§ 6.58 p.m.
§ LORD BESWICK
My Lords, I beg to move that the Television Act 1964 (Additional Payments) Order 1970, a draft of which was laid before this House on March 17, be approved.
The Television Act 1963 (and the Consolidating Act of 1964) introduced a new system of securing for the public purse a share in the income which independent television programme contractors enjoy from the right to benefit from an asset at public disposal; namely, the contracts granted by the Independent Television Authority. The additional rental payments which the contractors are to make to the Authority under this new system are paid to the Authority, who are required in turn to pay into the Consolidated Fund. The Act provided a scale of rates at which this so-called levy was payable. The rate payable is increased according to the amount of a contractor's advertising receipts.
Under the Act, the Postmaster General, now the Minister of Posts and Telecommunications, was empowered to change the scale of the levy by Statutory Instrument, made with the approval of the Treasury, and after consultation with the Authority; any such Instrument having first been laid in draft and approved by a Resolution of each House of Parliament. In June, 1969, my right honourable friend made an Order designed on 229 estimates then current to have the effect of increasing the yield of the levy by £3 million in a full year. The present draft Order would introduce a new scale which on present estimates will so reduce the yield by £6 million in a full year. The present Act runs until 1976. This is not, I suggest, the time to debate that Act. The principle that there should be a levy, chargeable upon the contractors' income has been accepted by both sides of Parliament.
The new scale set out in the draft Order has been decided by my right honourable friend to meet a changed situation. At the time of the increase made in the 1969 Order, the profits before tax for the three years ending 1967–68, taking The companies as a whole, had been running at well over 40 per cent. on capital employed. However, in the debate in another place on the 1969 Order my right honourable friend the Postmaster General gave a pledge, which my noble friend the Lord Privy Seal repeated in this House when your Lordships debated the Order on June 24. The pledge was that if the worst fears of the independent television contractors, as expressed to us, were realised, we should be ready to consider making a further Order reducing the impact of the charge. The contractors had forecast to my right honourable friend that during the current contract year their profits would decline sharply as a result of rising costs.
The turn of events led the Independent Television Authority to represent to my right honourable friend at the end of January of this year that there should be a substantial reduction in the amount of the levy. My right honourable friend naturally went into the Authority's, case fully with the noble Lord, Lord Aylestone, and his colleagues on the Authority. His conclusion was that not only were the companies faced with steeply increasing costs, but also that their advertising receipts were far less than anyone had been able to foresee. From £101.5 million in the twelve months ending with April, 1969, the total advertising receipts now look like falling to £93 million in the current contract year ending on July 29, 1970. Some of the smaller companies had found themselves doing even worse than that. It would not be right for me to give confidential figures, but the particular difficulties of Scottish Television, 230 one of the smallest of the regional companies, have become well known. The problem was not unique to these companies and, in varying degrees, was being experienced by the industry across the board. Her Majesty's Government there-fore decided upon the reduction which my right honourable friend announced on March 16, less than two months after receiving the Authority's case.
This conclusion does not of course mean that the independent television com-panies are relieved in future of the need to meet rising costs so far as possible by improved efficiency in the conduct of their operations. I believe that the industry will benefit greatly from the reference which the First Secretary of State and the Minister made at the end of last month of the costs and revenues of the companies to the National Board for Prices and Incomes. The aim of the reference to the N.B.P.I. is to obtain the Board's advice on the economy and efficiency with which the operations of the companies are conducted. There have been substantial changes in patterns of costs and revenues. The Government therefore consider that examination by the N.B.P.I. would throw valuable light on the policies and practice of an indutry which is subject to highly emotional judgments.
The new scale in the Order has been agreed between the Government and the Authority as the most appropriate way of distributing the reduction of £6 million. The four smallest companies—Border Television, Grampian Television, West-ward Television, and Ulster Television— will, as their advertising receipts do not exceed £2 million, no longer have to pay the levy at all. This is of course the biggest reduction those companies can be given. Medium-sized companies will, if their income reaches £9 million, pay nearly £600,000 less. The largest companies, if their receipts reached £16 million, will pay nearly £800,000 less. The amount of the relief given to the larger companies is of course greater than that given to the smaller companies, but in proportion to their commitments the amount of capital they need to employ to fulfil their contract obligations, and the amount of money they need to spend on producing programmes, is far smaller. The Government have shown a timely response to the problems presented to 231 them and have acted much sooner than some thought possible. I beg to move.
§ 7.6 p.m.
THE EARL OF BESSBOROUGH
My Lords, we must thank the noble Lord, Lord Beswick, for explaining this Order to us this evening. I made the views of those on this side of the House regarding the levy abundantly clear in our last debate on broadcasting, which took place after the increase in the levy announced by the Chancellor of the Exchequer in April last year. The increase then amounted to approximately £3 million, and the decrease in the levy announced by the Minister on March 16 this year was £6 million. So in fact the real reduction, the net reduction, I think I am right in saying, is only one of about £3 million. It is perfectly true that the regional companies benefit proportionately more than the major companies, but the relief was clearly necessary to save some of the smaller companies from extinction. It does mean, however, that the major companies, which provide the basic network on which the regional companies depend, have received only marginal relief. At the same time there has been, as I think the noble Lord knows, a drop in the overall annual expenditure on all types of advertising, including the revenue of Independent Television, and this certainly exacerbates the situation.
We should also remember that the total cost to Independent Television of con-version to colour is likely to be not less that £25 million, and that the annual cost of servicing this capital sum is there-fore approximately £2½ million. I gather that the cost of actual working in colour has not yet been fully determined but that it has been calculated to be approximately £5 million per annum, plus £4 million for depreciation All the costs within 232 Independent Television have been rising steadily. The costs of running Independent Television News, for example, have mounted by £1.1 million in three years.
While I think that we on this side of the House should welcome this interim relief, it seems to me that if the industry is to prosper fundamental changes will be necessary, and that for this levy on turn-over there should be substituted an Independent Television profits tax. I hear from all sides how grave the situation is in I.T.V., and my own view is that the position of the industry is now so very different from what it was when the levy was first introduced that the levy should now be abolished altogether, and also, in my view, a new system of two competitive television networks introduced. However, it would perhaps be ungracious of me not to say that so far as it goes we do give a moderate welcome to this Order.
§ On Question, Motion agreed to.