HL Deb 24 March 1986 vol 472 cc1250-2

9.11 p.m.

Viscount Davidson rose to move, The the draft order laid before the House on 4th March be approved. [15th Report from the Joint Committee.]

The noble Viscount said: The draft order relates to additional payments—usually known as the "levy"—which independent local radio companies are required under the Broadcasting Act 1981 to pay into the Consolidated Fund if they make sufficient profits. The levy was introduced for ILR in October 1981. Under the current arrangements, companies must pay a levy of 40 per cent. on profits above a certain threshold; that threshold is either the first £250,000 of an ILR company's profits, or profits equivalent to 2 per cent. of advertising income, whichever is the greater. The draft order seeks to reduce the rate of ILR levy to nil, and would thus remove from ILR companies the requirement to make levy payments into public funds. We propose that it whould take effect from 1st April, which is the half year point in the companies' financial year. Their liability to pay corporation tax would however continue in the usual way.

Our proposals stem from a review of the ITV and ILR levies carried out last year by a working group of officials from the Home Office, Treasury and IBA. In the case of radio, the review showed that the ILR companies' revenue fell substantially following the introduction of the ILR levy in 1981, and has not since recovered in real terms. Profit yields for all but the largest metropolitan stations have been very modest. In the autumn of 1984, the IBA announced a package of measures designed to relieve the pressure on the ILR system, including a 10 per cent. cut in primary rental payments with effect from 1st April 1985. The position has not improved since the working group's review was completed last year, and there are no firm grounds for believing that there will be a substantial increase in ILR profitability in the future. Rather, ILR seems likely to face increasing competitive challenges by way of free-sheets, the new technologies and other broadcasting media. In fact, ILR has already faced significant competition for revenue from Breakfast Television, which operates during ILR's peak earning period, and from Channel 4. The future holds the prospects of extended broadcasting hours on terrestial television, satellite broadcasting and cable.

Two particular developments, to which the working group referred as sources of further competition for ILR were community radio and independent national radio. So far as community radio is concerned, your Lordships will know that the Government intend to establish a small number of community radio stations on an experimental basis. These stations will be different in kind from ILR stations, but we recognise that the development of community radio raises important questions for existing sound broadcasting services, including ILR. We think it right that these matters should be the subject of wider consultation and we therefore propose to publish a Green Paper during the period of the community radio experiment. By the same token, there are important interrelationships between independent local radio and national radio, and the Government may want to have regard to these in framing the Green Paper.

Against the background of the financial and competitive pressures which I have outlined, the working group concluded that there was a strong case for removing the additional burden of levy from the ILR companies. The Government accept that view and my right honourable friend recently made an announcement to that effect in another place. In the last complete financial year (ending on 31st March 1985) for which figures are available, the sums paid by way of levy were £623,000. On the basis of the most recent forecasts only three companies—Capital in London, Piccadilly in Manchester and Clyde in Glasgow—would be liable for levy during the current year. If the levy rate is reduced to zero these companies will benefit in the six months from 1st April to 30th September 1986 by some £196,000 in total. The sums involved are therefore small relative to the equivalent levy on ITV companies; but the burden is large relative to the wealth of the ILR industry and to the resources of the individual companies subject to levy.

I might add that the internal review recommended that the IBA be invited to consider means by which the rental arrangements might be adjusted, so that sums otherwise payable in levy would be re-distributed throughout the ILR system. The IBA has since concluded that it would not be practicable to introduce such a system, and the Government accept that conclusion. There is already a measure of support from the larger, more profitable companies to the smaller, less profitable companies. Programmes made by the large stations can be made available for networking at low cost for the benefit of the industry as a whole; and larger stations contribute disproportionately to the common services provided by the Association of Independent Radio Contractors and the Radio Marketing Bureau. There are therefore various ways in which gains to the most successful companies will work to the benefit of the industry as a whole. My Lords, I beg to move.

Moved, That the draft order laid before the House on 4th March be approved. [15th Report from the Joint Committee.]—(Viscount Davidson.)

Baroness Ewart-Biggs

My Lords, we should like to say how grateful we are for the very clear explanation that we have received from the Minister about this order. I cannot help feeling that a measure that will help the ILR industry can only be welcomed, and that the working group that was set up to identify and discover this can only be very much respected. So may I say that a measure which relieves these contractors from a liability to the tune of 40 per cent. can only be applauded, and we on this side of the House should like to give our support to this order.

Viscount Davidson

My Lords, I am most grateful to the noble Baroness, Lady Ewart-Biggs, for her welcome of this order.

On Question, Motion agreed to.