§ 6.18 p.m.
§ LORD DENHAM
My Lords, I beg to move that the Television Act 1964 (Additional Payments) Order 1971, a draft of which was laid before this House on February 16, be approved. I commend this Order to your Lordships because it is needed to make it possible for I.T.V. to continue to provide its service on a satisfactory financial footing. The effect of this Order will be to reduce the amount payable by the independent television companies by half so that, on current forecasts that the advertising revenues of the companies this year will be under £94 million, the effect in a full year would be to reduce the amount payable from £20 million to £10 million. My right honourable friend the Minister of Posts and Telecommunications hopes to make the Order come into effect as soon as possible.
My right honourable friend made it plain that, in conjunction with the Authority, he will have another look at the way the levy is charged. In 1963 Parliament decided that the levy should be charged on the advertising receipts of the companies, with no deduction for the expenditures of the companies, although expenditure was of course reckoned with in fixing the sliding scale provided for in the original Act and in the subsequent changes in it. In 1963, alternatives which would have related the levy more directly to profitability were rejected; but now that the financial circumstances of I.T.V. have changed so radically, we are ready to re-examine them. There is, of course, no commitment to introducing a new 1224 system. We will introduce a better system if we can find one, but whether we can find one remains to be seen. However, we are going to look for one and decide by the middle of 1972.
My Lords, meanwhile we believe that the reduction which this Order would prescribe is necessary to make sure that I.T.V. continues to provide a first-class public service. The size of the reduction has been arrived at after close and thorough study of the prospective costs of the I.T.V. companies and their prospective revenues. There was an examination by the National Board for Prices and Incomes, which reported in October, 1970. The reference to the National Board for Prices and Incomes was announced by the previous Government in March, 1970. The terms of the reference did not allow the Board to report on the level of the levy payments, but the report proved a valuable study of the financial future of the industry. In addition to the Board's examination, the financial future of the industry has been kept under review by the Independent Television Authority, the public authority charged with oversight of the public service provided by I.T.V. In deciding what to allow, the Government had to take into account the I.T.A.'s need to increase their own rental charges in order not to fall behind with their plans for developing the network of 625-line U.H.F. stations, a development which is being carried out as an integrated exercise by the I.T.A. and B.B.C. jointly, and which brings viewers with colour sets the chance to see I.T.V. and B.B.C.1 in colour and the much greater number of viewers who are not yet changing to colour the chance to use single-standard sets with their greater technical simplicity and better standard of picture.
Next, the Government had to take into account the need to see that the industry, at a time of rising costs and stationary or declining revenue, could retain a sound financial structure yielding sufficient income to provide a first-class programme service. It is, I understand, the I.T.A.'s view that the standard of programmes in I.T.V. has not yet been affected, but that the continued atmosphere of financial stringency would, if steps had not been taken to correct it, have been bound to lead to a situation in which not enough risks were taken in seeking improvements 1225 in the programmes. In the new situation, a significant proportion of the money made free will be needed to make this possible, although the I.T.A. cannot say, and neither can I, what amount of money will be needed to do so. Taking all these factors into account, the Government concluded that the reduction provided for could be expected to last until July, 1972, the end of the fourth year of the present I.T.A. contracts.
The distribution of the relief between the different programme companies is something that I might mention here. The smallest companies in I.T.V., which pay no levy, have been as much troubled, and in some cases more troubled, by the difficult financial climate which has affected the whole industry. Directly, the reduction in the levy does nothing to help them. But, in distributing among its contractors the burden of the additional rentals which it is requiring, the Authority has provided for the smallest companies to pay less than they were paying before.
My Lords, Her Majesty's Government are satisfied that the reduction proposed in this draft Order will be fully sufficient at least until the middle of 1972. If we can find a better system to operate from then, we will. I beg to move.
§ 6.25 p.m.
§ BARONESS LLEWELYN-DAVIES OF HASTOE
My Lords, the House gave certainly a qualified approval to the noble Lord's original Statement that this Order concerning the television levy would be laid before the House. I think it is fair to say that there was a general feeling of relief that the Government had "tempered the wind to the shorn lamb"—even if it was "a lame duck". We still welcome the Order: but there are a few uncertainties left, and I gave the noble Lord notice of one or two questions that I wanted to ask. One of them he has already answered. He referred to the increase in rental which the Authority is going to make to the individual corn-panics. Of course, £10 million is a very substantial sum in reduction of the levy, but I understand that the rental will be 1226 something like £3½ million. This reduces the £10 million by over one-third.
On this side of the House, we are much concerned at the way in which the levy will be distributed, so that the larger companies do not get the lion's share and the smaller companies are neglected. I understand from what the noble Lord has said that he does not really know how the reduction will be distributed between the companies, but that the rental will be made much easier for the smaller companies so that in that way they will benefit. I hope that I have understood this correctly.
§ LORD DENHAM
My Lords, may I intervene just to clear up that point? The reduction is distributed between the companies on the basis of their advertising revenue; but the smaller companies will benefit from a redistribution of the rental charges. These ate two separate points.
§ BARONESS LLEWELYN-DAVIES OF HASTOE
My Lords, I thank the noble Lord for that explanation. It removes some, at any rate, of our anxieties. That part of the Statement most welcome to the House was, I think, the reference to the fact that the reduction in the levy would be used to improve the quality of the programmes. This is what the House is particularly interested in. Of course, it is a very complicated question, indeed it is a kind of indirect question. It is quite true that the stronger financially a company is, the more money it can afford to spend on good quality programmes, on minority programmes and on news items. All these things are needed to round off fully the presentation of a company's work. The poorer a company is, the more it has to make do with poor material, repeat material and so forth.
But the commercial companies have to consider their shareholders. We are in the middle of inflation, and I think we are entitled to ask the noble Lord if he can give us a complete assurance that this large sum of money will be used to improve the quality of the programmes. So far as the whole question of the levy itself is concerned, I think it is agreed that it is not at all a satisfactory system. There are all sorts of different ways which might be used. One view is that the levy should not be on advertising revenue 1227 at all, but on profits; another is that there might be longer periods for contracts so that firms would not have to recover their enormous capital costs by requiring enormous profits at the beginning. The Pilkington Commission, as the House will remember, recommended that the Authority should be the recipient of the advertising revenue and that the companies should be left to get on with the programmes. To me, that is very much the most attractive theory; but there are many others.
We were very glad to hear that the Government are going to consider the whole system. We should like a reassurance that it will be a comprehensive review. We agree that some relief was necessary; but this particular Order is really tinkering with the whole problem. The television industry must be put on a sound financial basis; but this Order will not go very far towards doing that. It will not have escaped the notice of the House that whereas the levy has been reduced for Independent Television, the licensing charges for B.B.C. have been increased. This year the public will be contributing something like £26 million extra to broadcasting in general, either directly by fees or through the Exchequer. The public take an extremely lively interest in television and broadcasting and in where their money goes—and rightly so.
As noble Lords will have noticed, there has been a great deal in the Press for the last few weeks about London Weekend Television. I was going to talk quite a lot about that, but I was glad to see on the tape that the Television Authority has decided that the Chairman of the Board should submit plans in detail, and that the Authority will suspend its judgment in the meantime. I think that this is indeed a good thing.
Noble Lords will know that London Weekend Television is now quite different, both in its sponsors and also in its programmes, from the company which was awarded the franchise in 1968; and that it was awarded that franchise in competition with other major companies. Undoubtedly public opinion feels that this should be looked at, and we are very glad that the Authority itself has made this move. I think there was doubt about whether that company would 1228 have got the franchise in 1968 had it been known then that a newspaper proprietor was in such direct control of programmes and production personnel. Of course, my Lords, we do not want the Minister of Posts and Telecommunications to dictate to the Authority in any way, but we should like an assurance from the noble Lord that this kind of thing will be closely watched, and that Parliament will be able to discuss such matters as and when they arise.
My Lords, this industry is extremely complicated and important. It is becoming basic to our national life. Technically, it has almost no limits. We ought now to be considering satellite broadcasting and cassette television, which may revolutionise television as we know it in the fairly early future. We ought to be considering piped television; it is already with us. Now you can get television piped into your house just as you get the telephone and electricity. I think it a matter for consideration whether, in the remoter parts of the country, like Wales and Cornwall, we should have piped television; not with competition between Independent Television and the B.B.C., but with the two Authorities working together, so as to cut the cost—though I am sure that that would be unpopular with both Authorities.
I think the Government need to consider all these questions now. They were extremely ill-advised to abolish with such haste the Commission of Inquiry, proposed by the previous Administration. Even if the Government did not like the form that we proposed, I am sure that by now they must realise that some kind of long-term review is necessary. We are looking forward to the White Paper on commercial radio. The postponement of its publication is an obvious indication that the matter has proved more difficult than the Government thought it was when they looked at it from the Opposition Benches.
My Lords, this is an important, indeed a vital, industry. Even in the United States, the richest country in the world, television companies are in severe financial difficulties. Technically and financially, this is part of a world problem, and while noble Lords on this side of the House do not dissent from this Order they would like some assurance from the noble Lord that the Government are 1229 prepared to consider the whole future of broadcasting, and will not just tinker with it in a piecemeal fashion.
§ 6.34 p.m.
§ BARONESS GAITSKELL
My Lords, I should like to add a very few words about this Order; but first I must declare an interest, as I am a member of the Board of Yorkshire Television. I welcome this Order and the reduction in the levy because in the present economic climate it has been very hard for such a company as Yorkshire Television to give investors a reasonable return on capital and to maintain the quality of its programmes. The public still exaggerates the profits that it thinks that television companies can make. The truth is that never again will companies be able to mint money or, to use that famous phrase, "print money". Perhaps that is a good thing.
Independent Television is now a risk business and not more privileged than other industries in the entertainment and communication business. I support my noble friend Lady Llewelyn-Davies of Hastoe who asked for a review of the finances of this industry. I think the reference to that was the most heartening thing in the speech of the Minister in the other place. It has become very urgent because ultimately the levy has not proved very satisfactory. Sometimes it helped only the richer companies; recently it did not prove helpful to London Weekend in the plight in which that company found itself. My noble friend Lady Burton of Coventry, who spoke from her great experience in I.T.V., suggested, in a most impressive speech on February 4, that the levy should go and that a tax on profit should be put in its place. Other people have suggested that a royalty should be charged for the use of the monopoly of the air.
I must refer again for a moment to London Weekend Television and the takeover by Mr. Richard Murdoch, though I am glad to see that a change has been made by the Authority. It again raises the questiton of financing the independent companies. The Independent Television Authority subjected those who applied for a new contract in 1967 to a thorough examination—a jolly severe viva—asking 1230 why they deserved to get a contract. It did not ask merely for financial wizards; had they been required, I do not see why all boards of Independent Television companies should not be composed of advertisers themselves, by magnates from among the soap powder producers. As my noble friend Lady Burton suggested, I believe that a public corporation and a commercial one should both produce good programmes of high quality and give alternative programmes. Independent Television is lagging behind the B B.C. in the provision of ambitious programmes. I hope that the reduction in the levy will help in the production of better programmes by Independent Television, as well as help to put its finances on a sounder footing.
§ 6.37 p.m.
§ LORD DENHAM
My Lords, both the noble Baroness, Lady Llewelyn-Davies of Hastoe, and also the noble Baroness, Lady Gaitskell, received this Order kindly, but had one or two points on which they wished to comment. I will endeavour to deal very shortly with one or two of the matters they raised. Lady Llewelyn-Davies had a worry, as have we all, that the quality of I.T.V. programmes should be maintained and improved. The noble Baroness felt that possibly my right honourable friend had not done his sums quite as accurately as he might have done and that £10 million, minus £3½ million rental, might leave little more than was needed to increase the quality of the programmes. I can assure the noble Baroness that my right honourable friend has gone into this matter very throughly indeed and that the figure was arrived at after taking all the considerations into account.
I would remind the noble Baroness that under the Television Act the Independent Television Authority has a duty to ensure that the quality of I.T.V. programmes is maintained at a high standard. Section 5 of the Act requires that all the programme schedules of contractors are approved in advance by the Authority; and it has power to direct that a contractor shall include or exclude a particular item or category of items. There is a sanction, in extreme eases, that the Authority may put the contractor out of business by terminating his contract.
§ BARONESS LLEWELYN-DAVIES OF HASTOE
My Lords, if I may interrupt the noble Lord, may I say that we are therefore particularly glad about the action taken by the Authority regarding London Weekend Television, and I welcome what he has said.
§ LORD DENHAM
My Lords, I am glad to hear that from the noble Baroness; it is the second point that I was going to make. I think that both noble Baronesses were happy with the announcement by the I.T.A. as it has appeared in the evening papers. I do not think I need to go into that further.
The noble Baroness, Lady Llewelyn-Davies, expressed a little unhappiness about the ending of the idea for the Annan Committee. I would remind her that my Tight honourable friend has undertaken to go into the whole question as to whether some form of inquiry on the future of broadcasting and all that it entails is necessary, and he is keeping a close watch on this point.
The noble Baroness, Lady Gaitskell, wondered whether a more equitable method of calculating the levy could be arrived at. This is a point that has always been put forward. It is thought to be a little unfair sometimes to base it on the advertising revenue, even though the way the levy is calculated takes into account what is expected to be the relationship between the advertising revenue and the expenses that have to come out of that revenue. My right honourable friend has undertaken to look closely into this point, and on this and other points he will of course take into account what has been said by the two noble Baronesses in the House to-night.
The other worry on this is that possibly the smaller companies do not get quite such a good deal. As I say, the Authority is going to help them out, even though they do not get any relief in respect of the levy, which they do not pay, by rearranging the rents that they pay. Perhaps I may give a few figures. The Independent Television Authority is reducing rentals for three companies: that of Westward is being reduced by £25,000; of Ulster by £101,000, and of Grampian by £54,000. None of these companies pays any levy. The reduction in the levy will however make it possible for improved programmes 1232 to be done by the major networks. As the charge of the network programmes is based upon the advertising, the smaller companies will get these network programmes cheaper, and so they will gain in this way. I am grateful to the two noble Baronesses who have spoken for their acceptance of this Order.