European Film and Television Industry: ECC Report

HL Deb 10 July 1995 vol 565 cc1406-44

4.54 p.m.

Lord Elibank rose to move, That this House takes note of the Report of the European Communities Committee on the European Film and Television Industry (Eighth Report, HL Paper 45).

The noble Lord said: My Lords, in introducing this report on audio-visual activity and the audio-visual industry in Europe, perhaps I may first thank all those who have contributed to it. I refer not only to the members of the sub-committee because we are also particularly grateful to two Members of your Lordships' House, the noble Lords, Lord Hollick and Lord Thomson of Monifieth. I am glad that the latter is to participate in the debate. It is also right that we should thank our specialist adviser, Mr. John Sanderson, who led us through what for most of us was pretty new territory which we approached with great caution. I should like to think that by the time we came to write the report, we could consider ourselves reasonably well-informed. I thank finally our then Clerk, Dr. Philippa Tudor, who made all the administrative arrangements and was largely responsible for producing the draft of the report.

It is easy to think of the audio-visual industry as a glamorous and frothy activity. It is most certainly glamorous, but it is not frothy. If we consider first what is perhaps the most important point, its effect on employment, your Lordships will see what I mean. It is very difficult to try to assess the employment figures relating to audio-visual activity because it is very difficult to say who is employed and who is not. Therefore, I hope that your Lordships will treat with a certain caution any figures produced under that heading. However, the Commission suggests that about 2 million people are employed at the moment, with the expectation that that will increase to about 4 million—that is, the number will double. That is a notable contribution to a continent which is suffering grievously from under-employment. Most of the traditional industrial and service activities are shedding jobs. On the other hand, the audio-visual sector is increasing in importance, productivity and employment and as such deserves the support not only of this country and this Government, but of other governments in Europe.

It is difficult to break down the audio-visual sector into its separate parts, but one must try to do so. There are films, television productions, videos and others. I found it surprising to learn what a predominant part video production played in the overall scheme. In fact, 20 per cent. of the revenue generated by a typically successful film comes from cinema exhibitions, with 20 per cent. from television, 50 per cent. from video leasing and purchases and another 10 per cent. from ancillary sources. So, the production of films is interwoven with other forms of exhibition, and the revenue to be obtained from them is similarly interwoven.

One of the most discussed aspects of the industry, particularly on the television side, is the issue of quotas. That issue is still alive and, as far as I know, has not yet been resolved. It dates back some seven or eight years to when an effort was made to produce and to show more European-based productions on television. That became a directive which insisted that 51 per cent. of all productions shown on television should be of European origin "where practical". That phrase was a great let-out and the source of a great deal of controversy. That is how the position stands at the moment. The exclusion or limiting clause is under attack from many countries in continental Europe.

This country always takes a fairly pragmatic and commercial view of television productions. Almost without exception, all the witnesses who appeared before the committee took the same view. One has to have at least some sympathy with other countries in Europe, in particular France, which are leading the fight for the maintenance of quotas, and which see themselves deluged under a flood of Anglo-Saxon productions—95 per cent. or more of which are of course American—as compared with ourselves. We are, and have been traditionally, anti any form of quota, but the French, and many other continental countries, see quotas as the bastion of the defence of their culture which, rightly, is of importance to them.

The committee considered the quota issue and came to the conclusion that quotas were undesirable and unworkable. They are undesirable because they are in essence a form of censorship. They insist that the adult viewer should see 51 per cent. of European productions which may not be to his taste. They also stimulate the promotion of what are sometimes known as "quota quickies", which are effectively rubbish. They meet the quota stipulation and are shown on television to justify the station's ration of European productions. All in all, we thought them very undesirable.

Quotas are also becoming increasingly unworkable. They were first thought of when there were just four terrestrial channels in this country and a similar broadcasting capability in the rest of Europe. Since then, things have changed dramatically. With cable and satellite television, one can now see something between 40 and 50 channels in this country. With the advent of digital technology, that figure is due to increase to something like 500 channels.

With that bewildering array of entertainment and information being transmitted onto the television screen of the average citizen, it seemed to us impossible to try to set a quota which would adequately cover those various transmissions. So we share Her Majesty's Government's view that quotas are, in every sense, undesirable, and we hope that the Government will continue their spirited resistance to their imposition.

Financial incentives form another subject where we tend to differ from our European allies. On the Continent, it is commonplace to offer subsidies of one type or another for film productions. There are, for example, levies on cinema attendance—all the money going into the pot for national film production. We heard a good deal of evidence from various witnesses to the effect that in several countries many of the films produced under this system were mediocre to the extent that they were never seen by anyone. Another tranche was seen but was made up of poor films, by anyone's standard. They did not recoup the money invested in them. Subsidies for film production are an unattractive way of trying to stimulate business.

However, we looked at various tax concessions. As your Lordships will see, in the report we recommended a modest tax concession; that is to say, the right to write off production costs in the space of one year rather than three years would be a sensible change in the law and the regulations.

One must face the fact that film production as such is a competitive business. If a producer—he will commonly be an American—seeks to make a film about, say, Brazil, he may choose to make it in Brazil, but he will be looking at the financial regulations obtaining in alternative countries where the film could be produced, and at the technological back-up in those countries. A film about Brazil could be made equally well in Canada, Thailand, South Africa or the Highlands of Scotland. We are competing for business in a global market. If we wish to stimulate the production of films in this country and to obtain our share—preferably more than our share—of the production that is going, it may well be necessary to make some adjustment.

Lord Harmar-Nicolls

My Lords, how does the tax condcession that my noble friend is now commending compare with what the French give to their film industry?

Lord Elibank

My Lords, very modestly indeed. The French give a great deal of money in subsidies and taxes, and impose levies on entrance to cinemas, and produce, I think, the largest subsidy pot in Europe. Anything we could do in the direction that I have been suggesting would be of the most modest order in comparison. Whether it would be enough is a matter for debate. But there is no doubt that we will have to compete in the global market.

There are of course subsidies to the generality of European production—the MEDIA II programme. There was of course a MEDIA I programme but that has been supplemented by the MEDIA II programme to which the Government are of course contributing. There is 50 per cent. more going into MEDIA II than went into MEDIA I, and so an encouraging effort is being made. I could spend a great deal longer on that issue if time permitted. It is small money in total. It amounts to 310 million ecus, I believe. Whereas that is a useful contribution, it will not be a sufficient incentive to lure the big producers to Europe or to this country.

I wish to say a word or two about copyright. The noble Lord, Lord Brain, has given me notice that he intends to raise, and indeed I think to criticise, some of the committee's conclusions. It will be interesting to hear his point of view. Copyright is extremely important, and so is the reverse side of the same coin—piracy.

Most people who produce an artistic creation want to make money. There are exceptions: academics put things on the Internet free just for the benefit of their academic brothers. Most people who produce anything of artistic significance want money for it. If that production is not protected. they will not produce it. The issue of copyright is important. It has also become a great deal more difficult because of the multiplicity of channels to which I referred earlier. Of course they include the Internet which is a fact of life with which it is difficult for someone of my generation to come to grips. Its immensity and complication will make the issue of copyright difficult.

There are broadly two systems of copyright: the Anglo-Saxon one which provides for copyright of a production to vest in the producer, and the continental one which provides for it to vest in the author, the director, the producer and actors, not just for their lifetimes but for periods after their death. It seemed to us that the Anglo-Saxon system of vesting the copyright in the producer was the simplest and most direct one, and it is the one we recommend. Which system is adopted is second in importance to its efficiency. We must produce copyright in modern audio-vision which works and which encourages people to produce the kind of material that we would want to see.

The future for audio-vision, not just in this country but in Europe, is extraordinarily exciting. There is a bewildering variety and it is developing at a remarkable speed. It offers prospects for an increase in knowledge and entertainment beyond the grasp of most of us. For that reason, it is most important that any legislation, directives or rules which we produce for the audio-visual industry should, as far as possible, relate to the future and not be an attempt to regulate yesterday's world.

Moved, That this House takes note of the Report of the European Communities Committee on the European Film and Television Industry (Eighth Report, H.L. Paper 45).—(Lord Elibank.)

5.10 p.m.

Lord Howie of Troon

My Lords, I am very pleased to be able to take part in this debate although I was not a member of the committee. Therefore, I start with both thanks and apology to the noble Lord, Lord Elibank. The thanks are to him and his committee for producing a report, which I have read, which was wide-ranging and extremely interesting. My apology is because I intend to raise a matter which is not covered by the report. I do not say that in any way as a matter of criticism but it is a matter of great interest to the Periodical Publishers Association, which has asked me to raise the matter.

The association has asked me to raise the subject because I am its vice-president, as is the noble Earl, Lord Stockton. It is an unpaid post although I should tell the House that tomorrow the association will he entertaining me to lunch. That is not at all because I am making this intervention but because it is its annual general meeting and vice-presidents are expected and, indeed, bound to attend.

The matter which the PPA has asked me to raise and on which I shall speak is what is known as the brand extension of magazines, especially the extension of masthead programming across Europe; that is, the adaptation of existing magazine or newspaper titles into television programmes. Such television programmes are produced by and bear the name of the magazine or newspaper concerned. That would meet at least one of the objectives of the sub-committee's report; that is, incentives to invest in programmes and movements towards deregulation and liberalisation.

However, there is a problem. The ITC interprets the sponsorship clause of the television without frontiers directive in such a way as to prevent publishers commissioning programmes for independent television which have the same name as a magazine or newspaper title. On the other hand, the BBC is not limited in that way. It can exploit its programmes by publishing magazines with the same name which then complement the programmes. For example, "Gardeners' World" is the name of a BBC programme and a successful periodical. On the other hand, Practical Gardening—a magazine—cannot produce independent television programmes entitled "Practical Gardening". Therefore, the BBC has a head start in an arena which is of some importance to the magazine publishing industry.

The situation throughout Europe is confused because the rules vary from country to country. Masthead programming is perfectly legal in Germany, Belgium, Spain, Italy and possibly France, although there is some ambiguity in that country, as is not unusual. It is permissible also in the United States although it is forbidden in Denmark, Norway, the Netherlands and the United Kingdom. In the United Kingdom, newspapers and magazines are governed by some of the most stringent regulations to apply anywhere in Europe.

This is a matter of creating equal opportunities for owners of intellectual property so that they may exploit that property across media, whether magazines or television, without unnecessary restrictions. The intention is not to promote a brand name but to exploit intellectual property. Editorial involvement in the programme content means that the publisher is the provider of intellectual material and he is not seeking to promote the brand name. Therefore, masthead programming is quite a different concept from sponsorship. I merely wish to ask the Minister to look at that problem. I am not asking the noble Lord, Lord Elibank, to worry about it in his reply at the end of the debate.

I take this opportunity to congratulate the Minister on his new appointment. I have no doubt that we shall see him nodding benignly towards us from time to time. His predecessor was good enough to look at the problem and he asked for some information about the situation in Europe and that information is now available. Today I am merely asking the Minister to give an assurance that he will look at the issue at the earliest opportunity with a view to giving British publishers the same freedom to exploit the commercial multi-media world which television broadcasters already have.

5.5 p.m.

Lord Thomson of Monifieth

My Lords, I hope that the noble Lord, Lord Howie of Troon, will forgive me if I do not follow him by dealing with the extremely interesting question which he raised. I am bound to say that when watching television I have thought that the BBC. which has no advertising at all, manages to advertise periodicals associated with the BBC with great ingenuity. Not for the first time, the rules of the ITC seem to be stricter than those which apply to the BBC. However, I shall say no more about that save to say to the noble Lord, Lord Howie of Troon, that speaking as a member of the Nolan Committee I exonerate him fully in relation to the lunch which he is to attend tomorrow and I hope that he deservedly enjoys it.

Like other noble Lords who are to speak in the debate, I wish to express my appreciation to the noble Lord, Lord Elibank, and the Members of Sub-Committee B for a report which is highly informative on a subject the details of which are not widely known. It is one of the few subjects about which I know a little and I believe that the report is full of sound common sense.

The noble Lord, Lord Elibank, invited me to give evidence to the sub-committee, which I was happy to do. He asked me some extremely pertinent and succinct questions and when I reread my evidence I was rather dismayed to see how long-winded were my replies. I shall try to do better this evening. I shall concentrate on one or two aspects of the report relating to television and my noble friend Lord Falkland will concentrate on the film side of the report about which he has considerable expertise.

My starting point is that broadcasting is more than an important part of a high-technology and high-growth industry. More than any other communications medium, it shapes the social values and cultural climate of our society. How could it be otherwise when, according to the statistics, people spend on average 23 hours per week in front of the television screen? I congratulate the noble Lord, Lord Inglewood, on his new appointment. I know that his Secretary of State is especially conscious of the impact of television on children and on their attitude to the world in which they live.

Therefore, I begin by saying how glad I am that the report chided the commission on overlooking in the Green Paper the vitally important role of public service broadcasting. The committee said that public service broadcasting, entails secure funding at an adequate level by national governments". I commend those words to the new Minister on the Front Bench at a time when the Government are drafting the new BBC Charter and Agreement.

It is dangerous for European Union governments to get into the mood of believing that the so-called "digital revolution", with its potential of up to 500 channels, will absolve them from the responsibility for the quality of their traditional public service channels with their deep-rooted and familiar appeal. The report is absolutely right to say that you cannot, Canute-like, turn back the tide of technology. But you can harness a tide and navigate on it to a consciously planned destination. There is no need to drown in a tide of technology.

The new cable and satellite channels at their best are a complement to the balanced diversity of the public service channels in western Europe. They can provide useful theme channels of 24-hour news services, special sports channels, special music channels and teleshopping channels; indeed, all that adds to the range of choice. However, it would be a disaster if they were allowed to drive public service broadcasting in Europe, as we know it, out of existence.

I venture a prophesy: when the day comes when there are potentially 500 channels at our fingertips with our remote controls I suspect that most of us will find that 10 or 12 of them meet all the normal needs that we have. In my judgment, our national channels can remain the heartland of that broadcaster's dozen—provided governments and professional broadcasters keep their nerve.

What then is the European Union dimension in all this? I believe that your Lordships' committee got the balance about right in paragraph 116 of its Opinion. There the committee argued: The primary responsibility for attempting to regulate the European audiovisual industry rests with Member States … The Commission's … role [is] helping to establish 'a framework in which the industry can flourish'". My own views on where national policies need supplementing with Community policies are, I must say, set out most generously in paragraph 36 of the report. They do not include subsidising pan-European programming which, in my view, is best left to professional broadcasters and, in most cases, best left alone altogether. However, there is a role for the European Union to subsidise and fund new dubbing techniques in order to bridge the language barriers which are one of the inherent handicaps of Western Europe within the global economy.

There is a need for European Union law on cross-media ownership to supplement national law and prevent excessive concentrations of economic power. Very recently, Italy had a Prime Minister who owned half of Italy's television systems; indeed, he owned and controlled that half and used it both to become, and to remain, Prime Minister. Now, Rupert Murdoch is riding to the rescue with proposals to add an Italian province to his global media empire.

On another front, Mr. Murdoch's undoubted enterprise has given him a dominating position in encryption technology—that is, the little black box which unscrambles signals for subscribers to a particular channel. As those channels proliferate and develop, none of us wants to have a proliferation of little black boxes on top of our television set competing with the family pictures and the Staffordshire china. Turner Broadcasting System, which gave evidence to the committee of the noble Lord, Lord Elibank, was absolutely right to say that what was needed was, a standardised European encryption system". However, if there is to be such a standardised system, what is also needed, in terms of competition, is that European competition law must ensure that programme providers should not also be the gate-keepers deciding the level of the toll to be paid by potential competitors. There is a major issue here both as regards the United Kingdom and the European Union as a whole.

Then there is the question of the present quota system to which the noble Lord, Lord Elibank, referred. Your Lordships' committee made a strong case for the abolition of those quotas at European level. However, it should be remembered that programme quotas have always been deeply embedded in our national legislation; that they remain there; and that they have in fact worked very well. The quota issue is a difficult and complicated one.

I would prefer to tackle the problem from the other end. Rigid quotas, particularly at the European Union level, undoubtedly deter new entrants, and that is wrong. That has been BSkyB's strongest case for a period of exemption from the programme obligations of our domestic broadcasters who are its competitors.

I do not want to intrude into that private quarrel which has been going on between Channel 4 and BSkyB about their respective contributions to the British film industry. However, the figures that were put forward recently by Channel 4's Director of Programmes, Mr. John Willis, were revealing. He claimed that BSkyB's income in 1994 was 50 per cent. greater than that of Channel 4. Yet, Channel 4 invested £179 million in new productions—85 per cent. of its total programme budget. But BSkyB, according to Mr. Willis, has made only negligible investments in new commissions … preferring instead to recycle existing material". BSkyB's own enterprise—and it has been enterprising—and also its privileged, protected position has now put it in profit. Surely the time has come in next year's broadcasting legislation to level that playing field in regard to original programme making.

I was much attracted to the proposal put forward to the committee by the witness from Turner Broadcasting System for a European policy for the new cable and satellite broadcasters that would be fair also to traditional broadcasters; namely, an investment quota based on net revenues for original programmes. The committee rather dismissed that idea feeling that it would be difficult to monitor. I believe that fear to be exaggerated. In an industry that is well accustomed to being monitored pretty closely for levies, and so on, I should have thought that it could be adequately monitored.

I have one final word to say about the global sales potential of the European audio-visual industry because, as the noble Lord, Lord Elibank, said, that is of great importance in terms of potential employment. The BBC is proud to be Europe's largest exporter of programming around the world. Of course, that is building on the splendid reputation of the BBC World Radio Service and it is now a world television service. In India, for example, its success is rather embarrassing and it has become a more popular television service than the Indian National Television Service. That does great credit to the BBC.

Commercial television is also expanding its worldwide sales. ITV's domestic strength lies in its regional companies, but 15 separate companies, which can be a richness for us on the domestic front, can be a handicap in terms of international selling. I notice that Mr. Ward Thomas, a veteran of ITV and now chairman and chief executive of Yorkshire Television, has been seeking to correct that by setting up a joint venture of a number of all ITV companies. There is the prospect of a single overseas sales consortium of ITV companies to match the BBC's sales efforts. All that would undoubtedly be in our national interest within the European audio-visual industry.

However, the challenge for both the BBC and ITV is a formidable one. The United States dominates the international market place, but it very much likes to have it both ways. The United States complains bitterly about any European protectionism. However, at the same time there are elusive and effective non-tariff barriers of practice and habit by the great American networks which make it extremely difficult for European broadcasters, and even for British broadcasters without a language barrier, to penetrate that marketplace. I am therefore rather cautious in believing that the global marketplace for audio-visual programme material, while not unimportant, will be a great saviour of the western European economy in the future. I would be careful about that. However, having said that, Britain within the European Union starts with a big advantage in the international audio-visual marketplace of sharing a world language with the Americans. Certainly it is much in our national interest to make the most of that advantage.

5.30 p.m.

Lord Bridges

My Lords, I speak in this debate as a member of the Sub-committee which prepared the report before the House. I first wish to pay tribute to the noble Lord, Lord Elibank, for his admirable chairmanship of our committee and for the skilful way in which he conducted it. We are all greatly in his debt.

What we are dealing with here is a small corner of a large subject. This is, as we all know, the age of the moving image and the screen. The printed page, which has been the means of diffusing knowledge and circulating information ever since the invention of movable type, is giving way to this new form of media. We all know this to be true and accept the concept; but the full dimension of the change is rather more difficult to grasp. Those of us who were brought up on the study of books and taught to operate in a literary society do not find it easy to transfer to the new technology and all it brings with it. I suspect, too, that governments suffer from something of the same difficulty. Their responsibilities are changing also, and it is not easy to recognise at first sight how governments should respond to the new circumstances. I suggest that the first step for us all, whether individuals or governments, is to accept the famous dictum of Marshall McLuhan that the medium is the message, and that this has been fulfilled more completely than he could have imagined at the time of his death in 1980.

What, then, is the role of the European Union in forming policy on audio-visual matters? The Commission's paper does not perhaps address this question directly. The Department of National Heritage deals with some of the individual issues in its recent glossy document replying to the Select Committee in another place; but the previous Secretary of State's reply to our report also avoids discussion of that central question. I do not blame him for that as the definition and allotment of responsibility, both within our country and in relation to the European Union, is not at all simple. However, there is one aspect on which the situation is reasonably clear; namely, the responsibility, which our Government have for long exercised, over the supervision of television in this country. The statutes put responsibility for the terrestrial channels clearly in the hands of government in the last resort. The Government are responsible for broadcasting policy and that is relevant to our policy in Europe.

However, the Government have a much more limited interest in the world of the film, which is regarded in this country much as any other form of industry. There is broad surveillance, benevolent supervision and sometimes a little money. However, as the noble Lord, Lord Elibank, has remarked, in continental Europe the situation is different. National film production in France, Italy, and I believe also in Spain, is regarded as a vital part of their living culture, which they take significant measures to promote and protect.

I also note that the treaty on European Union has brought some fresh responsibilities to the Community. Previously, cultural issues were not part of the Treaty of Rome. This was altered at Maastricht, when Article 3 of the treaty—the article which sets out the broad activities of the Community—was enlarged to include the following phrase, a contribution to education and training of quality and to the flowering of cultures of the member states". If one is not clear what this means, one may turn to Title IX of the treaty, which sets out, in Article 128, a general description of the cultural activities of the Union in somewhat less elliptical language. These new responsibilities of the Union are worth bearing in mind as the Green Paper is one of the first policy documents produced by the Commission in the cultural field since the Treaty of Maastricht.

The general view of the Sub-committee on this broad question of who does what in the cultural field was that the chief role of the Community in the audio-visual sector should be to improve the operation of the market. We had no confidence in the quota system for films shown on television, nor in levies on cinema tickets to finance film production. However, we supported the practical emphasis of the MEDIA II programme, which has now been approved by the Council, although at a rather lower level than first proposed by the Commission. We also suggested some improved tax relief to encourage film production in this country. With the exception of that latter point, the Government reacted positively to our report.

I should like to add two more personal comments. First, I want to oppose the argument advanced by many that the progress of technology is so inexorable that government policy in this area should be absolutely minimal. It is argued that any attempt to thwart, control or divert the limitless possibilities of the new technologies is a waste of time—in other words, technology wins. Like the noble Lord, Lord Thomson of Monifieth, I believe that this overstates the case. Government do have a direct responsibility for television, and can, if they choose, determine the way in which telephony, television and video-on-demand relate to each other. This looks like being a crucial factor in Europe as well as in our particular market.

The underlying cause of change in television is the extensive increase in the number of channels as the result of digitalisation and satellite broadcasting. It is my observation that television is an area of life where Gresham's Law operates. Diversity does not in itself encourage quality: rather, bad programmes drive out good. Here I beg to disagree with the Government's evidence presented to the committee. In particular I suggest that much more should be done, in Europe and on our own initiative, to exercise some degree of supervision over satellite broadcasting. I suggest that it would be in our own interest to do that, and to exercise some control and restraint over the number of digital channels made available for terrestrial broadcasting in this country. Failure to act will inevitably undermine the existing networks in this country—both BBC and commercial. As these stations are among the very best in Europe, we should not underestimate the danger and the effect.

It may be the case—it is a melancholy thought—that the golden age of television in this country is now drawing to its end. However, we do not want and do not need to accelerate its demise by accepting the proposition that everything which is technically possible must be encouraged. The example of American television, with its great diversity of channels and almost uniformly low quality, is the dreaded example which we seem bound to follow on our present course. I suggest that this is a field where there is a European dimension, particularly as regards the use of satellite television. We would do well to encourage some greater activity at the European level. We could begin by doing more to stop the diffusion of pornographic television programmes beamed at this country from continental Europe. It is one thing for a member state to allow such programmes in its own country, but quite another to permit their diffusion abroad. I recognise that the Government have achieved a satisfactory result in the case of the "Red Hot Dutch" programme, and I have read in the newspaper that they are taking measures as regards the new threat of the "Erotica" programme which is beamed to this country. I believe that more European powers, rather than relying on the goodwill of other broadcasting nations, would be in place here.

My second and final suggestion concerns media concentration, covered in paragraphs 143 and 144 of our report. This matter, although mentioned in our report, was not covered in the then Secretary of State's reply in his letter of 6th June to the chairman of the Select Committee. I believe that there have been developments since our report was written, and I understand that some further action by the Government may now be proposed, and I welcome that.

My purpose in referring to this matter today is to point out that we are not the only country in Europe where this issue arises. Obviously, as the noble Lord, Lord Thomson, said, it is an issue of acute political concern in Italy, even after the recent referendum there. The Sub-committee took evidence from Frau Junker, the rapporteur of the European Parliament on the Green Paper. She spoke clearly to us about the need for both European and national legislation on media concentration so as to place some limits on the operations of large international media companies—she named Bertelsmann as an example—and to prevent undue concentration of power in their hands. Such legal controls already exist in the United States, where they have existed for some years.

If we look at the wider scene internationally, raising our eyes for a moment from the anxieties that may exist about the position here, it will be seen that the difficulty is widespread. The best approach may be, as Frau Junker suggested, action at both international and national level. It would be easier for European governments to take some limited and responsible measures to prevent abuse in this area if it could be shown to follow from a broad understanding in the European Union of the nature of the problem and the best way of handling it.

The Green Paper touches on only a few of the large issues which arise when we consider this important subject. I am certain that its international aspects will continue to grow. I hope that the Government will be able to play a positive role when the next version of the paper is presented by the Commission.

There is perhaps some lingering hesitation on our part whenever questions of European cultural policy arise. In the past—and I speak of something which happened a good many years ago—I noticed that our representatives became uneasy when the subject came up for discussion. That impression was confirmed when the representative of another European country asked me why it was that we seemed instinctively to react like an infamous Nazi leader at the mention of the word "culture". That person, it will be remembered, once said that when he heard the word "culture" he reached for his revolver. I was taken aback by that remark and had to explain, rather slowly and painstakingly, that the two situations were entirely different. The Nazis knew exactly what was intended when the word "culture" was mentioned, and they disliked the concept exceedingly; whereas in Britain the word often conveys little meaning, only recently having arrived in our language. For those above a certain age it might be taken to mean a fungus which grows on a saucer in a laboratory. To underline my point I introduced my friend to the work of T. S. Eliot, and in particular to his perhaps insufficiently known work with the revealing title Notes towards the definition of Culture published in the 1950s.

We have come a very long way since then and we now understand what the word "culture" means. All of us who have heard the noble Lord, Lord Inglewood, speak in this House in the past two years will feel sure that he will prove a confident and clear-headed representative at meetings on European cultural matters. I am also hopeful that he will understand the importance of the European cultural dimension. We are part of that and can contribute to it and benefit from it.

5.43 p.m.

Viscount Mersey

My Lords, I thank my noble friend Lord Elibank both for chairing our committee and for initiating the debate. As the noble Lord, Lord Thomson of Monifieth, is on the Nolan Committee, I must at once, with great trepidation, declare an interest, which is that I have worked in film and television for 30 years.

I believe that all of us on the sub-committee found the Commission's Green Paper on audio-visual policy a bit of a handful because it is so diffuse. For a start, there is a huge difference between film and television. But if one extends the phrase "audio-visual" further, into Nintendo, computer games, twisted pairs, video on demand, digital compression and the like, it becomes as diffuse as shoes and ships and ceiling wax and cabbages and kings, almost too diffuse to debate. Therefore, in order to be vaguely helpful in this debate I shall confine my remarks to traditional film and television, but even those two are completely different.

We start in the United Kingdom with this difference. As the noble Lord, Lord Thomson, said, we watch 23 hours of television a week. We watch two films a year. The money matches the habit. The BBC's income is some £1.5 billion a year. The British Screen Finance Corporation produces about £3 million a year, and that is not a gift, merely a loan. Therefore, I take issue with the response to the Kaufman Report by my right honourable friend the former Secretary of State for National Heritage in the glossy document which has just been referred to by the noble Lord, Lord Bridges. In that document the Government paint a glowing picture of the film industry showing how the number of films and admissions have doubled since 1984. However, they start from such a low base. In 1984 we watched only one film a year. Now we watch a mere two.

I almost prefer the cynicism of Michael Winner, who defines the British film industry as follows: It has three strands. The 'Carry on' series, the 'Doctor in the House' series, and the Hammer House of Horror". That is all, qua industry. We have made many brilliant single films: "The Third Man", "Chariots of Fire", "The Bridge over the River Kwai" and the two "Henry V" films by Olivier and Branagh. Many of them win awards. Fewer of them make money. To my great dismay I have just discovered that our beloved Ealing comedies lost money and bankrupted Michael Balcon's Ealing Studios.

The Americans control our distribution system. It is unfair, but it is a bitter reality. In 1993 American films captured 94 per cent. of our box office receipts while we captured a paltry 2.5 per cent. The Americans may have a monopoly of distribution, but they are very good at exporting product. Other European film industries resemble our own. French, German, Italian and Spanish films just about scratch a living in their own countries, but they do not do as well as American imports. French films are highly subsidised. If my noble friend Lord Harmar-Nicholls, who interjected while my noble friend Lord Elibank was opening the debate, happens to read my speech he will find that the French film industry produces many a lame duck of a film which never even reaches a French screen. A staggering 60 per cent. of French films arc never shown anywhere. They are simply too boring. The top 10 films shown in France are mainly American.

What Europe can and does do well is to service American films. Last Wednesday I was at Shepperton. The place was alive with activity. The main film they are shooting there is "Muppet Treasure Island". It is occupying two and a half stages and the model theatre.

In 1993 we attracted to this country eight American movies with a total budget of £176 million. Some say that if we gave tax incentives we would attract even more, as does the Republic of Ireland. However, tax incentives are not everything. Ireland has as yet no proper studios, very little equipment and no technicians as good as our own. A senior technician such as a lighting cameraman cannot be created overnight. From my experience, I regard four years as a minimum in which to train him or her.

Ireland attracts what is called internationally mobile product—films which can be shot anywhere and which are not about the country they are shot in. The noble Lord, Lord Gregson, said in our committee that Ireland is just a jobbing shop. That is the situation at present, but Ireland could build studios, buy in equipment and train lighting cameramen. So we could easily lose that product to our friends across the Irish Sea, and we must be ever vigilant. It is for that reason, as my noble friend Lord Elibank said, that our committee recommends 100 per cent. first year tax write-offs and the simplification of withholding tax on the earnings of foreign entertainers working on films in this country.

Perhaps I may now turn to television. Most of Europe has a healthy home industry simply because people prefer to watch home products at prime time. No American programme can beat "Coronation Street", "Eastenders" or "The Bill". We cannot, of course, export these very British products to the Continent; and nor can the continental countries export to us their national prime-time soaps.

It is an interesting sideline, however, that we can export a format. Thus we export to Germany the plot of "The Bill". The police become the Polizei; London becomes Hamburg, and the programme is called "Stazione". There are also Dutch and Spanish versions of "The Bill". Similarly, the Australian series "Neighbours" is made more Teutonic and retitled "Nachtbaren".

I have dealt with domestic drama. There are other programmes which naturally cross all frontiers as they do not rely on dialogue: natural history programmes, sporting events and music.

However, what will never work is the so-called "Euro Pudding": a real co-production with German actors, French sets, Austrian pastimes and Scandinavian locations. That is sometimes rather cruelly called "Hermann the Riviera Vet on Ice". Naturally, it is doomed. The strength of Europe is its cultural diversity.

Even in the television field some transatlantic figures should cause us concern. First, America exported to Europe 4.1 billion dollars of television products, but Europe exported to America only 360 million dollars worth. Secondly, there is the sheer scale of the American operation: 104 episodes of "MASH" against a mere 12 of "Fawlty Towers".

The Americans are masters of both film and television. There is no other way of explaining why Germans will watch American but not French programmes; French will watch American but not British programmes; Spain will watch American but not Italian programmes. How can it be that MTV, the new American pop music channel, is Pan-European and regularly reaches more homes than any other channel—a staggering 60 million?

By now noble Lords must have realised that we do not believe that there ever can be a European audio-visual industry to rival that of Hollywood and that the Green Paper is misguided if it suggests that there could be in the shape of some Euro pudding. As my noble friend Lord Elibank said, we are opposed to quotas. An insistence that a certain percentage of film and television must be national or even European merely encourages the second rate. We are opposed to subsidies. Those encourage people to make films which are so bad they will not be seen. There is evidence of that in Germany as well as in France.

However, we favour subsidiarity. An expansion of that theme is set out in paragraph 116 of the opinion of the Committee. I believe that paragraph to be the nub of our 290 pages of report and evidence. I was pleased to hear that the noble Lord, Lord Thomson of Monifieth, and the noble Lord, Lord Bridges, felt the same way. Perhaps I may conclude by quoting some of the report. The heading is The rôle of the European Union, and paragraph 116 states: The primary responsibility for attempting to regulate the European audiovisual industry rests with Member States, and is exercised at national and regional government level and by the broadcasters themselves. For practical reasons, and in accordance with the principle of subsidiarity, the European Union has a less direct part to play". The paragraph concludes: The number one priority for the Commission in this area must be the creation of a level playing field so that the European audiovisual industry can achieve its potential". And that, my Lords, is all that the Commission should do.

5.54 p.m.

Viscount Chelmsford

My Lords, I begin by commending the Select Committee for setting out the background to the report and for summarising the evidence so well. The report employs the usual flair of all reports of the Select Committees of this House—a flair which one compares with the long-winded Eurospeak which so often comes my way and, I am sure, the way of noble Lords concerning reports from Brussels, not least those which originated in the UK.

I wish to concentrate on the television side of the report. I am not close enough to the film industry to comment. I have no difficulty in agreeing with the 28 recommendations in the report in so far as they relate to television. However, I should like to identify and discuss two other areas. The first has already been touched upon by the noble Lord, Lord Thomson of Monifieth, on a rather higher level than is my intention.

I begin with conditional access and the associated problem of encryption. That is the first policy issue currently being debated by the EURIM working party on audio-visual matters. The Select Committee heard some evidence on this issue but very much less than I would have expected considering the unhappiness that it engenders in certain parts of the industry. The key question is: does BSkyB have a monopoly on encryption and thus on conditional access? That is a major part of the debate. If noble Lords wish to decide the answer for themselves, and have not already done so, I recommend the reading of BSkyB's evidence to the Select Committee on that point. It is a fascinating story.

I shall now indulge in matters which are commercial. I work with no commercial company. I take no money from any corporate body. However, I work with EURIM, for no money, and EURIM is an all-party group. Therefore, I hope that I am reasonably unprejudiced.

The working party's opinion—it was formed before BSkyB joined us, as it did recently, and has still to be ratified by a full meeting of our members—is that the TV market place is at the least Pan-European if not worldwide. It has noted that there are two other European encryption competitors: Canal Plus and Deutsche Welle TV. It also has evidence to show that digital broadcasting has quite separate problems from those of analogue broadcasting.

In its evidence to the Select Committee, BSkyB claims that it has competitors in analogue conditional access: satellite via the other European encryptors, to which I have just referred; satellite with advertising revenue; and the 22 UK exclusive cable channels. We have just had further dispute in that area with two of the cable companies complaining bitterly. The subject is now being reviewed by regulators.

The EURIM working party is satisfied that when we achieve digital transmissions the position on encryption is quite different. As some noble Lords may know, Digital Video Broadcasting group has European agreement to a digital encryption system from all the EU broadcasters other than UK terrestrial broadcasters—that is, the BBC, ITV and Channel 4. The DVB has produced what is called a code of conduct, an agreement on fair access to allow all to have open access into the encryption system with separate smart cards on the single box. However, so far as I know, the UK terrestrial broadcasters may still be rejecting that. Why that is so, I have yet to ascertain.

There is no evidence to the Select Committee on digital encryption from either the BBC or the ITA. However, there is evidence from Channel 4 which implies that there is no difference between BSkyB's analogue encryption monopoly, so called, and that which will follow regarding digital encryption.

The BSkyB memorandum suggests that digital encryption is different, that ownership is undecided and that it accepts the DVB solution. EURIM has heard evidence that there are two alternative digital technologies, symulcrypt and multicrypt and that as yet they are too immature for positions on potential commercial ownership or profitability to be taken. We read that on 9th June in Paris the BBC, in accordance with other broadcasters, laid the foundations of a joint strategy which they presented as an 'act of faith' It is a little difficult to know what that strategy was. I assume that they were presenting it for the Telecommunications Council of Ministers on 13th June.

So far as I can see from the reports available to me, the Telecoms Council on 19th June went reasonably well: Fine progress is being made with the procedure designed to adopt EU standards for TV broadcasts so as to avoid a veritable explosion in the number of decoders coming onto the market … Ministers took note of the amendments"— made by the European Parliament— during their June 13 Telecommunications Council meeting and after the Member States' Permanent Representative to the EU … have given the matter more thought, the Member States are expected to signal their agreement to the Directive". The report states in slightly more detail later on: Within the DVB enclosure, the participants have managed to reach a compromise proposing that those offering subscriber-only services (Canal +, BSkyB, Filmnet and so on) would be allowed to provide closed systems, on condition that they permit other operators to use their systems. The DVB also undertook to develop a common interface to allow the use of a single decoder that could be accessed by several access cards". That sounds fine, but in the Economist there is reference to the fact that on 13th June the UK Government were the sole government rejecting the proposal. Unfortunately, the article does not say what was rejected by the UK Government, but it means that there is still quite a lot of confusion as to where we have got to. Obviously we all wish to see a fair trading position and a fair trading environment for our UK terrestrial broadcasters. It is difficult, though, to know how to respond unless we can understand the problem. Perhaps in his reply the Minister will be able to assist us. Obviously we are concerned that we should allow solutions to develop. If it is too early for that to happen, then it would be dangerous for us to agree on a final solution which will be a one-box solution before such solutions have developed further.

The second issue on which I wish to touch is multimedia and the regulators. EURIM wrote a paper on the G7 to government and the EC which supported the need for the EU to work on level playing fields, as does the Select Committee. However, the latter seems in its recommendations to be content to point out the need to end restrictions on tele-shopping. In EURIM, we went further. We said to ourselves: "The first problem about level playing fields is that they come up against differing legal systems which does not help them much. Secondly, they come up against genuine attempts by nation states to retain their national cultures". Neither of those points makes it easy to achieve level playing fields. Then we said: "Multimedia is round the corner, but we had better see who is actually regulating the various elements of it". We found that there were rather a lot of EU nation state regulators. We are worried that while the multimedia may be converging, it will probably be some time after it has converged that the regulators converge. On top of that, we have the great opportunity for the Commission to add another layer of regulation and make the whole thing tighter.

I know that the Minister is likely to explain that the Government have already made a start on the issue by expanding the ITC's responsibilities. But I think that there is a long way to go. Setting up in multimedia involves a corporate in three separate directorates general in Brussels and in the UK it may need clearance from any of the following: the DTI, the DNH, in some cases the Welsh Authority, Oftel, the ITC, the BBC, the Radio Communications Authority and the Radio Authority. If we want to sell something in the multimedia, we could find ourselves involved with the following bodies which are all connected in some way with standards: the Broadcasting Complaints Commission, BABT, ICSSTIS, the Broadcasting Standards Authority, the Advertising Standards Authority, the Trading Standards Association, the Video Standards Council and the Data Protection Registrar.

Of course, multimedia products evolve gradually. Indeed, if we define multimedia as including such things as exist today as ISDN, coaxial cable and compressed analogue signals, then multimedia products are already evolving. The point is not that regulators need to converge this instant but that we need some plans to be developed to allow us to achieve regulatory convergence approximately in line with multimedia convergence so that the UK's interests in leadership and profitability in the field are not damaged.

Regulation inhibits innovation, but if we have no regulation then we get monopolies and unlevel playing fields. Once again, we are back to a balance. I recognise the difficulties in achieving such an appropriate balance between the rules and the freedom. I suggest that the UK's overall costs of regulation need to go down, not up, and that where appropriate decisions on regulation are in doubt the scales should fall on the side of freedom, due to our need to be as competitive as possible.

I have spent much time on two aspects of what could loosely be called infrastructure. Perhaps I may end by saying that recently I was given a little chart. It had two sets of boxes. There was the technician's view of how to reach the consumer which had 10 separate boxes between content and consumer. All were properly identified with the kind of things I have been talking about today. Below that was the consumer's view. It had three boxes: content, interface, consumer. So there are different ways of looking at the matter and it is getting the content to the consumer that makes the profitability.

6.7 p.m.

Lord Brain

My Lords, I congratulate the noble Lord, Lord Elibank, and his committee on a comprehensive report. When we consider that there are 51 paragraphs of recommendations, they obviously studied the matter in great detail. The noble Lord started by saying that in the beginning he did not have a great deal of understanding of the industry but he now understood more. When we were discussing what became the Copyright, Designs and Patents Act 1988 I started in the same position. I have learnt a little more and that is why in a minute I shall speak on copyright. I leave to other speakers, who have much more knowledge of the film and television industry, all the other aspects of this excellent report.

It should be recognised at the start that the Green Paper and other documents on which the committee's report is based make no mention of copyright as a problem at this current state of the game in the European film and television industry. That is hardly surprising because, perhaps rather like our own government departments, DG X, which looks after the film industry, is at a couple of arm's lengths from DG XV, which looks after copyright. Therefore the fact that DG XV is in the process and may even have got out the first draft of a Green Paper on the problems of modern digital IT networking technology and copyright may not have reached the Department of National Heritage and certainly was not given in detailed evidence to the committee.

The more detailed discussions on copyright are covered in the report at paragraphs 73 to 77 and in the recommendations at paragraphs 145 and 146 and, with notes, at paragraphs 185 to 187. I declare an interest in discussing copyright in that I am a member of the British Copyright Council, a body which represents many of the interests of people who are classified as talent in the report. I myself have no work covered by copyright in the area under discussion in this debate.

The committee considered copyright to be an important topic. I refer to page 53 of the evidence. I suspect that was as a result of the British Screen Advisory Council's written evidence. It therefore seems most unfortunate that in referring in later pages to verbal evidence from the British Screen Advisory Council, the written evidence was not tested to discover what was meant about the feelings of the talent unions. I am afraid that I must contrast that with the evidence taken immediately afterwards by an organisation called PACT (pages 77 to 79), some of which was given by Sophie Balhetchet, even though in written evidence it is made quite clear (page 73) that she was much involved in damage limitation in the case of the harmonisation of copyright with the Commission. This indicates one of the problems that the committee may have had in trying to come to grips with the copyright situation.

Also—I rather regret this, because it slightly changes the balance of the case—the committee appears to have ignored the evidence (on page 35) of Channel 4 that current EU legislation is about right for the present situation, and, on page 39, in response to Question 121, that it is now happy with the amount of copyright legislation that is in force in the EU, and that it is the future development of the new technologies that is important. I shall not go on in great detail now; I have 20 further references to copyright in the evidence section of this report. Largely, the producers' point of view is presented. It is my regret that no evidence was called for from what I call the talent point of view.

It was said earlier that producers are not recognised in copyright law in this country. The author is the first holder of copyright. I quote from the 1988 Act: In this Part 'author', in relation to a work, means the person who creates it. That person shall he taken to he in the case of a sound recording or film, the person by whom the arrangements necessary for the making of the recording or film are undertaken". In an amendment to the Act which is in draft at the moment, those words are used in another section that is to be inserted with, in brackets after them, "film producer". I think that the committee was misled if it believes, as it reported in paragraph 145, that, The need to update copyright legislation … should be used as an opportunity for the European Union to reconsider the legal status of rights holders". In this country at least, part of the European Union, they are rights holders.

Much has been made of the difficulty of assembling a package so that it can be retailed on afterwards to people in other markets. Again, if evidence had been taken on the talent societies, I believe that the committee would have discovered some bodies known as collecting societies, or licensing and collecting societies. These can represent authors, musicians and other groups of copyright owners. Their function is to administer the copyright rights and the intellectual property rights of individuals, and negotiate their extension if necessary and, more importantly, in Europe—unfortunately, again, in the draft legislation in preparation by the Government, which I hope will be amended—the collection of the rental and lending rights of that very important sector, mentioned by the noble Lord, Lord Elibank, video recording. It is much to my regret that the government department involved does not at the moment seem to realise that its idea that the producers should collect the equitable rights to remuneration from the video recording is vested in the producers. As the evidence of the noble Lord, Lord Elibank, seems to indicate, that gives the producers a greater control over matters. But do the Government realise the problems?

Let us take the example of the producer of a video in this country. Perhaps it is not difficult for him in this country to go round the video shops, discover how much the video is being rented out, and reach a conclusion as to what the equitable remuneration is. But let us suppose that the same video is exported to, let us say, Spain, where there are quite a lot of English speaking residents. How will he go round the video shops there? If the task were to be given to a collecting society, the society already has the established systems for controlling these matters and, through an organisation in Europe, the International Council of Societies of Authors and Composers, it has the facility for working with similar societies in Spain or anywhere else which can monitor the rental of videos, and equally in due course the use of satellite and cable. Therefore there are problems that I should have liked the committee to investigate. However, we have to look forward.

I wholeheartedly agree with the real nub of the recommendations of the committee, which I feel is best summarised in Recommendations 185 to 187. I wholly agree that, It is essential that European copyright legislation should be revised to take account of technological developments and consolidate the legal status of producers"— I would add the words "and others"— as rights holders". I believe that it can be done by the greater use of collecting societies. Recommendation 186 states: We support development of a pan-European broadcasting rights market allowing the acquisition and pricing of rights on a Europe-wide basis". I wholeheartedly support that. After all, I realise that America is a one-language nation. But it is only the same size as the European Union. I am sure that that could be managed. Finally—this is a matter that I found very interesting in the evidence and the report—Recommendation 187 states: Piracy and unauthorised access to audiovisual material are the most important problems affecting the audiovisual industry". The British Copyright Council has a working party looking at all aspects of piracy and unauthorised access to any form of network, the Internet or whatever. We have been most interested by some of the evidence given to the committee, and we shall follow it up with those who gave evidence. I congratulate the committee again on a very good report. I am sorry that I had to criticise a particular aspect. I also congratulate the Minister who is to reply on his new appointment.

6.19 p.m.

Lord Bancroft

My Lords, I begin by adding my congratulations to those of previous speakers to the noble Lord, Lord Inglewood on his new appointment. We look forward very much to seeing the noble Lord wearing his new hat on the Front Bench.

I hope that my noble friend Lord Brain will forgive me for not following him on copyright and related matters. The European audio-visual industry—if one can conceive of such a wide and disparate being—is an enormous prairie on which many buffalo still roam. As has been demonstrated this afternoon, there is an abundant supply of technologically equipped hunters hanging on the flanks. By this stage in the debate most of my animals have been shot. I am a non-expert member of the sub-committee (on which it is an education to sit under the wise chairmanship of the noble Lord, Lord Elibank). Accordingly, I select only one or two badly wounded animals to pursue. By "badly" I infer that their wounds have been severe, not that the aim has been poor. First, I turn to the continuing argument about whether or not this is a sector in the European Union which is a business with a cultural dimension or one with predominantly commercial objectives. Therefore, in trying to help the industry, should we be looking for cultural schemes with economic side effects or economic schemes with cultural side effects? The sub-committee had little difficulty in concluding that the primary, but by no means the sole, emphasis should be on the business and economic role.

The noble Lord, Lord Elibank, has reminded us of the hugely important employment aspect. Both he and the noble Lord, Lord Thomson of Monifieth, have given us a health warning about forecasts of employment. Nevertheless, it is perhaps worth mentioning that we were told by a formidable German witness that the audio-visual media market was in his view the growth market. The numbers employed in that industry had increased from 430,000 in 1985 to 940,000 in 1993. For the Union as a whole, the Economic and Social Committee has set a target for the creation of 2 million new jobs in the audio-visual sector by the year 2000. Even if one takes that with the heaviest possible saline drip—which I am sure one should do—those are big figures in terms of useful future employment. We are discussing big business, not a cultural cottage industry.

My second target is film. That has also been the target of other noble Lords this afternoon. It is a bit of a paradox that the European Union has a strong television industry but a frail film industry. With respect to the noble Viscount, Lord Mersey, who made an extremely informed contribution, this country is an exception in the Union in that it has a recovering film industry, though from a very low base. Therefore, we do not view with quite the same anxiety as others—perhaps we should—the fact that American films fill 80 per cent. of the Union's market and that falling cinema attendances in the Union, though not here, have failed to affect the showing of US films.

I welcomed the former Heritage Secretary's enthusiastic, though in places guarded, response to our sub-committee's recommendations and those of the sub-committee in another place. Like other speakers, I am nonetheless grieved that he has been more guarded than enthusiastic about some of the tax proposals, particularly the introduction of 100 per cent. first year write off for investment in qualifying British films.

My third and final quarry is to do with broadcasting. As the noble Lord, Lord Thomson, has emphasised and the report records, the Commission's Green Paper almost totally overlooks the vital importance of public service broadcasting. Our report encapsulates the point in paragraph 121: It seems likely that more than ever before public service broadcasters will have a heavy responsibility in pointing the way to standards of high quality and in presenting national and regional cultures in Europe to their national and regional audiences. The obligations and corresponding privileges of public service broadcasters must be safeguarded. This entails secure funding at an adequate level by national Governments". I would print the last brief sentence with ail the solemn emphasis of capitals.

It is of interest to note that in its written evidence the BBC reported that it remained the leading British exporter of television programmes, accounting for 70 per cent. of all such exports, and that with a positive trade balance of about £50 million it was the largest production house in the world outside the US and Japan. Accordingly, it is quite reassuring to learn from his response that the former Heritage Secretary agrees with the importance that we attach to public service broadcasting. It is also good to see that he agrees that quotas should be eliminated or phased out in the near future.

The noble Lord, Lord Elibank, mentioned the modesty of the MEDIA programme. I believe it would be a little churlish not to acknowledge that the former Heritage Secretary at least partially took the sub-committee's advice and negotiated an increase in the MEDIA programme from 200 million ecus in phase 1 to 310 million ecus in phase 2. We would have much preferred 400 million ecus. But perhaps the most important statement of government policy is tucked away in the penultimate paragraph of the Government's flamboyantly produced response to the report of the sub-committee in another place. My noble friend Lord Bridges referred to it, perhaps implicitly, in his thoughtful speech. That paragraph refers to the creation of a new team in the heritage department with a specific remit to sponsor the audio-visual sector, which will augment the existing film sponsorship function and help to ensure that the Government properly understands the concerns of the industry and the difficulties confronting it. That is a very important statement. Among other things, it is further confirmation of a turn in the ideological tide. Out of respect for the politically dead, I refrain from referring to a U-turn. Just as the d-word—devaluation—was banned from the Government's papers and lips for two years in the mid-1960s, so the s-word—sponsorship—was banned for the whole of the 1980s. This welcome reversal of the Government's industrial policy is further confirmed in the flamboyantly produced paper that I have waved before your Lordships. That reversal was foreshadowed by the then President of the Board of Trade in the public affirmation of his postprandial interventionism of a year or so ago, which all of us will recollect. We must all devoutly hope that he eats well and often in his new incarnation as first Secretary of State and Deputy Prime Minister. We must also hope that the new Heritage Secretary is not on a diet.

6.30 p.m.

The Viscount of Falkland

My Lords, I too congratulate the noble Lord, Lord Elibank, and his committee upon producing a most interesting document and also upon asking so many pertinent questions, to which they received some fascinating replies. So carried away was I that even when Mr. Cazès of Lumière was giving his evidence I found myself mouthing his words in a French accent; so persuasive was his evidence.

Incidentally, I was interested and indeed horrified to be reminded by Mr. Cazès that his company, Lumière, had acquired the library of EMI through Cannon and various other channels. That represents 30 per cent. of our total British film archive. It reflects rather badly on the Government's alertness and care of our film heritage.

Having said that, perhaps I may pass on. I thank my noble friend Lord Thomson for his flattering introduction. I am not an expert on the film industry. I worked in the film industry a long time ago. I must also declare that there are two close members of my family involved with the industry today; one on the commercial side in this country and one on the creative side in Los Angeles in the United States. So I am not short of advice—sometimes conflicting advice—as to the remedies for the European situation.

The European situation has developed over a long period. At one extreme, there is the British film industry—if I may so call it; it is not so much a film industry as an area of film activity—which has been overshadowed for countless years by the American film industry. We share the same language, which increases the difficulties of competing with that great nation of cinema producers, at least without them seeing the films that we make because it is only then that we make a profit. At the other extreme there is the German industry, described in the report by the eminent German film director, Wim Wenders, as being dominated by the lethargy of subsidies. Other countries fall somewhere in between those two poles.

It was somewhat unfair not to give credit to the French. As has rightly been explained, they have lavished a great deal of subsidy on their film industry, with the consent of the taxpayer. Theirs is indeed a film industry. It has reached the level of 150 films a year, though falling to about 80 films in recent years. They have found ways of introducing subsidy at almost every level of French film activity, whether it be the production of prints, encouraging exhibition, actual production and so on, with a certain amount of fine tuning. Quite recently they discovered—it cannot have been a surprise to them—that if production subsidy goes very far, one starts making bad films that nobody wants to see. Generally speaking, in order to get production subsidy in France, a film now has to have a box office success in order for subsidy to apply.

So with what is the European Union faced in regard to film? Quite frankly, it is faced with the new technologies, which are imminent and now brought forward to about two years away. The new technologies are digital, with the ability to dial for films on demand through a telephone line. There is also the liberalisation that goes with that. Understandably, that is seen as a threat, which explains the rather defensive tone used in its Green Paper and which was remarked on by several of those who gave oral and written evidence for the report. The natural reaction, like that of anyone who is feeling defensive, is that one should resort to the enforcement of rules which already exist and if those rules are not obeyed, sanctions must apply. That is alien to us in the British field.

To be fair to the European Commission, it has identified one absolutely crucial area for success in making major feature films which will create a profit; namely, that one needs enormous funding to do it. It is an extremely dangerous, hazardous and risky business. That is why the Americans on the west coast of the United States have been so successful for so many years. From the earliest times of cinema they have not only brought in a great deal of commercial acumen but also, if I may say so—it may sound surprising in view of some productions of today—a great deal of creative judgment and good taste. They have created a machine which produces fictional cinematic material of a very high quality. It is not easy to compete with them.

The reason why the Americans can continue with their economies of scale is that they have on tap the funding to finance the losers. The ratio of losers to winners is very high. Evidence on that was given to the All-Party Film Group. I see the noble Viscount, Lord Mersey, nodding in agreement. He knows as well as I do that when the American majors come and explain to the All-Party Film Group why they do not invest more money in this country, they say it is because they have such a business to make a profit with so many losses to set against so few winners. I am afraid that the explanation is a lot more complicated than that. Nevertheless, that is the situation that we face. The European Commission has rightly identified as of primary importance some way to create the kind of funding which will allow continuity of production. That is what makes an industry and sadly we do not have it in this country.

Some 10 years ago I made my initial contributions to a debate during the progress of the Films Bill in 1985. That Bill was introduced by the Government, effectively to get rid of the Eady levy and produce a new economic background to the film activity. Over the past 10 years there has been an enormous change. I look back at what I said at that time and take some credit for predicting that there would be a recovery of film admissions in this country which would stem from an improvement in the exhibition sector. That happened within two years of the Films Bill coming onto the statute book.

The mostly American and Canadian investment in the new multiplex cinemas completely changed the viewing habits of cinema-goers. Nevertheless, film-going remains rather in the territory of young people under the age of 30 and mostly those under 24. So between 1985 and now, film attendances have grown from around 60 million a year to double that number. They will probably be even more this year. That is a result of the multiplex development with very high quality prints, good sound, good comfort and American standards of service. I cannot praise our native endeavours in that area, although some have followed in the wake of those North American innovations.

Apart from that, British film activity has been very slight. The British Government cannot be blamed for not succumbing to the blandishments of various interest groups, not all of which have been absolutely in step one with the other. The arguments presented to them have been confusing and they have been doubtful about our ability to compete with the Americans in any meaningful way. If we have a film industry at all, as I said recently during a Starred Question in this House, we have to be thankful to the BBC and Channel 4 for it. Quite understandably, they produce films which will show well on television, but they have kept the activity alive. In order for us to make a real impact, as the Commission identified, we have to find some way to create the continuing funding which will raise the average budget of pictures, so that we can compete and produce the kind of films that people appear to want to see.

Perhaps I may jump to one of the conclusions of the committee in that regard. I was rather disappointed in its recommendations, though I agree with all of them. However, I fancied I detected again an anti-cultural note creeping in. It said that scripts for films were of absolute importance. I agree with that. It is the development of scriptwriting in this country which will make an enormous impact. But it is not at the script stage when one knows that people will see one's film; it is somewhat later. A good script will give people a proper basis on which to judge whether or not it is a film in which they wish to invest money. Big budgets will need good scriptwriting and, as happens in the United States, probably multiple scriptwriting with dialogue writers and specialist writers brought in.

I did not like the phrase "aesthetically squeamish". I am afraid that I have been guilty in the past—in the presence, unknown to me, of the Member for Hampstead—of saying that too many films were made for West Hampstead and Belsize Park. I was roundly castigated by the right honourable lady who represented that constituency when she crept in behind me at the meeting where I said that. I excused myself, probably not to her satisfaction, but I agree that there has been too much in the British industry at small budget level which has been parochial and pretentious in an intellectual way which has put off cinema-goers. However, to call screenwriters aesthetically squeamish is not accurate. They are not frightened of the appeals of major budget pictures; there just is not the money around to make them. We have the expertise generally to make good films. However, there is a great deficiency in the screenwriting because television has taken over in the writing skills area from screenwriting. Provided we have the money, we have the skills to make a decent contribution to compete with the United States in a much more fruitful way than we do now.

I am sorry that the Secretary of State for National Heritage left us. I did not feel, at the various meetings I attended, that he necessarily spoke the language, but I became more and more attracted to his approach. The more I read the report, the more I find I agree with what he said, to the extent that I even agree with something he said with which the committee disagreed. At his visit to the Bordeaux meeting of cultural ministers he suggested that added on to the responsibilities of the media programmes should be some way of encouraging exhibition. He was absolutely right. The committee did not agree with that.

Exhibition is fundamentally important, as I said in 1984 about our own case. It is certainly important in some of the countries of Europe. If we want to see a French film which one has heard is good—to be fair, a good percentage of French films are well worth seeing—it is much better to see it in London. The quality of the print and the sound will be better; the seat will be more comfortable, though admittedly, the price will be slightly more expensive and one will not obtain such a good meal afterwards. Nevertheless, the way in which our films are shown in the new theatres in this country is excellent and that is something to which the Europeans need to address further attention.

The evidence from the American producers was very fair in that they said more effective marketing, sales and distribution was absolutely crucial to improvement in the industry. That is something which is extremely weak in Europe. It cannot be artificially stimulated through subsidy; it must emerge through increased activity of the right kind based on good scripts, more funding and so forth. The less necessity there is for government intervention, the better.

I have said enough about the situation. I am not optimistic in regard to the ability of the European Commission vastly to improve the chances of a "Eurofilm". Cinema exhibition in this country is vital to the opening of a film. Films are made on celluloid stock and made to be shown in cinemas. If one wants to get the best flavour from a film, one should see it in a cinema. Only 20 per cent. of the revenue now comes from theatrical releases; 50 per cent. from video; 20 per cent. from television and, as I learnt from the report, 10 per cent. from ancillary sales—marketing offshoots, clothing and so forth.

A film makes its initial impact in the cinema and it is vital that it should continue to do so. Nobody in the video or television field would deny that; they all rely on it and would encourage it. They would probably agree with me that, by and large, the quality of exhibition in this country by way of cinemas needs to be further encouraged, though the improvements have been beyond all measure. Indeed, some middle-aged people are now going to the cinema, which I thought would never happen. I hope that more will.

It is not an easy situation to deal with. On the language side I was intrigued to see that the noble Lord, Lord Hollick, said—not about film, but about television—that culturally we in this country did not like dubbed material. He is absolutely right. In relation to film there is a good reason for that. Technically in this country we developed a procedure of using sophisticated sound stages in the making of studio films. In the Latin countries they did not do that; they almost exclusively dubbed even their own productions.

I discovered that fact when a great pin-up of mine, the Italian actress Claudia Cardinale—I admit to having pin-ups in my youth; Claudia Cardinale and another very lovely actress called Gina Lollobrigida, both of whom I believe are still alive today—made her first Hollywood film. In fact, her voice had been dubbed all along and the wonderful, soft, melodious voice that I had listened to in the Italian films was in fact gravelly and raucous (not without attraction, I might say, but I can understand why it had been dubbed). On the other hand, Gina Lollobrigida had a very sweet voice. She was not such a good actress and used her own voice, but still dubbing the material. The Latin countries are used to mouths which do not work in "synch" with the voice. It is something that we find difficult to accept. I hate dubbed films. I much prefer sub-titled films. I do not know whether my noble friend mentioned it, but the dubbed soaps from France were a total failure. I fancy that most people, even before they became involved in the plot, were slightly mystified by some of the strange mouth movements.

It is a difficult problem. We must look for ways in this country of dealing with our problems; above all the quality of scripts. We must encourage the national film and television school at Beaconsfield, and I urge European countries to do likewise. I welcome the new Secretary of State for National Heritage. I am sure she will do an excellent job, continuing the excellent trend shown by her predecessor and supported by the Minister who will be responding today, who we welcome to his post. I look forward to some interesting exchanges across the House on this subject.

6.49 p.m.

Lord Donoughue

My Lords, I wish to join in the welcome to this excellent report from the noble Lords on the Select Committee. It is obviously very thorough. It seems comprehensive and I sympathise with most of its recommendations. I shall not attempt to cover its totality because that would keep the House too long, especially from the tug-of-war which is starting in a few minutes. I should like to consider a few of the major issues—not so big as the tug-of-war, but of some significance—because we are dealing with major industries.

Although the definitions, frontiers and estimates of size vary, it is generally agreed that film and television are major industries with great economic, employment and cultural significance. They are growing rapidly and changing technologically at dramatic speed. Indeed, media technology is advancing at such a rate that it is inevitable that any recommendations may be out of date. I believe that the Green Paper—not this report—is particularly weak on technological advance and seems over-attached to earlier media structures, while not taking on board the most recent technological advances. One sees that especially in the relationship between the video and the film industry, which has just been mentioned and the implications of the rapid growth of cable and satellite broadcasting.

In our considerations we must distinguish very clearly between film and television because they are very different industries. Film is genuinely international: the European product is very weak against the United States, and European audiences seem to prefer United States films. European television is, by contrast, strong. It is second to the United States in world markets and it is basically a national industry where European audiences prefer domestic programmes. There seems little scope for pan-European television programmes although much scope for European-wide financing.

We must also distinguish between the commercial and cultural objectives involved. Commercially, we want a strong film and television industry to promote growth and jobs. Culturally, there is the very difficult question of protecting the wide European culture from being swamped by that of the United States. On that issue I personally sympathise very much with the French and agree with all that the noble Lord, Lord Bridges, said on culture, of which we should not be ashamed. However, I admit that it is not always clear how we protect our own individual national cultures within the European Union.

Commercially, film, and especially television, as I have said, are important growth industries, but they are not simply commercial like, say, the motor car industry. They also have important cultural content and implications. Unbridled commercialism represented by complete deregulation could lead to endless "Miami Vice", perhaps with greater audiences and greater private investment, but involving neglect of the cultural factors. In fact, the mass international commercial market does not readily promote or protect the cultural identities of any society, particularly European societies. So there is a genuine dilemma here and a tension in our choice between cultural and commercial priorities.

Commercial dominance also threatens public sector broadcasting which, as the Select Committee says, figures too little in the Brussels' proposals. We need to strengthen that side of the European approach. I agree with everything that the noble Lord, Lord Thomson, said about that.

As regards the European aspect of this subject, it seems to me that the Government have been unclear in the recent past on whether or not they want to play a part in the European discussions on important film and television issues. We on this side see Europe as a positive and fruitful vehicle for dealing with several of the trans-national issues that confront us, although not all. We do not always accept the Commission's proposals. We hope that the leadership outcome opposite will stop some of the dithering that we have seen and lead to a more positive approach in Brussels and a clear recognition of the Commission's competence in certain of these matters. For a start, we hope that the Government will send Ministers and not just officials to important discussions there.

As the report states, the Commission's role is to establish a general framework while the main policy decisions lie with member states. But we must not underestimate that European dimension. We find often that the stickiest problems—and I refer only to cross-media ownership and the critical creation of a level playing field of laws and rules—can only be dealt with at the trans-national level in Europe. Here the question of copyright, on which the noble Lord, Lord Brain, spoke with such authority and detail and in which Britain has a major financial interest, is a good example.

Of course, among ourselves we may take different views on how strong a role is to be played by the European Union and the Commission. Is it to be strongly interventionist or simply enabling? Certainly, the Commission and individual member governments are not suitable to be directly involved in film or television production. We believe their role is to establish a level playing field of rules and the law in Europe, as was the first recommendation of this report. They have a role to encourage investment; to regulate cross-media ownership, as I have said, and to control excessive concentrations of power; to deal with particular monopoly or oligopoly situations as, for example, encryption; the gateway which must he opened—and I shall come back to that again—and in film distribution. There is also technological harmonisation to enable the European industry to compete worldwide. In all those areas I believe that Brussels has a competence and a very important role to play.

Looking more specifically at the film industry, I cannot compete with the intimate knowledge of the noble Viscounts, Lord Falkland and Lord Mersey, but the significance of the issues is clear to all. There is already existing here a web of financial incentives for film production in Europe. Member states spend 10 times as much as Brussels itself. In Ireland and Germany that appears to have encouraged film production, with Ireland either taking, or threatening to take, some or much from Britain. In France, which has been subject to some criticism tonight in the House, 30 per cent. of the films shown there are French. That is probably the best European exhibition rate. But whatever the incentives, the share of European films shown in Europe continues to fall as do audiences, except recently in Britain.

Obviously, we must be careful on the subject of financial incentives. We do not want Brussels bureaucrats picking winners. The Select Committee is properly wary of some of the suggestions on pan-European levies. We need not always be too wary. The British film industry, once so successful, needs nurturing back to life. One of the strongest recommendations in the report is in paragraph 134, which recommends, a new programme of support for film production in the United Kingdom", adding "without such support" there might well be no British or European film industry in the 21st century. It then recommends the tax breaks.

We shall await with interest what the Government propose to do and perhaps as regards the tax breaks we shall have to wait until the Budget. Obviously, the Government must do much more than was stated in the Secretary of State's mini-statement on the film industry in another place on 6th June.

Other noble Lords, especially the noble Viscount, Lord Falkland, mentioned the related areas of film distribution and exhibition which are crucial to the success of the film production industry. Here, as has been said, Britain and Europe have been very unsuccessful. I am not sure that the Brussels proposals will take us much further. In distribution, we face the massive power of the American global distribution networks. When relying on them for the distribution of our films, we do so against the competition of the Americans' own film products. In cinema exhibition, the United Kingdom has demonstrated with growing audiences what can be achieved by investment in high quality multiplex cinemas. The Europeans have not so far followed that successful example. I thought the most interesting figure was that video accounts for 50 per cent. of film receipts versus only 20 per cent. from cinemas. To me, it seems as if the future is already here. The Brussels Green Paper did not deal adequately with that point.

The Select Committee rightly welcomes the MEDIA II initiatives in training for filming and television work. We join strongly in that welcome. Apart from acting and direction, the United Kingdom's particular strengths in film and television lie in animation and special effects. They depend particularly on skilled training, so the MEDIA II proposals would reinforce our existing infrastructure.

We also support the proposals for aid for script development, but we need to know the Government's views on that. In the past, the Government have seemed to have reservations because it appears to involve subsidy—a "bad thing"—and government intervention—a "bad thing", and an unhappy thing on the Government's experience. I believe that that general approach is not reasonable and that it is too ideological. I agree with the noble Lord, Lord Bridges, that the Government can and should act in those areas and not just bow before finance or the allegedly irresistible advance of technology. In fact, the proposed assistance is not a direct subsidy to the industry. It is better seen as assistance to creating an efficient and competitive infrastructure. What is the Government's approach to that? How should we improve our training? What projects will be put forward for MEDIA II grants? Will the Government promise that they will enthusiastically support British project applications in the Brussels jungle?

I note that the Select Committee opposes the Commission's policy on quotas. That stance has received support this evening. Certainly, quotas have had little effect up to now. They have been ignored by satellite broadcasters. We look forward to having a level playing field some day in terms of regulation. Quotas have had little impact in the United Kingdom where UK content rules are legislated and stricter.

The arguments against quotas are serious. Quotas are easily avoided by repeats and late-night showings. There is no guaranteed coincidence of Euro-content and quality. Quotas are increasingly unenforceable in the technological world of multi-channels and video on demand. We are impressed by those arguments, but behind the quest for quotas lies a serious and valid point. Complete deregulation would allow suppliers to buy United States mass products at a marginal cost with which no European producer could compete. That would probably lower the quality of our television and would certainly lower the European cultural content. Moreover, any sudden abandonment of quotas could have a devastating impact on the fragile base of the European production industry.

Our prime objective must be to nurture the European film and television production industries, yet we accept that percentage quotas on exhibition showings may not he the right way. Investment quotas may be a more interesting approach. They are not easy to monitor, but they would ensure that British companies would invest in new programmes made in Britain, thus using British skills and developing our indigenous film and television industries. That approach needs further and sympathetic investigation.

On the delicate issue of digitalisation and the encryption process, I look forward to hearing the Government's views and their reaction to the sound comments of the noble Lord, Lord Thomson, with which I entirely agree. When digital arrives, viewers will need that black box to encode and rescramble the picture. Whoever controls and supplies that box and the encryption system controls the gateway to that myriad of channels. At present, one company controls the ability of other television suppliers to gain access, yet that company is itself a major programme supplier. What do the Government think of that? Europe is obviously worried—and rightly so. Europe believes that there should be a common interface—so do I, and I want to know what the Minister thinks.

I turn finally to education. Britain has a great opportunity and a great competitive advantage in this regard, given the common English language and the history and experience of the Open University with its vast body of course material. We must add to that software the opportunities presented by cable and satellite, especially in distance learning. There is a worldwide thirst for education and for the English language. Therefore, educational programming presents a great commercial and cultural opportunity. I should like to hear how the Government propose to exploit that in the European context.

In conclusion, the film and television industries are of crucial importance to our collective futures. They have a huge capacity to generate jobs, profits and exports and are of great importance to the protection of our culture. I trust that the Government will begin to treat them as such. The French do so, despite their language disadvantage in international markets. The European Commission does, seeing their importance to European culture and commerce. The Select Committee rightly did so in its report. The British Government should do so also and should resist their instinctive hostility to so-called "subsidy" and "government interference". The Government should—we trust that they will—recognise film and television for the great industries that they are.

7.7 p.m.

The Parliamentary Under-Secretary of State, Department of National Heritage (Lord Inglewood)

My Lords, I feel certain that I am speaking for all in your Lordships' House when I thank my noble friend Lord Elibank for raising this important and interesting topic this afternoon. Given that this is almost my first time out to bat, I must confess that I wish that my noble friend had chosen a subject that is slightly less multi-faceted.

However, this is an important industry. It is important for cultural reasons. I was interested to hear the remarks of the noble Lord, Lord Bridges, about the British view of culture. The industry is important for economic reasons also. At the beginning of the debate my noble friend mentioned the employment figures and from his speech onwards, right to the end of the debate, there has been unanimity about the fact that the industry will he of increasing significance. I do not mean merely that it will generate jobs, but that it will generate money. That is important for the future of the industry itself. It is important to emphasise that they are not alternatives. They are two sides of one and the same coin. Finally, the industry has significant social ramifications, although we have not debated that point as much as I had expected.

We are aware that this is a fast-changing world. Practically every speaker has touched on that point, from my noble friend Lord Elibank, who opened the debate, right through to the noble Viscount, Lord Falkland, and the noble Lord, Lord Donoughue. Things may soon change technologically to make much of what we have said seem out of date, but I can confirm one thing: we are concerned to ensure that the highest standards of public service broadcasting will be maintained whatever may occur.

It is equally important that we realise that aspects of that change—it is really a revolution—are causing considerable concern in all parts of society. Of course, the Government have a role to play. Indeed, a failure to appreciate that is an abnegation of the very concept of government itself.

Not only are the issues under discussion this afternoon central to the Department of National Heritage, but in a wider context they are central to the future development of the European audio-visual industry in which the United Kingdom plays a large and significant part. The report from your Lordships' European Communities Select Committee, which has formed the basis for our debate, fully recognises that and takes forward the debate in a positive and constructive way. Indeed, the Government agree with a great many of the points made by your Lordships. I will a little later go on to deal in detail with some of the key issues raised in this debate, but I would also like to take this opportunity to bring you up to date on the developments which have taken place since my right honourable friend the former Secretary of State for National Heritage replied to the noble Lord, Lord Tordoff, on 6th June.

The findings of the report we are discussing and the reply of 6th June by my right honourable friend to the noble Lord, Lord Tordoff, follow a similar format. Like my noble friend Lord Elibank I shall try to disaggregate the issues. At the same time, I shall try not merely to repeat what is already known, but to update that and make some comments. Clearly I cannot comprehensively cover everything that has been raised this afternoon. I shall try to deal with the main matters and I shall write to noble Lords if there arc any outstanding points to be considered.

There is one point which is not directly relevant to the debate which was touched upon by a number of noble Lords. It relates to cross-media ownership. We are fully aware of the importance of relaxing the present rules on cross-media ownership so that they correspond better to the realities of the present markets. Our proposals for adjustments to the rules were set out in the recent White Paper. We hope to bring forward legislation on that in the next Session.

I shall try to concentrate on the MEDIA II programme and the proposed new television without frontiers directive. I must begin with the European Union and its role which was mentioned by a number of noble Lords. We agree with paragraph 116 of the committee's report. We believe that the audio-visual sector is part of the single market. Equally, we are sure that the Community must not just usurp the role of member states in terms of regulation. At the same time, however, we must not overlook the fact that in the technological revolution that is occurring there are benefits in economies of scale. As a number of noble Lords have said, the main force in the industry worldwide is the US industry.

I shall begin with a few comments about television. We too appreciate that there is a distinct set of problems relating to television as opposed to films. I shall turn first to the directive. The European Commission's report on the application of the 1989 television without frontiers directive which it was required to make five years after the adoption of that directive, and the Commission's proposals for amendments to it, were not available to your Lordships' European Communities Committee before the completion of its report. Those are set out in EC document 9742/95 which was deposited with Parliament on 27th June and which will be the subject of an explanatory memorandum later this week.

Your Lordships will be pleased to know that the Commission has come to one important conclusion which is in accord with one of the recommendations of the committee's report. It is that the scope of the directive should not be enlarged to cover new point-to-point services such as video on demand or telemedicine. While there are important consumer protection and other regulatory issues to consider in developing such services, they are clearly telecommunications services and should not be included in a broadcasting directive. But it is fair to say that there is an undercurrent of unease among member states, some of them arguing that the means of delivery should not necessarily determine the way in which we regulate services which in content are similar to those of some broadcasters. We shall continue to resist the inclusion of those point-to-point services, but we will consider carefully any proposals which are made for regulation of them at a European level.

Your Lordships will not be surprised to learn that it is the Commission's proposals to remove the existing flexibility in the application of European programme content in Articles 4 and 5 of the 1989 directive which cause us, and the majority of other member states, the most concern. I welcome the attention your Lordships have given in the debate to that important issue, and I trust that the clear messages which have been delivered will reinforce the majority view that those proposals are unacceptable and will not achieve a strengthening of the European production sector.

We welcome the proposal to end a quota regime after 10 years, although we and a number of other states would prefer that abolition to take place immediately. In the Government's view, it is essential to pursue policies that avoid the creation of artificial barriers and regulatory measures which would stifle the development of new business. The matter of possible investment quotas for creating a level playing field between terrestrial channels and new cable and satellite channels was raised. That is one of the Commission's proposals upon which we are taking the industry's views. We shall consider carefully, in the context of the wider debate, removing the flexibility of meeting the majority European content, where practicable, progressively over time.

I should like also to draw your Lordships' attention to the revised Articles 2A, 22 and 22A of the proposed new directive which relate to amendments to protect minors and add the concept of public morality. I hope that will reassure the noble Lord, Lord Bridges, with regard to some of his concerns which he explained to the House. This is not yet legislation and there will be further negotiations in the council before a conclusion is reached. I should like to emphasise the assistance that we believe will be provided for the British case from the Select Committee's report.

I shall move on now to film. Like noble Lords, we see that the problems of film are separate but in many ways similar to those we discussed earlier in the debate. Before I comment about the MEDIA II programme, I should like to comment upon the point about tax which was raised by a number of noble Lords, in particular my noble friend Lord Elibank and the noble Lord, Lord Bridges, and the comments made by the National Heritage Select Committee of another place.

I am grateful to my noble friend Lord Mersey for pointing out that the grass is not always greener in Ireland, and all is not doom and gloom in the UK film industry. Nonetheless, we are considering those matters. They are under review. The noble Lord, Lord Donoughue, was right: this is a matter for my right honourable friend the Chancellor of the Exchequer rather than for me.

The most important development at the Audiovisual Culture Council, held on 21st June, was the political agreement to come to a common position on the MEDIA II package. There were two decisions. One concerned training and the other development and distribution. That represents a significant achievement by the French presidency which had made the audiovisual field one of its four presidency objectives.

If your Lordships will bear with me, I will describe in a little more detail the MEDIA II proposals, and the outcome which the Government consider an entirely satisfactory one from the UK's perspective. The MEDIA II proposals were adopted by the Commission on 8th February in the form of the paper entitled Audiovisual Policy—Stimulating Dynamic Growth in the European Programme Industry.

They comprised two draft council decisions, one on training, based on treaty Article 127 (which is subject to qualified majority voting) and the other on development and distribution, based on Article 130 (which is subject to unanimity). The Government welcomed those proposals. While we believe that primary responsibility for the audio-visual sector in its many forms lies with the authorities of member states, we recognise that there is a role for the community to play at the European level, not least to help counteract the dominance of foreign-owned companies, in particular those from the US. We see a need for support to correct market failure in this area and avoid terminal decline in the European audio-visual industry. That is also in line with our own stated policy aim of sustaining the UK production infrastructure.

The Government also welcomed the proposals as giving substance to the need to reorientate and refocus the present MEDIA programme, in particular by concentrating efforts on the areas of development, distribution and training.

I can confirm that support will be given under the new MEDIA II programme for dubbing, subtitling, and multilingual productions under the development and distribution decision. Limited support will also be available for cinema exhibition under the same part. There will also be support for script development and for marketing and distribution. In addition, the lottery will also contribute towards the improvement and refurbishment of cinemas. I can confirm also that we will endeavour to do what we can to ensure that the British film industry benefits as much as is possible from those initiatives. Of course, in the past the UK industry has a track record of success in that regard.

In the debate leading to the council's decision, we said also that we wished to ensure that the principles of subsidiarity were maintained fully in relation to the training proposals which should properly support and supplement member states' own programmes and not seek to replace them. I am pleased to report that the majority of our concerns have been met. Intensive negotiations within the official working group of the council culminated in the council, on 21st June, agreeing a common position as regards training and reaching a policy agreement on the development and distribution decision. We were able to achieve a reduction in the budget from the 400 million ecu originally proposed by the Commission to a satisfactory compromise of 310 million ecu. In both decisions we were also able to secure the inclusion of sound value-for-money principles and the adoption of strong "comitology" arrangements to oversee the programme as well as a host of improvements on points of substance.

We believe that the UK has negotiated a sound value-for-money package which will play a valuable part in strengthening the audio-visual industry in Europe, thereby enabling it to compete more effectively in both European and world markets.

Those MEDIA II proposals have been part of a larger package of audio-visual proposals from the Commission following on from the Green Paper of last year. The need to agree a programme to carry on in January 1996 from the existing media programme meant that the package has to some extent become unravelled. In your Lordships' report on the European film and television industry, a large number of associated issues were addressed and I should like to single out the most important of those which relate to the proposed amendment to the broadcasting directive and the new European financial instrument. Those form the other elements of the package which will occupy the attention of member states under the Spanish presidency. The Spanish presidency intends to give them a high profile as did the French presidency in relation to the MEDIA II proposals. I am grateful for the guidance which your Lordships have given to the Government both in respect to the report and to the remarks in today's debate.

The third element of the Commission's package, that of a financial instrument, might be seen as just the sort of supportive mechanism which would prove a perfect complement to the MEDIA II programme. But I am pleased to learn that your Lordships are as sceptical as are the Government on developing a new parafiscal measure which in essence would appear to use Commission money along the lines of the European Investment Fund to lever out further monies from the private sector. The Government will weigh up the merits of the particular proposals when they emerge from the Commission, but we are clear that the Commission must demonstrate that intervention is necessary, that a market failure exists to be successfully addressed by the proposed measure and that the measure would offer value for money. We have made it clear that the Government will not support a European Union-wide tax measure or novel forms of Community financing impacting on the audio-visual sector but, in any case, such measures are ultimately for finance Ministers and not for the Audiovisual Culture Council.

A number of your Lordships focused on the matter of copyright. That is a central factor in the matters which we are debating. One noble Lord said that most artists create work in order to gain some reward thereby. As Dr. Johnson said: No man but a blockhead wrote, except for money".

Secondly, it is important that we have a usable system. A very telling point was made about that by my noble friend Lord Elibank. Thirdly, whatever system is in place it must be enforceable, as science develops technical remedies against piracy and a means of monitoring the use of copyright works, particularly in connection with digital transmission. However, it is for rights' owners to choose whether to use such devices and between competing systems.

One point which it is important to note in that respect is that the value of copyright law does not merely relate to the creation itself but it has a significant impact on the merchandising of goods. As has been mentioned, that may form a very significant part of the return to the person who has the copyright rights. Indeed, looking at the Daily Telegraph today, it seems that the current Rolling Stones tour is likely to gross for the performances something in the order of £162 million while the profits derived from merchandising seem to be more in the order of £200 million.

My noble friend Lord Chelmsford mentioned the important matter of encryption. We have taken very careful note of the points raised by him and by other noble Lords and will ensure that they are brought to the attention of my right honourable friends the Secretary of State for National Heritage and the President of the Board of Trade. At this point I am not in a position to make any statement because it is a matter of enormous difficulty and sensitivity, involving issues of competition as well as regulation at national and European levels.

In addition, reference was made by a number of noble Lords to the involvement of a large number of departments and authorities in the regulations of multi-media products. I can confirm that multi-media developments clearly affect government and public organisations at many points. To assist the Government in ensuring that opportunities arising from that are explored fully, my right honourable friend the President of the Board of Trade has established a multi-media advisory group with representatives from the different industry groups.

Just as the report from your Lordships' Committee was constructive and positive—indeed, those are qualities which are well known in your Lordships' reports right across the European Union—so, too, this debate, which has been characterised by so many expert contributions, has given the Government food for thought and has encouraged us in the work that we are doing in Europe. It is precisely, in the words of the noble Lord, Lord Bancroft, because we see the audio-visual industry, both film and television, as big business and not as a cultural cottage industry that we do not support indulgent protectionist measures. The industry is growing and developing rapidly on a global scale. Each member state has a part to play, nurturing its own products. But those must compete ultimately on the basis of quality and watchability. The European Union can and does add an extra dimension to that competitiveness but it must do so by working with market forces and not by denying them. In the negotiations in the months to come, that will be our message.

I am most grateful for your Lordships' approval of the Government's overall approach and support for the audio-visual industries in the United Kingdom. Media matters are very important and I expect that I shall be returning to the Dispatch Box to deal with a number of them in the months ahead.

7.28 p.m.

Lord Elibank

My Lords, in conclusion I thank the members of my Committee for their kind remarks about me which are much appreciated. I must also thank noble Lords who have spoken today for their welcome of and appreciation for the report and the work which was put in to achieve it. Finally, I congratulate the Minister on his robust defence of the Government's policy. Also, I welcome the appreciative way in which he has dealt with the recommendations of the report. I hope that he will be able to follow some of those recommendations.

In introducing a debate like this, one can select only a few points on which to comment. I feared that some other equally valuable points might go by default. They have not done so. In one way or another in the course of the debate, your Lordships have covered all the main points of the report.

My noble friend Lord Chelmsford raised the matter of encryption. That is an exceptionally important subject. Control of the gate-keeper or gate-keepers of the system is a matter of national concern. I am not at all sure that the present situation in this country is entirely satisfactory. I shall say no more about that at present.

The noble Viscount, Lord Falkland, made the point about the importance of sheer quantities of money that are needed and the ability to ride many failures before you have the one blockbuster success. That is often underestimated by the general public who see the occasional "Chariots of Fire" or "Four Weddings and a Funeral" and think that we are on our way. We are not on our way until we have the type of financial backing which produces one or two good films but which can ride through many unsuccessful films.

Finally, I should at least refer to the courteous criticism of the Committee's report in relation to copyright made by the noble Lord, Lord Brain. I do not believe that there is quite as much difference between us as I had thought at first. But even if there is, the Committee would have to admit that in the diversity of subjects at which we looked, we were unable to go into any of the matters, particularly in relation to copyright, in the kind of depth that the noble Lord, Lord Brain, would have wished. That is a limitation imposed on any committee which is looking at a wide diversity of subjects in a Green Paper or whatever it is studying. Therefore, I hope that the noble Lord will feel satisfied that we did our best within the time constraints which were inflicted on us. I thank your Lordships, again, for participating in the debate. My last message to the Government would be: audio-visual is a sure-fire winner; do back it.

On Question, Motion agreed to.