HL Deb 04 December 1986 vol 482 cc954-64

4.38 p.m.

Lord Beaverbrook

My Lords, I beg to move that this Bill be now read a second time.

First, I must declare an interest. I am the indirect owner of a small number of shares in TV-AM, which is a publicly quoted company.

It is almost exactly three years since the Government last brought broadcasting legislation before your Lordships' House. That Bill was the Cable and Broadcasting Bill, which sought to establish a regulatory framework for the provision of cable and satellite broadcasting services. We recognised then that the emergence of new technologies capable of delivering a multiplicity of channels would in the long term have the profoundest implications for our present broadcasting services. However, I think it is fair to say that no one then could see how quickly the need would arise for a thorough assessment of the implications of technological developments for our broadcasting services taken as a whole. The opportunity for such an assessment, and indeed the agenda for it, have been set by the report of the committee under Professor Peacock's chairmanship, which examined the future financing of the BBC. It is now clear that broadcasting is on the threshold of a major period of change.

Although this Bill arises in part out of the Peacock Committee's recommendations, in itself it proposes no substantive changes to the structure of the independent broadcasting system. It is rather concerned with keeping open the options for change. I therefore do not propose to go in detail into the Peacock Committee's recommendations today. Your Lordships will have the opportunity to debate the report as a whole before too long.

I referred earlier to the Bill which became the Cable and Broadcasting Act 1984. That Bill, among other things, contains the framework for the provision of direct broadcasting by satellite services by the IBA. Last year we invited the IBA to assess the prospects for a British DBS service provided by independent commercial interests in accordance with the provisions in the Act. The IBA judged that there was sufficient interest to justify the implementation of the relevant statutory provisions, and the authority advertised in April this year contracts for a new DBS service which will provide three national television channels. In response to that advertisement, a number of consortia have applied to the IBA, and I am pleased to report that the authority hopes to be able to make its selection by the end of the year with the prospect of a British DBS service being available by the end of the decade.

Under the 1984 Act, it will be the responsibility of the successful commercial contractor to make the financial and other arrangements for the satellite from which the broadcasts will be relayed back for reception by households. The initial investment involved in such a venture is therefore likely to be very high indeed. The 1984 Act recognised this in part by providing for DBS contracts to last for a maximum of 12 years, in contrast with the eight years allowed to terrestrial ITV contractors.

However, as plans have been further refined it is clear that the costs and risks are likely to be even more substantial than previously recognised in 1984. We believe that, in order to allow sufficient time for a DBS contractor to recover his initial investment and move into profit, a 15-year contract period is justified. Accordingly, my right honourable friend the Home Secretary announced in another place earlier this year the Government's intention to seek an early legislative opportunity to make the necessary change to the 1984 Act. I should add that the lifetime of the IBA currently expires on 31st December 1996, but we intend in the near future to bring into force Section 45 of the 1984 Act, which provides for the extension of the lifetime of the IBA to encompass a 15-year DBS contract.

The second purpose of the Bill is to leave open the options for change which could affect the ITV contract system. The most obvious issue here concerns the procedure for awarding the contracts. A majority of the Peacock Committee thought that the procedure should incorporate an element of competitive tendering. However, there are a number of other equally important issues running through the Peacock report on which the natural time to take action would be at the beginning of a contract round. These include the proposal that Channel 4 should be given the option of selling its own advertising, rather than being financed by subscriptions from the ITV companies. There is also of course the possibility that some or all IBA services might be encoded at the same time as BBC services as part of the replacement of the television licence fee by a system of subscription.

These are very large issues, and I hasten to stress that the Government have reached no firm conclusions on them. In the case of subscription, for example, your Lordships will know that the Government have commissioned a study from independent consultants of the technical and economic aspects. The Peacock Committee's recommendations merit, and are receiving, a good deal of thought. The Government also remain anxious to receive the views of Parliament and the public.

Therefore, time is needed to assess the case for change and to put in hand any necessary preparatory work. However, the ITV contracts which are currently in force expire on 31st December 1989. If no change is made the IBA would want to advertise during the course of next year contracts for eight years to run from the beginning of 1990 to the end of 1997. If the IBA went ahead with that timetable, there would be no opportunity for changes to the contract system—or more basic changes which might bear heavily on the operation of these new contracts—before 1998. We discussed this matter with the IBA, who have themselves developed separate proposals for changing the present system of awarding ITV contracts.

We decided that the best course would be to provide for the next round of ITV contracts—which will commence on 1st January 1990—to last for only three years. Clause 1(3) of the Bill therefore amends the relevant provisions of the Broadcasting Act 1981 to provide that the contracts which will take effect on 1st January 1990 should expire no later than 31st December 1992. This deadline will also apply to the next breakfast television contract, which is due to commence on 1st February 1991. Therefore this part of the Bill simply preserves the options for change.

If the Government decide in due course to make changes to the ITV contract system, these can therefore be introduced for contracts which will run from 1st January 1993. For completeness, the Bill also covers the situation where the then government decide to propose no changes of the kind I have described. In this case the Bill provides that the IBA can award contracts under the present system from 1993 onwards. We intend, if Parliament agrees to the provisions in the Bill, to implement Section 46 of the Cable and Broadcasting Act 1984. This will relieve the IBA of the obligation to advertise the shortened round of ITV contracts. Section 46 was originally enacted in the context of the DBS joint venture, but with the collapse of that venture it was never brought into force. We have seen no need to re-enact a provision which is already on the statute book, and the passage of the Bill will provide the opportunity for Parliament to consider the use of this provision in its new context. Taken together, the Bill and Section 46 in effect provide a three-year extension of the contracts of those ITV companies which wish to apply for such an extension.

This Bill is a very modest measure designed to improve the arrangements for DBS contracts awarded by the IBA, and to provide the opportunity for change affecting the ITV contract system at some time before 1998. The Bill itself does not of course make any substantive change to that system. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Beaverbrook.)

4.45 p.m.

Baroness Birk

My Lords, the noble Lord has put forward the legislative case very clearly and several times has stressed that this is a very modest measure. It is not as modest as all that because the implications of this Bill are very large and wide-ranging. The noble Lord referred to the debate on the Peacock Committee's report, which is due to take place in this House later this month. That of course will be an in-the-round debate and I should have thought would largely concentrate on the BBC because it was the BBC with which the Peacock Committee was set up to deal in the first instance.

However, this so-called modest little Bill goes very much further than that. First, I would argue that the case for extending contracts has not been completely or inevitably made out. In fact, one or two of the companies to which I have spoken have felt that the same sort of work and examination could have been carried out if the timetable had been left as it is now and the new contracts came up in 1988. This Bill means that on the Government's proposition contained in this legislation the present companies will be in situ for about 11 years. It means that the one main sanction, which is to take the franchise from one company and give it to another—and that is how the system has worked since commercial television was first initiated—will be considerably delayed. By their nature the warning notices will have to be very halfhearted affairs if no real action can be taken.

Incidentally, some companies could quite easily have managed to carry on without any extension and still carried out the necessary work. However when the Government put forward an extension of two years, naturally everyone wanted four years. Therefore, the compromise reached has been three years.

One of the most important recommendations of the Peacock Committee, which to date it looks as though the Government are taking very seriously, is in the news release issued by the Home Office. The noble Lord, Lord Beaverbrook, said that all this could be dealt with in the debate on the Peacock Report. The Peacock Committee's recommendation on ITV contracts, is appended as part of the news release for this piece of legislation which we are considering today. Therefore, this does not relate entirely to the debate on the Peacock Committee's report.

Recommendation 10, which was supported by four members of the Committee, is that ITV contracts should be put out to competitive tender. With respect, I should not have thought that it needed three years to deal with that, but rather about three minutes. I have yet to find anyone in any of the commercial companies, or in television in any form at all or even in academia who has agreed that this is a good proposition. Naturally I, and many others—certainly my colleagues in another place—were hoping that in the debate on 20th November on the Peacock Report in another place the Home Secretary would take the opportunity to knock this particular recommendation on the head and say, "We don't have to discuss this because we are not going to implement it". In fact what he said at col. 717 in answer to an intervention was: One of the most significant recommendations was the proposal that in future ITV contracts should be put out to competitive tender". He then went on to say at col. 718: We simply do not want to foreclose the options". I can see that they might not on other things, but on this the sooner the Government make a statement the less uncertainty there will be for the companies. I hope that when the Minister replies today he will be able to put not just my mind at rest but everybody's and say that this is now out of court.

The proposition itself was bounced in very late in the Peacock Committee's proceedings. I believe that it was passed by a majority of just one. There has been no research into this and no evidence was given to support the proposition. It is something that the Government could deal with without waiting for three years.

Another recommendation highlighted in the same news release and which has a great and serious effect on the future of independent television in this country is that contracts should be awarded on a rolling review basis, with a formal annual review by the authority of a contractor's performance. But that again is something which has many disadvantages and a great many arguments against it.

It means that the only chance the public would get of alternatives would be after a series of early warnings. It is a system that will become set in concrete. Only if a company were to perform very badly would it be decided not to continue with it. If its performance was mediocre to good it could go on and on. It would not give, as does the existing system to some extent, the chance of exchanging the good for the better. It might give a chance to exchange the bad for the good. Also this rolling review is something that some companies and many others involved in television find unacceptable.

Personally, I should like to see the idea of staggering the franchises of the companies so that one does not have 15 coming up all at one time. Many years ago I was somewhat on the sidelines of this and saw what went on, and it is true that there are many disadvantages to the present system. There is too much hassle; there is too much building up by the companies, and putting on, towards the end of their time, the sort of programmes that they think are going to get them a renewal of their franchise.

If you had, say, five franchises at a time coming up there would be much more opportunity for the IBA to take them at a better and more considered pace. I appreciate that the details would have to be worked out, but it is something that should be given strong consideration. As I understand it, other countries—and I believe that Canada is one, but I shall not swear to it, and if I am wrong over this I shall understand if the Minister tells me—operate this system of staggering contracts.

When we come to the question of Channel 4 standing alone, we are again in a dangerous area. This is almost on a par with the tendering for the franchises, which is all based on trying to bring the market economy even further into commercial television than it is now. Channel 4 has been in existence for four years. It has done brilliantly during this time. To change a structure which is working well does not make sense at all. It would mean a deterioration in standards and would bring about the same loss of quality as would tendering for franchises except that that would mean, with franchises going to the highest bidder, that more money would go to the Exchequer.

Trying to produce a system by which Channel 4 would stand alone—when Channel 4 is one of the best examples of the redistribution of income that a Conservative Government has brought about—would mean once again a lowering of standards, and a scrabbling around by everybody for probably a lessening amount of advertising. Again we know what happens then; the programmes themselves fall in quality.

Then there is the question of independent producers and productions. At one point a quota of 40 per cent. was suggested and then the Home Secretary mentioned 25 per cent. I personally am not fond of the language of quotas, but a benchmark probably has to be put up in order to make sure that we get a significant input of independent production companies and independent producers into the whole television scene.

Finally, what has to be remembered throughout all this is that the object of our television and radio services, whether BBC or ITV—which we are discussing in this legislation—is the audience, the public. There is a duty to give them the best quality that can be achieved. Anything that detracts from that, which cuts down on the creativity or originality that can be brought into television must be opposed. It is enormously important that we keep our place as one of the best—if not the best—radio and television countries in the world. So far as other countries are concerned our standards are enormously high: one has only to go to America to see the tremendous difference.

I am seriously worried about the recommendations that are the subject of this legislation. If these are taken up they may advance the market economy but what we are talking about is a service to people. It covers educational services; it is a cultural service; an entertainment service. We should tread warily and be very careful in order to avoid anything that lowers the quality of that service.

4.59 p.m.

Lord Aylestone

My Lords, the House will pardon me if, on this occasion, I do not debate the Peacock Report, which we shall have the pleasure of debating before the Christmas Recess. However, there are one or two points that arise out of the Peacock Report that will have to be mentioned during this afternoon's debate, which has been the position with the noble Baroness herself.

I must admit that when I first read the small Bill—it is a small Bill—I thought that it was perhaps a cosy idea whereby the programme contractors increased their eight years to 11 years overnight without any apparent reason. Having heard the Minister today and having done some reading myself in the meanwhile I am convinced that this Bill is necessary. We on these Benches agree that because of the workload falling upon the Independent Broadcasting Authority and upon the Government departments (there are two of them) arising out of the Peacock Report from DBS and cable, that it would not be unreasonable to assist the authority by giving it an additional three years.

It is perhaps worth bearing in mind, if this Bill did not exist, what the authority would be required to do under the 1981 Act. It would have three years to run until 31st December 1989 before the new contracts were granted. Here we must remember that not only are contracts granted, but existing contractors sometimes lose the contracts they have. It is important that this should be done correctly. If there was nothing other than that three-year period to consider, the IBA could within that three years proceed at once to grant new contracts. The first things it would probably have to do under the 1981 Act is to sound public opinion in the 15 regions, to listen to what local authorities have to say about existing contracts, and to take into consideration the work and the programmes of the existing contractors and how they have functioned in the years up to the end of December 1989.

That would be possible within three years if there was nothing else in the offing, if there was nothing else about which television had to concern itself. But if one takes the three-year period after 1989 until 1992, we might by then have an idea of the effect of direct broadcasting by satellite on what is known as terrestrial television. We may have some idea, if it takes off at all—there is perhaps some doubt about that—of the effect of cable on terrestrial television. In addition we should have to take into consideration what would happen as a result of a general election if an incoming government had completely different ideas. These things have to be considered and in my view it is only right that the IBA on this occasion is given a period of three years by which it can increase the existing eight years for broadcasting programme contractors to 11 while it is getting on with the job of assessing the effect of everything else.

I have said that I do not intend to discuss Peacock, but we cannot ignore it altogether because if any proposals with regard to radio are accepted by Her Majesty's Government as a result of the Peacock Report—up to now the Government have not told us; they have not said whether they will accept any or none—that is bound to affect the work of the Independent Broadcasting Authority. My whole point is that if there were nothing else to take into consideration we could deal with the new contract position by the end of 1989 and either renew contracts or replace them (because sometimes they are replaced) and there would be no problem about doing it. But the workload that has to be borne by the authority—and to some extent by the BBC if we are to take Peacock into consideration—makes it necessary to have this short additional period, which I accept is helpful to the programme contractors, so that the position can be looked at overall. By 1992 we may have at least two channels from DBS; I was going to say "on the air" but I am not sure that they are on the air when they come down from a satellite.

We shall certainly have terrestrial radio and television as we understand them and changes in radio arising out of Peacock. Apart from that, a point I have made before and must make again is a purely technical one. As soon as any form of new transmitting technology or studio work is fitted with changes in cameras, they become obsolescent. Change is so rapid within that industry that time is required to consider all these matters. In my view on this occasion we should approve this small Bill and perhaps restrain ourselves from discussing Peacock, which was set up with the idea of discussing only the method by which the BBC should be financed; we should restrain ourselves from discussing the whole area to be gone into until we reach the Peacock Report later in this Session.

5.7 p.m.

Viscount Ridley

My Lords, after the very long Bills that your Lordships suffered in the previous Session it is a pleasure to see one that is constrained to one piece of paper. I hope my speech can be commendably brief on the same occasion.

Before I say anything about the Bill, I too must declare an interest as being a director of Tyne Tees Television for the past 22 years and a shareholder also in that company. Your Lordships will say, not unnaturally, that for obvious reasons I very much welcome the Government's decision to extend the franchise for three years until 1992. It is a typical British compromise between the two years originally suggested by the Government and the four years that the IBA asked for.

I welcome that because, as has already been said by the Minister, it must be sense to wait until all the future aspects of TV have been decided upon in view of the very fast developing technology and indeed in view of the Peacock report, which I shall not discuss tonight. I have more than once seen the tremendous upheaval that the award of a new contract can cause—the disruption and the expense which I do not think make for good television in the long run.

No commercial operation can really make longterm decisions in the light of the fact that it is likely to disappear into a puff of smoke every eight years. Anything that can ensure that is not done unnecessarily is to be welcomed. I am not saying that the re-awarding of contracts should be stopped. It is a successful decision that has been made and that everyone agrees with. It is not good, however, to have unnecessary re-awarding of contracts. This is one which is necessary in that the extension must make all sorts of political as well as financial sense.

I was very interested in the suggestion of the noble Baroness, Lady Birk, that the contracts should be staggered. I can see some merit in this. I imagine it would keep the industry in a state of permanent tension in one way and another with unsuccessful contractors whizzing round the country to try to find a space. I am sure the IBA would love the opportunity to remain in more or less permanent session dealing with it. It is certainly a suggestion of merit and should be looked at.

It is worth recalling how in the north of England we have seen tremendous changes dictated by the geography of the land. First, there was the creation of Yorkshire Television, rather like Eve was created from one of Adam's ribs a long time ago. Secondly, there was a shotgun wedding between Yorkshire Television and Tyne Tees Television, which effectively meant that two eggs were made into an omelette underneath an umbrella—if that is not mixing too many metaphors. Thirdly, the omelette was reassembled into two eggs again when the companies were separated at the last award of contracts. Any of your Lordships who have tried to make two eggs from an omelette know that it is a very expensive, difficult and slightly frustrating process.

I think it says a lot for independent television as a whole that it continues to provide excellent programmes in the light of that experience and has survived a certain amount of upheaval of this kind. I hope very much that my noble friend will give some reassurance that no more geographical upheavals of this kind are contemplated without at least the full concurrence of all those who are concerned before the re-award of the contracts in 1992.

Finally, independent television suffered for many years, as your Lordships are well aware, from an unfortunate remark made by a late Member of this House who said that it was a licence to print money. No doubt many outside or inside Parliament may think that that is still the case. I think therefore that this is an opportunity to say very briefly what the financial figures actually are in connection with ITV. The figures which I hope to quote I believe to be IBA figures and therefore absolutely impeccable in their source.

Over the past four years, 1982 to 1985 inclusive, the profits of the independent television companies totalled £1,079 million. From this has been deducted the IBA fee of £208 million and the subscription to Channel 4, which is no less than £507 million, leaving, I think, £364 million. The Government then put a levy on ITV which totals £110 million. That leaves £254 million and, if you assume tax (at the average rates for industry) of £117 million, you are left with only £137 million or 12½ per cent. of the original figure, which, divided among 15 companies, is not a great deal of money for expansion, experiment and all the other programme initiatives which are needed, never mind the shareholders.

So, although the goose lays a lot of golden eggs, most of them end up in the Government's pocket in one way or another. In the light of that, I hope we can acknowledge that it has made a great contribution, not only financial but also in the sense that the television of this country—and here I entirely agree with the noble Baroness, Lady Birk—is a very fine and splendid thing in its quality. Anything that we can do to help and therefore to encourage this Bill through the House should be warmly welcomed.

5.14 p.m.

Lord Beaverbrook

My Lords, this has been a short but interesting debate on broadcasting policy. It is clear that we have now reached a very important stage in the development of our broadcasting services where technology—which has until now placed constraints on the number of broadcasting outlets—will allow a multiplicity of differing channels and broaden the options for paying for what we watch and listen to. The Peacock Report has set out the considerations which the Government, the broadcasters and the public need to examine. As I said in my opening remarks, the Government for their part are giving very careul consideration to the committee's conclusions and are anxious to listen carefully to the views of Parliament and the public. As I have said earlier, your Lordships will have an opportunity for a full discussion of the issues raised by the Peacock Committee before too long.

If I may turn now to one or two points and questions raised by noble Lords, I would say to the noble Baroness that we believe this Bill to be a modest measure and that it is something that we believe in due course will be seen to be the correct route to take at this time. On the subject of the Peacock Committee—as I have said, the House will be debating this—the committee not only covered matters concerning the BBC but also expressed views on competitive tendering and length of contracts with IBA companies. The noble Baroness asked: "Why three years?" The Government believe that a three-year limit on new contracts would provide a realistic margin in which to take sensible decisions on future contract arrangements. A longer period would have tended to prolong the uncertainties and a shorter period may not have provided sufficient time for decisions to be taken and implemented.

As regards competitive tendering—another point raised by the noble Baroness—the Peacock Report helpfully outlines the arguments for and against. This is clearly a matter on which the Government will want to take account of the views of others. As I have said, the Government have not yet reached a decision. The aim of this Bill is to provide an opportunity for change in the contract arrangements if that were thought desirable.

It would not have been practicable for the Government to take decisions on the Peacock recommendations on ITV contracts before the current contracts expire on 31st December 1989. If the Peacock recommendations on competitive tendering were accepted, legislation would be required; but the IBA would normally begin considering the next round of contracts in 1987 with a view to advertising in 1988. The timetable simply would not permit sensible decisions. Options must be kept open not only for this but also in case changes are needed on subscription, Channel 4, independent production, and other matters.

I believe—and here I agree with the noble Baroness—that the final opinion on the success of our broadcasting arrangements will be that of the viewer. Only a positive response from the viewers will give us a viable broadcasting industry. As the noble Baroness may know, I, with my commercial background, would perhaps be among the very first to agree with this.

The noble Baroness and my noble friend Lord Ridley brought up the subject of the staggering of contracts. Of course, we shall look at such suggestions. We shall look at all suggestions; although the current view is that it would be desirable to try to standardise the expiry date of contracts for television contractors. I am grateful to the noble Lord, Lord Aylestone, for his supportive remarks on the three-year period. I fully agree with his point on the impact of technological change on our broadcasting arrangements.

While this Bill arises out of technological progress and the Peacock Report, I must stress again that it is no more than a very modest measure designed to improve the prospects of a British DBS service in the 1990s and to keep open options for changes affecting the ITV system which may arise from the Peacock Committee. The Bill itself makes no substantial change to the ITV contract system beyond, in effect, extending the present round of ITV contracts for three years.

If the then Government decide that there should be changes—for example, to arrangements under which the IBA award contracts—then future legislation will be necessary, and your Lordships will be able to discuss the precise nature of the changes at that time. It is the Government's hope that this Bill will receive a swift passage to enable the IBA to go ahead with the award of the DBS contract if a suitable applicant is identified. Similarly, the IBA will want to know at an early stage on what basis the contract renewals in 1990 are to take place. I hope therefore that these proposals will meet with your Lordships' approval, and I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.