors of some of the independent television companies to make use of the remaining years of their franchise for the benefit of the shareholders of their companies instead of the viewing public. The people who would have suffered had the present rates of levy continued would not have been the shareholders of the company but the viewing public and the quality of the programmes. That is the main reason that the Order should be approved.

Resolved, That the Television Act 1964 (Additional Payments) Order 1970, a draft of which was laid before this House on 17th March, be approved.