Television Programme Contractors (Payments) (Hansard, 20 October 1982)

§ The Minister of State, Home Office (Mr. Timothy Raison)
I beg to move, That the draft Broadcasting (Television Programme Contractors' Additional Payments) Order 1982, which was laid before this House on 18th October, be approved. This draft order is intended to increase the ITV levy free slice and thus to reduce the levy payments of the ITV companies in order to compensate them for the increased costs which they are meeting in full of the Welsh fourth channel. It comes on the air on 1 November. The ITV levy is the name commonly given to the additional payments paid by the ITV companies to the IBA under section 32 of the Broadcasting Act 1981, and then by the IBA into the Consolidated Fund.
The levy is, in effect, a special tax paid by the ITV companies on their profits, in addition to corporation tax. It is set at 66.7 per cent. of their profits in excess of a threshold known as the "free slice". This is currently £250,000 or 2 per cent. of advertising receipts, whichever is the greater.
Hon. Members will recall that during the passage of the Broadcasting Act 1980 the Government proposed to concentrate all Welsh language television programmes on a single channel. That single channel solution was subsequently approved by Parliament. The Broadcasting Act 1981 accordingly made special arrangements for the fourth channel in Wales and for the establishment of the Welsh Fourth Channel Authority. It was always recognised that these arrangements would be more expensive for the ITV companies, which finance both the fourth channel and the Welsh fourth channel through subscriptions paid to the Independent Broadcasting Authority. The Government agreed that they should compensate the ITV companies for the additional costs of the Welsh fourth channel by means of an adjustment to the ITV levy.
The additional costs of the single channel solution were estimated to be £10 million in aggregate. After consultation with the IBA and the Treasury, my right hon. Friend told the House in July of last year that he proposed to lay an order during the next session which should have the effect of increasing the ITV levy free slice to £650,000 or 2.8 per cent. of advertising revenue, whichever is the greater, with effect from 1 April 1982.
That is the draft order before the House today. There has been delay since it was discovered that the proposed order, which was intended to reduce the ITV companies' levy payments, would have had the perverse effect of increasing the levy liability of certain of the companies in the year of the change, because their accounting periods would be split into two as a result of the order. In the less profitable summer months they might not earn enough to benefit from the levy relief, and in the winter months they might earn super profits on which they would have to pay extra levy. Amending legislation was therefore introduced in section 144 of the Finance Act 1982, which made provision for the first order made after the passing of the Act to take effect from 1 April 1982. Hon. Members will note that this is reflected in the order now before the House.
476 I apologise to the House for the fact that inevitably this is a complicated and technical subject, but I hope that I have provided sufficient explanation to commend the draft order to the House.

§ Dr. Shirley Summerskill (Halifax)
Perhaps the Minister of State will answer a few questions about the order. He said that the purpose of the order was to provide some £20 million towards the costs of the Welsh fourth channel service. That sum was first announced by the Home Secretary as long as 15 months ago, in July of last year. If it was £20 million then, can the right hon. Gentleman assure us that it is still that sum that is needed? Will there not have been an increase in the estimate? Has a more recent estimate been made? Is it not possible that by the end of the process, in March of next year, the amount will have increased even more? It will then have been two years since the Home Secretary first made his estimate of £20 million.
The process of setting up this channel is a financial gamble, because nobody knows how many people will watch it or what its real cost will be. Is the Minister confident that after March 1983 the Welsh channel 4 will be able to exist wholly on its subscription income? What will be the future financial arrangements?
Will the Minister give an assurance that this measure will not adversely affect the quality, range and standard of the programmes on the existing ITV channel? The finances of those programmes are connected with the proposal in the order.
There is the further point of the payments to programme contractors. So that the Home Secretary can discharge the duty set out in the IBA Act 1974, a report is made to him by the IBA on each television contractor's income, expenditure and profits, midway through the contractor's accounting period. During the debate in Committee on the Broadcasting Bill I asked the Minister's predecessor why the IBA does not reveal detailed figures of the average costs of different types of programme. The BBC releases these figures. Should not the IBA—certainly in view of the order—give detailed information in the same way as the BBC?
When I asked that question in Committee, I was told by the then Minister that he would look into the matter, but I have not heard any more. Is this now being done? If not, will the Minister now look into the matter? It seems extraordinary that we are examining the finances connected with ITV additional payments by programme contractors, yet we do not have detailed figures of the average cost of the programmes.
It is important that the ITV companies should be encouraged to be cost-conscious, and the Home Secretary expressed that view on 18 February during the debate on the Broadcasting Bill 1980. We can find out if the companies are cost-conscious only if we are provided with detailed information about their expenditure, such as the BBC provides.

§ Mr. Tim Brinton (Gravesend)
I am very interested in the last question asked by the hon. Lady, because it seems to me that the ITV companies, by their nature, are cost-conscious. They have one thing that the BBC does not have, and that is a wish at the end of the day to make a profit and survive. Does one not assume that they must be cost-conscious?

§ Dr. Summerskill
That is one interpretation of cost-consciousness. Why do they not give details of the cost of the different types of programme that they put out, in the same way as the BBC does, so that we can ensure that they are cost conscious and can be seen so to be? Perhaps the hon. Member for Gravesend (Mr. Brinton) can give me the answer if the Minister cannot. The House, the Chancellor of the Exchequer and the Home Secretary should have those figures if we are to debate this sort of order.
During the debate on 18 February the Home Secretary said that he and the Chancellor were reviewing the operation of the ITV levy. Has that review been completed? If not, when does the Minister expect it to be completed? The Oppositiion have been pressing for such a review for some time.

§ Mr. Raison
I shall try to answer the points put perfectly fairly by the hon. Member for Halifax (Dr. Summerskill), although one or two of her later points go a little wide of the order. The budget of the Welsh fourth channel has not changed and is £20 million from start-up until the end of March 1983. We believe that that will suffice. The hon. Lady asked about the finances after 1983. Nobody knows what the revenues will be, because it is impossible to predict the advertising revenue.
The Welsh fourth channel is not to be financed direct by advertising revenue. As the hon. Lady knows, the system for financing is different from that for ITV as we have known it. The money will come from the ITV companies, but those companies will be reimbursed by the levy reduction, which is what the order is about. Nobody believes that the Welsh channel will be an enormous revenue generator. It will impose costs that will impose 478 costs that will have to be borne by a combination of a reduction in the levy and the subscriptions from the ITV companies. The hon. Lady asked why the IBA does not reveal detailed figures about programmes. I understand that for the first time this year the IBA gave figures for the average cost of programmes, in response to the request by the hon. Member for Halifax during the debates on the Broadcasting Bill 1980. There is a new section at the end of the finance chapter of the IBA's annual report, which was laid before Parliament today. The hon. Lady can go out into the night and say that she has achieved something in the cause of more and better information.
The hon. Lady then asked about the review of the ITV levy. The Home Secretary announced in July of last year that he had conducted a review of the levy with the Chancellor of the Exchequer, but that they had come to the conclusion that a change in the structure of the levy would not be desirable.
As the House knows, the ITV system is experiencing major changes with the new franchises in January, the introduction next month of the fourth channel and the Welsh fourth channel and breakfast television next year. The effect of the change on the basis of the levy will be difficult to predict with precision at a time of such major structural changes, but we shall consider again the basis of the levy, in consultation with the IBA, when those changes have been absorbed into the system in one or two years. I hope that the hon. Lady believes that I have answered her points and that the House will approve the order.