§ 4 p.m.
§ Lord Elton rose to move, That the draft order laid before the House on 14th October be approved.
§ The noble Lord said: My Lords, the order was considered by the Joint Committee on Statutory Instruments on 19th October and they had no comments. 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 subscriptions they will be paying to the IBA in order to meet their share of the costs of the Welsh fourth channel.
§ Noble Lords 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, and that 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 therefore agreed that they should compensate the ITV companies for the additonal 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 honourable friend announced 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—that is, the amount of their profits on which ITV contractors pay no levy—from £250.000, or 2 per cent. of advertising revenue, to £650,000, or 2.8 per cent. of advertising revenue, whichever is the greater, with effect from 1st April 1982.
§ That is the draft order before your Lordships' 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 as a result of the order. 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 1st April 1982; and noble Lords will note that this is reflected in the order now before the House. I apologise for the fact that this is inevitably a rather complicated and technical subject, but I hope I have provided a sufficient explanation to commend the draft order to your Lordships' House. I beg to move.
§ Moved, That the draft order laid before the House on 14th October be approved.—(Lord Elton.)
§ Lord Ponsonby of Shulbrede
My Lords, I thank the Minister for explaining the details of the order. We are glad to know that it has been approved by the Joint Committee on Statutory Instruments. We are also glad 241 to know that the order will enable there to be sufficient financial support for the Welsh language channel. The figures in the order are, in a sense, slightly complicated because, on the one hand, one has the increase in the amount of the free slice from £250,000 to £650,000 before the payments start, but, on the other, those additional payments—the amount of the levy payments—are increased from 2 to 2.8 per cent.
Although presumably most contractors will, as the noble Lord, Lord Elton, said, have a decrease in the amount of levy payment which they make—because of the increase in the size of the free slice—there must be a point at which they would be making an increased payment. Perhaps the Minister could say to what point advertising receipts would have to increase for a particular contractor to have to pay an increase in the amount of his levy payments. With those words, we welcome the order and the purpose for which it was made.
My Lords, I had intended to preface my brief remarks by thanking the noble Lord, Lord Elton, for explaining the order so clearly. Unhappily, I was prevented from being here to hear the explanation, but I am assured it was very clear and I rise to say that we on these Benches welcome the order in so far as it will be of help and assistance to the independent television contractors and other broadcasters at a time of very great difficulty. Looking at the order and the legislation on which it is based, it seems that there is an element of assistance here and a recognition of the special problems they face.
There is a tendency at present for us to assume that independent broadcasting is free—that somehow it falls from the sky and does not have to be paid for—whereas the amount of advertising income available is necessarily limited. As we now diversify into a fourth channel and breakfast television. I can see a point when the independent contractors will be in increasing difficulty in meeting their obligations according to the high standards with which they have always met them in the past. And therefore, in so far as the order is of some temporary assistance to the independent contractors at present, I would merely say, "Thank you for small mercies", but will look continually at the increasing difficulties which the independent sector will face as we diversify into new fields and as, in other words, we dilute the possible revenue that can come forward from advertisers to support this very important part of our public service broadcasting.
§ Lord Elton
My Lords, in thanking noble Lords for their reception of the order, I can explain the difficulty which the noble Lord, Lord Ponsonby, expressed by saying that this works not unlike income tax. By increasing the exempt income of the companies, we are not drawing more money from them and any company would have to increase its advertising revenue by a greater amount than the amount by which the free slice has been increased before it started to pay more, and of course it would be paying it on a larger income. I thank the noble Lord, Lord Winstanley, for his kind remarks and I hope that his break fast Hansard will have the effect of confirming his opinion of the lucidity of my explanation. If it does not, he has only to write to me.
§ On Question, Motion agreed to.