MOTION MOVED ON CONSIDERATION OF COMMONS AMENDMENT No. 144

HL Deb 18 July 1996 vol 574 cc1077-137

144A That the House do disagree with the Commons in their Amendment No. 144.

The Lord Thomson of Monifieth

My Lords, for the convenience of your Lordships this Motion is grouped with Motions 145A, 264A and 265A. I move the Motion because it was the best way that I could find to give your Lordships' House the chance, before the House rises for the Summer Recess, to express a concern which I know is widely shared about the future of the World Service of the BBC in the face of the radical re-organisation that is presently being undertaken by the BBC. In doing so, I declare an interest in the sense that a member of my family works for the World Service.

These new clauses and new schedules are before your Lordships for the first time. As the Minister said, they carry forward the privatisation of the BBC transmitter system. The World Service's overseas transmitters are an important part of that system. Like the World Service as a whole, they are funded by the Government. There are at present 11 World Service transmitter sites: four in the UK, and seven overseas, with an annual operating budget of £23 million. There is a twelfth transmitter in Thailand which will come on stream later this year. A vital new transmitter is being planned for Oman, but the finance is still to be found.

The political and regulatory arrangements for privatisation of the overseas sites are particularly complicated, and I do not wish to go into that today. In the past, transmitters have been much at risk at times of international tension. We are entitled, just on the transmitter front, to have an assurance from the Minister that if the Government persist in that aspect of the privatisation the capacity remains to look after the interests of those who are working at those transmitters, and to ensure that the capacity to continue operating will be properly protected.

Those overseas transmitters—privatised or not—will be greatly reduced in value if the quality and distinctive character of the World Service are undermined by the radical reorganisation of the BBC as a whole, which has now been launched, and in which the English language news and current affairs are to be commissioned from a new central news organisation, serving both radio and television for all domestic services as well as for the World Service.

The editorial integrity and independence of the World Service from any sort of political interference are of course vital, but the Government have a special responsibility for the World Service, which is different from their responsibilities towards the rest of the BBC. They have a responsibility, first, to ensure that it is funded adequately—that is a subject for another debate, not for tonight—and, equally, they have a responsibility to both its listeners overseas and to British taxpayers at home to ensure that the Government obtain value for money.

All the evidence is that the FCO, which is the responsible department for the grant for the World Service, was treated in the same cavalier way as were the senior management of the World Service and the BBC more generally, and in the same cavalier way, as far as I can gather, as the general body of governors was treated, and informed after the decisions had been taken and the new appointments determined.

Sir Nicholas Bonsor, the Minister in another place, claimed the other day that these are only proposals from the BBC and not a fait accompli. I hope that the Minister can give us some clarity on this matter. The Guardian newspaper today carries a report that the Foreign Secretary, Mr. Malcolm Rifkind, has asked the BBC to come and see him about the matter because he is angry that his department: was only informed of Mr. Birt's plans less than 24 hours before they were published". If in replying the Minister could tell us whether or not that is true, and what steps are being taken if it is true, it would be helpful to those noble Lords who are concerned about these matters.

Along with others, I was glad to hear from Mr. Sam Younger, the managing director of the World Service, in a briefing meeting that he held here yesterday that the original plan is in the process of some modification, at least until April 1998. What he called a "dedicated World Service news team" would continue to operate from inside Bush House, with its own responsible people with experience of the special needs and nature of the BBC World Service news activities. We were told that that would exist until at least April 1998 when the BBC has longer term building plans to bring all its activities under one roof. In any case, I understand that the Bush House lease comes to an end at the beginning of the next century.

I regard that as a welcome move and a welcome breathing space—I regard it as only a breathing space—for working out in a calmer, more considered and more consultative way how the benefits claimed for the wider BBC in the digital age out of the reorganisation may be achieved without damaging the special quality of the World Service.

That brings me up against the way in which the director-general, Mr. John Birt, has conducted this matter. I do not for a moment argue that the World Service should be immune from change in a world whose broadcasting technology, as we recognise in the Bill, is changing fast, but I question the method of almost total non-consultation adopted. I hope that the new BBC chairman, Sir Christopher Bland, whom I know personally, and who has great experience of broadcasting and business, will feel that there is a lesson to be learned here and will not allow that arrogant exercise to be repeated.

The only defence that I have been able to extract for the way in which the reorganisation has been done is that if there had been consultation, there would have had to be negotiation and that would have been an abdication of leadership. If that is modern McKinsey management philosophy, I hope that it will be abandoned by the BBC in the future.

Of course, the BBC is a peculiarly difficult organisation to manage. When it faces change it is full of leaky prima donnas who reach for a telephone to their favourite journalist every time they have a grievance. But that is the heat of the kind of kitchen in which the BBC's Director-General has to work. If you do not consult and do not try to carry people with you—good, loyal people who are proud of the BBC World Service—you get the present result. Whatever the pros and cons of the wider reorganisation which the BBC is undertaking—and I am sure that there are both pros and cons—it now faces the separate, self-created issue of a widespread crisis of morale.

The culture and ethos of an organisation—especially one as separated from the mainstream BBC as is Bush House—is the delicate achievement of years of people working together. It can be deeply damaged at an administrative stroke. In a situation such as this, what I might call the general body of governors of the BBC have a heavy responsibility. I should like to feel sure that they were ready to carry that out in the present circumstances.

The other day I came across something said by Lord Reith. I once even met John Reith before he died. Noble Lords will know that as Director-General of the BBC he was not noted for treating governors gladly. He did not defer very much to governors as members of the BBC institution, according to all the biographies we read. But on one occasion a governor had the temerity to ask him for advice on the role of the BBC governors. He said: Whatever governors may be prepared to leave to the executive, they must decide and direct policy, and they must have a lively, comprehensive and continuing care for the product of the organisation they are appointed to govern". I hope that the governors of the BBC will have a continuing care for the very special product that is the BBC World Service. I beg to move.

Moved, That this House do disagree with the Commons in their Amendment No. 144.—(Lord Thomson of Monifieth.)

5.45 p.m.

Baroness James of Holland Park

My Lords, I am grateful to the noble Lord for tabling the Motion and for giving your Lordships' House a chance to discuss this very important matter. The major restructuring of the World Service and the BBC is as ill-conceived in principle as it was deplorable in the way in which it was promulgated. The senior staff most concerned were not consulted, including the deputy director-general, who is accounting officer for the World Service. The Foreign and Commonwealth Office was given very little notice of what was virtually a fait accompli. The requirement under the BBC Agreement that changes to the home services should not take place without consultation was ignored—and that was a change to home radio as well as to the World Service. The governors, so reliable sources inform me, considered those fundamental and far-reaching proposals in 45 minutes, without all the governors being present.

Who is running the BBC? It would appear to be a triumvirate consisting of a chairman, the Director-General and McKinsey's! This is not what many of your Lordships had in mind when it vigorously championed the role of the governors during debates on the Charter and the new Agreement.

The nature of the fiction that I write may have given me an unduly sceptical and suspicious cast of mind, but I cannot help wondering what is behind the reorganisation which was carried out in such deep secrecy. Can it really be to save money? World Service programmes already cost 36 per cent. less than those made by the home services. Is it perhaps a ploy to bring the World Service to heel, as it were, to bring it more in line with current preoccupations and ideologies more popular with the young, more relevant, more accessible? Those fashionable words are usually shorthand for bringing it down market. Or is the reorganisation primarily intended to release resources to enable the BBC to compete world-wide in the brave new multi-channel, multi-media digital age? We are apparently to have as many as 100 TV channels. This prospect brings little joy to those of us who feel that there is insufficient creative talent to provide for the channels which we already have.

But should the BBC be using its resources to compete in this overcrowded, overheated arena? Should it not concentrate on doing superbly well what it does at present and on consolidating its position as the world's most distinguished and admired provider of public service broadcasting? And who is to make that decision? What voice, what influence are Parliament and the licence payers to have? We return to the question so often asked in recent days: whose BBC is it?

There are many questions to which I should like an answer. How many redundancies are expected as a result of the restructuring and what will be the cost? Managerial revolutions do not come cheaply, particularly when outside management consultants have a hand in them. The BBC accounts for 1995–96 show restructuring costs of £31.3 million in 1994–95 and £35.2 million in 1995–96. What is the expected cost of this new upheaval?

Another consideration arises from the restructuring. The World Service is paid for by Foreign and Commonwealth Office grants in aid and its accounts are subject to regular scrutiny by the National Audit Office. Now that the World Service and the domestic services are to become so closely related, would it not be proper for the BBC accounts also to be subject to National Audit Office scrutiny? I believe that there are many who would welcome this reform and some who feel that it is overdue.

I think that I know what will happen. Senior staff will be propitiated, small concessions will be made and assurances will be given. Parliament will go into Recess and the fuss will die down. Staff who are devoted to the World Service will somehow resolve to try and make the new arrangements work. The restructuring will go ahead. I hope that I am wrong but I am not sanguine. We have seen it all before. But harm will have been done—and not only to the World Service.

To speak today of the ethos of the BBC is to risk being called sentimental, naive or wilfully ignorant of the imperatives of the modern broadcasting age. But the affection, respect and admiration in which the BBC is held both at home and abroad rest on more than the number of listeners and viewers—on more, even, than the quality of its programmes. It rests on trust.

I conclude as I began. This restructuring was not well done. The fact that those responsible are apparently unable or unwilling to recognise that fact is one of the most depressing aspects of a deeply depressing episode in the history of the BBC.

Lord Donoughue

My Lords, first, I wish to praise my noble friend Lord Thomson of Monifieth for raising this important issue in such an ingenious way today. I draw attention to the fact that in another place 264 Members of Parliament have already signed the Early Day Motion.

There are two elements of concern here: one is the actual substance of the management changes; and the other is the handling of those changes. As regards the second, the BBC has clearly handled matters badly. It seems to me a curious feature of the new BBC regime that while it spends millions of pounds on employing consultants, it appears not to believe in consultation.

The art of management in modern services is to nurture the commitment and carry the support of key staff. It is clear that the BBC has not done that here. The Government and the new chairman will need to act quickly to repair damage and to halt demoralisation.

On the substance of the changes, I must say that my personal view is that the internal management of the BBC is a matter for BBC management. But what is happening to the World Service goes, I suspect, beyond those boundaries of internal management and introduces effectively a change of service.

The changes threaten to have radical implications for the future of the World Service, as has already been pointed out by the noble Baroness, Lady James. Above all, we fear the erosion of the distinctiveness of the World Service if it is merged into domestic news because it has distinct audiences and a distinct approach to them. They may be swamped by an increase in domestic news.

I accept that that is not the BBC's intention but many of us have experience of corporate politics. Large central departments tend to absorb new acquisitions and by a remorseless process, like the tide endlessly coming in, wash away all distinctiveness. I saw that personally in the City when I was a stockbroker. The merchant banks paid huge sums to buy us stockbrokers and then slowly crushed the distinctive qualities and assets for which they had paid so much. That is my fear for the BBC World Service: that the process of what might be called Stalinist centralisation and bureaucratic homogenising will erode its distinctive virtues which are the foundation of its great historic success. In particular, I am concerned also about the separation of the World Service news from the foreign language services which have often been a valuable source of the unique view which they bring to overseas news.

Given those worries and uncertainties, we on this side of the House suggest that those changes specific to the World Service should be completely stopped until there has been proper consultation with all relevant parties. I should point out that that is more necessary in a public service company than in a private company. It should be delayed until the implications of the reforms for the World Service are much clearer.

The World Service is a great national asset of international fame. If your Lordships look at the BBC report which came through my door yesterday, it praises the World Service for its reputation, intelligence and integrity. It points out that more people than ever are listening to it and how it won three Sony awards.

Its news production is cheaper than the main domestic news into which it will be absorbed. It is a public institution and not a private fiefdom. It does not belong to the BBC top management. It belongs to the British people, to the taxpayers who fund it, including all BBC staff and listeners. Parliament has a legitimate public interest in what it does. We wish to express our concern today. The BBC must start to listen because, on my observation, it is losing friends by the day.

Lord Runcie

My Lords, I am grateful for an opportunity to use a specific example of the danger which attends the new plans for the World Service and the centralisation of news and current affairs. It is something on which I shall speak briefly but about which I have some long experience; that is, the subject of religious broadcasting.

Religious broadcasting in this country has never quite rid itself of the image of itself which was dear to Lord Reith; that is, that it should be a kind of chaplain to the nation. Those who approve of that image watch like hawks to see that it is not diluted. We have had some examples of that many times in this House. Those who disapprove of that image see that the only alternative is to make clear that religion is a minority interest or a series of minority interests.

The result is that when the religious correspondent of the BBC appears, it is not so often in the midst of the news of the day, the mainstream events. It is perhaps on some technical matter like the implications of a Royal divorce or a specialist interest, perhaps what the Synod has been up to, or it may be something a little sensational like the ecclesiastical events in Lincoln.

In the World Service, religious broadcasting is something quite different and the interplay of religion and other news and cultural insights is vital. It is a core activity in the political and cultural life of the Middle East, Africa, India and, increasingly, in the Far East.

We have talked earlier today in this House of the Dalai Lama. The information about the activities, speeches and support for the Dalai Lama is gained chiefly by his followers from listening to the World Service of the BBC. In exactly the same way during the Cold War, in the old Soviet Union, believers obtained their Church news from nowhere else but the relevant department of the World Service.

Hence, religious broadcasting has a quite different perspective when it issues from Bush House to the huge variety of audiences that it must address. It may seem less of a chaplaincy to the world, which would be absurd, and it may be less evangelical, but somehow it is more seriously handled as a major ingredient in achieving human understanding.

A Harvard professor, Sam Huntingdon, has written recently a much debated article in which he points out that the fault lines of humanity in the future will lie increasingly not between ideologies or economic interests or nation states, but between civilisations in which religious attitudes will play a major part.

We must recognise the ability of the religious department of the World Service at Bush House, through the interaction that goes on between different forms of broadcasting, to perform with special sensitivity and in a unique way. I believe it is true that there is no other international broadcasting-radio agency like the Voice of America which has a serious and systematic broadcasting department.

Not long ago, with much debate, but not too much opposition, the religious department of the BBC was shifted from London to Manchester. I am not at all happy that people who made managerial decisions of that sort, without very wide consultation, will provide sufficient guarantees in the future for the unique contribution in world understanding that comes from the religious department of the World Service. I believe that religious broadcasting is just one instance—the principle may apply in other spheres. It is also a very powerful illustration of the danger of thinking that you can make this managerial change without loss.

6 p.m.

Lord Chalfont

My Lords, I, too, should like to thank the noble Lord, Lord Thomson of Monifieth, for giving the House the opportunity to discuss this most important matter before it goes too far, and indeed, before Parliament goes into Recess. I shall not spend much time, simply because there is no time, on the substance of the proposed changes or their implications. I merely want to ask, perhaps not entirely rhetorically, what has happened to consultation in the conduct of public affairs?

In the past few days we have had three examples of major administrative acts and acts of policy being carried without consultation with those immediately involved. I speak of the restructuring of local government and, with slightly more feeling, of the sale of the married quarters estate. We now have this administrative act, for that is what it seems to be, put forward—unless reports from reliable sources are to be disbelieved—without any consultation of any effective kind with those most directly affected.

If reliable sources are to be believed, the main body of the governors of the BBC was not properly consulted, the Foreign and Commonwealth Office was treated with a singular lack of regard and respect and the staff of the BBC, including those most closely associated with the World Service, were not consulted.

Only a few days ago Mr. Sam Younger, the managing director of the World Service, said in a speech to a Chatham House audience: The World Service is part of the public service broadcasting network. To many millions of listeners worldwide it is the very essence of public service". In her brief speech this afternoon, the noble Baroness, Lady James, mentioned that point. If that is public service broadcasting in action, I can only say that I tremble for the future. This is not public service broadcasting; it is public disservice broadcasting.

Other people have made this point but I make no apology for repeating it. The World Service is not a personal fiefdom of the BBC or any of its managers. The BBC World Service is a precious, national broadcasting asset in the first place. It has a worldwide reputation for truth, accuracy, impartiality and for a profound knowledge of the customs and cultures of the people to whom it broadcasts.

However, it is more than that. The BBC World Service is one of the most powerful instruments of public diplomacy in the world. It is as important to the Government of this country and to the foreign policy of this country as the Diplomatic Service, which it complements. In my view, this is not something which can be treated as though it were part of some in-house administrative experiment, conducted by fashionable worshippers at the shrine of the bottom line and of cost-effectiveness which seem to be at the root of most of our public policies nowadays. It is an act which will have profound political implications in this country. I repeat: profound political implications.

If as a result of this change the World Service loses any of its great assets and characteristics of conducting not only a great broadcasting operation but, as I said, a great public diplomatic operation, then, at the very least—although I fear that this will be crying for the moon—it is a matter for government intervention. As other speakers have said, this is not a matter to be left to the management of the BBC; it is a matter for government intervention or, at least, if the Government will not do that, a matter for parliamentary debate and, indeed, for both Houses of Parliament to discuss. It should not be conducted in this cavalier and, one might almost say, arrogant way.

I conclude by saying that those of us who proposed amendments to the Broadcasting Bill when it was before the House were persuaded to withdraw them in the light of assurances given to us by the noble Lord, Lord Inglewood, who has conducted all these proceedings with such great courtesy and patience. He said that we could rely upon the new regime at the BBC, operating under the new charter, to introduce a new kind of BBC with which we would all be happy. However, what is happening now is giving us very little comfort and encouragement.

Lord Habgood

My Lords, I shall be very brief because virtually all that I intended to say has been said very much better by other speakers. However, there is one point that I should like to make. I trust that the Government will not say, as has already been said in answers to both spoken and written Questions, that this is an operational matter and nothing to do with us. That would be an unforgivable "get-out".

At present, we are engaged in the most Byzantine piece of legislation that I have ever tried to wade my way through, which is all about the way in which the Government and public authorities should control broadcasting. If, when we come to a major crisis like this, which is also a matter of deep public concern, the Government then say, "It's nothing to do with us", what on earth is all this legislation about? Indeed, what can we expect from it in the future? That is the first and most important reason why we must have a proper response to the concerns which have been expressed.

The second reason is that, in my view, this is not simply an operational matter; it is about structures. The way in which a broadcasting service is structured expresses its aims and values. Therefore, inevitably, a change of structure will undo precisely what has made the World Service most distinctive. That must be a matter for our concern.

Thirdly, it must be a matter for our concern because, if I understand rightly, one of the things which precipitated the whole change was the reduction by the Foreign and Commonwealth Office of the grant to the World Service. Therefore, the Government are directly implicated. I hope that the plea for a pause—perhaps a six-month pause, a time for consultation and more debate—will be heeded and that we shall really see some action as regards the concerns that have been expressed.

Lord Pilkington of Oxenford

My Lords, I also welcome the opportunity to speak and I thank the noble Lord, Lord Thomson, giving us this opportunity. I have been chairman of the Broadcasting Complaints Commission for the past three years. On the whole, I have been very impressed with my contacts with the BBC and with the way in which it has seen its duty as a public service broadcaster.

I want briefly to concentrate on the body that should take responsibility for what has happened at the BBC; namely, the Governors of the BBC. That body was appointed many years ago to represent the interests of the community as well as the will that is expressed in this House and the other place.

I am surprised—in fact utterly amazed—that a body of men and women appointed to guard the public interest should be prepared to acquiesce in a new policy for which there was no consultation, and which informed the Foreign Office, a major contributor, only days before the plan was implemented. The governors of the BBC have, in this instance, failed in their duty. They may expect support for public service broadcasting in the future, but I am afraid that much of that support has disappeared over the past few weeks.

Lord Orr-Ewing

My Lords, I shall be brief because much has been said, and well said, from different quarters of the House. It was ingenious to find a way to debate this. I thought it might be very difficult.

My reflection is that this matter is too secret. I am afraid the body we are discussing has grown a little arrogant. It feels that it is sovereign. It is true that it can actually make governments and defeat governments. Sometimes it is busy trying to do so. The BBC does have a conscience—very much so—as I know from the previous chairman, but it does not like being judge and jury in its own case. When we endeavoured to find an independent body which could monitor and take up transgressions when they occurred, it was frowned on by the BBC and by the officers who advised my noble friend at the heritage department. This seemed to be going one too far. Some £170 million is involved. Finance is meant to be behind this move. This proposal is supposed to save money, as your Lordships will remember. I always doubt those who claim that their proposals will be much cheaper and will save money. When those proposals come into effect, they cost much more. New buildings have to be adapted and adopted, and much money is spent. But this proposal was intended to save money.

Unique opportunities have emerged from Bush House under the present regime. Mr. Tusa and other people have done wonderfully well. Many of us look to the BBC, and to the World Service to be balanced, impartial, and independent. This is a unique opportunity to keep it so. Let us not throw that away, and tear it up.

It is desperately important that world broadcasting should be flexible. Revolutions take place, new people come into power, amalgamations take place and it is important that broadcasting should be flexible. It should have its ear to the ground through its well-loved, unique and loyal people serving in different countries of the world. Do not try to centralise it. Let us not forget that this Parliament is sovereign. Action taken by the BBC unilaterally is not dedicated and is not inflexible. There is time now to make a change. Certain changes have already been made under pressure. Over 220 people in the other place have signed the Early Day Motion; so there is a massive movement to try to stop this proposal. I sincerely hope that it will have the necessary effect and bring pressure to bear so that at least we do not jump off this particular tower and wreck what is a very efficient, dedicated and loyal aspect of our country.

6.15 p.m.

Lord Cocks of Hartcliffe

My Lords, many of your Lordships know that I am the vice chairman of the BBC. I declare that at the start.

The question of consultation is always a balance. It may well be that the balance was not entirely correct in this case. But I do think that the very strong reaction to any possibility that the World Service may be under any sort of threat shows the difficulty of consultation in this case. I believe the number of signatures in another place on the Motion is already up to 280. I wonder how many of my former colleagues have studied the detail of what is proposed? To talk in terms of major crises, without a proper analysis of what is being proposed, does not take us very much further forward.

Like the noble Lord, Lord Chalfont, I heard the speech by Sam Younger at Chatham House. He said that he wanted to study the detail. The detail was spelt out by the chairman a day or two ago in a lecture to the Radio Society. He said that the BBC will still remain a separately managed directorate. It will go on managing the grant-in-aid. It will schedule its own programmes; and its editorial independence will be absolutely inviolate. It can specify what programmes it requires from the BBC News Unit and its authority will not be reduced. Its nature will remain entirely distinctive.

The governors are charged with looking after the public interest. I take this very seriously, as do my colleagues. When I spoke on the Broadcasting Bill—I think at Second Reading—I spoke about the experiences some of us had listening to the World Service during the war and have treasured all these years. Believe me, my Lords, I would be failing in my duty in the post I hold if I thought there was any threat at all to the World Service and its distinctive character and I did not create the most appalling row. But at the moment I think that if the detail is studied, it will be found that the threats are imaginary and that, in fact, it will be just as efficient as it has always been.

Lord Elton

My Lords, before the noble Lord sits down, can he tell your Lordships, because he is in a good position to do so, whether it is intended to merge the news-gathering services of the World Service with the rest of the BBC. If that is the case, I think he will have to say rather more to convince us that the character of the broadcast will not change.

Lord Cocks of Hartcliffe

My Lords, with the House in its present mood, I do not think that anything I say will convince your Lordships. However, although there will be a common core, it can commission what it requires and the distinctive nature will stay.

Baroness Williams of Crosby

My Lords, perhaps I may just say three sentences. First, with great respect, I do not believe that the noble Lord, Lord Cocks, can defend a situation in which not even the director of the World Service of the BBC had 24 hours' notice of what was being proposed. That was indefensible by any standards.

Secondly, I believe in the BBC World Service. This country has created, as the noble Lord, Lord Chalfont, so eloquently said, one of the great instruments of diplomacy and one that we should not lightly throw away. I have seen the United States Public Service Broadcasting adopt hours of BBC broadcasting, which it would not do for anything that was not outstandingly excellent. I have seen throughout Russia the BBC World Service producing educational services on the new democracy and on the market system sans pareil, which nobody else has been able to equal. We would be most foolish to throw away one of this country's greatest assets. I very much hope that in another place the Foreign Secretary will do his very best to persuade the BBC management to turn away from this disastrous course.

Baroness Park of Monmouth

My Lords, everything has already been said brilliantly by everyone else. I wish simply to say yet once more that it is absolutely vital that we insist on delay and that we debate this issue. Like everyone else in this House, I think, I am afraid I am not convinced that this has been properly looked at as an issue of national concern. It has been looked at as a piece of accountancy. Surely we are not going to allow something as important as an extension of our overseas representation—and something which brings the truth to the whole world—to be tidied away by a management cabal which has such contempt for everyone else in the BBC that it does not think it necessary or worthwhile to explain to them what reasons there may be for this proposal. It has not explained whether this is a good case, a good proposal, or a harmless proposal. Why could it not have been explained? It has not been explained. Referring us to public speeches and to public bodies is not enough. We are talking about the management of the BBC. Frankly, I have never seen such appalling man management in my life. I hope that we shall insist, as far as we possibly can, that this matter shall be debated in the House.

Lord Inglewood

My Lords, I am sure the whole House will thank the noble Lord, Lord Thomson, for finding this ingenious way to ensure that we have had this interesting and useful debate on the future of the BBC and of the World Service in particular.

I suppose it must be admitted that these matters may be a trifle beyond the scope of the particular amendments we have been considering. Indeed, I think some of them are probably beyond the Government's ability to provide answers to the questions posed. But one thing I am sure of is that the points raised will have been heard by those who can, should, and no doubt will, be able to provide answers. Indeed, the noble Lord, Lord Cocks, in some respects is better placed than I to be able to respond to a number of the points made. Indeed, it is a kind of paradox that probably your Lordships are better placed to tell the BBC what it should or should not do than myself standing at the Dispatch Box. Nonetheless, I welcome the opportunity to contribute to this discussion and to respond to some of the points made about a matter which I believe is quite properly of general concern not only to your Lordships, but to the country as a whole.

Before moving on to the main body of my remarks, I wish at the outset to respond to one of the questions of the noble Lord, Lord Thomson, who sought assurance that the post-privatisation overseas capacity of transmitters to go on operating would be properly protected. In that respect, nothing should change after privatisation. Indeed, the agreements for sale have been designed to provide that services will be securely available for the BBC both at home and abroad. Clearly, in a foreign country there may be a risk of a revolution, for example, which may result in a transmitter being overwhelmed by force. However, that is beyond the scope of what we are focusing on in this Bill.

I move to the main body of my comments. I begin by emphasising that the debates recently held here and in another place on the future of the BBC and the draft Charter and Agreement have focused on the constitution and obligations of the corporation. These are at the core of those documents which are the corporation's foundations. I hope I may remind your Lordships that how the corporation is organised to meet its obligations is a matter for the governors of the BBC. Indeed, paragraph 2.1 of the Agreement makes it clear that the corporation will be independent in the management of its affairs.

It is only right, of course, that governors who have the responsibilities established by the Agreement also have the authority to organise the corporation's affairs as they believe necessary in order best to meet those responsibilities. Nonetheless, the Government's legitimate concern is the BBC's performance. Our primary interest in the way it functions relates to the extent that its modus operandi affects its output. I believe that was the point that the noble and right reverend Lord, Lord Habgood, made. It is one that we very much accept.

We have sought assurances from the BBC about the general implications of the restructuring for meeting the BBC's objectives as established under the Charter and the Agreement. It seems from what I have heard of the concerns that your Lordships have expressed this afternoon—and other comments I have read in newspapers—that they appear to be based on the premise that organisational changes are bound to have an inevitably adverse effect on the quality of the BBC's services, and in particular that there will be a loss of distinctiveness in radio output and in the World Service. Of course it is right to be vigilant about such matters, but are we right to believe that there is inevitability about that? Does the evidence indicate that that must occur?

Certainly I do not believe that the governors would wish to pursue changes which they believed threatened the special qualities of each of the BBC's services. After all, that would be a direct breach of their obligations in paragraph 7 of the Charter. The BBC has explained that it is proposing change because in its judgment those changes will put the corporation in a stronger position so that its best qualities and attributes can be preserved and built upon in a future which is increasingly uncertain and challenging.

The Bill establishes the framework for the continuing expansion of broadcasting services and for the coming of the digital broadcasting age. Competition is increasing and will continue to increase further. The resources available to the BBC's successful competitors grow faster than licence fee funding reasonably could. In order to maintain its position as the United Kingdom's main public service broadcaster the BBC must find the money to invest in digital technology and to continue to provide the high quality programming which licence fee payers rightly expect. To do that, it must ensure that it operates as efficiently as possible so that it gives back the most it can to licence payers and to the Foreign and Commonwealth Office for the money it receives from that department.

In 1993 the BBC put in place Producer Choice as a route to increased efficiency. It divided the functions of channel controllers who commission and schedule programmes, programme production heads who make the programmes, and support services who manage the BBC's facilities. That reflects industry best practice worldwide. In the past three years that focus on efficiency has produced savings of around £100 million a year. It is that which has enabled the corporation to make more original programmes, to reduce the number of repeats, and to launch new services such as Radio 5 Live, which is the "Sony station of the year".

The present reorganisation is based on that logic and carries it forward. The Director-General has made it clear to the Foreign Affairs Select Committee of another place this afternoon that the principles of producer/supplier relations are settled. It is how they are to be implemented that is under discussion—

Baroness Williams of Crosby

My Lords, does the noble Lord accept that the comments he has just made to the House imply some lack of understanding of the World Service? Digital systems would not apply to a large part of the world and therefore the pressure for digitalisation does not meet the question about how we address the large numbers of people for whom that is a distant dream.

Lord Inglewood

My Lords, the noble Baroness is of course correct in that in the immediate future digital technology will not be directly relevant to their concerns. Simply to drop the guillotine like that does not take account of the interconnectivity of the corporation and the fact that it has to work as a collective whole. However, I accept the point that the noble Baroness makes.

I believe it was the noble Lord, Lord Thomson, who referred to redundancies and costs. I understand that the details have yet to be worked out. Therefore the level of redundancies, if any, cannot be explained at this point. That is a proper matter for further consultation which will, of course, take place.

Another fear that has been expressed both implicitly and expressly in the remarks this afternoon is that radio will inevitably be subordinated to television. Is that the case? Certainly in his speech to the Radio Society on Monday—to which reference has been made—Sir Christopher Bland, the chairman of the BBC, reminded his audience that similar fears had been expressed when the bi-media news and current affairs directorate was established nine years ago. But programmes like "Today" have retained their distinctiveness. At this year's Sony Awards the BBC achieved 26 out of the 33 awards that were given, and that is a record achievement.

I should like to turn specifically to the World Service. A number of views have been strongly expressed by noble Lords such as the noble Lord, Lord Chalfont, the noble and right reverend Lord, Lord Runcie, my noble friend Lord Pilkington, the noble Baroness, Lady Williams, and my noble friend Lady Park. Standing at this Dispatch Box I cannot answer their concerns directly. It is to the BBC, through your Lordships' Chamber, that the concerns are directed.

The output of the World Service is at record levels. This Government recognise the high value and quality of the World Service. Indeed, that is why we pay for it. Neither we nor, I believe, the governors of the BBC have the slightest wish to threaten the very qualities that have led to its success. After all, it is a service which reaches a record audience of at least 140 million people—more than twice the size of its nearest competitor—and provides a trusted source of objective news even in some of the darker corners of the world. It is a great ambassador and advertisement for this country; a great service to the whole world and the ideals we all share in this country and which underpin our democracy.

This Government always have been and are now a strong supporter of the World Service. After all, despite living in an era of stringency in public sector expenditure, in real terms the funding that the World Service receives has increased by 50 per cent. since 1979. Of course, we have a more direct responsibility for the objectives and funding of the World Service than for the Home Service. The Foreign and Commonwealth Office was understandably anxious when it was told of the organisational changes for the World Service. It is because of that that we sought assurances from the BBC, as my noble friend Lady Chalker confirmed in this House on 2nd July.

Assurances have been given that the quality and character of the service will not be diminished. The clear separation between the grant-in-aid funded World Service and the BBC's other activities will be maintained. We shall be fully consulted on the implementation of the reorganisation so that we can be confident, as we are fully entitled to be, that the World Service will go on meeting its obligations under the agreement and continue to maintain that quality which is its distinctive hallmark. I can confirm that my right honourable friend the Foreign Secretary will be meeting Sir Christopher Bland to discuss those matters.

I must emphasise that the Government insist that the unique character of the World Service output must be preserved and that the service will not be subsumed into an homogenous BBC. As the noble Lord, Lord Cocks, pointed out, it will continue to be a separate entity complete with its own managing director. It will have complete editorial independence, with absolute control over the commissioning and scheduling of programmes from inside or outside the BBC. It will retain responsibility for the production of services in 43 languages.

A dedicated World Service news team within the news directorate—I understand that the World Service news team is to remain at Bush House in the immediate future—will be able to draw on the resources of the whole organisation to provide news tailored to the World Service's specifications. The World Service and the main news operations of the BBC already work closely together. A considerable number of World Service reports come from BBC news and current affairs correspondents. The proposals will produce further economies, not least enabling the World Service to make a greater contribution to the work of the BBC as a whole than it does at present. That in turn will reduce unit costs.

As my noble friend Lady James emphasised, the World Service already has a good record for producing cost-effective programmes. Those economies and the more effective use of staff resources should further benefit the World Service and increase and improve the work it does. In addition, the World Service broadcasts material other than news, and there is considerable scope for avoiding duplication in, to give two examples, sports coverage and drama. At present there is duplication which, by definition, costs money and that is something that could be eliminated.

In short, while your Lordships are right to be cautious about changes in the way the World Service is arranged and to question critically what is happening, are we right in supposing inevitably that the fears expressed are well founded, either on the basis of the facts as they are or upon the inherent logic of what is being proposed? The BBC governors' duty is to ensure that the BBC meets the obligations laid upon it under the Charter and Agreement. They must ensure that programme standards and the distinctiveness of the BBC services are safeguarded and that the way in which the BBC is organised contributes to rather than detracts from those obligations.

I conclude with the World Service. The Chairman and the Governors of the BBC are committed by the Charter to uphold the distinctive quality and characteristics of the service. The Government pay for the World Service. This Government are adamant that it shall not be transmuted from gold into base metal.

Lord Chalfont

My Lords, before the Minister sits down, will he elaborate upon the point he just made? He said that under the new dispensation the BBC World Service will still have its own managing director. As far as I can see from the table of organisation drawn up by the BBC, there is no managing director shown in the organisation for BBC News. Indeed, the editor of the World Service news programmes reports to Mr. Peter Bell, the head of news programmes, and the controller of BBC World News reports to Jenny Abramski of Continuous News Services. Where does the autonomous managing director fit in?

Lord Inglewood

My Lords, the noble Lord, Lord Chalfont, asks a difficult question about proposals. It is difficult to answer emphatically. I am confident in what I have explained to your Lordships. I am sure that if the noble Lord makes express inquiries he will find that to be the case.

Lord Thomson of Monifieth

My Lords, we must bring this matter to a conclusion. I am immensely grateful to all noble Lords who spoke in support of my Motion. Indeed, a short debate of this kind on the eve of a Recess on a Thursday afternoon that attracts two distinguished former Governors of the BBC, two distinguished retired Prelates, a former Chairman of the Radio Authority and a present Chairman of the Broadcasting Complaints Commission is a debate to which I hope the Governors and Director-General of the BBC will pay close attention.

I am grateful for what the Minister said by way of giving us information on the questions that some of us asked. I can only say to him, and repeat, that we welcome the change being proposed in terms of maintaining a team at Bush House until April 1998, though—let us be clear—it is still going to be part of a much wider overall organisation, where the final responsibility of the Editor-in-Chief will lie outside Bush House. However, that change would not have taken place if it had not been for the outcry that there has been in both Houses of Parliament and from the public generally. That is ample justification for the belief that the failure of consultation has been monumental. If ever we needed the final evidence of that, it came in the information given to us by the Minister that next week the Secretary of State himself will summon the BBC to him for further discussion. That can only be the clearest possible evidence that the Government are dissatisfied with the degree of consultation that they have had, just as the rest of us are dissatisfied with the consultation that we experienced.

I know that it is a serious matter at this stage to move a Motion of this kind which, if your Lordships are willing to carry it, means that the matter will go back to the House of Commons. But, in view of the fact that the Secretary of State is calling the BBC to meet with him, it would be helpful for there to be an opportunity in another place next week before the House rises, on the basis of that well-supported Early-Day Motion, to give the Foreign Secretary every possible backing when he conducts that meeting. I commend the Motion to the House.

The Deputy Speaker (Viscount Allenby of Meggido)

My Lords, the Question is that this House do disagree with the Commons in their Amendment No. 144. As many as are of that opinion will say "Content"; to the contrary, "Not-Content". The "Contents" have it.

Lord Inglewood

My Lords, perhaps we may have clarification, I am confused about exactly what we have been asked to vote on. Is it correct that the noble Lord, Lord Thomson, is asking us to disagree with the amendment to which I spoke earlier?

Lord Thomson of Monifieth

My Lords, yes.

Lord Inglewood

My Lords, the Government cannot accept that we disagree. We are not content.

The Deputy Speaker

Clear the Bar!

6.41 p.m.

On Question, Whether the said Motion (No. 144A), as an amendment to Commons Amendment No. 144, shall be agreed to?

Their Lordships divided: Contents, 71; Not-Contents, 81.

Division No. 1
CONTENTS
Ackner, L.	Judd, L.
Addington, L.	Kennet, L.
Beaumont of Whitley, L.	Kilbracken, L.
Berkeley, L.	Kilmamock, L.
Broadbridge, L.	Lauderdale, E.
Carmichael of Kelvingrove, L.	Lawrence, L.
Chalfont, L.	Lichfield, Bp.
Chapple, L.	Longford, E.
Clinton-Davis, L.	McIntosh of Haringey, L.
Craigavon, V.	McNair, L.
Dahrendorf, L.	Mayhew, L.
Dainton, L.	Monkswell, L.
Darcy (de Knayth), B.	Napier and Ettrick, L.
David, B.	Nicol, B.
Dean of Thornton-le-Fylde, B.	Peston, L.
Desai, L.	Prys-Davies, L.
Donoughue, L.	Rea, L.
Dormand of Easington, L.	Richard, L.
Dubs, L.	Rodgers of Quarry Bank, L
Falkland, V.	Roskill, L.
Farrington of Ribbleton B	Runcie, L.
Freyberg, L.	Russell, E.
Gallacher, L.	Sandwich, E.
Gladwin of Clee, L.	Seear, B.
Graham of Edmonton, L. [Teller.]
Habgood, L.	Serota, B.
Harris of Greenwich, L. [Teller.]	Sherfield, L.
Hayman, B.	Smith of Gilmorehill, B.
Hilton of Eggardon, B.	Stoddart of Swindon, L.
Holme of Cheltenham, L.	Strathcarron, L.
Jeger, B.	Thomson of Monifieth, L.
Jenkins of Hillhead, L.	Turner of Camden, B.
Jenkins of Putney, L.	Whaddon, L.

White, B.	Williams of Elvel, L.
Wilberforce, L.	Winchilsea and Nottingham, E
Williams of Crosby, B.	Winston, L.
NOT-CONTENTS
Abinger, L.	Holderness, L.
Addison, V.	Howe, E.
Aldenham, L.	Howe of Aberavon, L.
Aldington, L.	Inglewood, L.
Allenby of Megiddo, V.	James of Holland Park, B.
Annaly, L.	Kenilworth, L.
Ashbourne, L.	Layton, L.
Berners, B.	Leigh, L.
Blatch, B.	Liverpool, E.
Brougham and Vaux, L.	Long, V.
Burnham, L.	Lucas, L.
Carlisle of Bucklow, L.	Lyell, L.
Carnegy of Lour, B.	McConnell, L.
Carnock,L.	Mackay of Ardbrecknish, L.
Carr of Hadley, L.	Macleod of Borve, B.
Chelmsford, V.	Mancroft, L.
Chesham, L. [Teller.]	Marlesford, L.
Clark of Kempston, L.
Cocks of Hartcliffe, L.	Massereene and Ferrard, V.
Coleraine, L.	Mersey, V.
Coleridge, L.	Mottistone, L.
Colwyn, L.	Munster, E.
Courtown, E.	Northesk, E.
Cranborne, V. [Lord Privy Seal.]	O'Cathain, B.
Crickhowell, L.	Orr-Ewing, L.
Cumberlege, B.	Oxfuird, V.
Davidson, V.	Pilkington of Oxenford, L.
Demon of Wakefield, B.	Prior, L.
Dixon-Smith, L.	Rankeillour, L.
Elton, L.	Renton, L.
Finsberg, L.	Seccombe, B.
Fraser of Carmyllie, L.	Shannon, E.
Gage, V.	Shaw of Northstead, L.
Gardner of Parkes, B.	Stewartby, L.
Gisborough, L.	Strathclyde, L. [Teller.]
Glenarthur, L.	Sudeley, L.
Goschen, V.	Swinfen, L.
Harlech, L.	Teviot, L.
Henley, L.	Trumpington, B.
Hogg,B.	Ullswater, V.
	Vivian, L.
	Wise, L.

Resolved in the negative, and Motion disagreed to accordingly.

On Question, Commons Amendment No. 144 agreed to.

6.50 p.m.

COMMONS AMENDMENT

145 After Clause 112, insert the following new clause—

TAXATION PROVISIONS WITH RESPECT TO TRANSFER SCHEMES

'. Schedule (Transfer schemes relating to the BBC transmission network: taxation provisions) (which makes provision about tax in connection with transfer schemes) shall have effect.'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 145.

Moved, That the House do agree with the Commons in their Amendment No.145—(Lord Inglewood.)

[Amendment No. 145A, as an amendment to Commons Amendment No. 145, not moved.]

On Question, Commons Amendment No. 144 agreed to.

COMMONS AMENDMENT

146 After Clause 113, insert the following new clause—

AVOIDANCE OF CERTAIN TERMS RELATING TO USE FOR PURPOSE OF NEWS REPORTING OF VISUAL IMAGES FROM BROADCAST OR CABLE PROGRAMME

'.—(1) Any provision in an agreement is void in so far as it purports to prohibit or restrict relevant dealing with a broadcast or cable programme in any circumstances where by virtue of section 30(2) of the Copyright, Designs and Patents Act 1988 (fair dealing for the purpose of reporting current events) copyright in the broadcast or cable programme is not infringed.

(2) In subsection (1)—

1. (a) "relevant dealing", in relation to a broadcast or cable programme, means dealing by including visual images taken from it in another broadcast or cable programme, and
2. (b) "broadcast" and "cable programme" have the same meaning as in Part I of the Copyright. Designs and Patents Act 1988.'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 146.

This new clause effects the commitment which my honourable friend the Minister of State gave in standing committee in another place to bring forward an amendment to the Bill to safeguard news access to sporting and other events. The new clause provides that any provision in a contract is void in so far as it prevents the use of visual images from another programme for the purposes of news reporting in circumstances where the fair dealing provisions of the copyright Act 1988 would apply. Any decisions on what fair dealing constitutes would remain for the courts to take, based on the specific circumstances of the case in question. I commend the amendment.

Moved, That the House do agree with the Commons in their Amendment No. 146—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

147 After Clause 113, insert the following new clause—

AMENDMENTS OF COPYRIGHT, DESIGNS AND PATENTS ACT 1988 RELATING TO CABLE PROGRAMME SERVICES

'Schedule (Amendments of Copyright, Designs and Patents Act 1988 relating to cable programme services) (which contains amendments of the Copyright, Designs and Patents Act 1988 relating to broadcasts included in cable programme services) shall have effect.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 147. I spoke to this amendment with Amendment No. 134.

Moved, That the House do agree with the Commons in their Amendment No. 147.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

148 After Clause 113, insert the following new clause—

COPYRIGHT LICENSING

'. (1) After section 135G of the Copyright, Designs and Patents Act 1988 there is inserted—

"Power to amend sections 135A to 135G.

135H.—(1) The Secretary of State may by order, subject to such transitional provision as appears to him to be appropriate, amend sections 135A to 135G so as

1. (a) to include in any reference to sound recordings any works of a description specified in the order; or
2. (b) to exclude from any reference to a broadcast or cable programme service any broadcast or cable programme service of a description so specified.

(2) An order shall be made by statutory instrument; and no order shall be made unless a draft of it has been laid before and approved by resolution of each House of Parliament."

(2) After section 151 of that Act there is inserted—

"Award of interest.

151A. —(1) Any of the following, namely—

1. (a) a direction under section 123(3) so far as relating to a licence for broadcasting a work or including a work in a cable programme service;
2. (b) a direction under section 128(3) so far as so relating;
3. (c) an order under section 135D(1); and
4. (d) an order under section 135F confirming or varying an order under section 135D(1),

may award simple interest at such rate and for such period, beginning not earlier than the relevant date and ending not later than the date of the order, as the Copyright Tribunal thinks reasonable in the circumstances.

(2) In this section "the relevant date" means—

1. (a) in relation to a direction under section 123(3), the date on which the reference was made;
2. (b) in relation to a direction under section 128(3), the date on which the reference or application was made;
3. (c) in relation to an order under section 135D(1), the date on which the first payment under section 135C(2) became due; and
4. (d) in relation to an order under section 135F, the date on which the application was made."

(3) Subsection (2) does not apply in any case where the reference or application to the Copyright Tribunal was or is made before the commencement of this section.'

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 148. In speaking to this amendment, I speak also to Amendment No. 148A.

Amendment No. 148 will allow an order to be made in the future to vary the application of a statutory licence. The House examined the background to this amendment when my noble friend Lord Lyell tabled an amendment during consideration of the Bill in Committee. The Government do not feel it is appropriate to proceed with any changes to the statutory licence at the moment; but the amendment will facilitate changes in the future should they become appropriate. The Government have in mind in particular the possible removal of on-demand services from statutory licensing.

The amendment would also give the copyright tribunal the discretion to add an element of interest to awards, including a backdated payment or repayment to compensate any party who has been financially disadvantaged by the unreasonable behaviour of another. This power to award interest will apply to cases involving the statutory licence and can be used by the tribunal if it feels that a licensee has unacceptably exploited its entitlement to a statutory licence.

By reason of the scope of the Bill, the amendment does not apply to cases where copyright works are used other than in broadcasting or cable programmes. But the Government intend to apply this change to all disputes which can be heard by the tribunal when the opportunity arises. I commend the amendment.

Moved, That the House do agree with the Commons in their Amendment No. 148.—(Lord Inglewood.)

AMENDMENT TO COMMONS AMENDMENT No. 148

148A Line 12, at end insert—

("(1A) Before making an order under subsection (1), the Secretary of State shall consult those persons, including broadcasters and licensing bodies, who would be likely to be affected by the order (if it were to be made).").

The Viscount of Falkland

My Lords, I beg to move Amendment No. 148A as an amendment to Commons Amendment No. 148.

There has been a good deal of discussion on the subject of statutory licences. I need not go into the meaning of such licences. As some noble Lords will be aware, an amendment brought forward by the Government in another place gave new powers to the Secretary of State to exclude certain broadcasters from the provisions of the statutory licence. I do not think any reasonable broadcaster, or the House, will have any difficulty in agreeing that such powers should exist.

As the Government have already indicated, clearly at some time in the future we may be faced with circumstances where it is necessary to exclude from statutory licensing some broadcasters with some particular types of broadcasts in mind. There is no problem with that. However, I tabled the amendment for two reasons.

First, I seek from the Minister an assurance, if he is able to give it, that before any broadcaster is excluded, that broadcaster and any other bodies relevant to the type of broadcast involved will be properly consulted. We have already had some discussion about consultation or the lack of it in relation to preceding amendments. But an assurance from the Minister on that point would be extremely helpful.

Secondly, perhaps the Minister at this stage could enlighten the House as to exactly what kind of broadcasts he has in mind for exclusion. Some of us have our own ideas, but perhaps he can guide us in this area.

We are dealing with the prospect of on-demand broadcasting, which is linked with the new technologies which we have discussed at length. It has been suggested, that on-demand broadcasting would be a possible area for exclusion in the future. However, the definition seems extraordinarily wide.

As digital broadcasting becomes more widely adopted, as one might expect more and more programming will be available in an on-demand form. Viewers will be able more and more to select, order and receive an increasing range of broadcasts on an individual basis. One would expect musical content to play a large part, of which a small fraction would be the type of on-demand service that could be expected to affect the interests of rights holders. High-quality music recordings could well affect the sales of records in the shops, and that may well be a reason for introducing a refusal to grant a statutory licence.

It seems at this stage that in a vast number of cases there would be no adverse effect on rights holders. The reason for withholding permission for statutory licences is to protect rights holders. I am sure the House will agree that it is important that proper consultative procedures are put in place to make sure that no broadcaster is unfairly excluded, or that his particular type of broadcast should have been thoroughly examined to see that exclusion was just and fair. My amendment was tabled in a spirit of inquiry. I look forward to the Minister's comments. I beg to move.

Moved, That Amendment No. 148A, as an amendment to Commons Amendment No. 148, be agreed to.—(The Viscount of Falkland.)

7 p.m.

Lord Inglewood

My Lords, I am very grateful to have had from the noble Viscount an explanation of his concerns underlying this amendment. I am very glad to be able to give him an assurance on behalf of my colleagues at the DTI that there will be further consultation and an opportunity for interested parties to express their views before any order changing the application of the statutory licence is made. I should also like to remind the House that no order can be made until it has been debated by both Houses, so your Lordships will have an opportunity in the future to express views on any proposed changes to the statutory licence.

It is also important to be clear that so far as we are concerned now, on demand is all that we have in mind for exclusion; but there may be other categories in future as technology develops, and precise definitions might well be rather tricky to make. Hence we felt it would be appropriate to have an order-making power of this kind. I very much hope that in the light of the assurance and the explanation I have given, the noble Viscount may feel able to withdraw his amendment.

The Viscount of Falkland

My Lords, I thank the noble Lord the Minister for that reply and for the explanation. Certainly that satisfies my concerns and the concerns of the broadcasters who have been behind my tabling of the amendment. In the circumstances, I beg leave to withdraw the amendment.

Amendment No. 148A, as an amendment to Commons Amendment No. 148, by leave, withdrawn.

On Question, Commons Amendment No. 148 agreed to.

COMMONS AMENDMENT

149 After Clause 113, insert the following new clause—

UNAUTHORISED DECODERS

'.—(1) In section 297A of the Copyright, Designs and Patents Act 1988 (unauthorised decoders), for subsection (1) there is substituted—

"(1) A person who makes, imports, sells or lets for hire, offers or exposes for sale or hire, or advertises for sale or hire, any unauthorised decoder shall be guilty of an offence and liable—

1. (a) on summary conviction, to a fine not exceeding the statutory maximum;
2. (b) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or to both."

(2) The amendment made by subsection (1) shall not apply to any offence committed before the commencement of this section.'

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 149. I should like at the same time to speak to Amendment No. 150. These two amendments extend the criminal and civil offences of decoder piracy to include the advertising of unauthorised decoders as well as their sale. Amendment No. 149 also increases the maximum penalties for those found guilty of the offence to an unlimited fine and/or two years' imprisonment.

Moved, That the House do agree with the Commons in their Amendment No. 149.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENTS

150 After Clause 113, insert the following new clause—

APPARATUS &C FOR UNAUTHORISED RECEPTION OF TRANSMISSIONS

'. In section 298 of the Copyright, Designs and Patents Act 1988 (apparatus &c for unauthorised reception of transmissions), in subsection (2)(a), after "hire" there is inserted ", offers or exposes for sale or hire, or advertises for sale or hire,".'.

151 Before Clause 114, insert the following new clause—

STANDARDS FOR TRANSMISSION SYSTEMS

'.—(1) The Independent Television Commission (in this section referred to as "the Commission") shall do all that they can to secure that every licensed service uses a transmission system complying with Article 2 of Council Directive 95/47/EC on the use of standards for the transmission of television signals ("the Directive").

(2) In this section "Community digital standard" means any of the alternatives permitted within the mandatory parts of the standards to be met by a transmission system for the purpose of complying with Article 2(c) of the Directive (which relates to television services that are fully digital).

(3) The Commission may, after consultation with the persons specified in subsection (6), specify particular Community digital standards to be met in the provision of licensed services which are fully digital.

(4) In deciding whether, and if so how, to exercise their powers under subsection (3), the Commission shall, in particular—

1. (a) have regard to the desirability of promoting—
1. (i) mutual technical compatibility between digital television services, and
2. (ii) the development of digital television broadcasting, and
2. (b) consider whether it would be reasonably practicable for persons providing licensed services which are fully digital to use transmission systems meeting the Community digital standards in question.

(5) Where the Commission have exercised their powers under subsection (3), they shall—

1. (a) publish notice of their determination in such manner as they think fit, and
2. (b) do all that they can to secure that any licensed service which is fully digital uses a transmission system meeting the Community digital standards specified under that subsection.

(6) The persons referred to in subsection (3) are—

1. (a) every person providing a licensed service,
2. (b) the BBC,
3. (c) the Welsh Authority,
4. (d) the Secretary of State,
5. (e) the Director General of Telecommunications,
6. (f) the Director General of Fair Trading,
7. (g) such persons appearing to them to represent manufacturers of television broadcasting or receiving equipment as they think fit,
8. (h) such persons appearing to them to represent viewers as they think fit, and
9. (j) such other persons as they think fit.

(7) In this section—

"licensed service" means any service licensed by the Commission under Part I of this Act or Part I or II of the 1990 Act or provided under a relevant cable licence, but does not include any service which is only broadcast or transmitted for reception outside the European Economic Area;

"relevant cable licence" means a relevant licence within the meaning of Part III of Schedule 12 to the 1990 Act (transitional provisions relating to existing cable services).'.

152 Insert the following new clause—

DUTIES OF INDEPENDENT TELEVISION COMMISSION OR RADIO AUTHORITY IN CASES INVOLVING DISQUALIFICATION ON GROUNDS RELATED TO POLITICAL OBJECTS

'.—(1) If it appears to the Independent Television Commission that there are grounds for suspecting that any person who is an applicant for a licence under Part I or II of the 1990 Act or Part I of this Act is by virtue of any of the provisions specified in subsection (5) a disqualified person in relation to that licence, the Commission shall be regarded as failing to discharge their duty under section 5(1) of the 1990 Act, or as the case may be section 5(1) of this Act, if they grant the licence to that person without being provided with information which satisfies them that he is not on those grounds a disqualified person by virtue of that provision.

(2) If it appears to the Independent Television Commission that there are grounds for suspecting that any person who is the holder of a licence under Parts I or II of the 1990 Act or Part I of this Act is by virtue of any of the provisions specified in subsection (5) a disqualified person in relation to that licence, the Commission shall be regarded as failing to discharge their duty under section 5(1) of the 1990 Act, or as the case may be section 5(1) of this Act, unless—

1. (a) they require him to provide them with information for the purpose of determining whether he is on those grounds a disqualified person by virtue of that provision, and
2. (b) if they are satisfied that he is a disqualified person, they revoke the licence.

(3) If it appears to the Radio Authority that there are grounds for suspecting that any person who is an applicant for a licence under Part III of the 1990 Act or Part II of this Act is by virtue of any of the provisions specified in subsection (5) a disqualified person in relation to that licence, the Authority shall be regarded as failing to discharge their duty under section 88(1) of the 1990 Act, or as the case may be section 38(1) of this Act, if they grant the licence to that person without being provided with information which satisfies them that he is not on those grounds a disqualified person by virtue of that provision.

(4) If it appears to the Radio Authority that there are grounds for suspecting that any person who is the holder of a licence under Part III of the 1990 Act or Part II of this Act is by virtue of any of the provisions specified in subsection (5) a disqualified person in relation to that licence, the Authority shall be regarded as failing to discharge their duty under section 88(1) of the 1990 Act, or as the case may be section 38(1) of this Act, unless—

1. (a) they require him to provide them with information for the purpose of determining whether he is a disqualified person on those grounds by virtue of that provision, and
2. (b) if they are satisfied that he is a disqualified person, they revoke the licence.

(5) The provisions referred to in subsections (1) to (4) are the following provisions of paragraph 1(1) of Part II of Schedule 2 to the 1990 Act—

1. (a) paragraphs (d) to (g),
2. (b) paragraph (h) so far as relating to participation by bodies falling within paragraph (d), (e) or (g),
3. (c) paragraph (hh) so far as relating to a body corporate controlled by a body corporate in which a body falling within paragraph (d), (e) or (g) is a participant with more than a 5 per cent. interest,
4. (d) paragraph (i) so far as relating to control by a person falling within any of paragraphs (d) to (g) or by two or more such persons, and
5. (e) paragraph (j) so far as relating to participation by a body corporate which is controlled by a person falling within any of paragraphs (d) to (g) or by two or more such persons.

(6) Nothing in subsections (1) to (5) shall be taken to limit the generality of—

1. (a) the duty imposed on the Independent Television Commission by section 5(1) of the 1990 Act or section 5(1) of this Act, or
2. (b) the duty imposed on the Radio Authority by section 88(1) of the 1990 Act or section 38(1) of this Act.'.

153 Insert the following new clause—

OFFENCE OF PROVIDING FALSE INFORMATION IN CERTAIN CIRCUMSTANCES

'.—(1) A person who, in connection with an application by him for, or his continued holding of, a licence under the 1990 Act or this Act—

1. (a) makes to the relevant authority a statement which he knows to be false in a material particular, or
2. (b) recklessly makes to the relevant authority a statement which is false in a material particular,

is guilty of an offence if the statement relates to a matter which would be relevant in determining whether he is by virtue of any of the provisions specified in subsection (3) a disqualified person, and he is by virtue of any of those provisions a disqualified person in relation to that licence.

(2) A person who, in connection with an application by him for, or his continued holding of, a licence under the 1990 Act or this Act, withholds any information with the intention of causing the relevant authority to be misled is guilty of an offence if—

1. (a) the information would be relevant in determining whether he is by virtue of any of the provisions specified in subsection (3) a disqualified person, and
2. (b) he is by virtue of any of those provisions a disqualified person in relation to that licence.

(3) The provisions referred to in subsections (1) and (2) are the following provisions of paragraph 1(1) of Part II of Schedule 2 to the 1990 Act—

1. (a) paragraphs (d) to (g),
2. (b) paragraph (h) so far as relating to participation by bodies falling within paragraph (d), (e) or (g),
3. (c) paragraph (hh) so far as relating to a body corporate controlled by a body corporate in which a body falling within paragraph (d), (e) or (g) is a participant with more than a 5 per cent. interest,
4. (d) paragraph (i) so far as relating to control by a person falling within any of paragraphs (d) to (g) or by two or more such persons, and
5. (e) paragraph (j) so far as relating to participation by a body corporate which is controlled by a person falling within any of paragraphs (d) to (g) or by two or more such persons.

(4) A person guilty of an offence under this section is liable on summary conviction to imprisonment for a term not exceeding three months or to a fine not exceeding level 5 on the standard scale or to both.

(5) In this section "the relevant authority" means—

1. (a) in relation to any licence under Parts I or II of the 1990 Act or Part I of this Act, the Independent Television Commission, and
2. (b) in relation to any licence under Part III of the 1990 Act or Part II of this Act, the Radio Authority.'.

154 Insert the following new clause—

DISQUALIFICATION FOR OFFENCE OF SUPPLYING FALSE INFORMATION ETC

'.—(1) Where a person is convicted of an offence under section (Offence of providing false information in certain circumstances) the court by which he is convicted may make an order (in this section referred to as a "disqualification order") disqualifying him from holding a licence during a period specified in the order.

(2) The period specified in a disqualification order shall not exceed five years beginning with the date on which the order takes effect.

(3) Where an individual is disqualified from holding a licence by virtue of a disqualification order, any body corporate—

1. (a) of which he is a director, or
2. (b) in the management of which he is directly or indirectly concerned,

is also disqualified from holding a licence.

(4) Where the holder of a licence is disqualified by virtue of a disqualification order, the licence shall be treated as being revoked with effect from the time when the order takes effect.

(5) For the purposes of any of the provisions specified in subsection (6) (which relate to the imposition of a financial penalty on the revocation of a licence), a licence which is revoked by virtue of subsection (4) shall be taken to have been revoked by the relevant authority as mentioned in that provision.

(6) The provisions referred to in subsection (5) are as follows—

1. (a) section 18(3) of the 1990 Act,
2. (b) section 101(3) of the 1990 Act,
3. (c) section 10(5), and
4. (d) section 47(5).

(7) In sections 5(1)(a) and 88(1)(a) of the 1990 Act and sections 5(1)(a) and 38(1)(a) of this Act, the reference to a person who is disqualified person by virtue of Part II of Schedule 2 to the 1990 Act includes a reference to a person who is disqualified by virtue of a disqualification order.

(8) In this section—

"licence" means any licence granted by the Independent Television Commission or the Radio Authority under the 1990 Act or this Act;

"the relevant authority" has the same meaning as in section (Offence of providing false information in certain circumstances).'.

155 Insert the following new clause—

SUPPLEMENTARY PROVISIONS AS TO DISQUALIFICATION ORDERS

'.—(1) A person disqualified by a disqualification order may appeal against the order in the same manner as against a conviction.

(2) A disqualification order made by a court in England and Wales or Northern Ireland—

1. (a) shall not take effect until the end of the period within which the person on whose conviction the order was made can appeal against the order, and
2. (b) if he so appeals, shall not take effect until the appeal has been determined or abandoned.

(3) A disqualification order made by a court in Scotland—

1. (a) shall not take effect until the end of the period within which the person on whose conviction the order was made can appeal against the order, and
2. (b) if an appeal against the order or the conviction is taken within that period, shall not take effect until the date when that appeal is determined or abandoned or deemed to have been abandoned.

(4) In this section "disqualification order" means an order under section (Disqualification for offence of supplying false information etc).'

156 Clause 114, page 87, line 27, leave out from first 'and' to 'were' in line 28 and insert 'the following provisions of this Act—

1. (a) Parts I and II and Schedule 1,
2. (b) Part IV,
3. (c) Part V and Schedules 3 and 4, and
4. (d) sections (Standards for transmission systems) and (Duties of Independent Television Commission or Radio Authority in cases involving disqualification on grounds related to political objects) to (Supplementary provisions as to disqualification orders)

shall be construed as if those provisions'.

157 Clause 115, page 87, line 32, after 'enactments' insert 'and instruments'.

158 Page 87, line 32, after 'repealed' insert 'or, as the case may be, revoked'.

Lord Inglewood

My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 150 to 158 en bloc. I have already spoken to these amendments.

Moved, That the House do agree with the Commons in their Amendments Nos. 150 to 158.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

159 Clause 116, page 87, line 34, at end insert—

'( ) paragraphs 4A to 4C of Schedule 2 so far as relating to BBC companies (as defined by section 202(1) of the 1990 Act), and section 66 so far as relating to those paragraphs in their application to such companies,'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 159. I should also like to speak to Amendments Nos. 161 to 170, 287, 288, 294 and 295. Amendments Nos. 159, 161, 162, 164 and 166 add various provisions to the list of those which will be effective immediately on Royal Assent. The government amendment tabled here to the Commons Amendment No. 166 is simply for the sake of consistency in the commencement of the provisions on BBC companies. Amendment No. 167 removes provisions extending the Bill to Northern Ireland and makes consequential amendments to the Welsh Development Agency Act, which obviously do not extend to Northern Ireland.

Amendments Nos. 168 and 169 enable provisions of the Bill to amend the Broadcasting Act 1990 to be extended to the Channel Islands and the Isle of Man. Amendment No. 170 deletes subsection (4) of Clause 117 which was added for the duration of the Bill's passage through your Lordships' House to avoid infringing the privilege of the other place to impose any charge on public funds. Amendment No. 287 updates the Welsh Development Agency Act, the Representation of the People Act 1983 and the Copyright, Design and Patents Act 1988 to reflect the enactment of the Bill.

Amendments Nos. 288 and 295 divide Schedule 8 into two parts, the first of which lists enactments repealed by the Bill, and the second of which lists subordinate legislation revoked by the Bill. Amendment No. 294 formally repeals provisions of the 1990 Act which are replaced by provisions in Amendment No. 287.

Moved, That the House do agree with the Commons in their Amendment No. 159.— (Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENTS

160 Clause 116, page 87, line 34, at end insert—

'( ) sections (Provision of news programmes by holders of regional Channel 3 licences) to (Nomination by Commission for purposes of section 31(2 of Broadcasting Act 1990)),'.

161 Page 87, line 35, leave out 'section' and insert 'sections 67 and'.

162 Page 87, line 37, leave out 'section' and insert 'sections 73, 74 and'.

163 Page 87, line 37, at end insert—

'( ) section (Modification of Restrictive Trade Practices Act 1976 in its application to agreements relating to Channel 3 news provision),'.

164 Page 87, line 38, leave out 'Schedule 5' and insert 'Schedules 5, (Transfer schemes relating to the BBC transmission network: successor companies), (Transfer schemes relating to the BBC transmission network: taxation provisions) and 6'.

165 Page 87, line 38, leave out second 'and'.

Lord Inglewood

My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 160 to 165 en bloc. I have already spoken to these amendments.

Moved, That the House do agree with the Commons in their Amendments Nos. 160 to 165.— (Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

166 Clause 116, page 87, line 39, after '114(1)' insert—

'(f) the entries in Schedule 8 relating to sections 45(8) and (9) and 47(11) and (12) of the 1990 Act, and section 115(2) so far as relating to those entries, and

(g)".

Lord Inglewood

My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 166.

Moved, That the House do agree with the Commons in their Amendment No. 166.— (Lord Inglewood.)

AMENDMENTS TO COMMONS AMENDMENT No. 166

166A Line 1, at end insert—

("( ) paragraphs 10B and 13A of Schedule 7 so far as relating to BBC companies (as defined by section 202(1) of the 1990 Act), and section 115(1) so far as relating to those paragraphs in their application to such companies,").

166B Line 2, after ("sections") insert ("32(9),")

Lord Inglewood

My Lords, I beg to move Amendments Nos. 166A and 166B as amendments to Commons Amendment No. 166.

Moved, That Amendments Nos. 166A and 166B, as amendments to Commons Amendment No. 166, be agreed to.— (Lord Inglewood.)

On Question, Amendments Nos. 166A and 166B agreed to.

On Question, Commons Amendment No. 166, as amended, agreed to.

167 Clause 117, page 88, line 8, after 'Act' insert 'except paragraph 15 of Schedule 7'.

168 Page 88, line 8, at end insert—

'( ) Section 204(6) of the 1990 Act (power to extend to Isle of Man and Channel Islands) applies to the provisions of this Act amending that Act.'.

169 Page 88, line 9, after 'the' insert 'other'.

170 Page 88, line 12, leave out subsection (4).

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 167 to 170 en bloc. I have already spoken to these amendments.

Moved, That the House do agree with the Commons in their Amendments Nos. 167 to 170.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

257 Schedule 3, page 112, leave out lines 15 and 16.

Lord Inglewood

My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 257. I should like also to speak to Amendment No. 258. This minor amendment removes the need for Treasury consent in respect of remuneration, allowances, pensions and compensation to members of the BSC and similarly of the recruitment, remuneration and so on of its employees. The Government's policy is that the responsibility for such routine financial matters should rest with the Secretary of State alone.

Moved, That the House do agree with the Commons in their Amendment No. 257.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENTS

258 Schedule 3, page 113, line 18, leave out from 'State' to end of line.

259 Schedule 5, page 117, line 16, after 'enforceable' insert 'by or'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 258 and 259. I have already spoken to these amendments.

Moved, That the House do agree with the Commons in their Amendments Nos. 258 and 259.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

260 Schedule 5, page 118, line 7, at end insert—

'(aa) rights and liabilities of the BBC under any agreement or arrangement for the payment of pensions, allowances and gratuities,'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 260. This relates to the sale by the BBC of its transmission services. The bulk of the amendments relating to this topic are of a technical nature and relate to various taxation and accounting matters which arise when an entity moves from the public to the private sector. In selling its transmission assets the BBC is likely to proceed either by trade sale of the assets direct or through the creation of a wholly owned subsidiary and then the sale of that subsidiary. A flotation is unlikely, but not impossible. The provisions now incorporated in the Bill are designed to ensure that this process can take place without accounting and taxation distortions or unnecessary constraints.

Amendment No. 260 deals with the pension rights of BBC transmission staff. Your Lordships may recall that during our debate on Third Reading we discussed an amendment tabled by the noble Baroness, Lady Dean of Thornton-le-Fylde, on this subject. I described the options that would be available to staff transferring with the transmission services, but indicated that the Government would consider the matter further and, if necessary, bring forward an amendment for the avoidance of doubt, making clear that pension obligations could form part of the BBC transfer scheme submitted for the Secretary of State's approval. That is what this amendment does. It adds pension rights and liabilities to the list of property at paragraph (3) of Schedule 5 to the Bill to which a transfer scheme may relate. Pensions will thus be brought explicitly within the scope of a transfer scheme. Under Clause 111, the Secretary of State's approval is needed for any transfer scheme made by the BBC. This will provide an additional safeguard for BBC transmission staff.

Moved, That the House do agree with the Commons in their Amendment No. 260.—(Lord Inglewood.)

AMENDMENT TO COMMONS AMENDMENT NO. 260

260A Line 3, after ("pensions") insert ("(including under any agreement or arrangement for the bulk transfer of an appropriate accrued pensions surplus for the payment of pensions)")

Baroness Dean of Thornton-le-Fylde

My Lords, I shall not detain the House too long on this amendment, but I feel that I must speak to it. It will amend Amendment No. 260 from the other place, which we support.

I feel the need to speak because the first time that we debated this issue was at Third Reading and the Minister kindly said that he would take away the amendment and look at it and that an amendment would be forthcoming when the matter came before another place. In fact, an amendment was not forthcoming at Committee stage in another place, when it could have been debated in full. An amendment was not tabled by the Government until Report stage in another place, when, on 11th June, the Minister accepted that the trustees' duty to all members of the scheme was to provide equitable treatment (Hansard, col. 638.) That is where the difference between us lies.

The amendment now before us will provide that the Bill itself, on the privatisation of BBC transmission services, will carry with it a requirement not only for the pension rights of employees to transfer on privatisation, but also for an appropriate accrued pension surplus to go with them. The Minister went on to say (col. 639) that the BBC had given an undertaking that it would make the best endeavours to ensure that protection was there. I suggest that "best endeavours" in this day and age is not good enough. There needs to be protection.

It is true that the amendment seeks to provide what is called a bulk transfer or a mirror image scheme. It seeks equity between the employees of the BBC transmission services now and the agreement which was applied when the IBA services were transferred. This issue was raised when I moved the amendment at Third Reading in this House.

The Minister in this Chamber (and indeed the Minister in another place) said that there were three options and choices. The employees could leave their pension where it was with the BBC fund and it would increase in line with the RPI or other increases given. That may well be justified and good advice to give. The employees could transfer to a personal pension scheme, which undoubtedly would be a money purchase scheme and not provide benefits for their families; or they could transfer to a new company scheme, and I shall return briefly to that point later.

The Minister said that this is not like the IBA transfer in that it is not a privatisation into three specific companies. In this case we do not have the facts; we do not know who will buy the BBC services when they are privatised. Indeed, because there has been so much rumour and so many statements made on this subject, on Tuesday I contacted the office of Sir Christopher Bland and asked for the opinion of the BBC on my amendment. I regret that I am still waiting for a reply. I have managed to get hold of the BBC scheme itself and a report issued by the BBC trustees—they have employee trustees on the board—from December 1995. We are not talking about an insignificant amount. In the 1993 evaluation there was a surplus of £532 million in the scheme. This amendment seeks to ensure that an appropriate part, actuarially assessed, is transferred with the employees when they move out of the employment of the BBC to whoever buys those transmission services.

It is on the record that the view of the Government is that pensions which have accrued will be valued for the individuals. They will have a transfer value. But that transfer value will only relate to their pension in accordance with pensions law. Nothing extra is being given. That is within pensions law. Indeed, many of the provisions can be found in the pensions deed itself, in the BBC scheme.

Because of the surplus that exists, and which has existed for some time—it is equivalent to 7½ per cent. of the scheme's assets and liabilities—the BBC itself has had a reduced employers' contribution. But the employees have still been paying 4½ per cent. of their salary into their scheme. If employees are transferred out of the BBC pension scheme without moving an element of that surplus with them, which I suggest they have accrued and from which they are entitled to benefit, I believe that they are being given short change. My amendment would rectify that. This is not a new idea. If it is said that the IBA sell-off was completely different, one could say that the telecommunications staff were in exactly the same situation and the department agreed that the transfer of the surplus would go with them.

Time and again it has been said that it is the loyalty of the staff of the BBC transmission services that has made it into an organisation which should make it attractive for a sell-off. Time will tell whether or not it is attractive for a sell-off.

The amendment does not seek special privilege. It does not seek to transfer moneys from the BBC to another employer. It seeks to transfer with the employees the actuarially assessed accrued part of that surplus which I suggest rightly belongs to them. I hope that the House and, more importantly at this stage, the Minister are able to accept it. I beg to move.

Moved, That Amendment No. 260A, as an amendment to Commons Amendment No. 260, be agreed to.—(Baroness Dean of Thornton-le-Fylde.)

7.15 p.m.

Lord Thomson of Monifieth

My Lords, I should like to say just a few sentences from this Bench. We strongly agree with what the noble Baroness has just said. Pensions are one of the most sensitive matters in the world today. In a world where people have to change employment, it is tremendously important that justice should be done. Those in the BBC transmission services under privatisation who go off to other employers have a right in equity to take some of the accrued benefits with them.

Lord Donoughue

My Lords, with the permission of the House I should like to speak from this Bench. I was a fund manager of the BBC pension fund for many years in the 1980s, when clearly it did quite well. Specifically, I should like to support what my noble friend said. It is simply not acceptable that employees who have worked with, and for, that surplus should, on moving, lose a part of it. If that is where they end up, they certainly should be advised to stay in the BBC scheme, keep their share and then start a new scheme elsewhere.

To make a more general point to the Minister, will he confirm that in the Bill there is no guarantee that a purchaser of the transmission system will operate an appropriate scheme for employees and pensioners? That seems to me to be the heart of the problem. That is what we are looking for. We are looking for the guarantee which my noble friend said was there for the IBA. That is what should be provided.

At present, BBC employees are members of an appropriate scheme. The Government say that one of the delights and risks of privatisation is that it may mean a deterioration in the pension position for which they have worked all their life on the assumption that it would not deteriorate. That is not acceptable. I ask the Minister, if he does not wish to change the Bill, whether he will agree that the Secretary of State, who has the power of final approval on transfer, should not give approval to any transfer of transmission unless an appropriate scheme is already in place. We would rather have that provision belt and braces in the Bill. If it is not in the Bill, I should like a guarantee from the Secretary of State that a transfer will not be made other than to a party that has an appropriate scheme in place.

Lord Inglewood

My Lords, I am most grateful to the noble Baroness for explaining the thinking behind her amendment and for the way in which it has been brought forward. She explained how she wants a proportion of the accrued surpluses in the BBC pension scheme to be transferred to the scheme operated by a new employer following the privatisation of the BBC's transmission network. I do not think this would be appropriate in these circumstances and, therefore, I cannot support this amendment.

I shall say a little about the background to begin with. There is currently a surplus in the BBC pension scheme. As is normal practice, when there is a transfer of a small proportion of staff from a scheme, this will remain in the main scheme. Let me explain: the BBC pension scheme is a "balance of cost" final salary scheme. The members pay contributions at an agreed rate, which in this case is 4.5 per cent. In return there is an agreed range of benefits. These include, most importantly, a pension related to the final salary they are receiving when they retire from the BBC. That pension is not determined by the level of any individual's contributions.

The BBC has an absolute obligation to pay whatever contributions are needed so that the benefits promised in the rules can be delivered. Whether the scheme is in surplus or deficit at any point is therefore dependent on the employer's contributions. It has no bearing on the pension which any member may be entitled to receive.

The options generally available to BBC employees when they leave the BBC are threefold and reference has already been made to them. They can either leave their accrued benefits in the BBC scheme where they will be guaranteed to increase each year in line with the retail price index up to 10 per cent. The second possibility is to take a transfer value payment to their new employer's scheme. The third is to take a transfer value payment to a personal pension arrangement.

However, when staff transfer with their function, as in this case, the BBC has agreed with the trustees of the BBC pension fund that it will pay into an appropriate scheme operated by the new employer a higher amount, known as the "past service reserve". The importance of that is that it goes beyond the legal obligation. This is the amount agreed between both sets of actuaries, which the new scheme would need in order to provide benefits equivalent in value to those accrued in the BBC scheme.

While there is no guarantee that the purchaser of transmission will operate an appropriate scheme based on final salary, the BBC has assured us that it will use its best endeavours to have a buyer who does. Indeed, some of the main potential bidders already operate such schemes.

In response to the second point made by the noble Lord, Lord Donoughue, the Secretary of State will ensure that fair arrangements are made for pensions in the transfer scheme, but cannot guarantee that a purchaser will offer a particular scheme.

We believe that it is right that the BBC, in selling its transmission assets itself, should have the responsibility for negotiating the arrangements with the purchaser and with staff, as with other services they have contracted out. In the case of transmission, there is a further safeguard introduced, as confirmed by the government amendment, that pension rights and liabilities can explicitly be included in the transfer scheme, which requires the Secretary of State's approval, as already mentioned.

It is important both for the BBC and for the potential purchasers that they maintain the loyalty and commitment of transmission staff who are providing a first-class service. But I do not believe that they should be put in a straitjacket. Staff benefits will be one criterion of selection, but not the determining criterion.

To return to the subject of this amendment, where a scheme provides specified benefits, as does the BBC pension scheme, those are guaranteed whether it is in surplus or deficit. There is no logic in requiring any surplus or deficit, which happens to have arisen at a particular time, being passed to the new employer. To transfer a deficit would be a drain on the new employer. To transfer a surplus would simply subsidise the new employer's future contributions and penalise the BBC for having contributed up front. It makes no difference to the member's final pension. Having heard this explanation, I hope that the noble Baroness is able to withdraw her amendment.

Baroness Dean of Thornton-le-Fylde

My Lords, I have listened very carefully to what the Minister has had to say. I shall respond to some of the points which do not answer the concerns that I have. The Minister frequently referred to "a normal transfer". These are not people who are leaving, but who are being sold on. Their work is being sold on and privatised. On that basis, as a group of employees and not individuals, I argue most strongly that the points that the Minister made about the surplus are not appropriate in this instance.

The Minister said that the BBC has agreed with the trustees. We have to remember that the trustees within a scheme have it within their discretion to decide about the scheme itself. Their first responsibility is to the scheme whereas the BBC management will not be able to instruct the trustees on what they will and will not do. That is another reason why we want this provision in the Bill, with the Secretary of State having responsibility.

The Minister used the term "best endeavours". In this situation best endeavours are not sufficient. On paper it might look right, but in reality and in everyday experience, it just does not work out. It may be that the bidders for transmission services have their own pension schemes. I do not know, and neither do the employees, whether those schemes match the BBC scheme, which is a good scheme. It is a final salary and defined benefits scheme. I do not know whether the potential bidders have money purchase schemes, which are nowhere near as good as the majority of defined benefits schemes. So the employees may not have a real choice.

If the company that buys the BBC transmission services is already an established company with its own pension scheme, it is no easy matter to transfer people into it. Time and time again one has seen situations where two schemes are run in tandem because the differences are so enormous.

Those are all arguments for the provision, but the core of the matter comes down to the surplus. I heard what the Minister said, that the BBC has to pay if the scheme is in deficit. I have here the BBC report which deals with managing the surplus. It says that the present surplus will see the BBC through to the year 2004. Therefore, it is not as though the scheme is going to go into deficit next year or the year after.

I am not convinced by the Minister's arguments. Although the present provision is an improvement on that in the original Bill, with my amendment it will give employees the security that they deserve and the surplus element that they are entitled to. I wish to test the opinion of the House.

7.27 p.m.

On Question, Whether the said amendment, (Amendment No. 260A) to Commons Amendment No. 260, shall be agreed to?

Their Lordships divided: Contents, 36; Not-Contents, 65.

Division No. 2
CONTENTS
Addington, L.	McGregor of Durris, L.
Berkeley, L [Teller.]	McIntosh of Haringey, L.
Carmichael of Kelvingrove, L.	McNair, L.
Chapple, L.	Mayhew, L.
Clinton-Davis, L.	Monkswell, L.
Dahrendorf, L.	Prys-Davies, L.
Dean of Thornton-le-Fylde, B.	Richard, L
Desai,L.	Russell, E.
Donoughue, L.	Serota, B.
Falkland, V.	Stoddart of Swindon, L
Farrington of Ribbleton, B.	Taylor of Blackburn, L.
Graham of Edmonton, L. [Teller.]	Thomson of Monifieth, L.
Harris of Greenwich, L.	Turner of Camden, B.
Hayman, B.	Whaddon, L.
Jeger, B.	White, B.
Judd, L.	Williams of Crosby, B.
Kilbracken, L.	Winchilsea and Nottingham, E
Longford, E.	Winston, L
NOT-CONTENTS
Abinger, L.	Glenarthur, L.
Addison, V.	Goschen, V.
Annaly, L.	Harlech, L.
Belstead, L.	Henley, L.
Berners, B.	Hogg, B.
Blaker, L.	HolmPatrick, L.
Blatch, B.	Howe, E.
Brougham and Vaux, L.	Inglewood, L.
Burnham, L.	Lawson of Blaby, L.
Carnegy of Lour, B.	Liverpool, E.
Carnock, L.	Long, V.
Chelmsford, V.	Lucas, L.
Chesham, L. [Teller.]	Lucas of Chilworth, L.
Clark of Kempston, L.	Lyell, L.
Coleraine, L.	McColl of Dulwich, L.
Coleridge, L.	Mackay of Ardbrecknish, L.
Colwyn, L.	Mackay of Drumadoon, L.
Courtown, E.	Macleod of Borve, B.
Cox, B.	Mancroft, L.
Cranborne, V. [Lord Privy Seal.]	Marlesford, L.
Cumberlege, B.	Massereene and Ferrard, V.
Demon of Wakefield, B.	Mersey, V.
Dixon-Smith, L.	Miller of Hendon, B.
Eccles, V.	Napier and Ettrick, L.
Elton, L.	Northesk, E.
Ferrers, E	Orr-Ewing, L.
Finsberg, L.	Park of Monmouth, B.
Fraser of Carmyllie, L.	Pilkington of Oxenford, L.

Rankeillour, L.	Swinfen, L.
Seccombe, B.	Teviot, L.
Shaw of Northstead, L.	Trumpington, B
	Ullswater, V.
Strathclyde, L. [Teller.]	Wilcox, B.

Resolved in the negative, and amendment disagreed to accordingly.

7.35 p.m.

On Question, Commons Amendment No. 260 agreed to.

COMMONS AMENDMENTS

261 Schedule 5, page 119, line 36, at end insert 'or Northern Ireland'.

262 Page 119, line 42, after 'documents)' insert 'or section 9 of the Conveyancing Act 1881 (the corresponding provision for Northern Ireland)'.

263 Page 123, line 27, at end insert—

'Consideration for transfer etc.

10.—(1) A transfer in accordance with a transfer scheme may be made for consideration or for no consideration and, if it is made for consideration, the consideration may, in particular, take the form of the issue of shares or securities.

(2) In sub-paragraph (1), "transfer" has the meaning given by paragraph 1(1) of Schedule (Transfer schemes relating to the BBC transmission network: taxation provisions).'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 261 to 263.

Moved, That the House do agree with the Commons in their Amendments Nos. 261 to 263.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

264 After Schedule 5, insert the following new schedule—

'SCHEDULE

TRANSFER SCHEMES RELATING TO THE BBC TRANSMISSION NETWORK: SUCCESSOR COMPANIES

Interpretation

1.—(1) In this Schedule—

"the Charter" means the Royal Charter of 1st May 1996 for the continuance of the British Broadcasting Corporation;

"preparatory scheme" means a transfer scheme whose main purpose is to provide for a transfer of property, rights or liabilities from the BBC to a wholly-owned subsidiary of the BBC;

"successor company" means a company to which property, rights or liabilities are transferred in accordance with a preparatory scheme at a time when the company is a wholly-owned subsidiary of the BBC;

"transfer" includes—

1. (a) any transfer effected by or under an agreement or instrument entered into or executed in pursuance of an obligation imposed by a provision contained in a preparatory scheme by virtue of paragraph 2(1)(g) of Schedule 5;
1115
2. (b) the creation of interests, rights or liabilities by or under any such agreement or instrument; and
3. (c) the creation of interests, rights or liabilities by virtue of any provision contained in a preparatory scheme by virtue of paragraph 2 of Schedule 5;

and references to a transfer in accordance with a preparatory scheme shall be construed accordingly;

"wholly-owned subsidiary" has the meaning given by section 736 of the Companies Act 1985.

(2) Any reference in this Schedule to vesting in accordance with a preparatory scheme or vesting effected by a preparatory scheme shall be construed as a reference to vesting as a result of a transfer in accordance with a preparatory scheme.

Statutory accounts

2.—(1) The following provisions of this paragraph shall have effect for the purposes of any statutory accounts of a successor company.

(2) The vesting in the company effected by any preparatory scheme shall be taken—

1. (a) to have been effected immediately after the end of the last financial year of the BBC to end before the coming into force of the scheme, and
2. (b) to have been a vesting of such property, rights and liabilities as are determined by or under the scheme.

(3) The value of any asset and the amount of any liability which is taken by virtue of sub-paragraph (2) to have been vested in the company shall be taken to have been—

1. (a) in the case where the value or amount is determined by or under the preparatory scheme, that value or amount, and
2. (b) in any other case, the value or amount assigned to the asset or liability for the purposes of the Account or Accounts prepared by the BBC for the purposes of Article 18(2) of the Charter in respect of their last financial year to end before the day on which the preparatory scheme comes into force.

(4) If an Account or Accounts are prepared by the BBC for the purposes of Article 18(2) of the Charter in respect of the residual part of a financial year, that residual part shall be treated as a financial year of the BBC for the purposes of sub-paragraph (3).

(5) In this paragraph "statutory accounts", in relation to a company, means any accounts of that company prepared for the purposes of any provision of the Companies Act 1985 (including group accounts).

Distributable reserves

3.—(1) Where statutory accounts of a successor company prepared as at any time would show the company as having net assets in excess of the aggregate of—

1. (a) its called-up share capital, and
2. (b) the amount, apart from any property, rights and liabilities transferred to it in accordance with any preparatory scheme, of its undistributable reserves,

then, for the purposes of section 263 of the Companies Act 1985 (profits available for distribution) and of the preparation as at that time of any statutory accounts of the company, that excess shall be treated, except so far as the Secretary of State may otherwise direct, as representing an excess of the company's accumulated realised profits over its accumulated realised losses.

(2) For the purposes of section 264 of the Companies Act 1985 (restriction on distribution of assets) so much of any excess of a company's net assets as falls, in accordance with a direction under this paragraph, to be treated otherwise than as representing an excess of the company's accumulated realised profits over its accumulated realised losses shall be treated (subject to any modification of that direction by a subsequent direction under this paragraph) as comprised in the company's undistributable reserves.

(3) A direction under this paragraph may provide, in relation to any amount to which it applies, that, on the realisation (whether before or after the company in question ceases to be a wholly-owned subsidiary of the BBC) of such profits and losses as may be specified or described in the direction, so much of that amount as may be determined in accordance with the direction is to cease to be treated as mentioned in sub-paragraph (2) and is to fall to be treated as comprised in the company's accumulated realised profits.

(4) The Secretary of State shall not give a direction under this paragraph in relation to a successor company at any time after the company has ceased to be a wholly-owned subsidiary of the BBC.

(5) The consent of the Treasury shall be required for the giving of a direction under this paragraph.

(6) In this paragraph—

"called-up share capital" has the same meaning as in the Companies Act 1985;

"net assets" has the meaning given by subsection (2) of section 264 of that Act;

"undistributable reserves" has the meaning given by subsection (3) of that section;

and references in this paragraph, in relation to a company, to statutory accounts are references to accounts of that company prepared in respect of any period in accordance with the requirements of that Act, or with those requirements applied with such modifications as are necessary where that period is not an accounting reference period.

Dividends

4.—(t) Where a distribution is proposed to be declared during any accounting reference period of a successor company which includes a transfer date or before any accounts are laid or filed in respect of such a period, sections 270 to 276 of the Companies Act 1985 (accounts relevant for determining whether a distribution may be made by a company) shall have effect as if—

1. (a) references in section 270 to the company's accounts or to accounts relevant under that section, and
2. (b) references in section 273 to initial accounts,

included references to such accounts as, on the assumptions stated in sub-paragraph (2), would have been prepared under section 226 of that Act in respect of the relevant year (in this paragraph referred to as "the relevant accounts").

(2) Those assumptions are—

1. (a) that the relevant year had been a financial year of the successor company,
2. (b) that the vesting in accordance with the preparatory scheme had been a vesting of all the property, rights and liabilities transferred to the company in accordance with that scheme and had been effected immediately after the beginning of that year,
3. (c) that the value of any asset and the amount of any liability of the BBC vested in the successor company in accordance with the preparatory scheme had been the value or (as the case may be) amount determined by or under the scheme or (if there is no such determination) the value or amount assigned to the asset or liability for the purposes of the Account or Accounts prepared by the BBC for the purposes of Article 18(2) of the Charter in respect of their financial year immediately preceding the relevant year,
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4. (d) that any securities of the successor company issued or allotted before the declaration of the distribution had been issued or allotted before the end of the relevant year, and
5. (e) such other assumptions (if any) as may appear to the directors of the successor company to be necessary or expedient for the purposes of this paragraph.

(3) If an Account or Accounts are prepared by the BBC for the purposes of Article 18(2) of the Charter in respect of the residual part of a financial year, that residual part shall be treated as a financial year of the BBC for the purposes of sub-paragraph (2)(c).

(4) The relevant accounts shall not be regarded as statutory accounts for the purposes of paragraph 2.

(5) In this paragraph—

"accounting reference period" has the meaning given by section 224 of the Companies Act 1985;

"complete financial year" means a financial year ending with 31st March;

"the relevant year", in relation to any transfer date, means the last complete financial year ending before that date;

"a transfer date", in relation to a successor company, means the date of the coming into force of any preparatory scheme in accordance with which property, rights or liabilities are transferred to that company.

Application of the Trustee Investments Act 1961

5.—(1) For the purpose of applying paragraph 3(b) of Part IV of Schedule 1 to the Trustee Investments Act 1961 (which provides that shares and debentures of a company shall not count as wider-range and narrower-range investments respectively within the meaning of that Act unless the company has paid dividends in each of the five years immediately preceding that in which the investment is made) in relation to investment in shares or debentures of a successor company during the calendar year in which the transfer date falls ("the first investment year") or during any year following that year, the successor company shall be deemed to have paid a dividend as there mentioned—

1. (a) in every year preceding the first investment year which is included in the relevant five years, and
2. (b) in the first investment year, if that year is included in the relevant five years and the successor company does not in fact pay such a dividend in that year.

(2) In sub-paragraph (1)—

"the relevant five years" means the five years immediately preceding the year in which the investment in question is made or proposed to be made;

"the transfer date", in relation to a successor company, means the first date on which any preparatory scheme in accordance with which property, rights or liabilities are transferred to that company comes into force.'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 264.

Moved, That the House do agree with the Commons in their Amendment No. 264.—(Lord Inglewood.)

[Amendment No. 264A, as an amendment to Commons Amendment No. 264, not moved.]

On Question, Commons Amendment No. 264 agreed to.

COMMONS AMENDMENT

265 After Schedule 5, insert the following new schedule—

'SCHEDULE

TRANSFER SCHEMES RELATING TO THE BBC TRANSMISSION NETWORK: TAXATION PROVISIONS

Interpretation

1.—(1) In this Schedule, unless the context otherwise requires—

"the Allowances Act" means the Capital Allowances Act 1990;

"the BBC transmission network" has the meaning given by section 110(2);

"the Capital Allowances Acts" has the meaning given by section 832(1) of the Taxes Act 1988;

"direct disposal scheme" means a transfer scheme which is not a preparatory scheme;

"direct disposal transfer" means a transfer in accordance with a direct disposal scheme;

"the documents regulating the BBC" includes—

1. (a) the Royal Charter of 1st May 1996 for the continuance of the British Broadcasting Corporation; and
2. (b) the Agreement dated 25th January 1996 between Her Majesty's Secretary of State for National Heritage and the British Broadcasting Corporation;

"the Gains Act" means the Taxation of Chargeable Gains Act 1992;

"modification agreement" has the meaning given by paragraph 7(7) of Schedule 5;

"preparatory scheme" means a transfer scheme whose main purpose is to provide for a transfer of property, rights or liabilities from the BBC to a wholly-owned subsidiary of the BBC;

"preparatory transfer" means a transfer in accordance with a preparatory scheme;

"relevant transfer" means a transfer in accordance with a transfer scheme;

"successor company" means a company to which property, rights or liabilities are transferred in accordance with a preparatory scheme at a time when the company is a wholly-owned subsidiary of the BBC;

"the Taxes Act 1988" means the Income and Corporation Taxes Act 1988;

"transfer", except for the purposes of paragraphs 13 to 18, includes—

1. (a) any transfer effected by or under an agreement or instrument entered into or executed in pursuance of an obligation imposed by a provision contained in a transfer scheme by virtue of paragraph 2(1)(g) of Schedule 5;
2. (b) the creation of interests, rights or liabilities by or under any such agreement or instrument; and
3. (c) the creation of interests, rights or liabilities by virtue of any provision contained in a transfer scheme by virtue of paragraph 2 of Schedule 5;

and references to a transfer in accordance with a transfer scheme (or any description of transfer scheme) shall be construed accordingly;

"transferee"—

1. (a) in relation to a transfer scheme, means a person to whom property, rights or liabilities are transferred in accordance with the transfer scheme; and
2. (b) in relation to a relevant transfer, means the person to whom the property, rights or liabilities in question are transferred in accordance with the transfer scheme in question;

"wholly-owned subsidiary" has the meaning given by section 736 of the Companies Act 1985.

(2) In any provision of this Schedule "the prescribed amount", in relation to any transferee under a transfer scheme, means such amount as may be specified by the Secretary of State by order for the purposes of that provision in its application to that transferee.

(3) This Schedule—

1. (a) so far as it relates to corporation tax, shall be construed as one with the Corporation Tax Acts, and
2. (b) so far as it relates to capital allowances, shall be construed as one with the Capital Allowances Acts.

Chargeable gains: preparatory transfers etc to be without gain or loss

2.—(1) For the purposes of corporation tax on chargeable gains, the disposal of property, rights or liabilities which is constituted by a preparatory transfer shall, subject to the following provisions of this Schedule, be taken in relation to both—

1. (a) the person to whom the disposal is made, and
2. (b) the person making the disposal,

to be effected for a consideration such that no gain or loss accrues to the person making the disposal.

(2) Section 171(1) of the Gains Act (which makes provision in relation to the disposal of assets from one member of a group of companies to another member of the group) shall not apply where the disposal in question is a preparatory transfer.

Chargeable gains: amendment of section 35(3)(d) of the Gains Act

3. In section 35(3)(d) of the Gains Act (list of provisions for transfers without gain or loss for purposes of provisions applying to assets held on 31st March 1982) after sub-paragraph (xi) there shall be inserted—

"(xii) paragraph 2(1) of Schedule (Transfer schemes relating to the BBC transmission network: taxation provisions) to the Broadcasting Act 1996;".

Chargeable gains: section 41 of the Gains Act

4. Subsection (1) of section 174 of the Gains Act (which applies section 41 of that Act to cases where assets have been acquired without gain or loss) shall have effect, without prejudice to paragraph 2, where there has been a preparatory transfer as if the asset to which the preparatory transfer relates had thereby been transferred and acquired in relevant circumstances, within the meaning of that subsection.

Chargeable gains: assets held before 6th April 1965

5. Schedule 2 to the Gains Act (assets held on 6th April 1965) shall have effect in relation to any assets which are transferred to a successor company in accordance with a preparatory scheme as if—

1. (a) the BBC and the successor company were the same person; and
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2. (b) those assets, to the extent that they were in fact acquired or provided by the BBC, were acquired or, as the case may be, provided by the successor company.

Chargeable gains: sale of successor company: group transactions

6.—(1) For the purposes of section 179 of the Gains Act (company ceasing to be a member of a group), where any company ("the degrouped company") ceases, by virtue of a qualifying transaction, to be a member of a group of companies, the degrouped company shall not, by virtue of that qualifying transaction, be treated under that section as having sold, and immediately reacquired, any asset acquired from a company which falls to be regarded for the purposes of subsection (1) of that section as having been at the time of acquisition a member of that group.

(2) Where, disregarding any preparatory transactions, a company would be regarded for the purposes of section 179 of the Gains Act (and, accordingly, of this paragraph) as ceasing to be a member of a group of companies by virtue of a qualifying transaction, it shall be regarded for those purposes as so doing by virtue of the qualifying transaction and not by virtue of any preparatory transactions.

(3) In this paragraph—

"preparatory transaction", in the case of any qualifying transaction, means anything done for the purpose of initiating, advancing or facilitating the qualifying transaction;

"qualifying transaction" means the disposal by the BBC of any shares or securities of a successor company.

(4) Expressions used in this paragraph and in section 179 of the Gains Act have the same meaning in this paragraph as they have in that section.

Chargeable gains: sale or exchange of shares or securities of successor company

7.—(1) Where a company issues shares or debentures to the BBC in exchange for shares in or debentures of a successor company which have not, before that exchange, been disposed of by the BBC—

1. (a) sections 127 to 131 of the Gains Act (reorganisation or reduction of share capital) shall not apply by virtue of subsection (3) of section 135 of that Act (exchange of securities) in relation to that exchange, and
2. (b) section 116 of that Act (reorganisations, conversions and reconstructions) accordingly does not have effect in relation to that transaction,

and the following provisions of this paragraph shall apply accordingly.

(2) The following provisions of this paragraph apply in any case where—

1. (a) there is a preparatory transfer to a successor company;
2. (b) the BBC disposes of any shares or securities of the successor company for a consideration in money or money's worth; and
3. (c) those shares or securities are shares or securities which were—
1. (i) held by or on behalf of the BBC immediately before the preparatory transfer takes effect, or
2. (ii) issued to or for the BBC at a time when the successor company is a wholly-owned subsidiary of the BBC,

and which have not previously been disposed of by the BBC.

(3) For the purposes of corporation tax on chargeable gains, neither a chargeable gain nor an allowable loss shall be regarded as arising to the BBC on the disposal mentioned in sub-paragraph (2)(b).

(4) If the consideration for the disposal mentioned in sub-paragraph (2)(b) consists of or includes a right to any variable deferred consideration, then, for the purposes of corporation tax on chargeable gains, neither a chargeable gain nor an allowable loss shall be regarded as arising to the BBC on the disposal of the right to the variable deferred consideration.

(5) In this paragraph "variable deferred consideration" means any consideration—

1. (a) which is not to be given until after the disposal mentioned in sub-paragraph (2)(b); and
2. (b) whose amount or value, as at the time when it is to be given, is not ascertainable at the time of that disposal.

No chargeable gain or allowable loss to arise on any disposal constituted by a direct disposal transfer

8.—(1) For the purposes of corporation tax on chargeable gains, neither a chargeable gain nor an allowable loss shall be regarded as arising to the BBC on any disposal constituted by a direct disposal transfer.

(2) If the consideration for a direct disposal transfer consists of or includes a right to any variable deferred consideration, then, for the purposes of corporation tax on chargeable gains, neither a chargeable gain nor an allowable loss shall be regarded as arising to the BBC on the disposal of the right to the variable deferred consideration.

(3) In this paragraph "variable deferred consideration", in the case of any direct disposal transfer, means any consideration—

1. (a) which is not to be given until after the direct disposal transfer; and
2. (b) whose amount or value, as at the time when it is to be given, is not ascertainable at the time of the disposal constituted by that transfer.

Chargeable gains: value shifting

9.—(1) Nothing in Part VI of this Act, and no instrument or agreement made, or other thing done, under or by virtue of that Part or for the purpose of initiating, advancing or facilitating the disposal by the BBC of—

1. (a) the whole or any part of the BBC transmission network, or
2. (b) any shares or securities of a successor company which are shares or securities which were—
1. (i) held by or on behalf of the BBC immediately before a preparatory transfer to the successor company takes effect, or
2. (ii) issued to or for the BBC at a time when the successor company is a wholly-owned subsidiary of the BBC,

and which have not previously been disposed of by the BBC,

shall be regarded as a scheme or arrangement for the purposes of section 30 of the Gains Act (value-shifting).

(2) In any case where—

1. (a) an asset which is the subject of a preparatory transfer has previously been the subject of a scheme or arrangements falling within subsection (1) of section 30 of the Gains Act,
2. (b) in consequence, subsection (5) of that section (consideration on disposal to be treated as increased for certain purposes) would, apart from sub-paragraph (3), have had effect in relation to the consideration for the preparatory transfer, and
1122
3. (c) the consideration for the preparatory transfer falls to be determined, for the purposes of corporation tax on chargeable gains, under paragraph 2,

sub-paragraph (3) shall apply.

(3) Where this sub-paragraph applies—

1. (a) subsection (5) of section 30 of the Gains Act shall not have effect in relation to the consideration for the preparatory transfer; but
2. (b) on the first subsequent disposal of the asset which is neither a preparatory transfer nor a group disposal—
1. (i) that subsection shall have effect in relation to the consideration for that disposal (whether or not it would otherwise have done so); and
2. (ii) the increase that falls to be made under that subsection shall be so calculated as to include any increase which would, but for paragraph (a) above, have fallen to be made in relation to the preparatory transfer.

(4) In this paragraph "group disposal" means a disposal which falls to be treated by virtue of section 171(1) of the Gains Act as made for a consideration such that no gain or loss accrues to the person making the disposal.

Chargeable gains: receipt of compensation or insurance money

10.—(1) Subsection (4) of section 23 of the Gains Act (adjustments where compensation or insurance money used for purchase of replacement asset) shall have effect in accordance with sub-paragraph (3) in any case where—

1. (a) there is a relevant transfer such that—
1. (i) a capital sum received by the BBC by way of compensation for the loss or destruction of an asset, or under a policy of insurance of the risk of the loss or destruction of an asset, becomes available to the transferee; or
2. (ii) a right of the BBC to receive such a sum is transferred to the transferee, and the transferee receives that sum; and
2. (b) the transferee acquires an asset in circumstances where—
1. (i) had there been no such relevant transfer, and
2. (ii) had the BBC acquired the asset by the application of that sum,

the BBC would be treated for the purposes of that subsection as having so acquired the asset in replacement for the asset lost or destroyed.

(2) Subsection (5) of that section (adjustments where a part of any compensation or insurance money is used for the purchase of a replacement asset) shall have effect in accordance with sub-paragraph (3) in any case where—

1. (a) there is a relevant transfer such that—
1. (i) a capital sum received by the BBC by way of compensation for the loss or destruction of an asset, or under a policy of insurance of the risk of the loss or destruction of an asset, becomes available to the transferee; or
2. (ii) a right of the BBC to receive such a sum is transferred to the transferee, and the transferee receives that sum; and
2. (b) the transferee acquires an asset in circumstances where—
1. (i) had there been no such relevant transfer, and
1123
2. (ii) had the BBC acquired the asset by the application of all of that sum except for a part which was less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal of the asset lost or destroyed,

the BBC would be treated for the purposes of that subsection as having so acquired the asset in replacement for the asset lost or destroyed.

(3) In a case falling within sub-paragraph (1) or (2) of this paragraph, subsection (4) or, as the case may be, subsection (5) of section 23 of the Gains Act shall have effect as if the transferee and the BBC were the same person, except that—

1. (a) in a case falling within sub-paragraph (1)(a)(i) or (2)(a)(i)—
1. (i) any claim under the subsection in question must be made by the BBC and the transferee; and
2. (ii) any adjustment to be made in consequence of paragraph (a) of that subsection shall be made for the purposes only of the taxation of the BBC; and
2. (b) in a case falling within sub-paragraph (l)(a)(ii) or (2)(a)(ii)—
1. (i) any claim under the subsection in question must be made by the transferee; and
2. (ii) any adjustment to be made in consequence of paragraph (a) of that subsection shall be made for the purposes only of the taxation of the transferee.

Loan relationships: disposal of securities by BBC

11.—(1) This paragraph applies in any case where—

1. (a) there is a preparatory transfer to a successor company;
2. (b) the BBC disposes of any securities of the successor company for a consideration in money or money's worth; and
3. (c) those securities are securities issued to or for the BBC in consideration for the preparatory transfer.

(2) Where this paragraph applies, any debits or credits which, by reason of the disposal mentioned in sub-paragraph (1)(b), would, apart from this sub-paragraph, be given by Chapter II of Part IV of the Finance Act 1996 (loan relationships) in respect of a loan relationship for an accounting period of the BBC shall not be brought into account for the purposes of that Chapter as respects the BBC.

Transfer of trade: loss relief, and capital allowances

12.—(1) This paragraph applies in any case where, as a result of a relevant transfer,—

1. (a) the BBC ceases to carry on a trade; and
2. (b) the transferee begins to carry on that trade.

(2) Where this paragraph applies, section 343 of the Taxes Act 1988 (company reconstructions without change of ownership) shall not have effect in relation to the event described in sub-paragraph (1).

(3) Where this paragraph applies, the trade mentioned in sub-paragraph (1) shall not be treated as permanently discontinued nor a new trade as set up and commenced for the purpose of the allowances and charges provided for by the Capital Allowances Acts; but—

1. (a) there shall be made to or on the transferee in accordance with those Acts all such allowances and charges as would, if the BBC had continued to carry on the trade, have fallen to be made to or on it; and
1124
2. (b) the amount of any such allowance or charge shall be computed as if—
1. (i) the transferee had been carrying on the trade since the BBC began to do so; and
2. (ii) everything done to or by the BBC had been done to or by the transferee (but so that no sale or transfer which on the transfer of the trade is made to the transferee by the BBC of any assets in use for the purpose of the trade shall be treated as giving rise to any such allowance or charge).

(4) For the purposes of this paragraph—

1. (a) where, on the BBC ceasing to carry on a trade, a company begins to carry on the activities of the trade as part of its trade, then that part of the trade carried on by the company shall be treated as a separate trade, if the effect of so treating it is that this paragraph applies by virtue of sub-paragraph (1) on that event in relation to that separate trade; and
2. (b) where, on the BBC ceasing to carry on part of a trade, a company begins to carry on the activities of that part as its trade or part of its trade, the BBC shall be treated as having carried on that part of its trade as a separate trade if the effect of so treating it is that this paragraph applies by virtue of sub-paragraph (1) on that event in relation to that separate trade.

Capital allowances: industrial buildings and structures

13.—(1) This paragraph applies in any case where there is a relevant transfer of property which is, for the purposes of Part I of the Allowances Act (industrial buildings and structures), the relevant interest in relation to any expenditure incurred on the construction of a building or structure.

(2) Where this paragraph applies, the Secretary of State may by order make provision specifying, as respects the transferee, —

1. (a) the amount which is to be taken for the purposes of Part I of the Allowances Act to be the amount of the capital expenditure incurred on the construction of the building or structure; and
2. (b) the date which is to be taken for the purposes of that Part as the date on which the building or structure was first used.

(3) This paragraph shall not have effect in relation to any property if paragraph 12(3) has effect in relation to it.

Capital allowances: machinery and plant

14.—(1) For the purposes of Part II of the Allowances Act (capital allowances in respect of machinery and plant) property which is transferred to a successor company in accordance with a preparatory scheme shall be treated as if—

1. (a) it had been acquired by the successor company, for the purposes for which it is used by that company on and after the date on which the transfer of the property in accordance with the scheme takes effect, on that date; and
2. (b) capital expenditure of the prescribed amount had been incurred on that date by the successor company on the acquisition of the property for the purposes mentioned in paragraph (a).

(2) This paragraph shall not have effect in relation to any property if paragraph 12(3) has effect in relation to it.

Capital allowances: leased fixtures

15.—(1) This paragraph applies to any lease which is granted in pursuance of an obligation imposed by a provision contained in a preparatory scheme by virtue of paragraph 2(1)(g) of Schedule 5.

(2) Where the conditions in paragraphs (a) and (b) of subsection (1) of section 55 of the Allowances Act (expenditure incurred by incoming lessee: transfer of allowances) are fulfilled in relation to a lease to which this paragraph applies—

1. (a) the lessee shall be deemed for the purposes of Part II of that Act to have given as consideration for the lease a capital sum which falls to be treated for the purposes of that Part as expenditure on the provision of the fixture concerned;
2. (b) the amount of that capital sum shall be the prescribed amount; and
3. (c) subsection (4)(a) of that section shall be disregarded.

(3) Where the conditions in paragraphs (a), (c) and (d) of section 56 of the Allowances Act (expenditure incurred by incoming lessee: lessor not entitled to allowances) are fulfilled in relation to a lease to which this paragraph applies—

1. (a) the lessee shall be deemed for the purposes of Part II of that Act to have given as consideration for the lease a capital sum which falls to be treated for the purposes of that Part as expenditure on the provision of the fixture concerned; and
2. (b) the amount of that capital sum shall be the prescribed amount.

Capital allowances: connected persons

16. In Part II of the Allowances Act (machinery and plant) references to a transaction (however described) between connected persons within the meaning of section 839 of the Taxes Act 1988 shall not include references to a preparatory transfer.

Capital allowances: agricultural buildings

17.—(1) This paragraph applies in any case where there is a relevant transfer of property which is the relevant interest in relation to any expenditure for which the BBC would be entitled to an allowance under Part V of the Allowances Act (agricultural buildings etc) apart from section 128 of that Act (balancing allowances and charges).

(2) Where this paragraph applies—

1. (a) the acquisition of the relevant interest by the transferee shall, as respects the transferee, be treated for the purposes of Part V of the Allowances Act as a balancing event falling within subsection (1)(a) of section 129 of that Act (so that, in particular, subsection (3) of that section applies by reason of its occurrence); and
2. (b) it shall accordingly be assumed, as respects the transferee, that an election has been made under subsection (2) of that section (acquisition of relevant interest by another not to be a balancing event without an election under that subsection) with respect to the acquisition of the relevant interest by the transferee.

(3) Where this paragraph applies, subsection (3) of section 129 of the Allowances Act (entitlement of the new owner to allowances) shall, as respects the transferee, have effect with the following modifications, that is to say—

1. (a) the period which, by virtue of paragraph (a) of that subsection, is to be treated as if it were itself the writing-down period in which the allowances in respect of the expenditure in question were to be made shall be such period as the Secretary of State may by order specify; and
2. (b) the expenditure which, by virtue of paragraph (b) of that subsection, is to be treated as the expenditure in respect of which the transferee (as being the new owner, within the meaning of that section) is entitled to the allowances mentioned in 1126 that paragraph shall be equal to the prescribed amount (without any reduction or addition under that paragraph).

(4) This paragraph shall not have effect in relation to any property if paragraph 12(3) has effect in relation to it.

Corporation tax: BBC and successor company to be treated as one for certain purposes

18.—(1) If any property, rights or liabilities are transferred to a successor company in accordance with a preparatory scheme, then, subject to sub-paragraph (2), the following provisions shall apply for the purposes of the Corporation Tax Acts in their application in respect of any accounting period ending on or after the date on which the transfer takes effect, namely—

1. (a) any trade or part of a trade carried on by the BBC which is transferred in accordance with the preparatory scheme to the successor company shall be treated as having been, at the time of its commencement and at all times since that time, a separate trade carried on by that company;
2. (b) the trade or trades carried on by the successor company on and after the date on which the transfer takes effect shall be treated as the same trade or trades as that which, by virtue of paragraph (a), is treated as carried on before that date;
3. (c) all property, rights and liabilities of the BBC which are transferred in accordance with the scheme to the successor company shall be treated as having been, at the time when they became vested in the BBC and at all times since that time, property, rights and liabilities of that company; and
4. (d) anything done by the BBC in relation to property, rights and liabilities which are transferred to the successor company in accordance with the preparatory scheme shall be treated as having been done by that company.

(2) Sub-paragraph (1) shall not apply for the purposes of—

1. (a) corporation tax on chargeable gains,
2. (b) capital allowances, or
3. (c) relief for losses incurred in carrying on a trade,

and no provision included in a scheme by virtue of paragraph 4(2)(a) of Schedule 5 shall have effect for those purposes.

Corporation tax: no profit or loss under Case I of Schedule D by reason of a direct disposal transfer

19. In determining for the purposes of Case I of Schedule D the profits or gains or losses arising or accruing to the BBC, it shall be assumed that no profits or gains, and no losses, arise or accrue to the BBC by reason of a direct disposal transfer of—

1. (a) any trading stock, within the meaning of section 100 of the Taxes Act 1988, belonging to a trade carried on by the BBC;
2. (b) any right of the BBC to receive an amount which is for the purposes of corporation tax—
1. (i) an amount brought into account as a trading receipt of the BBC for any accounting period ending before the time when the transfer takes effect; or
2. (ii) an amount falling to be so brought into account if it is assumed, where it is not the case, that the accounting period of the BBC current on the day before the transfer takes effect ends immediately before that time; or
1127
3. (c) the whole or any part of the amount of a liability which falls for the purposes of corporation tax—
1. (i) to be brought into account as deductible in computing the profits of any trade carried on by the BBC for any accounting period ending before the time when the transfer takes effect; or
2. (ii) to be so brought into account if it is assumed, where it is not the case, that the accounting period of the BBC current on the day before the transfer takes effect ends immediately before that time.

Corporation tax: group relief

20.—(1) None of the following, namely—

1. (a) the existence of the powers of any Minister of the Crown or the BBC under Part VI of this Act or under the documents regulating the BBC,
2. (b) any direction given by a Minister of the Crown under that Part or those documents, so far as that direction relates to a transfer scheme or (in a case where there is a preparatory scheme) to the sale of shares or securities issued by the successor company, or
3. (c) any arrangements (of any kind, whether in writing or not) so far as relating to a transfer scheme or any such sale,

shall be regarded as constituting arrangements falling within subsection (1) or (2) of section 410 of the Taxes Act 1988 (arrangements for the transfer of a company to another group or consortium).

(2) Neither—

1. (a) the existence of the powers of any Minister of the Crown or the BBC under Part VI of this Act or under the documents regulating the BBC, nor
2. (b) any direction given as mentioned in sub-paragraph (1)(b),

shall be regarded as constituting option arrangements for the purposes of paragraph 5B of Schedule 18 to the Taxes Act 1988.

(3) Any reference in sub-paragraph (1) or (2) to the documents regulating the BBC is a reference to those documents only so far as they have effect in relation to a disposal by the BBC of—

1. (a) the whole or any part of the BBC transmission network, or
2. (b) any shares or securities of a successor company,

or the initiating, advancing or facilitating of any such disposal.

(4) In this paragraph "Minister of the Crown" has the same meaning as in the Ministers of the Crown Act 1975.

Corporation tax: leases at an undervalue

21.—(1) Section 35 of the Taxes Act 1988 (charge on lease granted at an undervalue) shall not apply in the case of any lease which, in accordance with a transfer scheme, is granted—

1. (a) to a company which is a transferee under that or any other transfer scheme, or
2. (b) by such a company to the BBC.

(2) Section 87 of the Taxes Act 1988 (taxable premiums) shall not apply where there is an amount which would have become chargeable in relation to any land but for sub-paragraph (1); and, accordingly, references to any such amount shall not be included in references in that section to the amount chargeable.

(3) In this paragraph "lease" has the same meaning as in Part II of the Taxes Act 1988.

Corporation tax: sale and lease-back

22.—(1) Section 779 of the Taxes Act 1988 (sale and lease-back: limitation on tax reliefs) shall not apply where the liability of the transferor or of the person associated with that transferor is as a result of—

1. (a) the creation, in accordance with a transfer scheme, of any interest or right in favour of a transferee or the BBC;
2. (b) any other transaction for which a transfer scheme provides; or
3. (c) the grant by a company which is a transferee under a transfer scheme ("the relevant company") to the BBC or to another company which is a transferee (whether under that or any other transfer scheme) of any interest or right, at a time when the relevant company remains a wholly-owned subsidiary of the BBC, in a case where the ability of the relevant company to grant that interest or right derives from the transfer to the company in accordance with a transfer scheme of an estate or interest in land.

(2) In this paragraph "transferor" has the same meaning as in section 779 of the Taxes Act 1988 and "associated" shall be construed in accordance with that section.

Corporation tax: sale of lease of land

23.—(l) Section 780 of the Taxes Act 1988 (sale and lease-back: taxation of consideration) shall not apply where—

1. (a) the assignment of the original lease, and
2. (b) the grant or assignment of the new lease,

each fall within sub-paragraph (2).

(2) The assignment of the original lease, or the grant or assignment of the new lease, falls within this sub-paragraph if—

1. (a) it is a relevant transfer; or
2. (b) it takes place between the BBC and a successor company at a time when the successor company remains a wholly-owned subsidiary of the BBC; or
3. (c) it takes place between two successor companies at a time when both remain wholly-owned subsidiaries of the BBC.

(3) The reference in sub-paragraph (1) to the assignment of the original lease and the grant or assignment of the new lease shall be construed in accordance with section 780 of the Taxes Act 1988 and sub-paragraph (2) shall be construed accordingly.

Corporation tax: leased assets

24.—(1) For the purposes of section 781 of the Taxes Act 1988 (assets leased to traders and others) where the interest of the lessor or the lessee under a lease, or any other interest in an asset, is transferred in accordance with a transfer scheme to the BBC or a transferee, the transfer shall be treated as being effected without any capital sum having been obtained in respect of that interest by the BBC or the transferee.

(2) Section 782 of the Taxes Act 1988 (deduction of payment under leases: special cases) shall not apply to any payments made by the BBC or a company which is a transferee under a transfer scheme if the payments are made—

1. (a) under any lease created in favour of the BBC or such a company by virtue of, or in pursuance of an obligation imposed by, a provision contained in a transfer scheme by virtue of paragraph 2 of Schedule 5; or
1129
2. (b) under any lease—
1. (i) which is granted to or by a successor company at a time when it remains a wholly-owned subsidiary of the BBC; and
2. (ii) which is a lease of an asset which at any time before the creation of the lease was used by the BBC for the purposes of a trade carried on by the BBC and which was, when so used, owned by the BBC.

(3) In this paragraph "lease" and "asset" have the meaning given by section 785 of the Taxes Act 1988.

Stamp duty

25.—(1) Stamp duty shall not be chargeable on any agreement or instrument to the extent that it is certified by the Secretary of State to the Commissioners of Inland Revenue as being—

1. (a) a restructuring scheme,
2. (b) a restructuring scheme modification agreement, or
3. (c) an instrument giving effect to a restructuring scheme modification agreement,

or as having been made in accordance with, or in pursuance of an obligation imposed by, a restructuring scheme.

(2) No agreement or instrument which is certified as mentioned in sub-paragraph (1) shall be taken to be duly stamped unless—

1. (a) it is stamped with the duty to which it would be liable, apart from that sub-paragraph; or
2. (b) it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting that it is not chargeable with that duty or that it is duly stamped.

(3) Section 12 of the Finance Act 1895 (collection of stamp duty in cases of property vested by Act or purchased under statutory power) shall not operate to require—

1. (a) the delivery to the Commissioners of Inland Revenue of a copy of this Act, or
2. (b) the payment of stamp duty under that section on any copy of this Act,

and shall not apply in relation to any instrument on which, by virtue of the preceding provisions of this paragraph, stamp duty is not chargeable.

(4) In this paragraph—

"restructuring scheme modification agreement" means a modification agreement, so far as relating to a restructuring scheme;

"restructuring scheme" means a preparatory scheme, so far as it provides for the transfer of property, rights or liabilities in accordance with the scheme—

1. (a) from the BBC to a wholly-owned subsidiary of the BBC;
2. (b) to the BBC from a wholly-owned subsidiary of the BBC; or
3. (c) from one wholly-owned subsidiary of the BBC to another.

Stamp duty reserve tax

26.—(1) An agreement to transfer chargeable securities, as defined in section 99 of the Finance Act 1986, from the BBC to a wholly-owned subsidiary of the BBC shall not give rise to a charge to stamp duty reserve tax if the agreement is made for the purposes of, or for purposes connected with, a restructuring scheme.

(2) An agreement shall not give rise to a charge to stamp duty reserve tax if the agreement is a restructuring scheme modification agreement.

(3) In this paragraph "restructuring scheme" and "restructuring scheme modification agreement" have the same meaning as in paragraph 25.

Modifications of transfer schemes

27.—(1) If the effect of any transfer scheme is modified in pursuance of a modification agreement, then the Corporation Tax Acts and this Schedule, other than paragraphs 25 and 26, shall have effect as if—

1. (a) the scheme originally made had been the scheme as modified; and
2. (b) anything done by or in relation to the person who without the modification became entitled or subject in accordance with the scheme to any property, rights or liabilities had, so far as relating to the property, rights or liabilities to which another person becomes entitled or subject in consequence of the modification, been done by or in relation to that other person.

(2) If, in a case falling within sub-paragraph (1), the transfer scheme, as originally made, was a preparatory scheme, the scheme as modified shall be taken to be a preparatory scheme, whether or not any company which was a wholly-owned subsidiary of the BBC at the time when the preparatory scheme took effect remains a wholly-owned subsidiary of the BBC at the time when the modification takes effect.

Orders

28.—(1) The Secretary of State shall not make an order under this Schedule in relation to any transferee under a transfer scheme except—

1. (a) with the consent of the Treasury;
2. (b) after consultation with the BBC; and
3. (c) if the transferee is not a wholly-owned subsidiary of the BBC, after consultation with the transferee.

(2) Any power of the Secretary of State to make an order under this Part of this Schedule—

1. (a) shall be exercisable by statutory instrument; and
2. (b) shall include power to make different provision for different cases, including different provision in relation to different assets or descriptions of assets.'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 265.

Moved, That the House do agree with the Commons in their Amendment No. 265.—(Lord Inglewood.)

[Amendment No. 265A, as an amendment to Commons Amendment No. 265, not moved.]

On Question, Commons Amendment No. 265 agreed to.

COMMONS AMENDMENTS

266 Schedule 6, page 124, leave out lines 4 to 14.

267 Page 124, line 30, leave out 'to (7)'.

268 Page 124, line 46, leave out from beginning to end of line 7 on page 125.

269 Page 125, line 45, leave out from beginning to end of line 16 on page 126.

270 After Schedule 6, insert the following new Schedule—

'SCHEDULE

AMENDMENTS OF COPYRIGHT, DESIGNS AND PATENTS ACT 1988 RELATING TO CABLE PROGRAMME SERVICES.

1. For section 73 of the Copyright, Designs and Patents Act 1988 there is substituted—

"Reception and re-transmission of broadcast in cable programme service

73.—(1) This section applies where a broadcast made from a place in the United Kingdom is, by reception and immediate re-transmission, included in a cable programme service.

(2) The copyright in the broadcast is not infringed—

1. (a) if the inclusion is in pursuance of a relevant requirement, or
2. (b) if and to the extent that the broadcast is made for reception in the area in which the cable programme service is provided and forms part of a qualifying service.

(3) The copyright in any work included in the broadcast is not infringed if and to the extent that the broadcast is made for reception in the area in which the cable programme service is provided; but where the making of the broadcast was an infringement of the copyright in the work, the fact that the broadcast was re-transmitted as a programme in a cable programme service shall be taken into account in assessing the damages for that infringement.

(4) Where—

1. (a) the inclusion is in pursuance of a relevant requirement, but
2. (b) to any extent, the area in which the cable programme service is provided ("the cable area") falls outside the area for reception in which the broadcast is made ("the broadcast area"),

the inclusion in the cable programme service (to the extent that it is provided for so much of the cable area as falls outside the broadcast area) of any work included in the broadcast shall, subject to subsection (5) be treated as licensed by the owner of the copyright in the work, subject only to the payment to him by the person making the broadcast of such reasonable royalty or other payment in respect of the inclusion of the broadcast in the cable programme service as may be agreed or determined in default of agreement by the Copyright Tribunal.

(5) Subsection (4) does not apply if, or to the extent that, the inclusion of the work in the cable programme service is (apart from that subsection) licensed by the owner of the copyright in the work.

(6) In this section "qualifying service" means, subject to subsection (8), any of the following services—

1. (a) a regional or national Channel 3 service,
2. (b) Channel 4, Channel 5 and S4C,
3. (c) the teletext service referred to in section 49(2) of the Broadcasting Act 1990,
4. (d) the service referred to in section 57(1A)(a) of that Act (power of S4C to provide digital service), and
5. (e) the television broadcasting services and teletext service of the British Broadcasting Corporation;

and expressions used in this subsection have the same meaning as in Part I of the Broadcasting Act 1990.

(7) In this section "relevant requirement" means a requirement imposed under—

1. (a) section 78A of the Broadcasting Act 1990 (inclusion of certain services in local delivery services provided by digital means), or
1132
2. (b) paragraph 4 of Part III of Schedule 12 to that Act (inclusion of certain services in diffusion services originally licensed under the Cable and Broadcasting Act 1984).

(8) The Secretary of State may by order amend subsection (6) so as to add any service to, or remove any service from, the definition of "qualifying service".

(9) The Secretary of State may also by order—

1. (a) provide that in specified cases subsection (3) is to apply in relation to broadcasts of a specified description which are not made as mentioned in that subsection, or
2. (b) exclude the application of that subsection in relation to broadcasts of a specified description made as mentioned in that subsection.

(10) Where the Secretary of State exercises the power conferred by subsection (9)(b) in relation to broadcasts of any description, the order may also provide for subsection (4) to apply, subject to such modifications as may be specified in the order, in relation to broadcasts of that description.

(11) An order under this section may contain such transitional provision as appears to the Secretary of State to be appropriate.

(12) An order under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Royalty or other sum payable in pursuance of section 73(4).

73A.—(1) An application to settle the royalty or other sum payable in pursuance of subsection (4) of section 73 (reception and re-transmission of broadcast in cable programme service) may be made to the Copyright Tribunal by the copyright owner or the person making the broadcast.

(2) The Tribunal shall consider the matter and make such order as it may determine to be reasonable in the circumstances.

(3) Either party may subsequently apply to the Tribunal to vary the order, and the Tribunal shall consider the matter and make such order confirming or varying the original order as it may determine to be reasonable in the circumstances.

(4) An application under subsection (3) shall not, except with the special leave of the Tribunal, be made within twelve months from the date of the original order or of the order on a previous application under that subsection.

(5) An order under subsection (3) has effect from the date on which it is made or such later date as may be specified by the Tribunal."

2.—(1) Section 134 of that Act (licences in respect of works included in re-transmissions) is amended as follows.

(2) At the beginning of subsection (1) there is inserted "Subject to subsection (3A)".

(3) After subsection (3) there is inserted—

"(3A) This section does not apply in relation to any application under section 73A (royalty or other sum payable in pursuance of section 73(4))."

3. In section 149 of that Act (jurisdiction of Copyright Tribunal) before paragraph (a) there is inserted—

"(za) section 73 (determination of royalty or other remuneration to be paid with respect to re-transmission of broadcast including work);".

4. In section 205B of that Act (jurisdiction of Copyright Tribunal under Part II) after paragraph (c) there is inserted—

"(cc) paragraph 19 of Schedule 2 (determination of royalty or other remuneration to be paid with respect to re-transmission of broadcast including performance or recording);".

5. For paragraph 19 of Schedule 2 to that Act there is substituted—

"Reception and re-transmission of broadcast in cable programme service

19.—(1) This paragraph applies where a broadcast made from a place in the United Kingdom is, by reception and immediate re-transmission, included in a cable programme service.

(2) The rights conferred by Part II in relation to a performance or recording included in the broadcast are not infringed if and to the extent that the broadcast is made for reception in the area in which the cable programme service is provided; but where the making of the broadcast was an infringement of those rights, the fact that the broadcast was re-transmitted as a programme in a cable programme service shall be taken into account in assessing the damages for that infringement.

(3) Where—

1. (a) the inclusion is in pursuance of a relevant requirement, but
2. (b) to any extent, the area in which the cable programme service is provided ("the cable area") falls outside the area for reception in which the broadcast is made ("the broadcast area"),

the inclusion in the cable programme service (to the extent that it is provided for so much of the cable area as falls outside the broadcast area) of any performance or recording included in the broadcast shall, subject to sub-paragraph (4), be treated as licensed by the owner of the rights conferred by Part II in relation to the performance or recording, subject only to the payment to him by the person making the broadcast of such reasonable royalty or other payment in respect of the inclusion of the broadcast in the cable programme service as may be agreed or determined in default of agreement by the Copyright Tribunal.

(4) Sub-paragraph (3) does not apply if, or to the extent that, the inclusion of the work in the cable programme service is (apart from that sub-paragraph) licensed by the owner of the rights conferred by Part II in relation to the performance or recording.

(5) The Secretary of State may by order—

1. (a) provide that in specified cases sub-paragraph (2) is to apply in relation to broadcasts of a specified description which are not made as mentioned in that sub-paragraph, or
2. (b) exclude the application of that sub-paragraph in relation to broadcasts of a specified description made as mentioned in that sub-paragraph.

(6) Where the Secretary of State exercises the power conferred by sub-paragraph (5)(b) in relation to broadcasts of any description, the order may also provide for sub-paragraph (3) to apply, subject to such modifications as may be specified in the order, in relation to broadcasts of that description.

(7) An order under this paragraph may contain such transitional provision as appears to the Secretary of State to be appropriate.

(8) An order under this paragraph shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(9) Expressions used in this paragraph have the same meaning as in section 73."

6. After paragraph 19 of Schedule 2 to that Act there is inserted—

"19A.—(1) An application to settle the royalty or other sum payable in pursuance of sub-paragraph (3) of paragraph 19 may be made to the Copyright Tribunal by the owner of the rights conferred by Part II or the person making the broadcast.

(2) The Tribunal shall consider the matter and make such order as it may determine to be reasonable in the circumstances.

(3) Either party may subsequently apply to the Tribunal to vary the order, and the Tribunal shall consider the matter and make such order confirming or varying the original order as it may determine to be reasonable in the circumstances.

(4) An application under sub-paragraph (3) shall not, except with the special leave of the Tribunal, be made within twelve months from the date of the original order or of the order on a previous application under that sub-paragraph.

(5) An order under sub-paragraph (3) has effect from the date on which it is made or such later date as may be specified by the Tribunal."'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 266 to 270.

Moved, That the House do agree with the Commons in their Amendments Nos. 266 to 270.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

271 Schedule 7, page 126, line 38, after 'paragraph (b)' insert—'(i)"

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 271. In speaking to this amendment I should like to speak also to Amendments Nos. 272 and 274. These amendments relate to quality. Section 2 of the 1990 Act requires the ITC, inter alia, to ensure that, taken as a whole, the services that it licenses are of high quality and calculated to appeal to a wide variety of tastes and interests. Within that general remit, there are specific statutory arrangements spelling out the criteria to be applied in granting particular categories of licence. These take account of the very different circumstances of different licence categories.

The Bill is designed to give digital terrestrial services a fair opportunity to compete with cable and satellite. The regime applying to them is rightly more relaxed than that applying to the scarce analogue terrestrial frequencies, which still command the lion's share of national television audience. The general duties in the 1990 Act which I mentioned at the beginning will be applied by the Bill to the new digital programme services. This is what is secured by these amendments. Under the Bill the regulators will be free to take account of quality considerations in assessing just how likely a particular programme package proposed by a multiplex applicant is to appeal to viewers and listeners and thereby promote their take-up of digital receiving equipment. Similarly, quality considerations can be taken into account in considering as the market develops the acceptability of any licence variations relating to programming which a multiplex operator may propose. In the Government's view, this strikes the right balance between the need to ensure that the market can prosper and the need to allow the regulators to avoid any danger of a flood of low-quality or stale programming. I commend the amendment to the House.

Moved, That the House do agree with the Commons in their Amendment No. 271.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENTS

272 Schedule 7, page 126, line 39, at end insert—

'(ii) after "television programme services" there is inserted "and multiplex services (as defined by section 1(1) of that Act), and

(iii) for "such services" there is substituted "television programme services.'.

273 Page 127, line 7, at end insert—

'. In section 72 of the 1990 Act (local delivery services), in subsection (2) —

(a) after paragraph (c) there is inserted—

"(cc) any digital programme service (as defined by section 1(4) of the Broadcasting Act 1996);", and.

(b) at the end there is inserted "and

(f) any digital sound programme service (as defined by section 34(5) of the Broadcasting Act 1996)." '.

274 Page 127, line 27, at end insert 'digital sound programme'.

275 Page 127, line 33, at end insert—

'.In section 112 of the 1990 Act (licensable sound programme services), in subsection (2)(a), after "sound broadcasting service" there is inserted "or a radio multiplex service (as defined by section 34(1) of the Broadcasting Act 1996)".'.

276 Page 127, line 36, at end insert—

'. In section 176 of the 1990 Act (duty to provide advance information about programmes), in subsection (7), in the first column of the table—

1. (a) after "Welsh Authority" there is inserted "and the service referred to in section 57(1A)(a)", and
2. (b) after "Radio Authority" there is inserted ", any simulcast radio service (within the meaning of Part II of the Broadcasting Act 1996), and any national digital sound programme service (within the meaning of that Part of that Act) subject to regulation by the Radio Authority" '.

277 Page 127, line 49, at end insert—

'10A. In section 33 of the 1990 Act (conditions requiring holder of Channel 3 or Channel 5 licence to deliver licensed service) in subsection (3) after "subsection (1)" there is inserted "or section 21A(3) or (4)".'.

278 Page 127, line 49, at end insert—

'10B.—(1) Section 43 of the 1990 Act (domestic and non-domestic satellite services) is amended as follows.

(2) In subsection (3), after "shall", where first occurring, there is inserted "subject to subsection (3A)".

(3) After that subsection there is inserted—

"(3A) For the purposes of this Part, any non-domestic satellite service which is composed by, and transmitted for, a BBC company, a Channel 4 company or an S4C company—

1. (a) shall be regarded as provided by that company and not by the relevant broadcasting body (even if the relevant broadcasting body is in a position to determine what is to be included in the service), and
2. (b) shall be regarded as provided from a place in the United Kingdom."

(4) At the end of subsection (4) there is inserted—

"relevant broadcasting body" means—

1. (a) in relation to a BBC company, the BBC,
2. (b) in relation to a Channel 4 company, the Channel Four Television Corporation, and
1136
3. (c) in relation to an S4C company, the Welsh Authority."'.

279 Page 128, line 2, after 'inserted' insert 'a multiplex service (as defined by section 1(1) of the Broadcasting Act 1996),'.

280 Page 128, line 9, at end insert—

'13A.—(1) Section 84 of the 1990 Act (regulation by Radio Authority of independent radio services) is amended as follows.

(2) In subsection (3), after "shall", where first occurring, there is inserted "subject to subsection (3A)".

(3) After that subsection there is inserted—

"(3A) For the purposes of this Part, any satellite service which is composed by, and transmitted for, a BBC company, a Channel 4 company or an S4C company—

1. (a) shall be regarded as provided by that company and not by the relevant broadcasting body (even if the relevant broadcasting body is in a position to determine what is to be included in the service), and
2. (b) shall be regarded as provided from a place in the United Kingdom.

(3B) In subsection (3A) "relevant broadcasting body" means—

1. (a) in relation to a BBC company, the BBC,
2. (b) in relation to a Channel 4 company, the Channel Four Television Corporation, and
3. (c) in relation to an S4C company, the Welsh Authority."'.

281 Page 128, line 9, at end insert—

'. In section 188 of the 1990 Act (power to give broadcasting bodies etc. directions relating to international obligations), in subsection (2)(e), for "Broadcasting Standards Council" there is substituted "Broadcasting Standards Commission".'.

Lord Inglewood

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 272 to 281. I have already spoken to these amendments.

Moved, That the House do agree with the Commons in their Amendments Nos. 272 to 281.—(Lord Inglewood.)

On Question, Motion agreed to.

COMMONS AMENDMENT

282 Schedule 7, page 128, line 9, at end insert—

'. In section 202(1) of the 1990 Act (interpretation)—

(a) after the definition of "broadcast" there is inserted—

""a Channel 4 company" means—

1. (a) any body corporate which is controlled by the Channel Four Television Corporation, or
2. (b) any body corporate in which the Corporation or any body corporate falling within paragraph (a) above is (to any extent) a participant (as defined in paragraph 1(1) of Part I of Schedule 2);"

(b) in the definition of "connected", for "licence" there is substituted "person", and

(c) after the definition of "programme" there is inserted—

""an S4C company" means—

1. (a) any body corporate which is controlled by the Welsh Authority, or
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2. (b) any body corporate in which the Welsh Authority or any body corporate falling within paragraph (a) above is (to any extent) a participant (as defined in paragraph 1(1) of Part I of Schedule 2);"'.