§ 4.10 p.m.
§ House again in Committee.
§ Clause 16 [Membership etc. of the Consumer Panel]:
§ Baroness Wilcox
moved Amendment No. 71:Page 18, line 19, leave out from "by" to end of line 22 and insert "the Secretary of State, acting with the advice of OFCOM, and shall comprise a chairman and such other members as the Secretary of State may determineThe noble Baroness said: Amendments Nos. 71, 73, and 75 are intended to secure the independence of the consumer panel. They do this by making the Secretary of State responsible for making appointments to the panel, while Ofcom plays only an advisory role. That is in contrast to the Bill as it currently stands, whereby Ofcom appoints the members of the consumer panel and the Secretary of State is able to perform only a blocking role.
The amendment has the support of the National Consumer Council, which points out that in order to do its job properly and be able to fight the corner for consumers, the consumer panel must be truly independent of Ofcom. There can be no doubt that circumstances will arise when the opinions of the consumer panel and Ofcom are at odds with each other. In that event, it is vital that proper procedure is followed, without any underlying pressures, whether intended or not, as a result of the role Ofcom plays in appointing the consumer panel.
This debate is highly revealing about how Her Majesty's Government see the relationship between Ofcom and the consumer panel. Will the Minister explain whether the Government want the consumer panel to be independent of Ofcom? If not. how can the consumer panel be expected to do its job properly? If so, do the Government agree that an important way to secure this independence would be to remove Ofcom's power to play such a central role in the appointment of the consumer panel?
383 We received no explanation from Dr Kim Howells on the issue during Committee stage in another place, so I am extremely keen to hear the Minister's response now. I beg to move.
§ Lord Borrie
Clearly, there is no point in having a consumer panel at all unless it is independent of both government and Ofcom. Nor is there any point in having a consumer panel unless it is widely representative, although I do not favour members being representative of any particular consumer group or organisation, let alone the risk of being mandated by them.
The consumer panel is intended to be an advisory body. I feel sure that Ofcom would see no point in having a body that was in any way a replica of itself or not independent of itself. Its value as an advisory body surely depends on its members being free spirits, forthright and outspoken. It also needs to be well resourced, so as to act as an adequate counterweight to the advice that will undoubtedly come on so many matters from well-heeled and well-resourced parts of the corporate sector.
The amendment has extremely good intentions. It emphasises that the consumer panel should be independent of Ofcom, but I do not believe it to be necessary. It is unnecessary that the Secretary of State rather than Ofcom should make the appointments. Indeed, if the Secretary of State did make the appointments, it might elevate the role of the consumer panel in the minds of the public as if it were a rival to Ofcom, rather than an advisory body. It is Ofcom that in so many circumstances will have to judge the public interest. It is right that appointments to the consumer panel should be made by Ofcom, subject to the approval of the Secretary of State.
§ Viscount Falkland
I rise to support many of the remarks made by the noble Baroness, Lady Wilcox, and, particularly, the remarks of the noble Lord, Lord Borrie, about the appointment by Ofcom. We on these Benches support that view absolutely.
§ Lord McIntosh of Haringey
The noble Baroness, Lady Wilcox, is entirely right in what she said at the very beginning. The crucial point is the independence of the panel. I shall set out a number of ways in which that is achieved, of which the appointments process is only one part—but even that is not the whole story.
First, the panel is a legally separate unincorporated body, which will be operationally independent of Ofcom. Secondly, Ofcom is required to ensure that the consumer panel is able to fulfil its remit effectively—in other words, that the resources will be there for it. Thirdly, the consumer panel will be able to formulate its annual work plan and will be responsible for allocating its own resources. Fourthly, we expect that the consumer panel will have a memorandum of understanding with Ofcom, which will set out the relationship with sufficient clarity.
384 Fifthly, we believe it important that the panel should report independently on its work, and I have already indicated my support for a report along the lines of that which is proposed in Amendment No. 80. We are considering an amendment to the Bill to give that effect. Sixthly, we have included provisions in the Bill for the consumer panel to establish its own advisory committee and to determine its procedures. The seventh item in the package is that we have provided that no member or employee of Ofcom can be a member of the consumer panel. Finally, Ofcom must explain the reasons why it might not accept the advice given to it by the consumer panel.
Added to all of that is the very considerable safeguard of appointments to, and removals from, the panel requiring the approval of the Secretary of State. The amendments would make the Secretary of State directly responsible for appointments to the panel, which would alter the whole dynamic of the relationship that we want between Ofcom and the consumer panel. The noble Baroness, Lady Wilcox, was too polite to say so, but some people believe that the Secretary of State will merely rubber stamp the appointments. That is not my experience of the way in which Secretaries of State work.
There are two possible models from previous experience. The first is that of Postwatch or Energywatch. We are not saying that those bodies are not right for their own sector, but they have a different role from the Ofcom consumer panel. After all, they have a particular responsibility for dealing with complaints from consumers, which is not the role of the consumer panel.
We believe it to be much more appropriate to consider the other model, the Financial Services Authority consumer panel, which is appointed by the Financial Services Authority with the approval of the Secretary of State. That model is working well, and is more analogous to the model that we want for the consumer panel to Ofcom. We hope that the noble Baroness will recognise that that is the correct relationship, as the noble Lord, Lord Borrie, indicated from his own experience.
§ Baroness Wilcox
I thank the Minister, who always takes time and care in his replies, especially when talking to me about consumer issues, because he knows that I was chairman of the National Consumer Council and am president of the National Federation of Consumer Groups and the Institute of Trading Standards Administration. I thank him for his kindness in taking care to explain matters to me.
I am grateful, too, to the noble Lord, Lord Borrie, with whom I had a very good relationship when he was Director-General of Fair Trading for some 11 years.
I am a little confused by the noble Viscount, Lord Falkland, who very kindly agreed with me and then very kindly agreed with the noble Lord, Lord 385 Borrie. Given that the noble Lord was disagreeing with me, I am not sure whether I should thank the noble Viscount for agreeing with me.
§ Viscount Falkland
I was agreeing with the noble Baroness's general comments and I was agreeing with the particular point made by the noble Lord, Lord Borrie, that the appointment should be made by Ofcom rather than the Secretary of State. I did not explain that in detail in order to speed up the Bill. Now that I have had to have an extra word, I have failed in that aim.
§ Baroness Wilcox
I am grateful to the noble Viscount although I am still confused.
My experience on one of the bodies which the Minister did not mention—the Gas Consumers Council, a very independently appointed body—is that there is great variety in the way that advisory panels work. My concern, and perhaps that of the National Consumer Council—I shall go back to it, and I shall also think again—is that the Bill covers such an enormous body of work. We are discussing a regulator to beat all regulators. The Bill covers such an enormous area. I am still nervous that it will be difficult to criticise those who appoint a body if one's own next appointment depends on them. I am still uncomfortable about that. I shall re-consult, but I reserve the right to return to the point at a later stage. Meanwhile, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Puttnam
moved Amendment No. 72:Page 18, line 19, leave out from "by" to end of line 22 and insert "the Secretary of State, acting with the advice of OFCOM.( ) The chairman of the Consumer Panel shall be chosen by the Panel from among their members.
The noble Lord said: In moving Amendment No. 72 I shall also speak to Amendments Nos. 76 and 77. I should like to say first, however, that I completely share the confusion of the noble Baroness, Lady Wilcox. As I understand it, the noble Viscount, Lord Falkland, was disagreeing with an amendment that stands in my name and that of the noble Lord, Lord McNally. However, I am sure that they will sort that out over tea.
I also share the noble Baroness's concern that there is a problem here that is not being properly bottomed-out. I can deal with it quite briefly. I think that the Government have to understand that there is genuine and, to an extent, legitimate anxiety among consumer groups that they are being asked to rely tremendously on the good will of the consumer panel. They are being asked to rely on the fact that the chairman appointed over them, their leader, will be appointed from elsewhere. They are being denied the opportunity to publish or influence the activities of Ofcom. As I said earlier, I should think that it is in the Government's interest to bend over backwards to allay those anxieties. One means of doing so is to allow the consumer panel, as we are suggesting, to appoint its 386 own chair. The other way of doing it would he to give the panel as much flexibility as possible in the way in which it works.
I may have misunderstood the noble Lord, Lord McIntosh. He may already have agreed to a suggestion which we made and to which the Government seemed sympathetic in their response. Page 6 of the response states:We agree, however, that the Panel should be able to determine any committees of the Panel and we are considering whether any amendment is necessary to the current draft of the Bill to permit this
As I understand it, the noble Lord is saying that the Government have conceded that small but possibly—who knows?—important extra favour. I reiterate, however, that it is in the Government's interest to allay the fears of the consumer panel, and to ensure that the panel has the best possible relationship with the content board and that there is as much transparency as possible between the two. I beg to move.
§ Lord McIntosh of Haringey
I can certainly confirm what the noble Lord, Lord Puttnam, has just said: there is no restriction on the consumer panel appointing any committees that it wishes. However, I do not think that that needs to be on the face of the Bill. There is no way in which it could he ruled out. As he says, it is a minor but perhaps not unimportant matter.
I should like to reinforce what I have just said to the noble Baroness, Lady Wilcox, about the independence of the panel. I have one or two more examples of the panel's independence which I failed to give in response to her in addition to the most important fundamental fact—that the panel is a legally separate unincorporated body and operationally independent of Ofcom. The point that. I could have made to the noble Baroness and now make in response to Amendment No. 72 is that the panel does have independence of thought. It has the power to commission and publish its own research. It is able to give advice not only to Ofcom but to other bodies as well. For example, it might wish to advise the Office of Fair Trading. It might wish to take part in the formulation of European legislation by giving advice to European institutions. It might want to give advice to government departments or to the self-regulators who are provided for in this legislation such as ICSTIS.
It is not just that Ofcom has to receive the advice from the panel; it has to consider it. Where appropriate, it must have regard to the advice and the results of the research that the panel has notified Ofcom about. If Ofcom chooses not to follow the advice, it has to give the panel reasons for disagreeing, and it has to ensure that those who are aware of the panel's advice will also be informed of the reasons. Those are important measures for ensuring the independence of the consumer panel from Ofcom.
I turn to the amendments themselves. The combined effect of this group of amendments is not quite the same but similar to that of the previous group. It would make the Secretary of State responsible for 387 appointing the members of the consumer panel. Amendment No. 72 would have the additional effect of making the members of the consumer panel responsible for choosing their own chairman from among their membership. As we agree with the need to ensure the independence of the panel, we think that the measures we have included in the Bill provide for it.
As I said in response to the previous group of amendments, we think that although there is an analogy with Energywatch and Postwatch, for example, those bodies—which are separate non-departmental public bodies with their own legal identity and their own secretariats and staff—are different in that they have significant complaint-handling responsibilities with which the Ofcom consumer panel will not have to deal. I note what the noble Baroness, Lady Wilcox, says about the Gas Consumers Council. I am afraid that I am a little out of date as it is more than 20 years since my wife was chairman of the National Gas Consumers Council. That certainly was a separate body, with its own staff and secretariat and indeed regional structure. In terms of the volume of its work, it was, of course, primarily a complaints-handling body. However, that is not the model that we are looking for here. As I said, we are looking for a model closer to the FSA Consumer Panel. The members of the panel are appointed by the FSA although the chairman's appointment is subject to the approval of the Treasury.
We are going further than that in the Bill. We are providing that the Secretary of State has oversight over the appointment and the removal of all of the members of the consumer panel. Those appointments and removals are subject to the approval of the Secretary of State. So Ofcom cannot appoint anyone it pleases and cannot remove anyone of whom it disapproves. I think that that is the really important consideration. The difference between that and appointment by the Secretary of State is one really of comity between the consumer panel and Ofcom. The consumer panel is independent, but it will always be working closely with Ofcom. We think that the balance we have struck here is appropriate.
As to the appointment of a chairman, members of the consumer panel will be chosen for the experience and expertise they can provide in specific areas; in other words, different members for different specific areas—a point which the noble Viscount, Lord Falkland, made this morning—such as consumer interests, disability interests, the opinions of particular localities and so on. The chairman of the consumer panel is required to carry out that role objectively and with neutrality. These are perhaps different qualities from those which are required of the regular members of the panel who represent different interests. There could be conflicts of interest if the members of the panel with specific interests were required—as Amendment No. 72 would require them—to appoint an impartial chairman.
Under those circumstances we think that it is right that Ofcom should appoint a person who can bring to the post the necessary skills, can carry out the role of 388 chairman free from any potential conflicting interests and, indeed, play a role in the appointment of the other members of the panel.
I do not believe that the differences between us are earth shattering. We have thought the matter through carefully and I believe that we have achieved the right balance.
§ 4.30 p.m.
§ Lord Puttnam
I am perfectly comfortable with the Minister's response. As he says, the differences between us are not earth shattering. However, I suggest that the Government should be aware of the concerns and do all they can to address them. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 73 to 77 not moved.]
§ Clause 16 agreed to.
§ Clause 17 [Committees and other procedure of the Consumer Panel]:
§ [Amendments Nos. 78 to 80 not moved.]
§ Clause 17 agreed to.
§ Clauses 18 to 22 agreed to.
§ Clause 23 [Publication of information and advice for consumers etc.]:
§ [Amendment No. 81 not moved.]
§ Clause 23 agreed to.
§ Clause 24 [Training and equality of opportunity]:
§ Lord Gordon of Strathblane
moved Amendment No. 82:Page 23, line 6, after "providing- insert "telecommunications,The noble Lord said: The whole purpose of the Bill is to bring together the regulation of broadcasting, telecommunications and some ancillary activities. It therefore seems strange to make provision in Clause 24(1) for training for broadcasting but say nothing about telecommunications. My amendment seeks to remedy that omission by the simple insertion of the word "telecommunications". Other amendments in the group are more specific with regard to other matters. I am not worried about that. I invite the Government either to accept the amendment or, if they feel that it is not sufficiently all- encompassing, to introduce their own amendment which is. I beg to move.
§ Baroness Buscombe
I wish to speak to Amendments Nos. 83 and 84, which stand in my name. I wish to speak also in support of Amendments Nos. 85 and 86. My amendments are very similar to that of the noble Lord, Lord Gordon of Strathblane, except that they seek to insert the words "telecommunications, internet". We consider that that term is all the more encompassing in terms of what the Bill should cover.
We all recognise the importance of the development of opportunities for training and retraining, particularly for employment in an industry as fast moving as broadcasting. I feel, however, that training and retraining in telecommunications skills and the 389 Internet are as important as training in television and radio services. We should like to know, therefore, whether the Government consider that training in those broader areas is relevant.
There is another purpose behind the amendments, however. How will Ofcom decide what form of training is appropriate in such a diverse industry? Will the Minister explain how Ofcom will be in a position to decide what constitutes an appropriate level of training at any one time? Training strategies can be very specific to individual companies depending on the level and type of activity being undertaken and will depend to a large extent on a range of detailed factors which may be known only to the company concerned.
There are now literally hundreds of channels in the broadcasting sector, including many specialised services dedicated to music, sport, ethnic minorities and so on, and new forms of broadcasting, including pay-per-view and interactive offerings. Is it the expectation that Ofcom will know best how to allocate the resources of the relevant companies for their training needs and for the training needs of other very different players in the industry? Would Ofcom be empowered to dictate the training budget of, say, the shopping channel, QVC, or the documentary broadcaster, Discovery, or to transfer resources from one to another, for example, to fund training for other broadcasters' news or drama productions? We would appreciate some clarification from the Minister on that.
I turn to Amendment No. 85, in the names of the noble Lords, Lord Puttnam, Lord McNally, Lord Crickhowell and Lord Hussey. We understand that the clause requires Ofcom, inter alia, to take all such steps as it considers appropriate for promoting equality of opportunity in relation to employment by those providing television and radio services and the training and retraining of persons for such employment. This reference to equality of opportunity refers to equality of opportunity between men and women and between persons of different racial groups. Subsections (6) and (7) would give the Secretary of State power to add any other form of equality of opportunity which he considers appropriate by affirmative resolution.
I have read the memorandum of the House of Lords Select Committee on Delegated Powers and Regulatory Reform, to be found in annex 6 of the report of the Joint Committee on the draft communications Bill which records that the department says that the power to extend the clause to other forms of equality is intended to allow the clause to be brought into line with general equality law if it should be extended in the future; for example, to age or religious discrimination. The House of Lords Select Committee found that explanation unconvincing, as do we on this side of the Committee.
At present, primary legislation would be required to extend equality law in the future. That legislation would and should have a clause making consequential amendments to previous Acts and one of those amendments would be an amendment to this clause 390 extending its width so as to be consistent with that new legislation. If the primary legislation is passed extending equality law, it is almost inevitable that there will be a provision amending this clause which will stand or fall with that primary legislation.
I cannot envisage any problem with that course. The explanation given by the department is, we believe, wholly unconvincing. I ask myself why. I have always been impressed by the ability of the civil servants in the department. I have no doubt that they will agree with me that the explanation is unconvincing. I am drawn to the inescapable conclusion that there is another agenda here. We should like to know whether the Secretary of State has plans to extend general equality law by resolutions of both Houses rather than by primary legislation. Those are specific points which we should like the Minister to answer. In particular, what are the Government's intentions with regard to extending general equality law?
I turn to Amendment No. 86. I support the amendment in the name of the noble Lord, Lord Puttnam, in relation to backstop powers in respect of training. I refer specifically to support for the proposed new clause by Channel 4 which says that it welcomes,the amendment in the name of Lord Puttnam and others to give OFCOM backstop powers to impose a training levy on broadcasters".
I mention Channel 4 but a number of other stations have been in touch with us which very much support the amendment. Indeed, last night at the UK Film Council I was lucky enough to see a prescreening of the new film, "Nicholas Nickleby". That brought home to me the tremendous importance of skills and training in that field so that we can encourage more investment in this country's film industry. I refer to the calibre of the artists that we encourage. But we need to maintain that commitment to skills and training. We need resources and we need commitment from Ofcom.
There is strong support for the proposed new clause. Channel 4 says that in its view it enhances rather than constrains commercial as well as creative effectiveness. In an industry so completely dependent on talent for its long-term success the surest way to make Britain's communications industry the most dynamic and competitive in the world—the ambition expressed by the two sponsoring Secretaries of State in their joint introduction to the policy paper accompanying the draft Bill—is to give real teeth to training obligations. At present a minority of broadcasters, one of them being Channel 4, bear a hugely disproportionate share of the training costs for the whole industry.
We very much look forward to the Minister's response on the amendments.
§ Lord Carter
I tabled an amendment in the group. Amendment No. 270B deals with equal opportunities and the point raised by the noble Baroness, Lady Buscombe. Clause 330(l) deals with equality of opportunity between "men and women" and,persons of different racial groups".391 That also picks up the wording of Clause 24. Clause 330(2) asks for the promotion of,the fair treatment of disabled persons".Why the distinction between equal opportunity for men and women and persons of different racial groups, and only fair treatment for disabled persons? It would be helpful if we removed "fair treatment" and inserted "equality of opportunity", so that disabled people were on the same footing.
That seemed to deal with the problem, but I then looked at the earlier draft Bill. Here the mystery rather deepens. Clause 224(1) of the draft Bill has the same preamble as the present Bill, but it has four paragraphs. Paragraphs (a) and (b) deal with men and women and persons of different racial groups, as in the present Bill, but paragraphs (c) and (d) have disappeared from the present draft. Paragraph (c) reads,between disabled persons and persons who are not disabled".Paragraph (d)—it is the first time that I have seen the construction—reads,between persons who have had disabilities and persons who arc not disabled and have not had any disabilities".Therefore, in the draft Bill, equality of opportunity for disabled people was on all fours with gender and ethnicity. The draft Bill also included a subsection (2) that called for the fair treatment of disabled persons. In the present draft, equality of opportunity has disappeared from the first subsection and we are left with only fair treatment.
There is an argument that "fair treatment" allows for positive discrimination. That may be so; one would wish to take advice on it. "Fair treatment" seems fairly subjective, whereas we all know what "equality of opportunity" means. It occurred to me to look at the draft Bill only yesterday, so I tabled an amendment this morning that is not on the Marshalled List. It will probably be reached next Thursday, not this afternoon, but it would restore to Clause 330(1) the words in the draft Bill.
The Minister has an easy solution that would save the time of the Committee. We could restore "equality of opportunity" for disabled people in subsection (1) and leave subsection (2) with "fair treatment". That was exactly the wording in the draft Bill, and would mean that disabled people would have both equality of opportunity and, if necessary, the positive discrimination used in the arguments about fair treatment.
Baroness Darcy tie Knayth
I would like to support the noble Lord. It is very important that we get the drafting right now. He will remember that, about 10 years ago, there was a Bill that removed people from committees if they had a physical or mental disability. The provision crept into every Bill. We spent years and years on it before we removed it in the end. I strongly support our getting the drafting clear now.
§ 4.45 p.m.
§ Lord Addington
I tabled Amendment No. 270A, which refers to,persons of different age groups".
When we are dealing with something such as the communications industry we should probably address age discrimination. The amendment was inspired by a letter sent to me via a colleague in another place, which suggested that someone retraining in the industry—it is an expanding industry, and if one is retraining one is by definition a littler older—felt that he was experiencing tremendous age discrimination. That was made all the more pertinent when I realised that he was only five years older than me.
We really have to encourage the removal of age discrimination and ensure that it is taken seriously. I tabled the amendment, which is a probing amendment, to ask whether age discrimination is appropriate and whether action can be taken. The more substantive amendment to which I added my name is that spoken to by the noble Lord, Lord Carter.
Like the noble Lord, I feel that "equality of opportunity" is understood. It is not subjective. "Fair treatment" will depend on where one is standing. In the past, it has led to some beneficial tokenism, but ultimately that will not serve as a legal test for someone with a disability who is having problems. "Equality of opportunity" is solid. It means the concept of reasonableness in the Disability Discrimination Act. It is something for which we are striving. I suggest that it must be included in the Bill, unless the Minister can give us a better legal definition of what being fairly treated means. If it is as subjective as it sounds, I suggest that it is far more trouble than it is worth and will ultimately have a negative impact.
§ Baroness Howe of Idlicote
I shall speak very briefly on Amendment No. 271A, as I have been asked to do by the noble Lord, Lord Crickhowell. It is a probing amendment, but before we get into that, I want to support wholeheartedly every single point that Members of the Committee have made previously, without repeating them. "Fair treatment" is not the same as "equal opportunity". We know what "equal opportunity" means; we recognise it, very much as we recognise "public service broadcasting". I shall put that on one side.
Amendment No. 271A is a probing amendment. Its purpose is to ask the Minister to clarify a possible loophole in Clause 330, which aims to implement the Government's plan to make training and equal opportunities part of tier 1 regulation. Under subsections (5) to (7), the requirements apply to only television and radio licensees which employ more than 20 people. It is thought possible, therefore, that television and radio services in group ownership will not be caught by the requirement, as it is perfectly possible for most staff to be employed at group level rather than by the individual licensees.
393 I should be most grateful if the Minister would address those concerns and clarify the situation as regards those licensees employing fewer than 20 people.
§ Lord Puttnam
I tabled Amendments Nos. 85 and 86, and I want to speak specifically to Amendment No. 86. I should start by declaring an interest as patron of Skillset, the industry's training organisation. Amendment No. 86 is interesting, and I am more delighted than I can easily say to have the support of the noble Baroness, Lady Buscombe.
The noble Lord, Lord Baker of Dorking, was recently in his place, and it is worth mentioning that in 1985, when the industry was really on its uppers and he as a DTI Minister had extremely limited resources to help, he did a marvellous job in getting it to address its skills deficit. He did so by supporting the National Film and Television School and by a number of other very imaginative means. It is fair to say that the industry has been seriously skills-based ever since.
The industry has managed, quite tortuously, to create what one might term an all-industry agreement on training, based on a voluntary levy. However, we live in the real world, and there are a number of backsliders, professional evaders and non-payers, which has bedevilled the industry. The industry training organisation puts an extraordinary amount of time, effort and energy into tracking down and attempting to get the most reluctant of those people to pay. The provision merely seeks to give some statutory power to Ofcom to deal with those who will not pay those sums of money which the industry as a whole has identified as being necessary to keep its skills base adequate. This is a timely amendment.
Moreover, the amendment gives the Government a marvellous opportunity to put some flesh on the aspiration that is enunciated constantly by the Chancellor to do something about the skills deficit and the fact that employers must play their part. Here is a marvellous opportunity for the Government to say, "We support the industry. It has got its act together by creating its own voluntary levy. We will make as sure as we can that those within the industry who try to take advantage of the skills base but who do not pay for it are penalised".
§ Lord Thomson of Monifieth
I support the amendments spoken to by the noble Lord, Lord Gordon, and the noble Baroness, Lady Buscombe. I wish to speak in particular to speak to Amendments Nos. 85 and 86, as the noble Lord, Lord Puttnam, has just done.
Clause 24 deals with two aspects of employment policy—the conventional issue of training and the question of positive action to prevent discrimination. Amendment No. 85 proposes to remove those parts of the clause that would take steps to promote equality of treatment at work, confine them to existing law and follow the advice given by the Delegated Powers and Regulatory Reform Committee which said that it 394 could see no good reason for looking towards an uncertain future in this regard and that the issue should be dealt with when the time comes.
I strongly support the comments of the noble Lord, Lord Puttnam, on training within the broadcasting industry. He spoke with particular authority about the film industry. The history of training in the broadcasting industry is long and rather unhappy. The BBC has a long and honourable record in that field. I declared an interest at the start of the Committee stage; I have a daughter who is now a senior manager with the BBC. After leaving university, she did a postgraduate training course with the BBC, which was totally admirable. That is part of the great training tradition in the BBC.
I am sad to say that in commercial television there was no comparable record, despite the fact that. ITV companies had training provisions in their contracts. The degree to which we were able to keep them up to it was inadequate. In a world in which technology is changing so fast, it is very important that there should be adequate training. The proposed new clause is a back-up clause and would provide the means for ensuring that that occurs. It is an important matter. It is inappropriate that in the training field some organisations play a full part and others simply poach. The BBC and Channel 4 have good records but one wants adequate arrangements to ensure that everyone accepts their responsibilities.
§ Lord Lea of Crondall
I support my noble friend Lord Puttnam, who spoke to Amendment No. 86. We had a meeting with seven trade unions operating in the industry in the broad sense. This is one of the prominent issues about which they are very concerned. I include the question of telecommunications within the industry not only because it is part of the industry but also because the challenges in terms of "up-skilling" in telecommunications are integral to the progress of the whole industry.
The noble Lord, Lord Thomson, referred to the role of the BBC in particular. It has always struck me that years ago the tradition in the industry was that the BBC did the training and everyone else fed on it. In the same way, I remember going to Devonport dockyard. It was said that all those in Devon and Cornwall who had a small engineering business had been trained in Devonport dockyard. My noble friend Lord Puttnam described a more sophisticated body, which has a voluntary levy. There is much worry about the dilution of those commitments. The principle of public service obligations is rather different from the principle of competition. I refer to the practice of "Last person out switch off the lights" and so on. That is the central concern. Public responsibility must be written into the Bill more explicitly; the Bill is currently much too vague. That is why something along the lines of the amendment of my noble friend Lord Puttnam is essential for the whole of the sector.
BECTU, a big broadcasting union which plays a central role, points out that even those in the United States, and United States producers in Britain, support a compulsory training levy because it facilitates—let us 395 spell it out—a level playing field. That is another way of talking about poaching, as mentioned by the noble Lord. Lord Thomson.
We should remind ourselves of the big range of skills and occupational training that goes into what we call broadcasting. I remind noble Lords that broadcasters are journalists. In general. the first person one hears when one switches on the radio is a journalist. I draw attention to the Writers' Guild of Great Britain. Its members write soap operas, among other things. That is a complex and skilled area of the industry. I refer also to the Musicians' Union; we shall return to the role of music later in the Bill. I have mentioned the communication workers. We also have Equity. Drama is a mainstay of broadcasting but it is expensive to produce. I could go on through that list.
I conclude by mentioning the interpenetration of this issue with that of regional employment and regional content. I hope that the Government will seriously consider this proposal and the central principle of the compulsory levy, which is. I believe, part of Amendment No. 86.
§ Lord Bragg
I support my noble friends Lord Puttnam and Lord Gordon and the noble Baroness, Lady Buscombe.
I am one of the many hundreds of' beneficiaries of training schemes in the BBC. As the noble Lord, Lord Thomson, pointed out, it has a very good scheme indeed and it has continued in many ways. It is an example for all of us. I do not share the dismay of the noble Lord. Lord Thomson, about the ITV system. The company for which I work, Granada Television—I declared my interest at the start of this debate—puts £9 million a year into training. Considering our income at the moment, that is not bad. That extends all over the regions as well as London. In my department of arts and features, we take on people and give them two or three years' proper, fully paid training; we do not make them run round for work experience, which is valuable for some weeks, or two or three months, but which cannot be extended. That effort is going on. We also support Skillset.
Ofcom will find it difficult to impose the policy on small channels and on independents, which form an increasingly powerful part of our industry. I hope that they will continue to do so in our country. That will be most difficult to impose and there will therefore be a return to the position in which the BBC is supposed to supply all the training, backed up by ITV and Channel 4. That, as the independent sector grows—as it will and should do—will prove to be a very unfair burden.
In the spirit of being helpful, particularly to my noble friend Lord Puttnam, perhaps I may make a suggestion. It might seem to be pulled out of the air, but I truly believe it could be a radical solution to the problem, if I may in modesty say as much. ITV pays to the Government a completely unnecessary levy of £250 million a year, in addition to the tax it pays. I have talked on several occasions in this House about how that might have been useful about 20 years ago 396 but unnecessary now. Why cannot the Government divert 50 per cent of that—£125 million—to training schemes across the industry? That amount of money, well spent on schemes such as skills sets and invested fully and proportionately in BBC. ITV and particularly the smaller independent companies, could have the most radical effect. That is what we need in this country.
If communications bound forward after the passing of this Bill—often pointed out so eloquently by the noble Lord, Lord McNally, as an important Bill indeed—there will be a need for skilled young people. Skills continually change and increase. It is increasingly difficult for those who begin in the independent sector—and more of them do to find the time to obtain the training they need; that is, just getting on with it for months or even two or three years.
That amount of money directed to that end, and coming out of the levy given unnecessarily, used for the industry instead of the general mores of the Government might be a consideration which could have a radical effect—I am not afraid to repeat that—on the young people of this country coming into the communications industry. They often come in blind with nothing like the support they deserve and need if we are to run as an efficient industry as we would like.
§ 5 p.m.
§ Lord Lipsey
As we have more and more channels, we will have more and more broadcasters trying to buy more and more cheap programmes from more and more independent companies. Small independents, inevitably given the pressures on them, will be tempted to renege on or minimise their training obligations. If we are to maintain the training levels, we must have something along the lines of the back-up powers in Amendment No. 86 proposed by my noble friend Lord Puttnam. It is as simple as that.
§ Lord Avebury
I want to ask the Minister a simple question relating to Amendment No. 270B in the names of the noble Lord, Lord Carter, and my noble friend Lord Addington concerning disabled people. I notice that coming down the track are the Disability Discrimination Act 1995 (Amendment) Regulations 2003, which amend and extend the DDA in so far as it prohibits discrimination against disabled people in relation to employment and vocational training. The Explanatory Notes on that mention other instruments accompanying that which deal with discrimination on grounds of religion or belief, sexual orientation and age. Those arise from a European directive on discrimination in employment, to which we are a party. I want to be satisfied that that directive and the instruments which flow from it are fully reflected in the wording of this Bill.
§ Baroness Jay of Paddington
I, too, support the suggestion of my noble friend Lord Carter to reinstate the words in the draft Bill in order to accommodate some of these points. However, I want to return to some of the points raised by my noble friends 397 Lord Bragg, Lord Lipsey and Lord Puttnam. I, too, am a graduate of one of the BBC training schemes, although less distinguished in the broadcasting world than my noble friend Lord Bragg. I am so old that in the days when I was trained by the BBC, it visited universities in order to try to persuade people to join its training scheme. That shows your Lordships how long ago it was!
I, too, want to make the point that the provisions include not only training in broadcasting or in journalism, but, taking the other points made most notably by my noble friend Lord Lea, a broad spectrum of skills. They include those people working in telecommunications, which is an area different from, for example, journalism and some of the other professions or trades mentioned. One must not ignore the fact that one of the virtues of Ofcom's broad responsibility is that it has a wide scope to cover all the industries mentioned within its remit, which includes skills more technical than those in which my noble friend Lord Bragg and I were trained.
§ Baroness Blackstone
This is a large group of amendments and it will take me a little time to reply. Furthermore, many speakers have approached the issues from many different angles.
I of course sympathise with the aim behind Amendments Nos. 82, 83 and 84, but the fact is that Ofcom cannot be given any power, under the regulatory regime permitted by the EC communications directives, to impose any obligations in this area on communications providers. The Television Without Frontiers Directive, on the other hand, does permit stricter obligations to be imposed on broadcasters.
The EC communications directives limit the types of obligations which can be imposed on providers of electronic communications networks and services. The subject matter of the general conditions, which can be applied to any communications provider, is set out in Clause 48. In very broad terms, such conditions can cover issues such as consumer protection, service interoperability and network access, availability of services in the event of a disaster, protection of health and compliance with international standards.
The limitation on the subject matter of general conditions is necessary in order to implement Part A of the annex to the authorisation directive. This annex sets out the maximum list of conditions which may be attached to general authorisations and does not permit the imposition of any kind of condition in relation to training and equality of opportunity. Therefore, member states have no discretion to add other kinds of conditions to the regulatory regime permitted by the directives.
§ Lord Gordon of Strathblane
I thank the Minister for giving way. Will she direct me to the precise directive and explain why on earth we signed up to it if it is so restrictive?
§ Baroness Blackstone
I think I had better write to my noble friend about what happened in the past. I was 398 not a Minister in the Department for Culture, Media and Sport and did not attend culture Ministers' meetings when the decision was made to agree to what the Commission was recommending. I shall also let him know the precise directive referred to when I respond about the history.
I turn to Amendments Nos. 85, 271 and 270A. Recommendation 19 of the Joint Committee on the draft Communications Bill raised the same issue as that raised in Amendments Nos. 85 and 271: that is, the need for the Secretary of State's power to add by order other forms of equality to Clauses 24 and 330. As the government response to the committee indicated, this order-making power is important to these clauses as it will ensure that the obligations on Ofcom and the licence holders to which Clause 330 applies remain up-to-date alongside broader anti-discrimination legislation. Perhaps I may say to the noble Baroness. Lady Buscombe, that there is no intention to extend discrimination law by the back door.
In Clause 24, Ofcom is given a duty to promote equality of opportunity between men and women and between persons of different racial groups in relation to employment with broadcasters. Similarly, in Clause 330 Ofcom has an obligation to include in the licence for every service to which this clause applies conditions requiring the licence holder to promote, in relation to employment with it, equality of opportunity between men and women and between persons of different racial groups.
The list contained in Clause 24(4) and in Clause 330(1) mirrors two of the most important areas of anti-discrimination legislation. The noble Lord, Lord Addington, will perhaps be pleased to hear that we believe that it is right that, should new forms of general legislation be introduced—such as, in relation to age discrimination—the Secretary of State should have the ability to reflect the general equal opportunity legislation within Ofcom's obligations under Clause 24 and broadcasters' licence conditions. We do not think it would be right to anticipate such legislation in the Bill, as the purposes of Clauses 24 and 330 are to supplement existing anti-discrimination legislation. But we do believe that it is appropriate that the Secretary of State should have a power to amend the scope of these clauses to mirror developments in anti-discrimination legislation when they occur.
The Joint Committee's recommendation on these order-making powers was that, if retained, they should be subject to affirmative resolution procedure. We strongly believe that these powers should be retained. However, in view of the concern expressed by the Committee and by the Select Committee on Delegated Powers and Regulatory Reform, we agreed that they should be made subject to the affirmative resolution procedure. Therefore, there will always be an opportunity to debate them in the Chamber.
The purpose of Amendment No. 270B, tabled by my noble friend Lord Carter, is, presumably, to strengthen protection for disabled people. However, I believe that the effect could prove to be the opposite. The Disability Discrimination Act makes certain 399 provision prohibiting discrimination against disabled people and creating certain positive duties to make reasonable adjustments, but does not prohibit discrimination against able-bodied people. Thus, unlike the sex and race legislation, the equality duty does not work both ways.
We have sought to mirror that approach in the Bill in the requirement to promote the fair treatment of disabled people. But amending the Bill to create obligations relating to equality of opportunity for disabled people would imply reciprocal equality of opportunity for able-bodied people, even if able-bodied people are not mentioned, because the amendment otherwise begs the question: equality of opportunity with whom? The amendment could therefore conflict with other efforts to assist disabled people; for example, an obligation relating to equality between able-bodied and disabled people could conflict with efforts to help disabled people through the provision of, say, "sheltered jobs".
It was for this very reason that the Government changed references in the draft Bill, published last summer, to,equality of opportunity between disabled persons and persons who are not disabled
and,between persons who have had disabilities and persons who are not disabled and have not had disabilities",to the current formulation. The wording is designed to have a positive impact with relation to the rights of disabled people.
§ I turn to Amendment No. 86—
§ Lord Addington
The word "fairness" is worrying me. Is there a legal definition of the word in the Minister's response? If the noble Baroness gave one, I did not catch it. I not sure about the exact meaning of "fairness".
§ 5.15 p.m.
§ Baroness Blackstone
I understand that the concept is well understood. That is why it has been placed in the Bill in exchange for the earlier drafting to which I referred.
§ I turn to Amendment No. 86—
§ Lord Carter
My noble friend said "in exchange", but the draft Bill made reference to equality of opportunity and fairness of treatment; in other words, it had both of them. There has not been an exchange. We have removed "equality of opportunity" and left "fairness" in the legislation. I still believe that the latter would be stronger if both references were retained.
§ Baroness Blackstone
When I used the word "exchange", that was a slip of the tongue. I meant to say that we now rely on "fairness". I hope that what I have said is clear. I recognise that this is quite a complex area. However, I can assure my noble friend and the noble Lord, Lord Addington, of the Government's good faith in this respect. The provision 400 is designed to reflect the Disability Discrimination Act, and not to leave in the Bill something that could be deemed at some later point to be in conflict with what is laid down in the DDA. It is certainly designed to support the rights of disabled people—
§ Lord Avebury
Before the Minister moves on from Amendment No. 270B, can she answer my question about whether the wording reflects the regulations that are about to be laid before this Chamber?
§ Baroness Blackstone
I am sorry. I forgot to respond to the noble Lord. However, I shall write to him setting out clearly the answer to his question.
I cannot argue with the underlying aim of Amendment No. 86, which proposes to ensure a better-trained, more competitive broadcasting industry. I absolutely accept what all my noble friends said about the importance of training. I believe that most noble Lords who spoke to this amendment were from this side of the Committee. However, I do not share my noble friend's slightly pessimistic view that the existing provisions on training in the Bill will not be sufficient to achieve this aim. I shall return to that aspect in a moment.
My noble friend Lord Bragg has put forward an extremely interesting idea. It is certainly a proposal that I shall take away for consideration. However, I imagine that my right honourable friends, and my honourable friends in the Treasury, will argue that this money could be more usefully applied to many other areas of public expenditure. Nevertheless, I shall take away my noble friend's idea and see where that suggestion may lead.
I must also confess to being a little unclear about how the new clause would work in practice. It is not clear on whom the proposed levy would be imposed. Would it be an industry-wide levy? Would it be imposed only on those licensed radio and television services that fail to provide adequate opportunities for training and retraining? Alternatively, perhaps it would be imposed only on public service broadcasters.
It is a fact that the economics of the broadcasting industry, and the nature of a great deal of the employment within it, bring difficulties in sustaining the necessary level of skills development. Some broadcasters have recognised this, as evidenced in the support for voluntary initiatives such as the Skillset/ DCMS Audio Visual Training Group that reported last year—an initiative with which my noble friend Lord Puttnam is familiar.
However, as the Government have said previously, we believe that training is so important in this sector that it is not enough to rely on voluntary initiatives alone. That is why we have introduced new, strengthened provisions on training in this Bill. For the first time, training obligations will apply to all television and radio broadcasters who meet the threshold conditions set out in the Bill. Ofcom will have a new duty to promote training more widely in the sector. These provisions put the broadcasting 401 sector well ahead of many others. We are fairly confident that they will deliver the results that we all wish to see.
In answer to the noble Baroness, Lady Buscombe, much will of course depend on the action that Ofcom takes under Clause 24, and on the licence conditions that it imposes under Clause 330. Following a recommendation of the ITC's Programme Supply Review, the Secretary of State has asked Skillset, which was referred to by my noble friend Lord Puttnam, to establish a formal task force and report back to Ofcom on these very issues. Skillset has already begun working with all the key stakeholders to consider how Ofcom might maximise and further promote training within the industry. We look forward to considering the results of this most important work.
We should also remember that Ofcom will have very broad powers to vary broadcasters' licences if it is satisfied that licence holders are not properly performing their obligations. Ofcom might use those powers to impose more specific conditions to promote training if that is believed to be necessary.
In summary, I believe that effective measures are in place to make sure that licence holders do deliver on training. Therefore, it is with regret that I have to tell my noble friend that I do not think that his amendment is really necessary.
Finally, I turn to Amendment No. 271A tabled by the noble Lord, Lord Crickhowell, but spoken to by the noble Baroness, Lady Howe. She said it was a probing amendment, but I believe that the noble Lord and, indeed, the noble Baroness, are on to something here. I have considerable sympathy with the aim of the amendment to ensure that the equal opportunities and training requirements are not evaded where individual television channels or local radio stations are part of a larger group of companies that, taken together, would meet the thresholds. It seems right that such services should play their parts both in promoting equal opportunities and training, but at present they would be exempted from the requirements of Clause 330, which relate only to the individual licence holder.
We shall take this away and consider it. However, in the light of what I said earlier, I very much hope that my noble friend will feel able to withdraw his amendment.
§ Lord Gordon of Strathblane
I am slightly astonished that any European directive should prevent a government agency such as Ofcom from simply promoting the development of opportunities for young people in the field of telecommunications. I could understand that if perhaps it was going to pay for it because that might be construed as interference with international competition. However, the Minister has been very gracious in offering to write to me on the subject. I shall study her letter with the greatest interest and return to this matter on Report.
§ ? Baroness Buscombe
Before the noble Lord sits down, perhaps I may ask the Minister if I could be copied on that letter. I am disappointed that 402 telecommunications and the Internet should be excluded and I do not understand why. I thought that this was what convergence was all about; perhaps I am missing the plot. I would be grateful for a copy of the letter.
§ Lord Lea of Crondall
As regards Amendment No. 86, the question was raised by the Minister of a levy and what would happen about training. The normal principle of a levy is that there is a rebate for people who carry out the training. Clearly, this has to be considered more and will arise again on Report. Given the support around the Chamber, we are asking that the Government consider how this could be made better. It would be helpful if the Minister could give consideration to how the principle set out by my noble friend Lord Puttnam in Amendment No. 86 can be improved before we reach Report.
§ Lord Puttnam
I shall not move Amendment No. 86, but I should like to make three points. First, I hope the noble Baroness will acknowledge the increasing and total discontinuity between the rhetoric and action in the Government's entire attitude to training. We cannot keep referring to a skills gap; keep urging the Creative Industries Board or keep referring to parity of opportunity and not be prepared to hack to the hilt those industries and, indeed, those companies within those industries, that are prepared to pay for training. It is interesting—we have touched on Europe—that the German industrial economy is being crippled by what is termed "the free rider principle". German businesses, in droves, are getting out of paying for training for which they have paid not just for decades but centuries. Are we seriously to go down the same route?
Here, we have an industry and major players within it who want to pay but who are extremely irritated by the fact that many people are able to evade and avoid. All we suggest is a back-up power for Ofcom to address that issue. Perhaps this is not the right amendment. I am certain that other and more specific amendments will be tabled on Report.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 83 to 85 not moved.]
§ Clause 24 agreed to.
§ [Amendment No. 86 not moved.]
§ Clause 25 agreed to.
§ "CHARGING PRINCIPLES
- (1) Other than in the circumstances specified in subsection (3), OFCOM shall not fix any administrative charge for any functions undertaken by OFCOM for any charging year unless—
- (a) at the time the charge is fixed there is in force a statement by OFCOM of the principles that OFCOM are proposing to apply in fixing charges for the relevant functions for that year; and
- (b) the charge is fixed in accordance with those charging principles.
- (2) Those principles must be such as appear to OFCOM to be likely to secure, on the basis of such estimates of the likely costs as it is practicable for them to make—
- (a) that, on a year by year basis, the aggregate amount of the charges payable to OFCOM in accordance with the relevant statement is sufficient to meet, but does not exceed, the annual cost to OFCOM of carrying out the functions to which the relevant statement applies;
- (b) that the cost of carrying out those functions is met by the imposition of charges that are objectively justifiable and proportionate to the matters in respect of which they are imposed; and
- (c) that the relationship between the meeting of the cost of carrying out those functions and the amounts of the charges is transparent.
- (3) The provisions of this section do not apply to—
- (a) administrative charges under Chapter 1 of Part 2 of this Act;
- (b) charges, fees or payments under the enactments relating to the management of the radio spectrum;
- (c) any other payment made to OFCOM which is to be paid into the appropriate Consolidated Fund by virtue of section 393;
- (d) charges under section (Charges in respect of OFCOM's central functions); and
- (e) charges relating to costs incurred by OFCOM prior to the radio and television transfer dates.
- (4) A relevant statement of charging principles for the purposes of this section shall specify—
- (a) the relevant functions carried out by OFCOM, and
- (b) the statutory basis for those functions.
- (5) No tariff shall be fixed by OFCOM under sections 4 and 87 of the 1990 Act and sections 4 and 43 of the 1996 Act (general licence conditions) except in accordance with the relevant statement of charging principles.
- (6) As soon as reasonably practicable after the end of each charging year, OFCOM shall publish a statement setting out, in respect of each service for which a relevant statement of charging principles has been made and of that year—
- (a) the aggregate amounts of the administrative charges for that year that have been received by OFCOM;
- (b) the aggregate amount of the administrative charges for that year that remain outstanding and are likely to be paid or recovered; and
- (c) the cost to OFCOM of carrying out the functions specified in the relevant statement of charging principles.
- (7) Any deficit or surplus shown (after applying this subsection for all previous years) by a statement under subsection (6) shall be carried forward and taken into account in determining what is required to satisfy the requirement imposed by virtue of subsection (2)(a) in relation to the following year.
- (8) The provisions of section 36(1), (5) and (6) shall apply to a statement of charging principles made under this section.
- (9) In this section "charging year" has the same meaning as in section 35."
§ The noble Lord said: I rise to move Amendment No. 87 in the name of the noble Lord, Lord Crickhowell, who cannot be in his place. I shall do my best, but inadequately, to make the case that he would have set out. I suggest that this is one of the big brutes of the Committee stage of the Bill. It is a very big issue indeed.
§ In moving these amendments which introduce a number of new clauses it is hoped that I shall provide the House with the opportunity to debate funding 404 issues and the charging principles to be followed by Ofcom. Perhaps even more important, I am giving Ministers the opportunity to explain their approach to these issues and, for the very first time, to give detailed explanations to Parliament about the way in which Ofcom is to be funded.
§ It is really extraordinary that the elected House did not find the time to examine the adequacy and fairness of these financial arrangements. We in this Chamber must at least try to repair that neglect and focus on what I referred to at Second Reading at col. 673 as one or two of the "fatal flaws" in this legislation. I said then that unless Ofcom is more than adequately resourced with a clear underpinning from the public purse, frankly it begs the question, "Why bother with the Bill in the first place?"
The response of the noble Lord, Lord McIntosh of Haringey was, I am sad to say, uncharacteristically complacent. He stated:
I assure my noble friend … that there is not really any problem of the funding of competition costs. It has been agreed by Ofcom. by the DTI and by Her Majesty's Treasury. That is set out both in this Bill and in the paving Bill".—[Official Report, 25/3/03; col. 784.]
§ I am not sure that that tells us very much. Incidentally, it is not set out in the Bill.
§ Ofcom, the DTI and Her Majesty's Treasury may well have agreed. But what about Parliament? Surely, we are entitled to know what has been agreed and to be supplied with adequate information about the analysis that led to that agreement so that we can form some sort of judgment regarding the adequacy of the funding to be provided.
§ As to the second part of the Minister's response, the more innocent among those who heard or read the remarks might think that all they had to do was to turn to the relevant sections of the Bill and everything would become absolutely clear. I suggest that noble Lords do just that and turn to Clause 35 entitled "Fixing of Charges ". There are two-and-a-half pages. Clause 36 on "Supplemental service provision for non-payment " is another full page. Clauses 37 and 38, which relate to non-payment, result in two-and-a-bit additional pages. Finally, Clause 39 on "Suspending service provision for non-payment" is another one-and-a-quarter pages. I am afraid that my eyes had begun to glaze over well before I got to the end of Clauses 35 and 36 without ever feeling remotely reassured by what I was reading.
The Explanatory Notes presented by the Government helped a little. Paragraphs 87 and 88 inform us that universal service providers designated in Clause 63 have to meet charges,
set by OFCOM in accordance with pre-determined 'charging principles' designed to ensure that the aggregate charges collected in any one year will just cover OFCOM's costs—in that same year—of carrying out the administrative functions listed in subsection (5)".
Note "listed in subsection (5)", which is important. Paragraph 88 reads:
Charges must also be objectively justifiable, proportionate and transparent".
§ All that implements the relevant EU authorisation directive.
So far so good but the functions listed in subsection (5) are by no means all the functions of Ofcom. In paragraph 75 of its report the Joint Committee commented:
It is intended that the costs of OFCOM will be met almost entirely from those it regulates. This broadly replicates the way in which the current costs of the five existing regulators of £118 million are met, although at present the Exchequer meets half the running costs of the BSC, an arrangement that is to be discontinued under the new legislation, and some of the costs of Oftel. Both the Radiocommunications Agency and Oftel have forecast increases in the future in the costs of regulating the sectors for which they are responsible. Taken together with the transitional costs associated with the move to a single regulator, this may, according to the Government, led to 'some modest increases in the pecuniary cost of the new regime' with the savings associated with merger accruing over a longer timescale".
Some witnesses before the Joint Committee were concerned at the lack of savings foreseen as a consequence of the merger and several organisations expressed worries that they should not be asked to fund activities unrelated to their sector. The Secretaries of State expected that there would be economies of scale from combining the five regulators. The Joint Committee agreed but urged caution in seeking to apply too much pressure on Ofcom to secure cost reductions. It said:
This may lead to false economy and strike at the heart of the purposes of the Bill. Effective regulation does not come cheap, and the long-term costs to industry and to the public will be greater if OFCOM lacks the resources to undertake effective regulation".
§ I attempted to make that point at Second Reading.
I have referred to the charges that meet the requirements of the authorisation directive set out in Clauses 35 and 36. However, the Joint Committee suggested that:
These provisions leave it uncertain whether OFCOM could charge an organisation providing an electronic communications network or service for the performance of central functions or policy development or"—
What the Joint Committee said in paragraphs 79 and 80 is of crucial importance. I quote from it almost in full. It stated:
Although the ITC has developed general principles of cost-based apportionments, an assessment of regulatory exposure and the ability of licensees to pay, there are no statutory provisions for broadcasting or for wireless telegraphy directly analogous to those in Clause 29. This at least makes it theoretically possible that the entire burden of OFCOM's general costs that cannot be attributed to functions under Chapter 1 of Part 2 will fall entirely on other sectors. This would in our view be unfair and unacceptable".
It went on to recommend that,
the principles underpinning charges under Clause 29, namely that charges should be fixed in accordance with clear principles and related only to relevant functions, be extended to all administrative charges under the Communications Bill and the broadcasting legislation that it amends, except where incentive charging for wider purposes is intended".
The committee went on to state:
This creates a potential gap with regard to OFCOM's central services and its competition law functions, which cannot easily be allocated in advance to particular parts of the communications sector. We will examine OFCOM's powers under competition law and its capacity to exercise them later, but it is evident that these powers will require OFCOM to employ high quality staff with specialist skills of a kind that it is unlikely to inherit from the existing regulators. Don Cruickshank, a former Director-General of Telecommunications, pointed out that the OFT and Competition Commission were funded from the Exchequer and that their capacity to attract resources was helped by the Treasury's commitment to competitive markets".
It therefore recommended:
To ensure that OFCOM has adequate resources to undertake its competition law functions, we recommend that those functions be funded directly by the Exchequer. We would prefer to see OFCOM's central functions funded proportionately and transparently through a levy on all companies above a certain size in the regulated sectors. If this proves incompatible with the EC Directives, we recommend that such costs should also be met from the Exchequer".
§ I apologise for quoting at such length, but I hope that in a minute the Committee will agree that it was entirely necessary.
The Government's response to the Joint Committee was:
The Government is considering the Funding Issue".
§ That was it. Since then all we have had from the Minister is that reference to an agreement by Ofcom, the DTI and the Treasury. In other words, the parliamentary telescope is today focused on a black hole at the very centre of the regulatory universe. By the time the Bill leaves this House we must know exactly who funds competition powers, and how; we must know about the principles of charging that apply to those not covered by the EU directive; and we must know how central costs are to be allocated.
§ There is another even denser black hole at the centre of the immense chasm that the Government have so far left in this particular part of the universe that they have created. It is: who stands behind the regulator in the event of a counter suit from a regulated concern? Ofcom will be dealing with vast, well-resourced international organisations. If they face what they consider to be unreasonable delay, loss of business or harassment, they may well sue Ofcom. Tragically, we live in an age where litigation of this kind is increasingly common. Who pays the costs incurred by Ofcom or any damages awarded in the courts? What is certain is that it cannot be the organisations that it regulates.
§ That is the background and the reason for bringing forward these new clauses. Amendment No. 87 introduces a new clause designed to provide an opportunity to debate Recommendation 30 of the Joint Committee, that all administrative charges under the Bill and broadcasting legislation that it amends should be fixed in accordance with clear principles and related only to relevant functions, except where incentive pricing is intended. The new clause is modelled on Clause 35 which relates only to electronic communications networks and services.407
§ Amendment No. 88 arises from Recommendation 31A that Ofcom's competition law functions should be funded directly from the Exchequer. Amendments Nos. 88 and 80 cover Recommendation 31B that central costs should be funded by a "unified levy" or by the Exchequer. The two clauses relate to the alternatives. Finally, Amendment No. 91 deals with the extraordinarily important question of legal costs. Ofcom will be dealing with extremely tough characters. It is going to be a rough old world out there. The big beasts in the communications jungle may well be tempted to find out just how much courage Ofcom has. Its courage will necessarily relate to how deep its pockets are in the event of things going wrong. There may be an early and difficult test for Ofcom to meet. It would be tragic if it fell at the first hurdle. I beg to move.
§ Lord Thomson of Monifieth
These Benches strongly support what the noble Lord, Lord Puttnam, has just said. The noble Lord, my noble friend Lord McNally and others were part of the House's team dealing with the pre-legislative scrutiny.
I was fascinated to hear the noble Lord say that in preparing his remarks, even after all his experience of the pre-legislative process, he found some difficulty in running to earth exactly where in this vast Bill the financial buck stops if Ofcom is to do service to the public interest. As a newcomer to this great Bill. I certainly found it an extraordinary experience to go through it to try to find out exactly what are the financial arrangements for funding.
This series of new clauses is vitally important at the very heart of this new Bill if the Ofcom operation is to be successful. Therefore, for my part, I congratulate the members of the pre-legislative Joint Committee on this series of new clauses. As a very long retired regulator of broadcasting, I am glad that I lived in simpler times.
Both the Government and Ofcom face a massive challenge in converting five regulators into one and regulating the combined interests of the telecommunications and broadcasting industries in a global economy which is itself in a state of rapid change. The Government should feel relieved that the five regulatory bodies to be merged into one super-regulator in a multi-merger exercise have been able to do so in a remarkable spirit of co-operation. It is important for the Government to appreciate how fortunate they are in that.
Like the noble Lord, Lord Puttnam, I read with some dismay the Government's response to the Joint Committee report. Like the noble Lord, I was rather taken aback to see that, despite all the years that the Bill has been before us in one form or another, the Government are still currently considering funding issues. I find myself totally astonished that that should be the position today.
However, on page 10 of the Government's response, in reply to the recommendation made by the Joint 408 Committee on the merger of the regulators and the question of the likely costs of having a single regulator instead of five, they say:We expect OFCOM to be efficiently and effectively run and will not countenance waste or inefficiency. But we also expect OFCOM to be a world class regulator with highly skilled, professional personnel capable of delivering quality regulation".The noble Lord, Lord Puttnam, mentioned the fact that the Government's weakness in their whole presentation of what are truly momentous issues in the Bill is that, while they are extremely strong on rhetoric. they are a good deal weaker on the will to follow it through. In carrying through a merger of five separate regulatory organisations, we know that individual interests will be expressed and that the merger should be completed as efficiently and with as little waste as possible. However, one must face the inevitable fact that, during the transitional period, rather than enjoying cost-savings, some additional costs will have to be met.
The absolutely critical issue here is that Ofcom itself should be adequately funded in order to perform its role as, to use the Government's own words,a world class regulator … delivering quality regulation".I pay tribute to those who have produced the series of new clauses before us. In itself that must have been a formidable task. The clauses provide a road map—to employ the current rather over-used cliché—to achieve the Government's aim, if they have the will to do so. They make it clear that if the Government want Ofcom to defend the national interest effectively in a world of global telecommunications and broadcasting, then the Exchequer will have to be the final funder. That is the heart of the issue. It is on that point that we want a positive response from the Government. If we do not get it today, then we will demand it under different circumstances at a later stage in the Bill.
The Government appear ready to expose commercial television in Britain to the winds of global competition in a way that neither the United States Government nor the governments of our European neighbours have even begun to contemplate. That is the situation into which this Bill will put the British broadcasting and telecommunications industries. As the noble Lord, Lord Puttnam, remarked, the giants of the global media world will not lack money and resources. They will use the most expensive lawyers and experts to fight their corner. In this country, we should not allow Ofcom to be outgunned. We have a world-class public broadcasting system and great economic interests vested in our telecommunications industry. We should ensure that Ofcom is adequately funded so that it can look after the national interest.
§ Baroness Buscombe
I should like to support Amendments Nos. 87. 88 and 90, and to raise one or two questions in relation to Amendments Nos. 89 and 91. As has already been said so eloquently by the noble Lord, Lord Puttnam, one of the criticisms that can be made about the Bill is that it is not clear how Ofcom is to be funded. It is important for all concerned that 409 Ofcom is properly funded. The Ofcom pump will need to be primed. A watchdog needs its meat. So, too, does Ofcom if it is to discharge its functions efficiently.
Amendment No. 87 proposes a new clause setting out the various principles underlying the administrative charges to be fixed by Ofcom in respect of certain functions that it undertakes. The new clause limits the charges to the annual cost of carrying out the relevant function. That seems to make good sense: the user pays. We therefore support the amendment.
On Amendments Nos. 88 and 90, we agree that Ofcom's competition law functions and central functions should be funded by the Exchequer. As regards Ofcom's competition law functions, it is difficult to identify the user who should pay. Those who would benefit from Ofcom's competition law function would be everyone in the relevant market. It would be difficult to impose any specific charges on any one or more of those in the market. In those circumstances, it seems obvious that the Exchequer should pay for those functions, which are for the common good.
Ofcom's central functions are defined in the new clause as,functions relating to the administration, management and policy of OFCOM",excluding functions on which provision is made elsewhere in the Bill. Here the difficulty is identifying how much of those charges should be paid by the user. If the central function were funded by the user, there would be almost impossible problems as to how to apportion the expense among the users of the relevant functions. Any error would result in some users paying more than they should— that should be avoided. We therefore support the clause proposed in Amendment No. 90, which provides for the Exchequer to provide those funds.
We are concerned about how Amendment No. 91 would work in practice. We can entirely see the purpose: to ensure that legal costs are paid. However, what will happen if an order for costs is made against Ofcom, and the Secretary of State does not make a grant under the new clause? I should be grateful, therefore, if the noble Lord, Lord Puttnam, could clarify that point.
§ 5.45 p.m.
§ Lord McIntosh of Haringey
I fully recognise the importance of the subject and the strength of feeling about it in the Joint Committee. The Government's general approach as between sectoral regulation and general regulation is that the costs of sectoral regulation should be borne by those who are regulated. Therefore, Ofcom will be funded in the main by a mixture of fees and charges levied on the industries that it will regulate. We intend that Ofcom's charges will, in general, be proportionate and related to the sectors to which they apply.
However, we must also recognise the constraints that apply to the separate sectors and the limitations placed on charges that can be imposed on providers of networks and services and users of spectrum, which do 410 not apply to the other sectors for which Ofcom is responsible. The Joint Committee expressed concern that the costs of carrying on Oxfam's—sorry, Ofcom's—central functions could be loaded, unfairly, on to the broadcasters. That point has been made very eloquently today.
Amendment No. 87 would require Ofcom to fix administrative charges for any functions undertaken in relation to broadcasting in accordance with a statement of principles. The basis on which fees are charged for broadcasting licences is set out in the 1990 and 1996 Broadcasting Acts. Those provisions will be retained within the regime that Ofcom will operate. They provide for a clear split between licence fees, which any licence-holder may be asked to pay, and the additional payments that holders of certain radio and television licences must pay. The licence fee element is intended to cover the cost of regulating licensed services. Under the provisions of the Broadcasting Acts, in setting the fees for broadcasting licences, Ofcom must publish tariffs of its charges. As we told the Joint Committee, the Government have sympathy for the argument that there should he transparency in how Ofcom fixes its administrative charge under the broadcasting regime.
I can, therefore, undertake to the noble Lord, Lord Puttnam, that we will consider the amendment further to ensure that the different sectors that Ofcom regulates will be treated fairly. He makes the perfectly valid point that, so far as concerns telecommunications, Clauses 35 to 39, which implement the authorisation directive, provide for telecommunications the exact provision that he seeks for broadcasting. He said, "So far, so good". It is that exact point that I am now undertaking to consider between now and Report stage. It seems to be a legitimate point.
The noble Lord, Lord Puttnam, read out at length the Government's response to the Joint Committee's recommendations. I acknowledge that the response did not go as far as I have been able to go today, as the Government were not able to do so at the time. We have gone further in discussions between the Treasury and Ofcom to settle the overall funding regime of Ofcom. That is why we are now prepared to consider a statement of charging principles for broadcasting comparable to that for telecommunications.
We recognise that there is a problem. I do not know yet what the solution is with regard to what we might call "orphan costs"—in other words, the costs, to which everybody has referred, that are the responsibility of Ofcom but are difficult to assign to broadcasters or to anybody in the industry sector. Again, the question of how to cover those costs, whether it is done by grants from the Secretary of State or in some other way, must be considered, and I undertake to consider it before Report.
I can deal more briefly with the other amendments in the group. With regard to Amendment No. 88. we agree that it is important to ensure that Ofcom's functions under Part 5 are adequately resourced. It is possible for the costs of exercising powers under the 411 Broadcasting Acts to ensure fair and effective competition to be met from licence fee revenue, and applicants for consent to newspaper transfers pay a set fee according to the circulation figures of the titles concerned. We can see no reason why that should not continue with Ofcom, but we recognise that, mainly because of the restrictions imposed by the electronic communications directives, there will be competition functions under Part 5 for which Ofcom is unable to levy a charge. I shall return to that matter.
I shall deal with Amendments Nos. 89 and 90 together. They concern the central functions and the alternative means by which they might be funded. As I said, we accept that there are central functions that cannot be funded from a levy. The best example of that is the costs of, for example, work on media literacy. We have recognised throughout that there will be orphan costs. We accept that, where it is genuinely impossible for such costs to be met through charges, some provision will need to be made from the Exchequer. We do not intend that Ofcom should levy a charge to cover those costs, as Amendment No. 89 would require. Indeed, the Office of Communications Act 2002 contains specific provision to enable the Secretary of State to make payments of grant to Ofcom. If that happens, Ofcom should set out clearly the functions for which it seeks the grant and the reasons why they cannot be supported in other ways. We see no reason for specific statements applying to those costs, as Amendment No. 90 would require. Amendments Nos. 89 and 90 are unnecessary.
The final amendment, Amendment No. 91, reflects the fact that, as my noble friend Lord Puttnam, said, it is a rough old world. As the noble Lord, Lord Thomson of Monifieth, said, well funded people could sue Ofcom, and the money must be found from somewhere. That is true of any aspect of government. We could have another BSE crisis, and we have just had substantial expenditure on an Iraqi war, which could not have been anticipated and for which the Treasury had to make special provision.
We recognise the risks that, if Ofcom loses a legal case, it may find that the costs of the other parties are awarded against it, and that could be a lot of money. Ofcom has looked into the possibility of obtaining commercial cover against that, but I do not think that that will be possible, especially when there might be a statutory duty to undertake the legal action in the first place. If that were the case, it would be necessary for Ofcom to make a case for costs to be met from grant payments. The Office of Communications Act 2002 already allows the Secretary of State to pay grant to Ofcom from money provided for such purposes.
I am sorry to have taken so long, but I recognise the importance attached to the issues. I hope that my response, particularly that on Amendment No. 87, was helpful.
§ Lord Thomson of Monifieth
Before the Minister sits down, is he really telling the Committee that in this major Bill, which sets out the long-term future through the 21st century for our broadcasting and 412 telecommunications industry, the kind of financial risks that it will undoubtedly face are to be dealt with on a begging-bowl basis for the contingency fund of the Government after the accidents have happened? Is no provision to be made for proper state backing for safeguarding our national interests in these matters?
§ Lord McIntosh of Haringey
The noble Lord, Lord Thomson, has been in government and has long experience. He knows that where we have contingent liabilities we make provision for them. Where there is no event anticipated which would give rise to a contingent liability, it is impossible to make provision. I say this time after time at Starred Questions in response to the noble Lord, Lord Saatchi. We are very transparent about our contingent liabilities. We provide a statement every year of contingent liabilities, even when they are unquantifiable. But those are risks for which there is some trigger. The risks of losing a legal action can apply to any part of government and no government can, or should, provide in legislation for how those risks will be covered. They are the responsibility of government. They do not need to be reflected in individual legislation.
§ Lord Puttnam
I thank the noble Lord for his response. I am hugely encouraged. He will understand that it would have helped me enormously if we could have had that kind of response a month or two ago. I failed my maths O-level and it has really tested everything that I have learned since to get to grips with these clauses.
I should like to make two points. I am slightly puzzled. The Minister raised the analogy of the Iraq war. He would agree that it would have been a poor incentive to Saddam Hussein to back off if he believed for one second that the Exchequer was not prepared to fund the costs of the military. It is not a great analogy, but it serves.
In a much earlier speech in Committee, my noble friend Lord Alli made a very good point. He said. "I come from that tough business, I am a producer. I know how to look after myself". He said to the Government, "Don't tempt me to test you". I suppose that what I am hoping to hear at Report is that the level of determination of the Government not to be, to use the phrase of the noble Lord, Lord Thomson, out-gunned by a tough global company is something which I am not suggesting necessarily should be on the face of the Bill, but that the Government must make it absolutely evident that they will back Ofcom to the hilt. If they find themselves head-to-head with one of the big beasts in the jungle, that big beast can assume that our pockets are, if anything, deeper than its. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 88 to 90 not moved.]
§ Clause 26 agreed to.
§ [Amendment No. 91 not moved.]
§ Clause 27 agreed to.
§ Schedule 2 agreed to.413
§ Clause 28 [Transitional functions and abolition of pre-commencement regulators]:
Lord Avebury moved Amendment No. 92
Page 26, line 31, at end insert—( ) Where under contractual arrangements in place prior to the commencement of the Act liability is established for payment of charges levied by pre-commencement regulators such arrangements shall continue to have effect after the abolition of the pre-commencement regulators as if they applied to charges levied by OFCOM.
The noble Lord said: Amendment No. 92 deals with transitional functions in Clause 28 and Amendment No. 320 concerns transitional provisions in Schedule 18. These amendments deal with the transitional arrangements for charges made by pre-commencement regulators for terrestrial-shared network infrastructure facilities. The effectiveness of these commercially managed and owned national network services is reflected in the fact that the UK is currently the acknowledged world leader in matters of terrestrial broadcasting networks and the introduction of new technologies and services.
The providers played a key role in the development of the UK's terrestrial radio and television and they also licence antenna space to mobile and fixed wireless operators in the United Kingdom, thus reducing the number of mast and tower sites that are needed. Most of the sites are potentially suitable for sharing by mobile operators, subject to planning permission and to obtaining third party consent—for example, from the landlord—and they can provide the mobile telephone industry with a significant proportion of its network site requirements in the United Kingdom.
Under present arrangements, the owners of the masts and towers enter into contracts for the provision of sharing arrangements with mobile operators, and these may include charges to recover the costs imposed by the existing regulator. The Bill provides Ofcom with the power to define what kind of communication providers are to he subject to charges and to fix the charges to he paid by those providers. It does not, however, specify the basis on which the charges would be levied. In essence, as it appears to fix charges, it is not clear whether costs associated with providing the services can continue to be passed on under the new arrangements. It would he unfair if new financial burdens were to be imposed on those providers in respect of existing contractual arrangements.
I cannot believe that that is the Government's intention. To make that clear, the amendments seek to ensure that existing contractual arrangements continue to have effect as if any new charges levied by Ofcom were, for the purposes of those contracts, charges made by the previous regulator. I beg to move.
§ 6 p.m.
§ Lord McIntosh of Haringey
I do not wish to preempt further debate but there is a very simple answer to the amendments. Clause 27 of the Bill and Schedule 2 associated with it— which we have already passed—contain provisions for the transfer of the property, rights and liabilities of the existing regulators to Ofcom. These provisions give the Secretary of State 414 power to direct the existing regulators to make schemes to transfer their property, rights and liabilities to Ofcom. This includes liabilities of the kind to which the amendments relate.
Schedule 2 specifies the property, rights and liabilities that are capable of being transferred and specifically, at paragraph 2, includes provision the effect of which would be to ensure that references in any agreement, document, process or instrument of any description to the pre-commencement regulator would be treated as references to Ofcom once the scheme has come into force. The Bill already contains adequate provision.
§ Lord Avebury
That sounds very convincing. I wonder how it was that in the discussions between the Government and the proprietors of the masts and towers that was not made clear so that they did not feel it necessary to raise the matter with us and cause us to table the amendments.
§ Amendment, by leave, withdrawn.
§ Clause 28 agreed to.
§ [Amendment No. 93 not moved.]
§ Clauses 29 to 34 agreed to.
§ Clause 35 [Fixing of charges]:
§ Lord Evans of Temple Guiting
moved Amendment No. 94:Page 35, line 32, leave out from "charges" to end of line 36 and insert "for a particular case includes—
The noble Lord said: The amendment gives clarification of the scope of the existing provisions. It adds nothing new to the Bill. A question was raised whether the existing wording was entirely consistent with the possibility that Ofcom might wish to levy administrative charges on a basis related to turnover. There was a suggestion that Ofcom might, on the contrary, be obliged to levy flat-rate charges—that is to say, that the charge should be the same for every person, or every person of a particular description, irrespective of the size of the business.
- (a) power to provide that the charges in that case are to be equal to the amounts produced by a computation made in the manner, and by reference to the factors, specified by them;
- (b) power to provide for different charges to be imposed in that case on different descriptions of persons; and
- (c) power to provide for particular descriptions of persons falling within subsection (2)(d) to (f) to be excluded from the liability to pay charges in that case."
It is not the intention of the Bill to set out a particular charging system or systems to be used by Ofcom. There may be cases or categories for which flat-rate charges would be appropriate. Equally, there will certainly be categories for which other charging bases—perhaps relating to turnover—would be more 415 appropriate. The amendment removes any possible implication that Ofcom is limited to flat-rate charges. I am sure that it is a right change to make. I beg to move.
§ Baroness Buscombe
I am grateful for the Minister's explanation, both now and earlier in a letter that he kindly sent to me, a copy of which was placed in the Library. I entirely understand the purpose of the amendment and agree with it.
§ On Question, amendment agreed to.
§ Clause 35, as amended, agreed to.
§ Clauses 36 to 41 agreed to.
§ Clause 42 [Power of OFCOM to set conditions]:
Lord McNally moved Amendment No. 95
Page 42, line 31, at end insert—(9A) OFCOM shall not set conditions of a discretionary character under this section in any case in which they decide that a more appropriate way of proceeding in relation to the matter in question would be under the Competition Act 1998 (c. 41).(9B) When OFCOM have come to a decision on the appropriate way of proceeding under subsection (9A) they shall publish a notice to that effect, giving their reasons for the decision, in such manner as they consider appropriate for bringing their decision to the attention of the persons who, in their opinion, are likely to be affected by it.The noble Lord said: I hope that Ministers will find this group of amendments useful if not acceptable. We are trying to make sure that we have the balance right between Ofcom's sector-specific powers and the competition powers in the Competition Act 1998 and the Enterprise Act 2002. I think our committee was much influenced by one of the Conservative members, Andrew Lansley, who had served on the Enterprise Bill in another place and had become quite an enthusiast for its powers, if properly used. We were also impressed by the evidence from Don Cruickshank, who said that the United Kingdom is acquiring a system of competition law "worthy of its name" and developing a culture of enforcement to match. Without going back to the previous debate, that culture of enforcement and resources of enforcement will be very important.
It was interesting that, on balance, the pre-legislative committee thought that, where it could, Ofcom should leave these matters to the competition and enterprise legislation to give greater certainty to the players in the sector that they have clear Acts to refer to and to make sure that Ofcom used its sector powers only where absolutely necessary. These amendments seek to get that balance right. I beg to move.
§ Baroness Buscombe
We support these amendments. Clause 42 gives Ofcom the power to set conditions in the electronic communications industry. Amendment No. 95 would prevent Ofcom from setting conditions of a discretionary character if it decides that a more appropriate way of proceeding would be under the Competition Act 1998. That we entirely support.
416 Although I am not quite sure what,conditions of a discretionary character
are, and whether the noble Lord, Lord McNally intends the amendment to apply only to those conditions referred to in Clause 42(10)(c), the purpose behind the amendment is, we think, entirely right. One of the principles of good regulation which we discussed in relation to Clause 3 is proportionality, and the proportionate approach of the regulator should be to apply ex ante regulation only where necessary. If competition law will do the trick, there should be no need to regulate. Furthermore, the amendment is entirely consistent with the framework directive which states in Recital 27:It is essential that ex ante regulatory obligations should only be imposed where there is not effective competition … and where national and community competition law remedies are not sufficient to address the problem".In the light of the other obligations on Ofcom, it may be said that this amendment is not strictly necessary, but we believe it is right in principle and look forward to what the Minister will say in response.
The effect of Amendments Nos. 104 and 127 is to prevent Ofcom from making a market power determination where Ofcom has determined that the identified market is effectively competitive. That seems to us to be right. If the relevant market is effectively competitive, there is no need for Ofcom to interfere and it should not make a market power determination. As with Amendment No. 95, Amendment No. 104 makes explicit the obligation on regulators contained in the framework directive not to interfere when a market is effectively competitive.
§ Lord McIntosh of Haringey
I, too, worked on the Enterprise Bill, and I am certainly enthusiastic about the idea of a general competition law applying, with sectoral law applying only when necessary. The problem is that we are now in Part 2. I shall bore the House by saying over and over again that Part 2 implements a number of European directives. Clause 42, to which Amendment No. 95 refers, implements article 6.1 and part A of the annexe of the authorisation directive and articles 4.1 and 4.3 of the access directive. Clauses 75 and 76 implement articles 14 and 15 of the framework directive. Clause 91 implements article 10 of the authorisation directive.
It would be lovely if general competition law could deal with all the matters under debate, but we have not yet reached that position in the European electronic communications network and services market. Progress across Europe varies, which is why we have supported the directives and why we are transposing them into United Kingdom law.
I recognise that Amendment No. 95 follows recommendation 74 of the Joint Committee report. As we said in the government response, we certainly understand the Joint Committee's concern that sectoral obligations should be confined to situations where normal competition legislation is not sufficiently effective for the special circumstances of this market. However, we believe that the Joint Committee's concerns are adequately dealt with in the 417 way in which conditions are set, especially in the requirements on the regulator before he sets any conditions.
The regulator can set conditions only where they are really needed and appropriate, and all activities of Ofcom are subject to provisions of Clause 3(3)(b). They must be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed. That is an adequate safeguard on the way in which Ofcom sets conditions, and makes Amendment No. 95 unnecessary.
Amendment No. 104 would add further requirements on Ofcom when considering the setting of significant market power conditions. We consider that to be unnecessary, too. As we promised in responding to the Joint Committee's recommendation 63, we considered again whether the Bill could be improved to provide that significant market power conditions were set only when there was no effective competition. The way in which we have drafted Clauses 75 and 76 give the effect that the Joint Committee required.
Significant market power conditions can be set only when someone has a position that amounts to dominance in the market concerned. That is set out in Clause 75(2), which refers to provisions of the framework directive to ensure that our interpretation of "dominance" is consistent with the interpretation across Europe. It is obvious that, if we have regulations consistent with European legislation, quite apart from the fact that we are obliged to introduce them, it is enormously to the benefit of the broadcasting and telecommunications industry that the same conditions should apply throughout Europe. If someone has "dominance", in our view and in the view of European Commission there is manifestly a lack of effective competition. In those circumstances, the regulator should be able to decide what ex ante conditions it is appropriate to set. Therefore, I do not believe Amendment No. 104 is necessary, and it follows that Amendment No. 127, which provides definitions, is unnecessary.
I see the argument in favour of Amendment No. 117. It is a good thing to have consistency with other parts of the Bill, although it has not worried us in the past. We are prepared to accept that amendment, if that is the wish of the House.
§ Lord McNally
I do not know whether to do a lap of honour. We understand that there are constraints. It is worth emphasising that the Joint Committee was not simply a nanny and a meddler. It did not simply add on responsibilities, as the noble Lord, Lord Peyton, seemed to suggest. We accepted the argument that the communication industries would benefit from the type of rigorous competition established by the Enterprise and Competition Acts. I quoted Don Cruickshank's feeling that this country now has some extremely good competition machinery. Consequently, and reverting to the previous debate, we want that machinery to have the necessary resources to make the provisions bite.
418 The Minister has given a most welcome response. Do we get the concession now? When we reach that part of the Bill, do we all say, "Agree"?
§ Lord McNally
That is excellent. Thank you very much. I beg leave to withdraw the amendment and await the win.
§ Amendment, by leave, withdrawn.
§ Clause 42 agreed to.
§ Clauses 43 to 60 agreed to.
§ 6.15 p.m.
§ Clause 62 [Obligations to be secured by universal service conditions]:
§ Baroness Gibson of Market Rasen
moved Amendment No. 95A:Page 64, line 23, at end insert "; and(f) to secure the availability throughout the United Kingdom of affordable access to services of ever-greater bandwidth"The noble Baroness said: Amendment No. 95A asks Ofcom to ensure that broadband services are included within the definition of what constitutes high-speed services. That will both hasten the design and delivery of broadband services and assist the Government to achieve their aim of the UK being the most extensive and competitive broadband market in the G7 by 2005. For the UK that means a high-tech infrastructure that will enable worthwhile jobs to be located anywhere in the country, and it means the ability to attract international investment and to compete effectively with other modern economies.
Overall, the problem is not predominantly one of supply. Most of the population of the UK now have access to a broadband service. Nevertheless, many rural users are prevented from accessing the technology because they live too far from their local exchange or their exchange has not been upgraded, or because the range of alternative access technologies are not available or are directed to the non-residential market.
There are a number of matters on which the Government need to take action. They need to show potential users the practical benefits of broadband through pilots and demonstration and showcase projects. The Government should publicise the benefits of broadband through major education and awareness programmes. They should take the lead in creating demand through the public sector by co-ordinating the response of public sector authorities at the local level, such as councils and schools, and by using the public sector, through the post office and library, as focal points for the delivery of broadband services.
Ofcom, of course, has the primary role in boosting take-up by providing a definition of universal service—the mechanism by which everyone has the right to receive certain communications service 419 regardless of where they live, at a price they can afford, which encompasses the high-speed delivery of those services.
Such is the success of broadband where it is available that no one accessing broadband will return to the narrow-band dial-up of yesterday. The services available through and generated by broadband delivery will become as essential to residential homes as the telephone and the power supply. Above all, a universal access requirement will ensure that we do not create a broadband barrier to go alongside the digital divide that already exists and that broadband instead becomes the means of overcoming that divide. I beg to move.
§ Baroness Turner of Camden
I rise to support my noble friend's amendment. As my noble friend Lord Lea indicated earlier, we had a meeting prior to this Bill with the unions involved in the industry. It is quite clear from those exchanges that the unions representing employees are very keen on broadband.
I have a letter from the Communication Workers Union that indicates that the union has,continually pressed for the obligation on government to guarantee the universal availability of affordable technology to be included within OFCOM's remit. Lack of leadership from government on the issue of providing broadband has led to the current slow and patchy availability across the country. This will result in a technological divide meaning that those on lower incomes or in rural locations will not be able to benefit from the new technology".
Clearly there is an important social message here. We want the new technologies to be universally available. It seems to us—hence our amendment—that this can best be achieved if it is made a responsibility of Ofcom and included in the Ofcom obligations. I support the amendment.
§ Lord Lucas
I am delighted to join the two noble Baronesses opposite in supporting the amendment. I am a regular user of broadband. I rely on it for my business. It is one of the reasons I have to live in London. If I were to move outside London. broadband would not be available to me. In the particular place where I might go to live in the country there would be difficulties in terms of getting broadband. No one is trying to make it happen.
The only opportunity to try to do something about the lack of availability of broadband in a small local exchange is to sign up on the relevant website. It is extremely difficult to get a campaign going among the users of that exchange. The cost of making an exchange broadband capable is a matter of a few thousand pounds. Some £10,000 or £15,000 would be sufficient for almost any rural exchange. If you can get together the people locally who would need the service and benefit from it and organise them to help BT subsidise the cost of that service, it can be done. But 420 BT is not facing in that direction and does not offer that as an option. It is difficult to get hold of anyone at BT to talk about it.
§ Lord Avebury
I am most grateful to the noble Lord for giving way. Is the noble Lord aware that the sign-up campaign which he mentioned has worked extremely well in some areas, for example, in North Walsham where people got together privately and persuaded enough users to sign on at the website? They have now just achieved the breakthrough number which allows them to be connected to broadband. That will happen in July.
§ Lord Lucas
It can be done if there is sufficient impetus locally and someone is prepared to devote time to the matter. But the process ought to be assisted by the authorities. It is an absolutely vital part of the regeneration of the countryside that it should be possible for technologically aware businesses to be located there. To have such a process pushed and supported by BT and Ofcom would be much more satisfactory than having a situation where in certain parts of the countryside there happens to be someone with the time, initiative and knowledge to make it all happen. Ofcom and BT between them could make the whole process happen much faster.
The Government could be helpful too—in areas which are technologically difficult from the point of view of ADSL along fixed copper cables—in opening up the radio spectrum. They have not allowed BT to proceed with experiments with wave bands which would allow a reasonable coverage. You can get radio systems where the coverage is quite short. However, something which would stretch 20 kilometres or so and could be used as a wide area network happens to be occupied mostly by bits of the Government that they do not want to talk about. They do not seem inclined to let it go. But it is essential that the Government have an imperative to make broadband available in all parts of the country where it is commercially sensible to do so and that the Government are behind it and that the momentum of government is behind it. Without that, large parts of the countryside will become inoperable from the point of view of running a business there. That is not a sensible basis for government policy. Therefore, I entirely support the two noble Baronesses opposite.
§ Lord McNally
I want to support the amendment briefly. It has emerged in a number of areas, including disability, that we are within touching distance of real revolutions. In the case of broadband, there could be a gap between what hard-headed and hard-nosed businessmen will do, looking at shareholder value or some other priority, and the broader national interest.
Much of the evidence that we received showed that the opportunities that the rollout of broadband offers—it is often in the rhetoric of the Prime Minister and other Ministers—need a push from the Government. However, if there is a push from government, there will be an enormous beneficial 421 impact on the rural economy and for transport. A new and entirely beneficial avenue for development in such areas is opened up. It is very exciting.
Things seem constantly beyond our grasp, however. One has seen so often in other areas that there is the technology and the national demand, but there is insufficient government initiative to build the bridge between them. Therefore, I welcome the amendment, too.
§ Baroness Buscombe
We very much support the development of broadband, but we had this debate some days ago, quite fully.
§ Lord McIntosh of Haringey
We did indeed. I thought that I had made the Government's support for broadband clear when I responded to the amendments tabled by the noble Earl, Lord Northesk. I hope that I made it clear that the Government are committed to making broadband available across the country. There are plenty of examples of the initiatives that we are undertaking. The East England Development Agency ran the "Connecting Communities" scheme, with 102 applicants at the close of the application period on 30th April. Act Now in Cornwall is using EU structural funds, and 13 exchanges have been ADSL-enabled as a result. I am sure that there are many more, but I do not have time to recollect them.
There is no doubt about our commitment to broadband. The trouble is that I have to address the amendment, and I have to do so in relation to Clause 61, which relates to must-carry obligations. The clause implements Article 6(1) and Condition 6 of Part. A to the annex of the authorisation directive, and Article 31 of the universal service directive.
For the time being, there are no Community obligations in relation to broadband. I wish there were. The Commission will review the requirements periodically, starting in 2005, but at the present stage of the development of communications services, there is no Community requirement, and we could not include a requirement relating to broadband in the Bill. That does not mean that we cannot do everything that we can ourselves, quite apart from the amendment, on the subject.
I beg the pardon of Members of the Committee; the amendment is tabled to Clause 62.
What would he added to the list of features for the universal service order is not of the same character as the others, which are the essential core characteristics of modern electronic communications systems. The Bill cannot specify the technological characteristics of future services in setting the requirements, and the legislation has to last for a number of years. Even if we were to include technological parameters, "ever-greater bandwidth" is not a single technological development that we might want to promote by specifying in statute.
In any case, I am not sure that bandwidth is the right word to use in legislation. I tremble in the presence of the noble Lords, Lord Lucas and Lord Avebury, but surely a more precise definition than greater 422 bandwidth is higher data rates. I suspect that there is general agreement that bandwidth will continue to increase, but it is possible that compression technologies will develop so that other technical characteristics, such as latency, may become more important. Our commitment to broadband at this time is undoubted. We shall continue to be committed to it. However, for obvious reasons, I cannot support the amendment.
§ 6.30 p.m.
§ Baroness Gibson of Market Rasen
I thank my noble friend Lady Turner and the noble Lords, Lord Lucas and Lord McNally, for supporting the amendment. I am also grateful to the noble Lord, Lord Avebury, for the information that he gave us about the sign-up campaign. I was pleased to hear that that is happening successfully in parts of the country.
I thank my noble friend the Minister for his helpful reply. In view of it, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Avebury
moved Amendment No. 96:Page 64, line 24, leave out "may" and insert "shallThe noble Lord said: The amendments are concerned with the pricing of services that must be provided under the universal service conditions. As I understand it, that currently means fixed narrow band telephony and associated services, public call boxes and directory inquiries, which are provided by BT and Kingston Communications in Hull. The Bill gives the Secretary of State the power to issue guidance in the universal service order about the pricing of those services. The Select Committee pointed out that that does not accurately reflect the division of responsibility between regulators and member stales in articles 9 and 10 of the universal service directive. A few minutes ago, the noble Lord, Lord McIntosh, emphasised that Part 2 does nothing more than implement the four directives and that was the basis of the Bill. It is therefore important that the Bill should accurately reflect what is in the directives. The committee said unambiguously that in this case it does not do that. I noticed that the government response to the Select Committee report carefully omitted references to articles 9 and 10 of the universal service directive.
Paragraph 156 of the select committee report recommended that,the Secretary of State should be required to give guidance about relative pricing for the same service among different customers".That would be achieved by Amendments Nos. 96 and 97. The Select Committee further recommended that Ofcom should be obliged to publish proposals relating to pricing in respect of universal service conditions and that the Secretary of State should in effect have the final say because of the wide political and social significance of pricing for those services and the need for direct political accountability. Amendments Nos. 98 to 101 do that. We simply cannot accept the five-line dismissal of those proposals in the 423 Government's response to the Select Committee without reference to the interpretation of the directive, which is the key to the amendments. I beg to move.
§ Baroness Buscombe
Under Clause 62, the Secretary of State is under an obligation to make what is called the universal service order, which sets out a number of matters which must be provided throughout the UK by universal service providers. The price for services is of course an important matter because the cost of providing a service in Cornwall, for example, may be very different from the cost of providing a service in London. It may therefore be appropriate for the universal service order to contain guidance about pricing, and Clause 62 provides for that. However, Amendment No. 97 makes it mandatory for the universal service order to contain guidance relating to the pricing of services. That is really a matter for the regulator, who is independent of government, and there seems to me to he no reason for it to be mandatory for the Government to seek to influence the regulator.
However, the amendment requires the word "pricing" on its own to he left out, and that unduly restricts the Secretary of State's power. We should by all means give the Secretary of State power to include within the universal service order guidance about relative pricing. I am with the noble Lord on that point. He and I part company over whether or not the Secretary of State should have power to give guidance about pricing generally. We believe that that would be useful and the Secretary of State should have that power. However, it should not be mandatory for him to exercise it.
The thrust of Amendments Nos. 98 to 101 is to give the Secretary of State power to modify any proposals made by Ofcom which relate to the pricing of certain services and functions. Clause 62 provides for the Secretary of State to make a universal service order which must deal with certain specific functions and services to be provided or made available or supplied throughout the UK.
Clause 64(1) provides that Ofcom can set universal service conditions for securing compliance with the obligations set out in the universal service order. The effect of this amendment as regards pricing of the various services and functions is that Ofcom, instead of setting universal service conditions, must publish proposals which have then to be approved by the Secretary of State. The Secretary of State can then modify those proposals.
That, we believe, seems to be wrong in principle. Ofcom is intended to be an independent regulator and these matters should be left to it and not subject to interference by the Government. Nor do I think it is a sensible use of the time of the Secretary of State or Ofcom. It involves an order being made by the Secretary of State, Ofcom then publishing proposals consistent with that order, and then the Secretary of State reconsidering those proposals. The Secretary of State is therefore involved at two stages.
424 I would have thought it better for the Secretary of State to consult Ofcom at an early stage so the universal service order is quite clear as to what the Secretary of State requires. Clause 62(4) contains such a provision and we believe that that is a much better solution than the one proposed in the amendment.
§ Lord McIntosh of Haringey
First, I apologise for misplacing Amendment No. 95A, which led me to a number of errors. I said that it was in Clause 61. In fact, it is in Clause 62. I said that Clause 61 was about the must-carry obligations, which indeed it is, but Clause 62 is about the universal service obligation. I therefore misrepresented the European directives with which Clause 62, and therefore Amendment No. 95A, are concerned. Clauses 62 and 64 to 66 implement articles 3 to 7 and 9 to 11 and Part A of Annex 1 to the universal service directive. I apologise for that, but it cannot be put right in Hansard.
I agree with much of what was said by the noble Baroness, Lady Buscombe. We said in response to the Joint Committee that we do not think Ministers should do more than offer general guidance on the pricing of the universal service. We envisage that by way of guidance on the pricing of universal service obligations—this, after all, implements the universal service order and we have published a draft of the guidance for consultation—charges for essential elements of universal service should be offered on the basis of geographically average prices. That addresses the point made by the noble Lord, Lord Avebury. However, beyond that, we believe that decisions should be left to Ofcom.
We are deliberately setting the framework for dealing with the electronic communications sector over the coming years, setting up a high-powered regulator to deal with the detail in the manner prescribed in the Bill. We do not want to reserve all the details involved in the amendment to government. There is no need for government to take political decisions on the pricing of the universal service. It would not be desirable for the telecommunications industry and it would not be desirable for consumers.
Clause 65 requires Ofcom to keep universal service tariffs under review. It provides that universal service conditions can require the use of a common tariff for the provision of network services, apparatus, associated facilities, directories and directory inquiry facilities set out in the universal service order. In cases specified by Ofcom, special tariffs may be required. I believe that these measures are sufficient to secure fair pricing for universal services under Ofcom and there is no need to resort to further intervention by Ministers.
The noble Lord, Lord Avebury, said that the Bill does not accurately reflect the directive. We believe that it does, particularly in the difference in the obligation specified in articles 9.1 and 9.2 of the universal service directive. But I appreciate that he has raised a precise point and I would like to write to him to explain it in more detail.
§ Lord Avebury
It is a pity that the Government did not address the point properly in the reply that they 425 made to the Joint Committee. It is clear in paragraph 156 of the committee's report that it did not believe that there is a mirroring in the Bill of the division of responsibility between NRAs and member states in Articles 9 and 10 of the Universal Service Directive. The Minister has said that he disagrees with that opinion. If he had given the reasoning for his conclusion to the Joint Committee, it might well have been accepted. I do not know.
I shall have to discuss the matter with members of the Joint Committee, as I was not a serving member. I should particularly like to take the advice of the noble Lord, Lord Puttnam, before deciding whether this is a matter to which we should return on Report. In the mean time, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 97 not moved.]
§ Clause 62 agreed to.
§ Clause 63 agreed to.
§ Clause 64 [Subject-matter of universal service conditions]:
§ [Amendments Nos. 98 to 100 not moved.]
§ Clause 64 agreed to.
§ Clause 65 [Tariffs etc. for universal services]
§ [Amendment No. 101 not moved.]
§ Lord Avebury
moved Amendment No. 102:Page 66, line 38, leave out subsections (3) and (4) and insert—( ) Universal service conditions must secure that a designated undertaking, in providing facilities and services additional to those referred to in the universal service order, establishes terms and conditions in such a way that the customer is not obliged to pay for facilities or services which are not necessary or not required for the service requested by the customer.The noble Lord said: As currently drafted, subsections (3) and (4) of this clause implement the Universal Service Directive in a way which, we say, "gold plates" the EU rules. The approach will adversely affect universal service providers in a way that we do not believe was intended by the directive.
The universal service order, made by the Secretary of State under Clause 62, sets out the extent to which the things specified in subsection (2) of the clause must be made available and supplied throughout the United Kingdom, while under Clause 63 Ofcom has the power to designate universal service providers, who are persons to whom the order applies.
Subsections (3) and (4) of Clause 65, which this amendment proposes to remove from the Bill, are intended to implement Article 10(1) of the EU's Universal Service Directive, though the Explanatory Notes do not actually say so. Article 10(1) requires that if designated undertakings—USPs under this Bill—provide additional services beyond those mandated by the USO, they must,establish terms and conditions in such a way that the subscriber is not obliged to pay for facilities or services which are not necessary for the service requested".
In the case of Kingston Communications and BT, the products and services provided under the USO include telephony services and calls, public payphones, and 426 special services for low-income users. So the directive says, as we have it in Amendment No. 102, that if they provide services outside those specified in the USO they must not charge the customer for other facilities or services that are not necessary for the particular service requested.
The directive says nothing about the charges made for services provided under the USO, but the Bill as drafted wrongly interprets Article 10(1) as meaning that customers of the basic services shall not be required to "subsidise" other services, meaning services provided outside the USO. This would mean that any normal profits generated from products supplied under the universal service obligation, such as telephone calls, cannot be invested in the start-up and development of new products and services.
Telecommunications is a dynamic and rapidly developing industry with new service capabilities becoming available, such as broadband access— a subject that we have just discussed—which are of economic and social value to customers. It is perfectly normal for such new service introductions to be initially loss-making and, therefore, in effect subsidised by the profits generated by more mature services. If the ability to rely on some degree of internal cross-subsidy is removed, service innovation will he severely restricted and ultimately consumers will suffer.
The prices of the products and services provided under the universal service order are already constrained by competitive forces or by direct controls by Oftel, providing the market and regulatory pressure that the directive intended. Both Kingston Communications and BT would be harmed by the current wording, but Kingston would be hit much harder because of its size. I beg to move.
§ 6.45 p.m.
§ Lord McIntosh of Haringey
I do not want to preempt debate, but I could be helpful to the amendment, which might save time.
We agree that the intention of Article 10(1) of the universal service directive appears to be that subscribers to any of the universal services mandated by the directive should not be required to pay for other facilities or services where those are not a necessary part of that service. Certainly, we think the drafting will achieve that but we recognise the concern that it might lead to more extensive regulatory interventions than are envisaged by the directive, which is "officialese" for what the noble Lord, Lord Avebury, called "gold plating".
So, we are sympathetic to the intention of the directive. We should like to consider the point further. We shall undertake that the Government will consider bringing forward an amendment on Report on that point.
§ Amendment, by leave, withdrawn.
§ Clause 65 agreed to.
§ Clauses 66 to 70 agreed to.
§ Clause 71 [Specific types of access-related conditions]:
§ Lord Avebury
moved Amendment No. 102A:Page 71, line 42, at end insert "; and(c) that where the practices required by the code for electronic programme guides under section 304 in relation to the type of selection described in subsection (2A)(a)(ii) of that section require additional software or an additional facility to be provided in relation to the guide, that such facility or software be provided within a reasonable period of time, and that the terms as to price on which it is provided are set to entitle the recovery of the direct cost of making the facility or software available together with a reasonable return for the provider only.The noble Lord said: This amendment refers to a very important problem, which I referred to at Second Reading. Up until now the BBC's programmes have been transmitted in encrypted form for users of set-top boxes but from 30th May onwards they will be in the clear. That means that digital satellite viewers in the UK will be able to receive the eight BBC channels without the use of a Sky viewing card, through any make of digital satellite receiver, but current and future Sky subscribers will still be able to receive all the BBC's services.
The BBC states that it will save an estimated £85 million over the next five years because it will no longer need BSkyB's conditional access system. Nearly half of those savings, £40 million, will be used to improve access to the BBC's national services in Scotland, Wales and Northern Ireland plus, for the first time, the 15 regional variations of BBC1 in England will be available on satellite and will be listed on the Sky electronic programme guide. That means that viewers will be able to choose the regional or national version of the BBC that they prefer, irrespective of where they may be living.
The BBC has been able to do that because its conditional access contract with Sky expires at the end of May and because the signals which it now proposes to transmit are being tightly focused via the Astra 2D satellite, which eliminates the rights problems that would have arisen with the larger footprint of the old transmissions.
In order to give the viewers the ability to select the version of BBC1 and BBC2 of their choice, the EPG software needs to be modified and the BBC obviously hopes that that can be done as soon as the new arrangements begin and at a reasonable cost. Sky, on the other hand, is understandably miffed at the prospect of losing a substantial income over the next five years and would like to make up some of the difference via its monopoly on the EPG.
The software is a proprietary system, but the BBC knows enough about the way it works to be able to say that the modification it needs is fairly simple. It would 428 be prepared to pay a fair price to Sky for the programming work, including a fair profit margin, and that is what the amendment proposes. In the absence of such a provision, Sky could hold the BBC to ransom. It has already said that it is unwilling to do what the BBC asks when there are other commercial opportunities that it could pursue with the limited programming capacity at its disposal.
It would be difficult to overstate the importance of the EPG. It is a combined Radio Times and channel selector. If an agreement is not reached between the BBC and Sky, it is the viewers who will suffer. This is par excellence a case where the regulator should have the power to set conditions so as to ensure that the customer of a monopoly is not held to ransom. I beg to move.
§ Baroness Howe of Idlicote
I support the amendment. I hope it will provide the following benefits. First, that it will underline Parliament's support for the availability of high-quality public service programming on the digital satellite platform, including local and regional services such as news and current affairs; secondly, that it will enable television viewers to select easily the regional services of their choice; and, thirdly, that it will ensure that satellite operators are guaranteed a fair price for making any required software upgrades.
In the Broadcasting Act 1996, Parliament made its intention quite clear regarding the access to public service channels broadcast on digital platforms. By defining the principles of "fair access" and "due prominence", it ensured that public service channels could be easily located by viewers using electronic programme guides.
However, as we all know, further advances in technology—apart from providing for a proliferation in the total number of channels available—have now provided, as we have heard, the opportunity to further extend viewer choice in the area of regional services. I agree with the noble Lord, Lord Avebury, that the amendment is important for ensuring that digital satellite viewers have the maximum choice over which public service regional services they want to watch on the top slots of the electronic programme guide.
As we have heard, following its recent decision to broadcast unencrypted on Sky's digital platform, the BBC has announced that it intends to place its regional services on Sky's EPG. It also wants viewers to select which regional service they want to watch on slots 101 and 102.
For the vast majority of viewers the choice of regional programming will no doubt be determined by where they live. However, there will now be a choice for them to take the decision for themselves. A Scot, for example, working in London may wish to keep in touch with his or her local news north of the Border. Similarly, a Londoner who resides—no doubt because of his job—in the West Country may relish the opportunity to keep up-to-date with local news in the capital.
429 To facilitate this consumer choice, the BBC has requested that Sky make the required simple software upgrade to its EPG system. I believe that both ITV and Channel 4 support the amendment because in the future they too may possibly want to offer a similar choice to viewers.
It is important that Parliament gives some guidance in the Bill as to how the cost of these potential software upgrades are to be regulated and the speed with which they are to be implemented. Naturally, platform operators are entitled to recover in full the costs they incur in carrying out such upgrades and—I may say—to receive a reasonable profit margin for so doing. There must be no question of public service broadcasters getting something for nothing.
Similarly, attempts to provide greater consumer choice must not be hindered by interminable disputes over the cost and timing of providing such upgrades. In debates that have taken place outside the House, we have had examples of some of those. So, by addressing the issues of cost and timing, the hope is that this amendment will not only protect the interests of the platform operators—which is perfectly legitimate—but that the public interest aspect will also be fully taken into account.
§ Lord Gordon of Strathblane
I put my name to the amendment because it came closest to what I was looking for in the Bill as regards either conditional access or electronic programme guides. I do not regard the amendment as being fully satisfactory. I hope that on Report the Government will return with an amendment couched in even more general terms, which simply gives power to Ofcom to intervene proactively to fix tariffs.
I do not sign up in full either to the position of the BBC or to the position of Sky. Both are misrepresenting each other like nobody's business. But what I am clear about is the fact that we have a monopoly supplier and we need proper regulation in the public interest as to how it operates.
I leave it to the Government to do that. Also, I fully recognise that the nature of the game is changing. Incidentally, perhaps I may correct the noble Lord, Lord Avebury. I do not think that the BBC is going to switch on 30th May precisely because it is involved in negotiations with Sky. To be frank, much fine verbiage about this matter has been exchanged, but the two organisations are playing a poker game to decide how much to pay. We have two very good poker players in the BBC and Sky. I am simply concerned that the public interest could be lost unless Ofcom is given the power to intervene and say, "We are not leaving you two to go on like this for another year. This is what will happen." I hope the Government will come forward with something on Report to address that.
§ Lord Brooke of Sutton Mandeville
I echo what has been said by the noble Lord, Lord Gordon. When I was in the private sector, I recall a dispute between our world-wide auditors and our German subsidiary. It was perfectly clear that there had been a total breakdown in communication between them. I 430 intervened personally because it was obvious that, while intelligent people were corresponding on both sides, in fact they were paying no attention to the letters they were receiving from the other side. That appears very much on a par with what has been said by the noble Lord, Lord Gordon, about the misrepresentation of the parties concerned.
This is an important issue. While I do not seek remotely to put myself in the position of Ofcom in regulating the dispute in Germany many years ago. I know that it is important that the power should exist so that good sense can prevail.
§ Lord Lipsey
We should not think that Ministers are granted a monopoly on opposing amendments. I am afraid that I oppose this amendment, although I do not oppose some of those appearing later on the Marshalled List such as Amendment No. 250A whereby the BBC seeks to address the same problem.
We have discussed the issue before. My noble friend Lord Gordon and the noble Lord, Lord Brooke, have described the problem well. We have here the BBC trying to get Sky to provide it with a lot for a little, and Sky trying to get a lot for providing a little; it is a standoff situation. We experienced much the same last year when the BBC was trying to persuade Sky to carry all its services for practically nothing. Of course the correct thing ultimately took place. After looking at all the facts, Oftel gave a considered ruling and determined what the appropriate price would be—and that was the end of it.
In this case, there are two substantial matters of fact on which the parties disagree. The first is whether the software upgrade is as simple as the BBC insists. Or is it not? I do not know whether the noble Baroness, Lady Howe, and the noble Lord, Lord Avebury, have examined the software in detail and are able to answer that question for the Committee. Personally. I have nothing like the technical knowledge to do so. Secondly, what kind of pricing regime would be fair? Simply to say "cost/plus" is not sufficient. Is the BBC to borrow Sky's technicians and decide what is the appropriate cost for such a technician and then decide what is the appropriate plus? Is it to be decided by Parliament without examination by means of this kind of amendment? That is not the approach we need.
What has to take place and what is the sensible approach is for the two parties to enter into negotiations. If they cannot agree, then it will go to Ofcom to resolve. Indeed, some of the later amendments will make clear the kind of conditions under which Ofcom should resolve such a dispute. Furthermore, let us not doubt that Ofcom has the power to resolve it. It would be wrong for this Committee to reach a technical decision on the technology or a decision on the appropriate pricing regime by supporting this amendment. I hope that we shall find a way of helping to resolve the situation, but this amendment ain't it.
§ 7 p.m.
§ Viscount Astor
Existing legislation already gives guarantees on both conditional access and EPGs that there should be fair, reasonable and nondiscriminatory terms. The regulators already have that power and Ofcom will have it as well. I hope the Minister will be able to confirm that. I believe that the regulator will have the tools required, as it were, if it is necessary to intervene in this dispute.
While I am in one sense sympathetic to the BBC case, I cannot agree with this amendment. However, later amendments concerning due prominence, mentioned by the noble Lord, Lord Lipsey, may have greater validity. Have the Government looked at the arguments on either side? Most of us do not have the technical knowledge to give us any idea of whether the satellite footprint of the proposal will cover Ireland and, therefore, affect the RTE service, preventing the BBC, if it broadcasts in the clear, from having slots one or two. Have the Government asked the ITC for its advice?
In the same way, as the noble Lord, Lord Lipsey, says, I do not think that any of us have any idea about software upgrades. All I know is that, usually, when someone upgrades my software, it never works as well afterwards—definitely not for the first month. It is wildly optimistic of the BBC to say that it knows about someone else's software and that it can be upgraded easily. The important point is that the regulator seems to have the necessary power. I question whether we should insert in the Bill such an amendment, which seems to go too far.
§ Lord McNally
I do not share the complacency of either the noble Lord, Lord Lipsey, or the noble Viscount, Lord Astor, about the present powers of the regulator and the powers that the Bill gives Ofcom. I see real problems. It is difficult to tell whether the amendment addresses it properly, as we are only at Committee stage. By the time the Bill is enacted, I hope that we have proper powers. In my experience over the years, when great corporations have the choice between trying to score short-term advantages off one another or acting in the public interest, all too often they go for short-term, petty victories. In Tony Ball and Greg Dyke we are not dealing with men who have gone through the Lucie Clayton charm school. I fear that we are in for some macho corporate mud-wrestling between the BBC and Sky. But it will be the consumer who ends up dirty and dishevelled.
Of course we do not know all the technology involved. The Government and Ofcom need to obtain proper advice. As the noble Lord, Lord Gordon, said, I have been heavily lobbied by both Sky and the BBC. I have told both broadcasters that if they keep on playing for a 100 per cent victory they will irritate Parliament and end up with legislation that they do not like at all. They will deserve what they get. The noble Viscount, Lord Astor, says that we should let the broadcasters get on with negotiating, and that we have provision in the Bill. That is a recipe for chaos and 432 dissatisfied consumers five years down the road. We may not have got it perfect this time, but we are only in Committee stage—
§ Viscount Astor
Does the noble Lord agree that the current regulators and Ofcom have the powers to regulate both conditional access and EPG services?
§ Lord McNally
Having looked at the industry over the past few years, one of my concerns is just how long. It is not a question of the broad powers written into the Bill, but how effective the regulation will be. I am attracted by the fact that the amendment deals with a specific problem that needs to be addressed. I do not want it to be caught up with some general powers that the lawyers will take away year after year. When it is claimed that that cannot happen, I say that they have already done it. Part of my concern is that previous practice in this area involving disputes has involved long "lawyerfests" rather than quick resolution in favour of the consumer; and that is what we should be trying to achieve in this Bill.
§ Lord Lipsey
The noble Lord says with great wisdom that we should not go 100 per cent BBC or 100 per cent Sky. Why, then, is he putting his weight behind an amendment that is, in drafting and content, 100 per cent BBC? Why does he not suggest an amendment that balances the two?
§ Lord McNally
I did not say whether I would go 100 per cent BBC. I have not come to a decision yet. What I am saying and what I have made clear to Sky is that, because of a chapter of historical accidents, it has ended up with a monopoly. That does not mean that Sky should be on the gravy train, able to milk public broadcasters for whatever it can get for as long as it can. If it tries to do that, Parliament will intervene. That is the friendly warning that I gave Sky and to Sky friends such as the noble Lord, Lord Lipsey. I see that the noble Lord is unprovokable—
§ Lord Lipsey
The noble Lord knows me better than that. I am neither on Sky's side nor the BBC's side. I said earlier that I supported some of the later BBC amendments, as does the noble Viscount, Lord Astor. It is the noble Lord, Lord McNally, who is on one side. This is the BBC's amendment and gives the BBC 100 per cent of what it wants, which is why it would be so unwise to accept it.
§ Lord McNally
I shall finish by reminding the noble Lord, Lord Lipsey, of some advice I received from Ian Mikardo MP many years ago. He said, "Tom, if you stand in the middle of the road, you get hit by the traffic going both ways".
§ Baroness O'Cathain
I intervene briefly in the debate, although I have a terrible sense of déjà-vu, having been knocked about on the issue in debates on the 1996 Broadcasting Bill.
In all our discussions about the BBC and Sky and how the two are locking horns, we should not forget about the customer or consumer. I support the 433 amendment because I want to make sure that viewers have easy access to public service channels. We should not forget that we are talking about public service broadcasting, and consumers should have easy access to it. I am sure that we will have a long debate on this again on Report.
§ Baroness Buscombe
It would be remiss of me not to say something on behalf on Her Majesty's Loyal Opposition on such an emotive subject.
Noble Lords in all parts of the Committee have made clear how tough the situation is. We have all been strenuously lobbied by both sides. Some of us were fortunate enough to attend a debate on these matters chaired by the noble Baroness, Lady Howe of Idlicote. As a result of that debate, having heard all sides of the arguments made by the BBC, Sky and others from the platform, I became convinced that the issue should not be subject to primary legislation.
That said, I agree with Carolyn Fairbairn of the BBC that, if we continue to believe in the value of public service broadcasting, we must ensure that public service broadcasting channels can be easily found. That is not the subject of the amendment; it is a subject for a later debate. The pricing and technological issues are difficult, and most of us would agree that we do not necessarily understand them entirely, having been given different stories by the BBC and Sky. Surely, however, the reason why the Bill is before us is to set up the regulator, Ofcom, and to give it powers to deal with such issues. Those issues will arise, and they are important, but we should not try to confront them in primary legislation.
I must defend the noble Lord, Lord Lipsey, and my noble friend Lord Astor. Their contributions did not show complacency about what the Bill can provide for or the powers that will be given to Ofcom to deal with such issues. We are all waiting to hear the Government's response on the issue.
§ Baroness Blackstone
I begin by saying that I am not taking sides on this issue. I think that both Mr Greg Dyke and Mr Tony Ball are utterly charming. It may not be the Lucie Clayton school of charm but, in my view, they are both delightful gentlemen to spend time with.
§ Baroness Blackstone
No thanks! I strongly identify with what the noble Baroness, Lady Buscombe, has just said. This is a BBC-inspired amendment. It concerns a particular dispute which is taking place and I am not sure that we should be amending primary legislation to deal with a dispute of this type in this way. I agree with quite a lot of what my noble friend Lord Lipsey said and, indeed, what the noble Viscount, Lord Astor, said. There are already provisions which allow the regulator and the broadcaster the platform to sort out such a dispute.
434 However, my main reasons for rejecting this amendment are technical. Amendment No. 102A seeks to amend Clause 71. As noble Lords will see. it relates directly to the new subsection (2A)(a )(ii) that Amendment No. 250A would introduce to Clause 304. This provision would have the effect of giving viewers the ability to manipulate their EPGs and, where the implementation of this necessitated the provision of a particular facility or piece of software, Amendment No. 102A would allow Ofcom to set conditions on EPG providers to ensure that they supplied the facility or software concerned within a reasonable period of time and at no more than a modest profit.
More fundamentally, I must underline the fact that Clause 71(2) has been drafted specifically to implement Article 5(1)(b) of the access directive. The precise reference—which I am sure that the noble Lord, Lord Avebury, will ask for if I do not give it —is Directive 2002/19/EC dated 7th March on access to, and interconnection of, electronic communications networks and associated facilities. It is related solely to the access-related conditions that national regulatory bodies may impose and provides that Ofcom is able to impose obligations on operators to provide access to EPGs and application programme interfaces on fair, reasonable and non-discriminatory terms.
Clause 71(2) already transposes article 5(1)(b) in full and to alter it in the way suggested would take it beyond the bounds of what is permitted by that provision. We are therefore debarred from doing what has been proposed. For technical reasons we have to reject this amendment, but I think the other reasons for rejecting this amendment were well expressed by the noble Baroness, Lady Buscombe.
§ Lord Avebury
I always think that governments must have very weak cases if they have to fall back on technical arguments for rejecting an amendment. It was a pity that the noble Baroness did not address the real problem. We are coming to the end of May, when the BBC is going free-to-air and when the question of how viewers will access programmes is of crucial importance. I think that there has been a certain amount of complacency in certain quarters—though not all—and I am grateful to those noble Lords and Baronesses who have supported the amendment, particularly the noble Baroness, Lady Howe, whose comments I greatly welcomed.
I do not think that the Government are sufficiently seized of the urgency of this problem. Whatever the noble Lord, Lord Gordon of Strathblane, may say, it is the intention of the BBC to go free-to-air at the end of this month. The question of what happens to the EPG and how consumers are to obtain the BBC1 and BBC2 of their choice is urgent. It is no good saying that somewhere—
§ Viscount Astor
Is the noble Lord aware that the only reason that the issue arises is not because the BBC wishes to broadcast "in the clear" but it wishes to have regional services available? If it puts off the introduction of the access to regional services. the main BBC programmes can be seen broadcast "in 435 the clear" without any problem after the end of May and for as long as anyone wants. Adding the regional element is the only difference.
§ 7.15 p.m.
§ Lord Avebury
Being able to access the BBC1 and BBC2 of your choice is of critical importance. As the noble Baroness, Lady O'Cathain, said, you are asking for consumers to be able to look at the programmes of their choice. Everyone agrees that that is a most important element of the new system being developed by the BBC, which is costing £40 million—or half of the savings it is making by not having to go through the encryption services of BSkyB.
§ Lord Gordon of Strathblane
What do we mean when we refer to the "main BBC service"? The one out of London? That is actually a regional service for London. Given the devolved situation that we have in Scotland, if you broadcast something that does not cover Scottish affairs, you are positively misleading the population. You could refer to a Minister for Education, a Minister for Housing and a Minister for Health who have no authority in Scotland.
Not only that, contempt of court regulations are different. To my certain knowledge, when my successor was at Radio 4 he was fined £10,000 because his radio station broadcast a Scotland Yard press release which was okay south of the Border but not okay in Scotland. There is no such thing as a mainstream BBC service. The service is regionalised throughout the country, much to its credit.
§ Lord Avebury
I am not quite sure what the noble Lord, Lord Gordon of Strathblane, is trying to say. I think he, as a Scot in London, was underlining the importance of being able to see the Scottish service. Equally, if an Englishman in Edinburgh wants to see a regional English service, he should be able to do so.
436 If we do not tackle the problem now, after 30th May we will have a situation where all the money being spent by the BBC—the £40 million—will be wasted from the consumer's point of view because he or she will not get the benefit of the regional services on offer.
The software referred to by the noble Lord, Lord Lipsey, and the noble Viscount, Lord Astor—who do not believe the BBC's contention that this a fairly modest alteration in the programme—does not matter. We are not putting a price on it. We are saying that the BBC should have to pay whatever the software alteration costs may be, plus a suitable profit margin. Whether that is £100,000 or £1 million is neither here nor there if we do not give Ofcom the powers contained in the amendment.
There is no alternative. The Minister did not refer to another solution. She merely said that we would not do well to pass primary legislation to deal with a dispute between two major corporations; that we should allow the regulators to sort it out. If she is of that opinion, she is condemning the industry to months, or perhaps even longer, of uncertainty. She is saying that consumers will not be able to access the important new services that would be available to them if the dispute was sorted out.
We shall not solve the issue on the Floor of the House today. I shall return to it at a later stage in the Bill. In the mean time, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 71 agreed to.
§ Clauses 72 to 75 agreed to.
§ Clause 76 [Market power determinations]:
§ [Amendments Nos. 103 and 104 not moved.]
§ Clause 76 agreed to.
§ Clauses 77 to 90 agreed to.
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.
§ House adjourned at twenty minutes past seven o'clock.