§ 7.7 p.m.
§ Baroness Trumpington rose to move, That the draft order laid before the House on 29th November be approved [2nd Report from the Joint Committee].
§ The noble Baroness said: My Lords, this order is made under powers in Schedule 2 to the Broadcasting Act 1990. On 24th November my right honourable friend the Secretary of State for National Heritage announced that he proposed to make changes in the regulations governing the ownership of the regional ITV companies. He made it clear that the proposed changes were subject to parliamentary approval. The purpose of this draft order is to give effect to those changes.
§ The draft order amends the present order restricting the holding of licences, which was made in May 1991. Article 2(1) amends Article 3 of the 1991 order. Its effect is to remove the distinction between licences for the nine areas with the largest advertising revenue and those for the other six areas. Article 3 of the 1991 order prevents anyone from holding two licences in the nine large areas. The draft order would remove that. restriction, except that no one could hold both the London licences. The overall limit on holding no more than two licences remains. The other changes are technical. Article 2(2) removes from the 1991 order provisions which have already ceased to have effect, and the references to them.
§ Although I am a comparatively new recruit to the broadcasting scene, I know that your Lordships have taken a particular interest in ITV ownership matters, both during the passage of what became the Broadcasting Act 1990 and subsequently. During the last year there have been a number of Questions on those issues and on 31st March there was a debate on a Motion by the noble Lord, Lord Buxton of Alsa. A number of your Lordships have also taken opportunities 1179 to discuss these matters with my right honourable friend the Secretary of State as well as my noble friend Lord Astor and with me.
§ During the debate in the spring, a number of your Lordships urged the Government to extend the so-called moratorium. That is the provision in the Broadcasting Act 1990 which requires the Independent Television Commission to approve any takeovers of companies holding Channel 3, or ITV, licences before they take place. Under the terms of the Act, it is due to expire at the end of the year.
§ The impression is sometimes given that this provision prevents any takeovers of ITV companies. That is not the position. It is an inhibiting factor, and I accept that its existence would tend to discourage hostile takeovers.
§ I know that my right honourable friend the Secretary of State considered carefully whether or not to extend this provision, particularly as he recognised the strength of feeling in your Lordships' House on the issue. There was no consensus among the ITV companies. Some were in favour of extension while others were against.
§ My right honourable friend made a particular effort to hear a wide range of views on the issues on ITV ownership. He made sure that all the companies, both large and small, had an opportunity to explain their position to him directly. He consulted the Independent Television Commission. Other interested organisations, including representatives of the advertising industry, discussed their views with him or his officials.
§ During the year it has become increasingly clear that broadcasting throughout the world is going through a period of considerable and rapid change. The number of services has been increasing, particularly satellite and cable services. More services will become available in the next few years with the introduction of digital transmission technology. The technologies of broad-casting, telecommunications and computers are beginning to converge, and this development is likely to proceed rapidly in the years ahead.
§ It has also become clearer that traditional broadcasting services of the kind we have had for the past 40 years will be only a small part of a very large range of services of entertainment, information and education which will be available. By the year 2000, people will be able to pick and choose from a wide variety of sources of news, information and entertainment, including films, videos, music and computer games. Some of these services will be interactive. People will be able to pay for individual items as well as whole services. This is a complete change from the small number of general television services which we have had until comparatively recently. It was only last year that we were celebrating the tenth anniversary of the introduction of Channel 4.
§ The changes are taking place not only in the United Kingdom but throughout the world; they are opening up a global market for broadcasting services. My right honourable friends the Secretary of State and the President of the Board of Trade are anxious to ensure that United Kingdom broadcasters are well placed to take advantage of these opportunities, building on their 1180 successful exports of high quality programmes. The ITV companies have, for many years, sold programmes successfully to overseas broadcasting organisations.
§ These developments world-wide may help to explain why my right honourable friend concluded that extending the moratorium, and the ITC's control over takeovers, was not a sensible approach to a world which was opening up new markets. It is unrealistic to believe that we could, through legislation, provide a period of stability for ITV, when rapid changes are taking place in the rest of the broadcasting world. In these circumstances, trying to stand still is likely to develop into rigor mortis.
§ The moratorium has achieved what it was intended to achieve —a short period of stability during the transition from the old ITV system to the one introduced in January this year. But we cannot protect the ITV companies indefinitely from the disciplines of the market and this should not be necessary. The Government want the British public to continue to have the television services which they value. ITV services are watched by more than 90 per cent. of the people in this country every week. We also want to sustain the production base for the broadcasters' programmes throughout the United Kingdom. Nearly three-quarters of the programme output of the ITV system is original programming, made specifically for ITV's audiences. The programmes reflect the United Kingdom's traditions and culture, and that of its regions. The Government want programme production to continue and to grow throughout the United Kingdom.
§ One of the important features of the ITV system is its regional nature. My right honourable friend would not have proposed these changes if he thought they would put at risk the regional programming and regional production which are valued features of the ITV system. The Broadcasting Act places requirements on the ITV licence holders about regional programming and production. These are reinforced by conditions of the ITC licences, which include the promises about programmes made by the companies when they applied for licences. The ITC's licence conditions also require that 80 per cent. of the regional programming is produced in the area.
§ We know that the commission will enforce these conditions. It is required, by the terms of the Act, to assess each year how far the ITV companies have complied with their licence conditions. If any licence holders do not comply, the commission has to include information about those failures in its annual report, presented to Parliament.
§ The ITV companies believe that the regional nature of the system is one of its strengths. They know the regional programmes are valued by their audiences. Whatever the legislative or licence requirements, it will remain in the ITV companies' own interests to keep their regional programming and production. I understand that regional production has increased in the first nine months of this year, compared with 1992.
§ However, not all the companies consider that regional licences have to be supported by fragmented ownership. There are, of course, a variety of views among the ITV companies about the best way for the 1181 system to develop. But they all accept that some consolidation of ownership is inevitable. They differ about the degree of consolidation, and the speed at which it should take place.
§ It is the Government's view that some consolidation at this stage could help the ITV companies to flourish in the new global market for broadcasting.
§ Under the terms of the draft order there would have to be at least eight companies in the ITV system, holding the 15 regional licences. The conditions of the licence about regional programming and production remain, even if there are changes in ownership. I commend the draft order to your Lordships.
§ Moved, That the draft order laid before the House on 29th November be approved [2nd Report from the Joint Committee].—(Baroness Trumpington.)
§ 7.18 p.m.
§ Baroness Birk
My Lords, as the noble Baroness pointed out, a great deal of the feeling about the order is concerned with the question of the moratorium. The period of moratorium was inserted into the Broadcasting Bill in this House. There was nothing in the original Bill. There was a feeling on all sides of the House that a period of stability was essential to enable the legislation to proceed in a way that was to the benefit of television. The ITC supported the idea of a moratorium and was ready, like many of your Lordships, to have a longer period. Many of us wanted a year while the Act was being prepared and then a period of two years afterwards so that it could get into its stride without having to look over its shoulder all the time to see whether somebody was creeping up to take over a particular company.
We want the question of ownership to be looked at with consideration, together with that of the BBC charter. Broadcasting is a total environment. To break it up in this way, so that we have this part now for independent television, and then at the same time to have consideration about the future of the BBC does not make much sense. It should all be considered together. The various Green and White Papers should be linked so that one can look at broadcasting overall to see what the future holds.
As regards the regional dimension which the noble Baroness mentioned when she introduced the order, the ITC believes that it can be held. But nevertheless there is a potential for damage here where some of the companies do not feel that they are an intrinsic part of a region but somewhat semi-detached. We have had promises that there will be no redundancies when the mergers or takeovers take place. But I believe that to be phooey. I believe that there will be redundancies, and so do many people working in broadcasting at all levels, particularly in programming and production.
The Government are trying to clear up the mess they made with the 1990 Act, but in a piecemeal fashion rather than as a whole. So there are a great many misfits, and perhaps I may give one example. If the ITV mergers are allowed, the Government, the ITC and the other regulatory authorities must turn their attention to the issue of ITV advertising sales houses. At the moment these companies are allowed to sell no more than 25 per 1182 cent. of ITV air time. But ITV dominates the advertising sales market and could squeeze out new competitors like Channel 4 if its power is uncontrolled. Therefore, the 25 per cent. limit must be kept for the foreseeable future. It is time that the Government went back to basics on this occasion, which the Prime Minister often talks about. There is no time to lose. Quality has already deteriorated and repeats are tripping over each other all the time.
The idea that this relaxation will prevent the European giants like Berusconi and Bertelsmann from swallowing up our companies is absurd. They are probably bigger than all of our companies put together.
For 35 years our television has been an engine room of creativity, serving the viewer well. Now we have corporate bun fights. I believe that the first many of us knew about the Carlton Central takeover or merger was in the news, when people were seen throwing champagne over each other. The merger had not been through Parliament and nobody knew about it. I had tabled a Question on the subject and I did not know what had happened. I thought that something had occurred of which I was unaware. This was a case of jumping the gun, which was very bad.
Less and less time goes into programme-making and the two takeovers or mergers currently to be read about in the press mean that about £2.5 million a week has to come out of programming funds in order to repay the Treasury for the moneys which are still being paid for the auction that preceded the 1990 Act. It would be ludicrous if it were not doing so much harm. The whole exercise has shown contempt for Parliament, for ITC and for the viewer. All that matters now seems to be the bottom line—that is to say, with a broadcasting system ever more geared to financial performance and less concerned with producing programmes of interest in our cultural life. It is for those reasons that I feel very sad at the thought that this order will undoubtedly go through tonight. But the Government can still change their mind and extend the moratorium. I wish that they would, but I do not have much hope.
§ 7.26 p.m.
§ Lord Armstrong of Ilminster
My Lords, I should declare an interest in this matter as a non-executive director of Carlton Television, the wholly-owned subsidiary of Carlton Communications plc which has the television franchise for London midweek. Carlton Communications has made an agreed bid for Central Television, subject to parliamentary approval of the order now before the House. If the order is approved and the bid goes through, Carlton Television and Central Television will in effect be sister subsidiaries of Carlton Communications.
I should like briefly to commend the order for your Lordships' approval. It represents a sensible, if modest, relaxation of the arrangements resulting from the moratorium imposed in 1991 and will enable, the independent television industry to carry out a degree of consolidation and rationalisation which should further strengthen the industry in the face of competition from overseas, particularly from European companies. It will 1183 enable it to achieve a degree of synergy and a sharing of overheads which should increase the resources available to be put into programming.
As the noble Baroness, Lady Birk, said, it has been suggested that it would be preferable to extend the moratorium for a further year. I understand the attractions of that suggestion, but I share the views expressed by the noble Baroness, Lady Trumpington, about the reasons why it would be preferable not to extend the moratorium. In any case, I am not sure that it would really be a viable option. As I understand it, it would not prevent European companies from moving in to acquire blocks of shares in independent television companies which would be insufficient to provide immediate control, but would be sufficient to provide a useful platform for subsequent bids for control once the moratorium came to an end. As a protection, therefore, the moratorium is by no means watertight.
I do not believe that the passage of this order would put at risk the distinctive regionality of existing services. As the noble Baroness, Lady Trumpington, pointed out, that is laid down as part of the conditions of licences and the terms and conditions of such licences will be unaffected by this order. Certainly, so far as Carlton and Central are concerned, the two services will continue to be distinct in regional terms as they are now. I doubt whether the viewers will be able to detect any loss of regionality in the programmes. Indeed, I believe that they will continue to see very much what they have already become accustomed to seeing. The benefits behind the scene, if I may put it that way, in terms of sharing production facilities and overheads are expected to release, if anything, more resources for the programme making which is after all the raison d'être of the companies concerned.
I therefore commend the order as a necessary if modest contribution to the strength and effectiveness of the independent television industry in this country, and as an enhancement of the industry's ability to resist incursions from overseas, particularly from European television companies, into the British market.
§ 7.30 p.m.
§ Lord Colwyn
My Lords, I am delighted this evening to be the sole supporter from these Benches of my noble friend Lady Trumpington on this order.
The new rules which are proposed for the ownership of ITV licences are both necessary and sensible. They are necessary because ITV cannot grow, or, longer term, even survive, if it is restricted by an ownership structure which was devised nearly 40 years ago. They are sensible because they allow existing ITV licensees to take a modest first step forward towards rationalising their organisation.
Resistance to change and progress has been a factor which has damaged many British industries in the past. The fragmentation of ITV, and the duplicated costs which came with it, was not a burning issue when the channel enjoyed a monopoly of television airtime. That monopoly has now gone, and ITV must be given the opportunity to respond to a period of growing competition.
1184 Within the UK, ITV now competes directly with Channel 4, which is clearly in commercial good health. It also competes with a growing number of cable and satellite channels. Soon we shall have digital television and many more UK terrestrial channels. ITV must be allowed to move with the times and to respond creatively and effectively to those challenges.
This year, ITV will spend over £500 million on new programmes for British audiences but, despite that, our trade balances are already starting to fall behind the rest of the world. They are moving steadily into the red. In 1985, Britain enjoyed a £25 million surplus. In 1991, that had fallen to a £100 million deficit. By the year 2000, that deficit is forecast to reach over £600 million as new channels are filled with cheap, imported programmes.
That makes it even more important for ITV companies to be able to combine their strengths. The old 15-company fragmentation is simply too inefficient and managerially slow to respond. The British television production industry, including the BBC, needs to take money out of the overhead and put it on to the screen.
ITV companies must be allowed to grow to a size which will allow them to compete with international media companies. Broadcasting has changed beyond recognition since the 15-company area map was introduced in 1955. ITV needs a strong domestic base and the confidence to meet new players from the US, Europe and Japan.
I think that any objection to changing the rules is misplaced and see no reason why a change should threaten ITV's regional services. Ownership has never been a regional requirement, but programmes have been and will continue to be. Opponents of the new rules should be aware that there is not now, nor ever has been, any requirement that each ITV licence should be owned within its region. Most of them are already controlled from London, which is irrelevant to their viewers. Quite simply, regional ownership is not an essential guarantee of regional programmes. The real guarantees of regionality are five-fold. They are the terms of the 15 licences granted by the ITC in 1991; the powers of the ITC to enforce them; good regional management; the popularity of regional programmes; and the ability of the owners to support and sustain the broadcasters.
Whatever mergers may take place, each of the 15 regional Channel 3 licences has to be delivered to the satisfaction of the ITC. Each licence enshrines the promises of the winning bidders in 1991—setting the precise number of hours and minutes of programming which must be broadcast. Specific categories are listed and regional production, as my noble friend has reminded us, is protected by the requirement that 80 per cent. of regional programmes must be transmitted in the licence area.
The ITC has the power to deal with any situation where these quotas are not being met and is ultimately able to withdraw a licence, making any company which is seriously defaulting on its obligations liable to losses running into millions of pounds.
It is entirely right and proper that the commercial opportunities which the Government wish broadcasters to develop should be accompanied by rigorous scrutiny 1185 of the output by the regulators. That is their function and, if we cannot trust them to monitor the regional obligations of the 15 ITV licences, then we cannot rely on them for their scrutiny of the rest of the output. The ITC has an important role in the years ahead and it is simply absurd to pretend that commercially restrictive ownership rules are a more workable way of protecting the public interest.
A more practical guarantee for regionality, and one on which the ITC will insist, is that each licence should maintain its own district identity, with its own committed regional management. Indeed, it makes commercial sense for any licence owner to engage the best regional talents to work in and manage the television station.
Common sense also suggests that regionality is a valuable commodity in ITV, valued by both viewers and advertisers. ITV is the only commercial channel in the UK with this distinctive regional character. As competition grows from the satellite channels with national coverage only, it makes sense to maximise the impact of regionality.
The final support for regionality is of course the financial health of the licence owner and of the ITV system as a whole. No promises about programming have any value unless they are backed up by the ability to meet production budgets. The 1991 franchise round produced a wide range of winning bids and now some licensees look less able than others to keep up a high level of commitment to network and regional programme budgets. Only if an orderly process of amalgamations takes place will the duplicated overheads of the old system be made available to programme making in the future. Ownership mergers are not a threat to regionality; on the contrary, they will provide the efficiencies through which regional programmes are sustained in the future.
In conclusion, I should like to turn to a final misconception. There are still those calling for an extension of the so-called moratorium on takeovers, claiming that we should take time carefully to consider ITV ownership together with all the other issues which the changing world of broadcasting is throwing at us each day. I am not sure there has ever been a moratorium. The word does not appear in any legislation and the ITC has no power under the 1990 Act to ban foreign takeovers. It does have power, under Section 21 of the Act, to refuse a change of ownership, if it considers this "appropriate". According to its evidence given to the Select Committee on National Heritage in October, in paragraph 38 "appropriate" meant that it would oppose a change of ownership only if it believed that a prospective new owner was unlikely to maintain the quality of service. There was nothing about foreigners or hostile take-over bids.
If the so-called moratorium was extended for another year or two or three, I cannot see that it would stop a well-founded European company from buying an ITV licence, nor prohibit it from taking minority stakes in ITV licences in anticipation of future full bids.
Even if this order is not supported because of false claims that it threatens the regional traditions of ITV, from 1st January 1994 European companies will have 1186 the ability to take over ITV licences while we continue to forbid existing large licensees to merge. Does anyone believe that it will be a better way of maintaining the quality of ITV or enabling UK broadcasters to play a bigger role internationally if they are penalised in their home market in favour of foreign interests?
The clock cannot simply be stopped. In Britain we are good at television and proud of our television production industry. The new rules offer a first step to ensure that we allow it to succeed in the challenging years ahead.
§ 7.40 p.m.
§ Lord Hollick
My Lords, I declare an interest. I am chairman of Meridian Broadcasting, a licence holder for the south and south-east of England. As the Minister pointed out, we have discussed this and associated issues in the House on a number of occasions. The most extensive recent debate was possibly the one introduced by the noble Lord, Lord Buxton, when we discussed the moratorium. We have discussed many other issues, however. We discussed some of the problems that arose from the Broadcasting Act 1990; some of the structural faults in the industry; and some of the technological changes of the past few years, which require the Government to look again at the provisions of the Broadcasting Act.
With one exception, noble Lords were broadly in agreement in the debate on the moratorium that there was need to extend the moratorium so that matters could be looked at. There was also agreement that change was necessary. It is important to understand that there is no one in the industry standing against change. The argument is about the pace and scope of change. What we have in the order is a narrow, rather timid, and, I would suggest, somewhat illogical step which takes us not too far down the road that we need to travel to have a properly liberalised, deregulated industry.
The choice, as mentioned by my noble friend Lady Birk, was between a piecemeal change to ownership and a comprehensive review. The ITV companies themselves were broadly split down the middle on the issue. There were those who wanted immediate change on ownership and those who wanted the broader approach. We have ended up with neither. What we have is a half-baked measure.
In the other place, the Secretary of State indicated that the purpose was to strengthen the competitiveness of the UK industry generally. He cited two issues:First, I want to ensure that the British public keep the television services that they value and that the diversity of choice that they have is maintained and extended".—[Official Report, Commons, 8/12/93; col. 436.]I am not sure what the order does to ensure that the British public keep the television services that they value and that the diversity of choice is maintained. Perhaps the Minister will tell us.
The second objective was to sustain the production base for broadcast programmes in the UK. Here again, I am somewhat puzzled to see how the order achieves that objective. Your Lordships will remember possibly that the most devastating blow dealt to the production base in the UK was the provision in the Broadcasting 1187 Act 1990 which called for competitive bids. The competitive bids, while they enriched the Treasury, unfortunately impoverished the industry. The industry is a great deal more efficient now, and can become more so, but several hundred millions were taken out of the kitty and that money is not available for production.
Far more important than ownership arrangements is the fact that the production industry in this country relies upon money going into regional programming. The proposed measure does nothing to eliminate the error made in the Broadcasting Act 1990. I should again be grateful if the Minister will explain what help it does offer.
In the debate on the moratorium I described the present ownership laws as quaint. I said that they prevented the natural coming together of companies into larger, more efficient units which could eliminate the duplication of selling and administrative costs. So I am with many of your Lordships on that point. However, I was somewhat understating the case when I said that the rules were quaint. I believe that the rules are bizarre. The changes being made today do not make them any less bizarre.
The Secretary of State said that he wanted to strengthen the competitiveness of the UK industry generally. Competition is normally measured by reference to the share of a particular marketplace. Indeed, the competition authorities, competition law and competition practice seek to ensure that no one unit gains too large a share of the market. Conventionally, 25 per cent. is considered to be about the size of the market, as defined by the monopolies authorities. What we have here is a new definition of "competitiveness"—one that I believe would probably fit neatly into the world of Alice in Wonderland, because if we look into the wonderland of the new competitive world of ITV we see that it is not decided by reference to market share but by reference to the number of licences that one holds.
The Secretary of State, in his wisdom, and the Government deemed that two licences equal one big competitive force on the international market. My noble friend referred to one takeover proposal already announced—the merger of the London weekday franchise with the franchise for the Midlands. That would create a company having more than 30 per cent. of the market—well over, your Lordships will note, the 25 per cent. Parenthetically, I should like to ask the Minister whether the order deprives the competition authorities of the power to review and to define the market. Are we talking about 25 per cent. of terrestrial advertising or 25 per cent. of just Channel 3? By one measure, that is well in excess of the normal 25 per cent. rule.
Continuing in our Alice in Wonderland world, we have the prospect of two companies—one with 1 per cent. of network advertising spending and the other with 2 per cent. —joining together to create a powerful competitive unit which will no doubt send shudders around the media conglomerates of the world. It is an absurd situation. It is doubly absurd because it ignores completely what is already permitted under the selling arrangements. Here, as my noble friend pointed out, 25 1188 per cent. of the network can be sold by a single sales point. So we have the position at the moment where, let us say, the London Weekend company may wish to extend its arrangements with the Yorkshire and Tyne Tees companies beyond the sales house arrangements that it currently has. The sales house arrangements give it something like 20 per cent. of the network sales but would prevent it acting as I have described. Where is the logic in that? Where can it be logical to supply up to 25 per cent. of sales—one of the primary services supplied by the industry—but not logical for the ownership rules to follow that? I should be grateful for some illumination from the Minister.
What we are left with is an unsatisfactory and incoherent model. Noble Lords have stated that this is a first step. Indeed, it is a faltering and a rather false first step. The Secretary of State promised a further review of ownership rules. He said in response to a question in the other place that in the coming months the present restrictions on cross-media ownership should be looked at again and, indeed, that that was the intention. When pressed he said that he intended to do that within the next few months. I wonder whether we can be told by the Minister what is intended and when the Secretary of State will pronounce on the issue. I urge the Secretary of State to consider not just the cross-media ownership, which is an important issue, but a number of other problems and concerns raised by the television industry.
Above all, the television industry needs to know where it is. We have had a tremendous amount of change. We had the Broadcasting Act 1990; we have had new licences starting; we have had new network agreements that are only just being put into place; and we have all the problems and growing pains of the new network arrangements. What we now need is a period of stability. I have operated in a number of industries which have been deregulated. I have to say that it was done in a far more efficient and less cack-handed manner than is proposed in the order. The relevant regulator set out clearly, "This is what we are going to do and this is how we are going to work and to operate for the next five or 10 years". We have had no such guidance from the Government as regards this measure. We have had one step with the promise of another step, which leads we know not where.
I suggest that the Government commit themselves to a comprehensive review of ownership—and I mean also cross-media ownership—and that they remove the illogical and bizarre structure that they are in danger of creating in ITV. They need also to review the role of the regulator which should cover the entire industry. At present we have a somewhat anomalous position, of which I am sure noble Lords are well aware. The regulator has a particular interest in the programmes that are broadcast terrestrially but has little or no influence over programmes broadcast by satellite. As far as the viewers and the British production industry are concerned, that should be immaterial. But it is not. The regulator is unable to have any real influence over satellite broadcasting.
The Secretary of State should also review the structural problems arising from the 1990 Act. I wish to name three. The first is the arrangement whereby small 1189 companies receive, in effect, a subsidy. They pay less into the network pot. Approximately £36 million is paid by the larger companies towards the running of the smaller companies. That is a long-standing arrangement but in the new deregulated world it is out of date.
Secondly, I suggest that the Secretary of State reviews the basis of the cash bid. In particular, he should enable companies to have their bids renewed after four years as opposed to the present six years. There is considerable merit in doing that. It would enable the ITC to make an earlier adjustment to compensate for the cluster of unexpected changes in the broadcasting environment and to underpin the resources for meeting or increasing licence obligations. The Government have argued that the new system for awarding TV licences would enable the Treasury to obtain a fair return from a scarce resource. However, the scarcity value of that resource—the ability to broadcast on the Channel 3 spectrum—will be reduced by the proliferation of new channels sooner than anticipated.
There is a strong case reviewing the cash bids and levelling the playing field to some extent. That would enable more money to be put into programming and would also leave ITV better equipped to deal with the proliferation of channels, most of which are unregulated, and able to buy their programmes inexpensively from abroad. That would level the competitive playing field.
The third issue which the Secretary of State should address is the fact that our licences cover only analogue broadcasting. As was mentioned by several noble Lords, the "digital revolution" will enable many signals to be broadcast on the same wavelength. If the technology is introduced and implemented, it is important that the ITV companies secure the right to broadcast on that digital spectrum, otherwise they will again be further hampered in the competition with satellite.
In summary, I find the measure disappointing, illogical and incoherent. It is a fudge by the Government. It is a step on the way they are not quite sure to where. They are not quite sure when they are going to make the next move and they are not sure what the next move will he. We should be told. The Government have said that they regard the broadcasting industry as important not only in cultural and domestic terms but internationally. It is important that the industry is told the rules of the game for the next five years. We cannot continue with a system in which the rules are changed every 12 months, in this case by ministerial diktat. The Government should stop tinkering and should address the fundamental issues if they are to assist the competitiveness of the industry, benefit the viewer and sustain the British production base.
§ 7.55 p.m.
§ Viscount Chandos
My Lords, in speaking for the first time from these Benches, and after several years of absence, I fear that my rustiness will be only too apparent—perhaps like a television presenter whose autocue is on the blink.
I too declare my interests. I am a former member of the General Advisory Council of the IBA, serving at a 1190 time when the noble Lord, Lord Thomson of Monifieth, was the distinguished chairman of the authority. I advised on the only completed merger of Channel 3 licences, and I continue to advise a Channel 3 licensee. I work with a number of film and television production companies. Finally, I am on the board of an advertising agency. I hope that that variety of interests at least encourages a balanced view, even if I cannot claim the depth of involvement and experience that applies to other Members of your Lordships' House; for instance, the noble Lords, Lord Hollick, and Lord Armstrong of Ilminster.
While I may have taken a special interest in the television industry, which has encouraged me to speak this evening, I believe that this subject is of substantial importance in a wide range of areas. It may be a coincidence of timing that the GATT negotiations today hinge on resolving the impasse between the USA and the European Union over the treatment of film and television production, but it is also a powerful reminder that we are dealing with an issue that is more than a sideshow on the world stage—or screen.
US film and television production represents that country's second largest export earner after the aerospace industry. While that may explain the vigour with which the United States has fought its audio-visual corner in the GATT negotiations, it is also an example to the United Kingdom, with the natural advantage in the world markets of the English language, of what an important part of the economy the television and film industry can be.
The counter-position of the European Union, and of France in particular, in the GATT talks also reflects anxieties which are prevalent in the UK and are at the centre of some of the worries expressed by your Lordships tonight and by the country at large. Television is the most popular manifestation of our national culture—and that of most other developed countries—and very few people in this country will feel indifferent about the way in which television programming develops or how it affects film, theatre, art and other parts of our cultural life.
The tension between the development of television as an industry and its role as a flagship for popular culture is what the Government and their appointed regulator, the ITC —and the IBA and the ITA before—have sought to resolve. Within the Government it is symbolised by the revived interest of the DTI in the industry and the differing viewpoint which that department may have from the Department of National Heritage.
It is difficult for the regulator of any industry, or for the Government acting in an essentially regulatory capacity, not to fight yesterday's battles. In a market economy it is likely that the initiatives for growth and expansion will come—and should come—from the participants in the commercial marketplace, with the Government or the regulator testing, when appropriate, whether any particular step is in the public interest.
In looking back and taking a broad view of ITV's development and the role of the Government and their appointed regulator, it is difficult not to feel that the balance between regulatory promotion of a cultural 1191 ideal and the creation of a framework within which a successful industry could grow was rarely achieved. While the commitment to local programming and the regional nature of the ITV network, which the regulators promoted, undoubtedly brought benefits, too often the regional tail wagged the industry dog. In the 1970s and the 1980s ITV companies, which may have seen their franchises as the base for building a larger media business, tended to see this adversely affect their chances of franchise renewal. I have no doubt that this was one factor which contributed to the decline during this period of the British film industry, for which the ITV companies should have been the natural long-term partners.
Even if the Broadcasting Act sought to establish a lighter regulatory touch and a more market-based system, it was clear even at the time that, in detailed implementation, that was not the case. Although the ITC has advanced its arguments as to why it decided to re-advertise licences in 1991 based on an unchanged map of regions (while all the time expecting consolidation to occur at a later stage), that decision caused acute problems for the applicants or re-applicants for the smaller licences because of the uncertain cost for them of network programming, to which the noble Lord, Lord Hollick, referred; and that has led to an early change of regulation, with the resulting disruption, uncertainty and arbitrary allocation of value. It must have been better to advertise licences, with whatever sub-regional programming requirements were needed to provide the desired level of local service, which were already viable and strong potential members of the network without artificial subsidies or arrangements.
I believe, therefore, that the lesson we can learn from that particular piece of history is that gradualist change is likely to create as many problems as it solves, although the abolition of the distinction between large and small licensees is welcome in starting the process of consolidation. The maintenance of a limit of two licences can only lead, as other noble Lords have argued, to the weakening of some of the licensees which, for predominantly arithmetic reasons, may remain outside the major groupings that form, like wallflowers at a teenage dance. While that, in the short term, will be to the disadvantage of those particular licensees, in the longer term, through the continuing destabilisation of the network, it will disadvantage the industry as a whole to the detriment of its contribution to employment, exports and the country's economic prosperity and of the quality of programmes available to viewers.
In that then I have common cause with what I understood the Labour Party spokesman in another place to believe; namely, that there should be no restrictions on the number of ITV licences that could be held and that normal competition policy should determine the ceiling, whether that be achieved through the control of two or five licences. However, I must differ with the Labour Party and noble Lords on those Benches as regards the belief that an extension of the moratorium would in any way have been beneficial to 1192 anyone. This is not a very complicated issue and, even if the Government have managed once more to snatch a degree of muddle from the jaws of logical deregulation, there is little evidence that more time would have necessarily enhanced their decision-making. And while it would be wrong to paint a portrait of continental European invaders poised to set sail from the Bay of Biscay on 31st December, it cannot have made sense for any relaxation of rules relating to intra-ITV mergers or takeovers to have been held back and introduced only in response to a specific bid by a continental European or other unrestricted company.
Although the ITC had advocated an extension of the moratorium, during which it could have maintained a greater degree of control over any consolidation process, the reality is that once the ITC had approved a merger or takeover, it would have found great difficulty in justifying blocking any other offeror for the relevant licensee which would not otherwise have been ruled out or disqualified. I believe then that the ITC should feel relieved that it has not been placed in that position, and if its response to that is that the extension of the moratorium would have led it to block all mergers or takeovers, then I suggest that we are very much better off, even with this imperfect step.
The argument that the moratorium should have been extended to prevent any further change of licence ownership, pending a full review of the cross-review media restrictions, seems to me to be equally unconvincing: first, because it seems quite fair to allow a degree of consolidation within the industry after 40 years of restrictions that were clearly tighter and more arbitrary than those applying to the newspaper industry; and, secondly, because I see no reason why any such consideration requires a further extended period. Television and newspapers have coexisted for over 50 years, if the BBC is to be included, and it is three years since the passage of the most recent Broadcasting Act. Consideration has a tendency to fill the time available.
If my speech is not to risk conforming to the same principle, I shall not address in any detail the issue of cross-media ownership. I would suggest only that there is often a confusion in the anxiety felt about the concentration of commercial interests and market share on the one hand and concentration of editorial power on the other. The former anxiety can and should be addressed once again by the normal competition procedure of the Office of Fair Trading and, where appropriate, the Monopolies and Mergers Commission. The latter concern is obviously the one unique to the media industry and requiring specific attention. In that respect, it is worth noting that the federal network system of ITV, which is likely to continue even after substantial consolidation, does not lend itself easily to the imposition of editorial views by any one owner of a licence or licences. Moreover, in most countries television has tended to be relatively unpoliticised, although the surprising recent intervention of Mr. Berlusconi in the Italian political arena is an exception to that rule.
I believe that the consolidation of the ITV companies can be achieved with the powers already afforded to the ITC under the Broadcasting Act and under the terms of 1193 the individual licences without any change to the quality of local services. Even though some mergers, such as that of Carlton and Central, are likely to strengthen network production outside London, it would be naive to believe that there may not be in other cases some rationalisation of network production between merged companies.
In her desire to maintain the quality of programmes, with which I and all other noble Lords undoubtedly agree, I believe that the noble Baroness, Lady Birk, is misguided in seeing profitability as the enemy of that quality. In fact, it is a condition for it. Quality programming, whether regional or prime time, should not be pursued by broadcasters only because it is required by their licence, but rather because audience ratings, as is demonstrated every day of the week, respond to good programming, which in turn generates the advertising revenues on which the ITV companies' operations and profitability are dependent.
In conclusion, I commend the order to the House, with regret only that it does not introduce more complete and balanced change and will inevitably need to be succeeded in the foreseeable future by a further order. This and future regulatory changes may place the onus very heavily on the enlarged ITV companies to achieve the economic benefits that a vibrant television and film industry offers. But that, in a market economy, is surely how it should be.
§ 7.58 p.m.
§ Lord Thomson of Monifieth
My Lords, I begin by thanking the Minister for the very clear way in which she explained the Government's position on the order. She played a sturdy innings but it remained a very, very sticky wicket on which she was playing, although that was not her personal responsibility.
The defects of the order arise directly from the blunders of the 1990 Broadcasting Act; in particular, its auction process. Two thousand pounds for the lucrative Midlands region but £37 million for a licence in neighbouring Yorkshire clearly left distortions which cannot be sustained in the long run. I believe that there is general agreement in the House on that point. However, this is not a long run; it is a very short run of a Government retreating before pressure. The present system has been running for less than 12 months. Indeed, the companies that have been putting on most of the pressure and which are at present scrambling to merge are those that have not been in any difficulties. One of the ironies of the order is that the company most protected by it is Yorkshire, which is the one with the most financial difficulties.
If there was a case for any short-term immediate change in the Broadcasting Act, it was some measure to provide reciprocity as between other countries in the European Community and ourselves as regards takeover bids. We pressed that point strongly in Committee, failed to convince the Government and it has now caught up with us. It is the Government's responsibility that that is so.
The Minister is absolutely right to say that the technology of broadcasting is changing radically and steadily towards a multi-channel world. However, from 1194 these Benches, we strongly believe that the sensible course for the Government would have been to look as a whole at the likely landscape of broadcasting in the 21st century and make coherent and consistent changes. The noble Lord, Lord Colwyn, thought that those of us who urged that line were simply taking a standstill position. I do not think that that is right. A perfect opportunity lies in front of the Government for following that course, bearing in mind the fact that they have to produce a White Paper on the future of the BBC next spring. That would present an opportunity for a major new broadcasting Act covering the whole field of broadcasting in the following year.
I believe that the future of the BBC should be decided alongside the future pattern of ownership for ITV, together with the creation of fair conditions for competition with the new providers of satellite and cable services to the family television screen, many of which, as the Minister said, are providing more than television services. Equally, a new broadcasting Act should introduce fair deals for other media owners other than Mr. Rupert Murdoch. We look for an assurance from the Government that the future of the BBC will not be treated in isolation and that there will he no more piecemeal tampering with ITV ownership. Instead, we should have a new, comprehensive and rational broadcasting Act by 1996.
In the meantime, what are the short-term consequences of such a misconceived order, if the Government are able to carry it through your Lordships' House this evening? I should point out to the Minister and her colleague on the Front Bench that there would be a very strong case for voting against the order tonight in the light of the almost total unanimity that there was on the issue in March, which was the last time that your Lordships' House debated such matters. If the proposed mergers do go through, it will put a great deal of power in the hands of one or two companies. Those that are presently joining in what the Independent Television Commissioner calls the equivalent of a "scramble for Africa" include Granada and Carlton.
It is true to say that Granada is a distinguished programme maker. I listened with interest to the comments made by the noble Lord, Lord Armstrong of Ilminster. I profoundly hope that he is right in his belief that a merger would improve programme making. However, Carlton is not a programme maker with a programme making tradition behind it; it is a programme publisher, and is none the worse for that as that is part of the provisions of the present. Broadcasting Act. But it has still to win its spurs in the programme field. As regards the responsibilities it is seeking to take on, it would be better to be well aware of the situation.
The present scramble is no doubt good for the shareholders, some of whom are doing extremely well out of it. However, I am not at all sure that it is equally good for viewers. It is true that there will be some savings of overheads, although I think that they have been greatly exaggerated in the merger ideas that have been canvassed. However, such takeovers do involve the deployment of very substantial resources in bidding 1195 to take over the other company. I suspect that there will be some considerable pressure at the end of the day on the resources left for programme making.
The Independent Television Commission recognises, as I do, that consolidation within ITV and a reduction in the number of owners is inevitable. However, the commission argued for an orderly approach, as we are doing to changes in ownership. Of course, its wise advice has been disregarded by the Government. The noble Lord, Lord Colwyn, indicated his belief that all would be well because the ITC would be able to hold the ring. It will certainly be left holding the baby, with the tough task of preserving programme commitments against powerful economic pressures pulling the other way.
My favourite television company is Grampian, in the north-east of Scotland on my old home ground. Rightly or wrongly, it feels seriously threatened by the consequences of the order. It commissioned a nationwide NOP poll which showed the value placed by viewers on regional services. Interestingly enough, Grampian was considered the most popular across mainland Britain with its local news and local interest programmes. It is also equally interesting to note that by far the worst performers in the poll, in the view of viewers in London, were the London companies. I do not quite know what conclusions one can draw from that, but I believe that it is worth giving it just a little meditation.
Channel 4, the remaining jewel in the commercial television crown in this country, I believe is also at some risk as regards the consequences of the order. Channel 4 has done well in providing a measure of distinctive competition for advertising time on television. But it remains a minnow in comparison with the ITV companies whose commanding position in the marketplace enables them to demand premium rates for their advertising time and to earn together 75 per cent. of Independent Television revenue. Channel 4's ability to compete and maintain its present remit depends to a substantial extent on the ITC maintaining its rule that no individual ITV sales operation can offer for sale more than 25 per cent. of ITV total revenue. Now that the Government have given way on their merger rules, the heat is now on for a retreat on the 25 per cent. rule. I echo what the noble Baroness, Lady Birk, said. I hope that that pressure will be resisted.
As has also been mentioned, there is also a legitimate interest of the advertising industry in the change. It has an interest in the regional vitality of the ITV system just as the viewers do. Satellites cannot provide regional coverage. Even Channel 4 sells in macro regions which are considerably bigger than the ITV regions. A national ITV plc, even with regional opt-outs, as has been urged in some quarters, would be a monopolistic monster for British advertisers.
The noble Lord, Lord Hollick, who knows about such matters, was right to mention the question of cross-ownership in relation to ITV sales houses. In some ways that issue is as important as the cross-ownership of ITV licences, perhaps even more important. The sales houses in which Carlton, Central, Granada and LWT are 1196 involved together handle 60 per cent. of all ITV advertising. In order to introduce a degree of competition into the marketplace and to protect the minor players—whether Channel 4, the national breakfast contractor GMTV, the fledgling satellite industry —or to look after the proper interests of the advertisers, it is vital that that power is limited by a curb on the potential sales points. That should clearly remain at the current level of 25 per cent. of potential ITV revenue, thus restricting concentration to a minimum of four ITV sales operations. This would provide the necessary competition for national advertisers and a degree of protection from abuse at the local level. It would, of course, still be possible for two licensees generating over 25 per cent. of ITV revenue to be owned by a single group provided that they were represented by separate sales teams with real and effective Chinese walls in operation. There will still be need for great vigilance as regards the pernicious temptation that undoubtedly exists for sales teams representing different contractors to engage in conditional selling. The noble Lord, Lord Hollick, was quite right to underline those matters. He asked some searching questions and I look forward, with interest, to hearing the answers.
Finally, I wish to say a few words about the new justification for the Government's ITV merger changes; namely, that it would build mega-companies capable of contributing to our balance of payments with massive global sales of programmes. This vision is said to have come to Mr. Michael Heseltine, the President of the Board of Trade, with such a flash of light and such force that it dissuaded Mr. Peter Brooke from following the more sensible course of taking the advice of the ITC about orderly change.
We were all sorry to hear about Michael Heseltine's illness and we are all glad to see him back on form. However, I am a little sorry that he seems to have spent too much of his convalescence watching television. I know from my own experience that it is a dangerous addiction. I must tell Mr. Heseltine and the Government that in exporting TV programmes to other parts of the world bigness is not enough. The matter is much more complicated than that. Both the BBC and ITV, who have reasonable-records of selling abroad, can tell of the special difficulties of selling British programmes in the USA, and that has nothing to do with the relative bigness of the BBC or the relative smallness of the ITV companies. There are much bigger companies in the rest of the European Community that are owned by people such as Mr. Berlusconi and the Bertelsmann Group. They do not find that simply being big enables them to gain access to the international market place.
American programmes are created first and foremost—one ought to remember this—for American consumption. Their export trade is a bonus on top of that. They reflect a continental American culture which, over 70 years, Hollywood has made a secondary culture for much of the rest of the world. Western Europe, with its diversity of cultures and its internal language barriers, can never be a second America in this sense. The noble Viscount, Lord Chandos, made some interesting and thoughtful remarks about the audio-visual issue in GATT. I agreed a good deal more with 1197 those remarks than with some of the later remarks in his speech. The GATT row over audio-visual protection gives ample evidence of the complications in this field.
Of course, the BBC and ITV sell overseas, and they will sell more as the multi-channel marketplace expands, but the appeal of British programmes to British viewers is that they reflect our own society and values. That is the way it ought to remain. Of course ITV programmes have to be paid for and make a profit, but they are much more than a purely commercial product that can be traded across frontiers like cars and cans of beans. It is, sadly, the failure to see this that remains the blind spot at the heart of this Government's approach to broadcasting policy.
§ 8.24 p.m.
§ Lord Donoughue
My Lords, apart from regretting that these proposed changes in ITV were announced to the world outside two weeks before Parliament had an opportunity to discuss them, I should begin by conceding that the new TV arrangements could be worse. The Secretary of State was undoubtedly under great pressure to allow a complete and immediate commercial free-for-all in British TV. There are certainly many Conservative Party supporters who believe big is always beautiful and enjoy the thought of total free markets and the media jungle.
The process of mergers which would accompany that would almost certainly conclude with British media—terrestrial TV, satellite TV, radio and news-papers—owned, apart from the diminishing public sector broadcasting, by only two or three media moguls, of whom Mr. Murdoch, by arrangement with the Government, would certainly be one. That would, of course, mean that the British media were safely in Right Wing hands.
Therefore we are grateful to the Secretary of State for resisting pressures for a total free-for-all, or at least so far. That, I fear, may be the next step. But I must say that what we have here, as some other noble Lords have said, is just a muddled compromise—half baked, as the noble Lord, Lord Hollick, rightly stated—which is why it would be appropriate for this House to have a chance to vote against this order, especially as the usual arrangements between the parties in Parliament are, I am told, no longer operating very happily. After all, what the Government have done allows enough mergers to create uncertainty in the industry, especially as regards whether there is any future at all for the smaller regional companies, such as Grampian, Border and HTV, but not enough to allow consolidation on a large scale and to satisfy the free marketeers.
Basically, it is a disguised admission by the Secretary of State that the ludicrous 1990 Broadcasting Act, with its farce of blind auctions, was a botched job. We on these Benches knew that, and said so at the time, but we did not expect to see it unravelling in the first year of the 10-year licensing system. The basic question is, why? The Secretary of State, and the noble Baroness at Question Time last Thursday, have given no proper explanation. The Hambros Bank document announcing 1198 the recommended offer by Carlton for Central gave, as far as I can find, only one explanation on page 3, where it stated that both partners believe,that larger UK television companies are needed to compete effectively on the world stage. The offers for Central represent a significant and logical step in that direction".The words "consolidation" and "rationalisation" are littered around as concepts that are assumed to be good.
That argument is typical City bunkum and was comprehensively demolished, in my view, by the noble Lord, Lord Thomson. These companies do not, and will not in any significant way, compete as world players on the world television stage. Their size remains relatively small; their programme audience and their advertising audience is domestic and will mainly remain so. As programme makers they have relatively little world presence and that will continue to be the case after these mergers. As for their regional programming, in so far as they stick to their licence pledges, that will inevitably be unsuited to the world stage.
If we were looking at different proposals to allow the restructuring of the whole media field, for example to allow the creation of multi-media companies able to compete internationally across the whole media field, that would be different. There is a plausible case for that, but that is not what is before us. This is mini-tinkering of a botched kind.
Hambros was understandably shy of giving the obvious reasons for these takeovers. The reasons are: first, to satisfy the desire of some to become bigger media moguls; secondly, to secure large profits for the director shareholders; and, thirdly, to reduce costs by sacking some skilled and experienced staff and reducing the quality of the programme output. I can see no other practical, financial reasons for doing it. Admittedly, there might have been a case, in terms of financial rescue—this has been mentioned by others—for allowing a merger in the one case where a company is in difficulty as a consequence of the 1990 Act; namely, Yorkshire. But, ironically, at present any way, that company is excluded because of its poison pill; namely, that it has already carried out its merger.
I look forward to hearing a convincing explanation as to why the Government have taken this half bite at deregulation. I am even more interested to learn why they have done it now. Even if one were committed to loosening the 1990 franchise regulations in due course there are good reasons for not doing it now. A number of those reasons have been mentioned in the debate by other noble Lords and have been clearly set out by the relevant regulatory body—the ITC. It has formally and publicly advised the Government and the public of the case for not deregulating now but for extending the so-called moratorium on take-overs until 1995. That is not long, and there is a strong case for it.
The ITC has given three convincing reasons for doing that. First, it would allow a period of stability in the new system of networking. After all, that system was set up with licences for 10 years and is still in only its first year after the upheavals of the franchise auction inspired by that ludicrous 1990 Act. Secondly, it would enable the future shape of the BBC to be decided. That process is well advanced. Last week we had the Select 1199 Committee report on the BBC. In the spring we expect the Government White Paper on the BBC. The BBC is and will be an important part of the future broadcasting picture. Surely we should wait until that piece is ready and in a shape to fit into the media jigsaw.
The third reason for delay given by the ITC is to sort out the shape of those other pieces in the media jigsaw, cable and satellite. They need urgent consideration, particularly the intolerable situation in relation to satellite under which the rules for the Murdoch satellite TV channel are different from and looser than those applying to terrestrial television and Murdoch's satellite channel is apparently allowed brazenly to breach the EC rules on the European origin of programmes. In the case of cable there is the odd situation in which access to cable will almost certainly be totally controlled in North America and, for example, British Telecom is statutorily forbidden to send films down its lines.
We also need and have been promised a thorough review of cross-media ownership. It is surely illogical that national newspapers are allowed to control 100 per cent. of satellite TV but are constrained to only 20 per cent. of terrestrial TV. Surely, as the noble Lord, Lord Thomson of Monifieth, argued convincingly, with so much of the media world fluid and currently under review now is the wrong time to take a decision on the ITV part of the jigsaw. Surely the rational and sensible decision would have been, if I may change the image from jigsaws to birds, to get all the ducks in a row—the BBC, cable, satellite and newspaper ownership—and then to take coherent decisions covering those interrelated media sectors. The ITC—the expert body in this area—was right to call for a period of stability and for an extension of the moratorium on take-overs. Why have the Government rejected that sensible advice? I suspect that they may have given way to a self-interested lobby from some of the Conservative Party's main supporters in the media industry.
One consequence is that British TV companies are now open to takeover by predators from Europe, as has already been mentioned. This House discussed that threat in a debate in the spring, as my noble friend Lord Hollick mentioned. At that time it was pointed out how European companies could take over British companies but British companies could not take over any of them in return. They are protected either by private controls or by national state protection. Our only protection in this country is the ITC, whose views and advice the Government obviously do not greatly respect. With one exception, it was the unanimous view from all sides of this House, on the basis of great experience and expertise in the industry, that the moratorium should be extended. The Government have chosen to ignore this House, as they have ignored the ITC. That is why it is tempting to take the opinion of the House.
Britain is now the only country in Europe where foreign companies can take a 100 per cent. interest in domestic commercial broadcasters. It will be of only small consolation to us on these Benches to see the embarrassment of the Secretary of State and the 1200 Government when Bertelsmann from Germany, Berlusconi or a French water company bids for, say, Anglia or even for the combined Carlton/Central.
One of the ironies of this situation is that a larger British company, after merger, will not be protected from take-over as has been suggested. It will probably be more attractive to European giants when it covers a substantial part of the market than when it is a tiddler in its pre-merger form. Therefore, I do not accept those arguments.
I should also like to ask the Minister about two regulatory limits which are breached by the proposed Carlton/Central takeover. The point has been raised and I should like to press the Minister to reply. The first was described from behind me as an Alice in Wonderland world. It is the 25 per cent. limit on advertising revenue for any one operator. Carlton and Central together have 31 per cent. I hope that the Minister will explain the position in that regard. There is also a 20 per cent. statutory ceiling on any single shareholding in ITN. Carlton and Central now have 36 per cent. Will the Minister tell us what the Government and the ITC propose to do to prevent those breaches? Can she give us an assurance, especially, that the 25 per cent. limit on advertising revenue for one operator will not be removed?
One of our main anxieties on this side of the House, as in another place, is the regional dimension to television in this country. The commendable desire to protect and enhance that has underpinned all existing and previous legislative organisation of UK television. ITC surveys have found that appreciation of the regional dimension remains high. Will the Minister give an absolute guarantee that the regional dimension will be maintained?
We also need assurances about quality. Central Television has a good reputation for quality of programmes, especially its documentaries. Carlton has not yet established any such reputation. I watched part of a programme called "A Woman's Guide to Adultery" last week and I did not think that it was up to the mark. If the result of the merger is to impose and spread that kind of material over the larger region while losing Central's documentary quality, it will be a bad move for television watchers. I should like assurances on that aspect.
In relation to programme quality one should make the point that the main damage has been imposed by the Government. The costs of bidding for franchises under the 1990 Act and the cost now of mounting hugely expensive bids must inevitably drain money out of the system. Those costs can only be met to some extent by cutting expenditure on programmes.
This has been an interesting and important debate. Many who study the media may feel that the main danger for us is of being out of date and that we should not treat ITV with such great concern because very soon it will no longer be a major player. The dynamic technological change means that the future lies with a multiplicity of satellite and local cable channels. Therefore, by the end of the decade our ITV terrestrial companies will be of little consequence. That may be the case at some time in the future, and I appreciate the 1201 forces which may bring that change about. However, tonight we are dealing with the here and now—the mid-1990's—, and ITV's regional television matters to millions of people.
It is crucially important that the future landscape of the media in Britain be surveyed in a rational and measured way. That should mean that the structure of ITV is considered alongside the imminent proposals for the BBC, cable, satellite and cross-media ownership, to establish a rational and coherent picture. But the Government have not done that. They have merely tampered with a part of it. They have also snubbed and ignored the ITC, which is the body upon which we rely to protect the regional quality and programme quality of broadcasting. They have created uncertainty where we need stability and have left us with the Alice-in-Wonderland tangle that my noble friend Lord Hollick described. For all those reasons we regret this muddled and half-cocked measure and hope, with little belief, for some reassurance from the Minister on the many doubts and questions raised.
§ 8.40 p.m.
§ Baroness Trumpington
My Lords, in my opening remarks I endeavoured to give the reasons—perhaps the noble Lord, Lord Donoughue, would like to listen to me, or perhaps not—why my noble friend the Secretary of State took the decisions embodied in the order. Let me now take up the various points made by noble Lords.
I would immediately say to the noble Baroness, Lady Birk, and the noble Lord, Lord Donoughue, that, when the Secretary of State for National Heritage made a public announcement about proposed changes to the ownership rules before informing the House, no disrespect to Parliament was intended. The announcement was always going to be very market sensitive and it was important to minimise the effects on the stock market. The Secretary of State wrote personally to several interested Members in both Houses as the announcement was made to keep them fully informed; and Answers were given to Parliamentary Questions in this House and in another place later in the day.
I do not intend to spend a lot of time on the subject of regional broadcasting. I should like to commend the remarks in my opening speech to the noble Baroness, Lady Birk, and the noble Lord, Lord Donoughue. I remind them that at the very end I said:The conditions of the licence about regional programming and production remain, even if there are changes in ownership".The noble Baroness, Lady Birk, the noble Lord, Lord Armstrong, and my noble friend Lord Colwyn mentioned the moratorium. I was grateful for the remarks of the noble Viscount, Lord Chandos. The noble Lord, Lord Donoughue, also returned to the subject. I have to say yet again that the moratorium was only ever intended to provide a short period of stability at the start of the licence period, not long-term protection against the normal disciplines of the market. Extending the moratorium would provide little, if any, real or long-term protection to the ITV companies in the future.
I turn now to the Independent Television Commission and the issue of consultation. I am not a 1202 cricketer but I believe that the noble Lords, Lord Thomson of Monifieth and Lord Donoughue, bowled many a maiden over. However, for all that, I must repeat that, as my right honourable friend the Secretary of State made clear in another place last week, he discussed the issues with the chairman of the ITC on a number of occasions. He understood the commission's view, which it held during the passage of the Broadcasting Bill, that the moratorium should have lasted longer. However, the Government were not obliged to accept the commission's view on that any more than they did in 1990 when they decided that the moratorium should last for only one year after the new ITV arrangements came into force. The Government's decision was market sensitive and the Government's conclusions could not be disclosed in advance. The chairman of the commission has made it clear that he believes that on matters of regional programming it is the licence conditions, not the ownership, that matter.
The noble Baroness, Lady Birk, stated that mergers would result in job losses. That is a matter for the companies. Some jobs may be lost but others may be created, especially if British broadcasting is allowed to develop its export potential.
The noble Lord, Lord Hollick, referred to the role of the Office of Fair Trading. The position of the Director General of Fair Trading is not affected by the order. The Director General of Fair Trading operates independently of the ITC. The Broadcasting Act states clearly that the responsibilities of the commission do not affect the discharge by the Director General of Fair Trading or by the President of the Board of Trade of their functions in connection with competition.
The noble Lord, Lord Hollick, also asked what the order would do for programme production. The production base is safeguarded by the financial health of industry. That could be helped by greater consolidation than was allowed under the 1991 order. The Government decided on an evolutionary approach to ownership, not sudden deregulation. The question of how to define the market share was considered at the time of the broadcasting legislation. The share of audiences and advertising revenue fluctuates. Ownership seemed a clearer basis for determining questions of ownership.
The noble Lord, Lord Hollick, the noble Viscount, Lord Chandos, and the noble Lord, Lord Donoughue, also referred to cross-media ownership. I believe that I stated in answer to a question last week—I may not have done so—that the Government were carrying out a review which would include all forms of broadcasting, including radio, cable and satellite, as well as the press, and which may go wider.
The noble Lord, Lord Thomson of Monifieth, spoke of the size of bids for ITV licences. ITC did not award a licence if it thought that a company could not maintain the quality of the service throughout the period of the licence. The BBC charter does not expire until the end of 1996. We cannot hold up all changes for broadcasting until then.
The regulation of advertising sales arrangements is a matter for the Independent Television Commission. The commission's present policy is that it would not expect 1203 any joint arrangements for selling advertising time to account for more than 25 per cent. of ITV's regional revenue in 1993. When it announced its policies in 1991, the commission said that it would review the rules in 1994. I understand that that is still the commission's intention. In accordance with the commission's usual practice, I would expect it to consult widely and seek views from interested organisations. Meanwhile, the 25 per cent. limit remains in force.
The noble Lord, Lord Donoughue, stated that while circumstances are fluid it is difficult to get the ducks in a row—and other bird-like remarks. The 25 per cent. limit on the advertising revenue is a matter for the ITC, which will review the policy next year. Therefore, exactly what I have stated before remains true.
The noble Lord, Lord Donoughue, also referred to ITN. Under the provisions of the Broadcasting Act the Channel 3 licences must together hold less than a 50 per cent. stake in ITN and no one participant, person or body connected to that participant can have more than a 20 per cent. interest in ITN. Those restrictions are planned to come into force at the end of 1994, a date chosen by the ITC. We have no plans to amend the legislation on the ownership of ITN. However, the ITN ownership restrictions would be included in our wider review of ownership issues.
The noble Lords, Lord Thomson and Lord Hollick, spoke about the dominance of a few ITV companies. Fears have been expressed that the ITV system will be dominated by a few companies as a result of some of the proposed mergers or takeovers, such as that between Carlton and Central or Granada's bid for London Weekend Television. Under the proposals in the order there would have to be at least eight companies, since no one can hold more than two licences. The companies that have held the franchises in London, the Midlands and the North West have been the leaders of ITV for many years.
We want to make sure that there is a strong base of programme production in this country so that there is plenty of UK material to be distributed by the new technologies. That should create new jobs and the UK could become a centre for broadcasting, production and distribution. That will not be achieved if we live in the past and assume that we can hold back the tide of change and technology and prevent sensible partnerships which aim to make the most of the opportunities that the changes in technology are creating.
It takes two sides to tango and we have certainly seen two sides this evening. I am most grateful to the noble Lord, Lord Armstrong of Ilminster, and my noble friend Lord Colwyn for their remarks. It has been interesting to hear all noble Lords' remarks. If I have omitted answering any of your Lordships' questions, I shall of course write to any noble Lord who wishes me to. But in the meantime I commend the Motion to your Lordships.
§ On Question, Motion agreed to.