§ 11.14 a.m.
§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey) rose to move, That the draft order laid before the House on 10 June be approved [22nd Report from the Joint Committee].
The noble Lord said
My Lords, one of the many responsibilities of the new regulator, Ofcom, is to oversee standards in broadcast advertising. The Communications Act 2003 gives Ofcom the general duty to regulate the content of broadcasting services, including all advertisements.
Furthermore, both the Control of Misleading Advertisements Regulations 1988 and the Medicines (Monitoring of Advertising) Regulations 1994 make specific provision for complaints about broadcast advertising arising under those regulations to be referred to Ofcom. The Communications Act also makes specific provision to allow any of Ofcom's functions to be contracted out using the powers in the Deregulation and Contracting Out Act 1994. 1509 This is the first order to be laid before Parliament in connection with the contracting out of Ofcom's functions. It will permit Ofcom to contract out functions relating to the regulation of broadcast advertising. In developing these proposals, Ofcom undertook a consultation, which ran between October 2003 and February 2004.
The draft order is intended to be supplemented by an authorisation and memorandum of understanding between Ofcom and the newly established co-regulatory body. Taken together, those two documents will establish the detailed arrangements for day-to-day operations. Copies of both an indicative draft of the authorisation and the memorandum of understanding have already been placed in the Libraries of both Houses with the intention of assisting consideration of the draft order. I understand that they are available in the Printed Paper Office.
The arrangements for the new co-regulatory bodies will parallel those of the well established Advertising Standards Authority, but they will operate separately. The ASA is an effective self-regulatory body whose arrangements enjoy national and international respect. That was remarked upon during the passage of the Communications Act. Ofcom's responsibility for considering and responding to complaints about broadcast advertising will be considered by a new body—ASA (Broadcast)—paralleling the ASA arrangements and sitting under a joint chair.
Similarly, Ofcom's functions in respect of the setting, reviewing and revising of advertising standards codes will be undertaken by a Broadcasting Committee of Advertising Practice, which I guess will be known as BCAP.
The new co-regulatory system will provide the public with a "one-stop shop" for complaints about advertising content under the ASA umbrella. That will make it simpler and easier for the public to complain. Formally, the ASA and ASA(B) will be two distinct bodies, with the ASA(B) assuming sole responsibility for all complaints relating to broadcast advertising.
The system will be funded by a voluntary levy on the advertising industry administered by another new body, the Broadcast Advertising Standards Board of Finance Ltd (BASBOF), thus preserving the independence of the new co-regulatory bodies. There is also provision for an independent advisory panel to support development of the advertising code and an independent adjudicator to consider appeals from industry and the public. Arrangements for regular monitoring by, and reporting to, Ofcom will be established.
The ASA(B) will be able to require changes, restrictions or removal of advertisements. These are the day-to-day tools of broadcast advertising regulation. But it is not to be given wider enforcement powers beyond the regulation of advertising. If a code breach appears serious enough to merit further enforcement action, such as the imposition of a fine on the broadcaster concerned, that will revert to Ofcom. Broadcasters would still remain responsible to Ofcom for all broadcast content 1510 through their Ofcom licence conditions. Ofcom is proposing to make the contracting-out exercise subject to the condition that it would approve the standards code drawn up by the new body.
The new co-regulatory system will provide a number of benefits, including clearer arrangements for the public to make complaints about advertising. Many broadcasting complaints are submitted to the ASA in error. In the first half of 2004 alone, the ASA has had to refer to Ofcom 3,278 complaints about TV and radio advertisements. That is 64 per cent up on the same period last year.
Under the new system the public will now be able to submit a complaint about an advertisement to a single point. In addition, advertisers will be able to take advantage of greater consistency of regulation across all media. Advertisers have recognised the benefits that this new system will bring and are therefore committing to a voluntary levy on broadcast advertising to fund the new functions.
The Government have given careful consideration to the functions which Ofcom should be permitted to contract out through this order. There are some notable exceptions to the new co-regulatory body's responsibilities, especially where the current rules extend beyond the basic consideration of broadcast advertising content; for example, where there are strong links between editorial content and advertising, such as with the sponsorship of programmes; similarly, with the requirement under the Communications Act for Ofcom to ensure that the prohibition on political advertising is enforced-that involves particularly sensitive judgment and is best reserved to Ofcom because of the potential impact on our electoral and democratic system—or where rules are not about the content of advertisements, such as rules on the amount and scheduling of advertising, which derive largely from the Television Without Frontiers Directive.
In such cases it makes sense for Ofcom to retain responsibility for regulating these areas and the order therefore specifically identifies them as reserved to Ofcom. Of course, Ofcom does not have to contract out every function identified by this order. It simply gives it the option to do so.
Concerns were raised in another place about what can be done to ensure adequate controls in the code in relation to public policy concerns, such as the advertising of food to children and alcohol advertising. I should emphasise, first, that the ASA itself has rules regulating the advertising of these matters and we would expect both the ASA and the proposed ASA(B) to review their rules periodically in the light of public concern. But if that expectation were disappointed, action could still be taken. Under the terms of the Deregulation and Contracting Out Act, Ofcom can continue to exercise any function of theirs regardless of whether it has been contracted out. If necessary, therefore, they could ultimately make code changes themselves if they had to.
In addition, the Secretary of State will of course keep her existing power under the Communications Act to issue directions in relation to prohibited 1511 categories of advertising. However, in practice, she would do so only exceptionally and following consultation with Ofcom.
We believe that this new framework will prove highly successful but, if weaknesses emerge, Ofcom could ultimately take back direct control of this area of regulation if necessary. There are three other matters which I should place on the record.
In addition to its main purpose, the order also corrects a minor omission in the Communications Act by adding the functions under the Medicines (Monitoring of Advertising) Regulations 1994 to the range of "relevant functions" pursuant to which the disclosure of information may be permitted under Section 393 of the Communications Act 2003.
The overall effect of Section 393 of the Act is to place restrictions on Ofcom's disclosure of information to protect businesses with which it deals. But the Act also recognises that there are circumstances where limited disclosure might nevertheless be necessary for the proper discharge of Ofcom's functions or the functions of certain other persons who are carrying out "relevant functions". Advertising regulation is intended to be one such "relevant function", so we are taking this opportunity to correct the omission of the 1994 regulations from Section 393 of the Act.
Secondly, for the record, this order is made under the powers in Sections 69 and 77(1) of the Deregulation and Contracting Out Act 1994 (read with Section 1(7) of the Communications Act 2003) in relation to the new contracting out arrangements; and under Section 393(4) of the Communications Act 2003 in relation to the further provision for the disclosure of information. The order has been laid before Parliament for approval in accordance with Section 77(2) of the Deregulation and Contracting Out Act 1994 and Section 393(11) of the Communications Act 2003. Thirdly and finally, I am satisfied that this draft order before the House is compatible with the European Convention on Human Rights. I beg to move.
Moved, That the draft order laid before the House on 10 June be approved [22nd Report from the Joint Committee].—(Lord McIntosh of Haringey.)
§ Baroness Buscombe
My Lords, I begin by thanking the Minister for his inclusive and coherent explanation of the provisions of this draft order. This order relates to the functions conferred on Ofcom by the Communications Act concerning the regulation of broadcast advertising. The Act permits Ofcom to contract out these functions as exercised for the purpose of, or in connection with, regulating standards and practice in advertising as included in television and radio services.
Put simply, this instrument permits Ofcom to transfer the day-to-day responsibility for the regulation of broadcast advertising to a new, independent, self-regulatory regime under the umbrella of the Advertising Standards Authority. However, Ofcom will retain certain backstop powers relating to the broadcast advertising regulation, such as rules pertaining to political advertising, to which the Minister referred, television quota and sponsorship regulation. Therefore, 1512 this co-regulatory system will differ slightly from that of the current ASA structure as Ofcom will ultimately retain statutory responsibility for compliance with broadcasting standards as required by the Communications Act.
The Advertising Standards Authority, a self-regulatory body funded by the advertising industry, was established more than 40 years ago and retains responsibility for non-broadcast advertisements from newspapers, magazines and cinemas to new media including advertisements on the Internet. As the Minister explained, the new structure for broadcast advertising will comprise three main bodies: the Advertising Standards Authority (Broadcast), the complaints adjudication body; the Broadcast Committee of Advertising Practice, the code-making body and the Broadcast Advertising Standards Board of Finance, the funding body. Funding will be provided through the imposition of a voluntary levy on the advertising industry and administered by the ASBF to ensure independence and transparency.
The new system will be subject to a two-year probationary period following commencement on 1 November 2004. If the system is found to function effectively, this new regime will continue for a further eight years, then becoming subject to renewal by Ofcom on expiry of the 10-year period. Initially, Ofcom's current codes will remain operative. However, the BCAP may amend the codes, if appropriate, following formal public consultation.
We welcome Ofcom's move in relation to the public consultation on the future of broadcast advertising to establish an advertising advisory committee. This committee will provide lay and expert advice to the code -making body where necessary. Can the Minister confirm how this committee will be comprised in terms of lay and expert membership?
The Communications Act confers a duty on Ofcom to promote self-regulation where possible. Indeed, we on these Benches have repeatedly expressed our support for self-regulation. Throughout the passage of the Communications Act, we encouraged the Government to adopt a less fragmented regulatory model for the regulation of broadcast advertising for many reasons. First and foremost is uniformity. In this age of media convergence, it is simply not appropriate to have numerous bodies with parallel responsibilities. Indeed, I spent part of my career in the industry working for the trade body representing the advertising agencies, the IPA. I therefore know first hand that increasingly, the industry needs a joined-up approach to regulation and that the old approach of different regulators for different media will start to crack under the strain of technological change.
My time at the IPA also convinced me of the deep-seated belief within the advertising industry in the need for robust and effective self-regulation. The industry has funded the ASA via a levy on advertising space since its inception 40 years ago and yet it certainly does not demand that the ASA sings to the industry's tune; far from it. So, the ASA model, now being extended to 1513 broadcast advertising, has built-in safeguards to ensure a proper level of independence and effective funding.
In short, redress where appropriate, therefore, should be transparent, fast and effective and a convergent body, albeit with an alternative accountability structure, will ensure that complaints are dealt with consistently and fairly. Additionally, this new regime has the benefit of familiarity. It is important to stress the point that technological change means that it will become increasingly difficult to distinguish whether an advertisement is a broadcast advertisement falling within Ofcom's remit or a non-broadcast advertisement falling within the ASA's remit. Advertising campaigns are usually spread across different media and, therefore, a number of different regulators can be involved. Indeed, on some occasions, this has led to different decisions by different regulators about the same campaign. That of course is not helpful to either the industry or the consumer. So we welcome this instrument.
Research illustrates that many public complaints have been redirected from the ASA to Ofcom. The public know and trust the existing system. This transfer of responsibility can only help to reinforce the consumer's understanding of advertising regulations.
I recognise the concerns raised by the Consumers' Association regarding industry ownership of the advertising codes. However, I believe that the backstop powers retained by Ofcom and the creation of the advertising advisory committee, together with the experience to which I referred, should help to alleviate those fears. I think that the record of the advertising industry speaks for itself—a view that we stressed during the passage of the Communications Act. Indeed, under the chairmanship of the noble Lord, Lord Borrie, who I am pleased to see in his place, the Advertising Standards Authority should be commended on its commitment to ensuring that this policy has been thoroughly and expediently implemented.
§ 11.30 p.m.
§ Lord Thomson of Monifieth
My Lords, I should like to support the statutory instrument and to congratulate the Government, Ofcom and the ASA on putting together this ingenious new method of co-regulating broadcast advertising. It is now more than a year since we dealt with the Communications Bill in this House. During our long debates on that legislation I spoke in support of the duty placed on Ofcom to promote and encourage effective self-regulation and the fact that broadcast advertising could be a prime contender for a greater level of self-regulation.
During one debate on the Bill we were told, if I remember rightly by the noble Lord, Lord Borrie—whom I am glad to see in his place—the present distinguished chairman of the ASA, that an advertising association task force consisting of representatives of the broadcasting and advertising sectors had submitted a proposal to Ofcom that it should contract out advertising to the ASA, thus 1514 enabling a one-stop shop with a single letterbox for complaints to be established for all advertising regulation. I welcomed that at the time, as I do now. As I believe the noble Baroness has just said, this system will be simpler to understand and therefore much more effective.
One consequence of the ASA's record of success in the self-regulation of print advertising is that it has repeatedly received large numbers of complaints regarding broadcast advertising, which it has had simply to pass on elsewhere. Therefore, as I think the noble Baroness said, this will be a useful example of joined-up administration in this important field of regulating the public interest.
I had the privilege of being a chairman of the Advertising Standards Authority a very long time ago when it was a much more controversial organisation than it is today, thanks to the splendid work done by my successor chairmen. I followed that, curiously enough, in my odd public life, by becoming the chairman of the Independent Broadcasting Authority, and therefore the regulator of commercial television and radio broadcasting.
At that time there were deep suspicions-much deeper than exist today about this whole area of looking after the consumer and the public interest. I therefore set up an advertising liaison committee which I chaired myself. It was a sort of summit meeting of all the interested parties in this field, to try to ensure that properly considered and balanced conclusions were reached on the broadcast side of advertising regulation. I therefore note with great interest the proposal in the order for an advertising advisory committee on somewhat comparable lines. Its role will be very important.
A modification of the ASA's self-regulation, into co-regulation, is now proposed for commercial broadcasting. The ASA will be applying its great experience at operational level of self-regulation to commercial broadcasting. However, as the Minister said, Ofcom will still have strong and effective backstop powers. That is very important. It is not possible to have a pure self-regulatory system in the modern world for almost anything. There has to be some kind of mix of self-regulation with an ultimate backup of statutory regulation.
Where appropriate, self-regulation is infinitely to be preferred to statutory regulation as it has the advantages of flexibility and adaptability. However, if self-regulation is to work in the consumer field, it must enjoy several conditions that have been the background to the ASA's success. It is now proposed to replicate those in the structure which the Minister has just described.
First, there must be an adequate and independent source of finance. That is why the proposed levy system—not going round with a begging bowl, but a levy system; independent of the regulatory body called ASBOF which is being replicated for these new arrangements—will be set up. 1515 Secondly, the regulatory body should have effective enforcement sanctions. I think that the ASA system has proved that it has those.
Finally, through the quality of the ASA council, it must command credibility from both the public and the industry. The ASA council has always sought to provide that by ensuring that a majority of the council are independent members. I can only report that when I became ASA chairman—for which I thought my essential qualification was that I knew nothing at all about the advertising industry and was totally independent of it—I was struck by the fact that it was the advertising industry members of the council who—with their expert knowledge of what advertisers could get up to in stretching the code of standards to the limit—were most determined to maintain the industry's standards and reputation. That is why self-regulation, when you can make it work, as the ASA does, is so much better than the bureaucratic alternative.
I therefore very much hope that this new marriage between Ofcom and the ASA will prove a resounding success.
§ Lord Borrie
My Lords, I must first declare an interest as chairman of the Advertising Standards Authority for the past three and a half years and as chairman of Advertising Standards Authority (Broadcast), which it is proposed will handle complaints about television and radio ads under the new arrangements.
As the Minister has explained, a great deal of work and consultation has gone into this proposal before the House today. Contracting out by Ofcom was envisaged by several noble Lords during the debates on the Communications Bill, and emphasis was put on the convenience to consumers if we could create a one-stop shop for all advertising complaints. At present, considerable numbers of people already believe that the ASA handles complaints about radio and television ads. Some 5,000 people complained to us about that in the first half of last year.
The ASA has been handling non-broadcast advertising complaints for over 40 years. My predecessor as chairman, the noble Lord, Lord Rodgers of Quarry Bank, whom I am pleased to see in his place, may well wish to intervene in this debate. But whether or not he does, the many changes in procedure that have taken place under previous chairmen, including the noble Lord, Lord Thomson of Monifieth, have of course improved the system. It is not the same as it was 40 years ago. For example, the council very clearly has a majority of those who are independent of the industry, together with an independent chairman, and the financing of the organisation by a levy ensures adequate resources and of course safeguards the ASA's independence.
I am fairly sure that it was the noble Lord, Lord Rodgers, himself who was responsible for introducing transparent Nolan principles to the recruitment of council members and for introducing an appeal system, which remains. Enforcement of our rulings has been considerably improved. Last year, for example, we secured the withdrawal of more than 1516 1,700 unacceptable advertisements. We sometimes have to require all future ads from a particular advertiser to be pre-vetted before publication—something that, in the non-broadcast field, would be impossible to inaugurate for every possible advertiser.
For broadcast ads, with which the present order deals, the proposal is one of co-regulation between the ASA and the statutory regulator, Ofcom. Day-to-day complaints about individual ads will be a matter primarily for the ASA, but all television and radio broadcasters will have to have a licence from Ofcom and licences will require compliance with the code of practice for advertising. Ofcom's powers over its licensees will be significant. The Minister has already mentioned the power to fine and, ultimately, in the most extreme cases—like the nuclear option, this is a deterrent more than anything else—to withdraw a licence from a broadcaster. That is the big stick in the cupboard to which my noble friend Lord Currie of Marylebone, chairman of Ofcom, likes to refer.
We at the ASA realise that the order will give us a major new responsibility. We are accountable to Ofcom for how we deal with broadcast ads, to perform our task effectively, efficiently and fairly. Those are our fundamental objectives for the future.
§ 11.42 a.m.
§ Lord Rodgers of Quarry Bank
My Lords, 1, too, welcome the draft order and am glad to follow the remarks of my noble friend Lord Thomson of Monifieth and of the noble Lord, Lord Borrie. I was chairman of the ASA for six years but, beyond that, I now have no personal or professional interest in the matter, except in the continuing success of the ASA and the satisfactory outcome of the negotiation.
I was a witness to the origins of the order five or six years ago, but I cannot claim any personal merit. On the contrary, I was partly sceptical and then cautious when Andrew Brown of the Advertising Association, who deserves much credit for the outcome of these matters, began to put proposals together. I was sceptical about whether the government of the day would contract out the existing statutory safeguards. Parliament is always sensitive about the impact of broadcasting, including advertising, on the public.
When the Communications White Paper was published towards the end of 2000 only five short paragraphs out of 300 concerned advertising. Earlier, the advertising industry had been omitted by the DTI and the Department for Culture, Media and Sport from the consultation list when the White Paper was being prepared.
Quite separately, I was cautious about whether the reputation of the ASA would be prejudiced if broadcast advertising was brought within its scope. The White Paper praised the ASA for its strengths and effectiveness, as the noble Lord, Lord McIntosh, said, and is well regarded both at home and abroad. The White Paper said that that gave confidence that "a more co-regulatory approach" to broadcasting advertising would be more effective than the present arrangements. 1517 However, a co-regulatory approach is not the same as self-regulation. I did not want the independence of the ASA to be qualified or diminished. The ASA has been both rigorous in its standards and flexible in its methods. It has learnt from experience and has moved with the times. The role of the chairman and council is crucial in making decisions and it would be a disaster if broadcast advertisers, the Government or Ofcom were to interfere with the existing ASA procedures.
However, I think that my caution can now be set aside. At first sight, co-regulation seems clumsy and bureaucratic. The concordat—the memorandum of agreement—contains 25 detailed pages. However, the existing identity of the ASA is preserved, with ASA(B), as we shall now have to call it, functioning in parallel.
I have just a few questions. When the draft order was debated in the House of Commons last week, the Minister was asked in what way Parliament could have "an input politically" into Ofcom and the ASA. He replied that the Secretary of State might exceptionally issue directions, adding:If there are differences of opinion between the ASAB and Ofcom, Ofcom will have the power to intervene and will be able to direct and, if necessary, amend".—[Official Report, Commons Twelfth Standing Committee on Delegated Legislation, 8/7/04; col. 7.]
I think that I am reassured, but perhaps the Minister would make plain that in practice the ASA(B) will have the same character, integrity and independence as the existing Advertising Standards Authority.
Then there was the role of the advertising advisory committee. I am puzzled by its purpose. Ofcom states that it is to be,an essentially lay and expert bodyboth lay and expert. It is intended to advise,on code and policy issues".
I am not aware of any equivalent in the ASA or CAP. That seems to be over-egging the pudding with yet another body. I would like to hear the justification for that committee. I am tempted to probe a little further about the,full-time Executive whose role will be to oversee and to liaise with the new system",as Ofcom puts it; but instead, if I may, I shall ask one further question.
In paragraph 15 of the concordat there are references to the role of the chairman over the two parallel, half-integrated bodies. It states that the single chairman will be appointed by the two relevant advertising financial bodies, which I think is an excellent proposal. That builds on the existing, satisfactory arrangement of the ASA. I hope that the noble Lord, Lord Borrie, will hold that role in the immediate future. The concordat states:Ofcom will be consulted…but with no right of appointment or veto".
That relates to the appointment of the chairman. I welcome the latter references to no right and no veto, but that could leave room for a positive view of Ofcom's own. 1518 I will not labour the point, but the Department of Trade and Industry-and its predecessor departments—has always had a light touch concerning consultation about the appointment of the chairman. I hope that that spirit will be maintained.
For more than 40 years, particularly in the past half century, the ASA has been a great success. I hope that the new arrangements embodied in the order will give it further fresh life.
§ Lord McIntosh of Haringey
My Lords, I am grateful for the unanimous support expressed for the regulations; it has been so unanimous that I have been called upon to answer few specific questions.
I am grateful to the noble Baroness, Lady Buscombe, for her helpful exposition of some aspects of the order that I did not have time to refer to myself. It is good to have them on the record. I agree with her very strongly about the need for a joined-up approach, transparency and accessibility. I believe that it has been agreed that this approach, which makes a single point of contact for those who want to complain about advertising, whether in the press or the broadcast media, will be successful. I am grateful also for her support of self-regulation as a general principle and for co-regulation as it has been worked out here.
The noble Baroness asked about the composition of the committee and the balance of the role of lay and expert membership. The noble Lord, Lord Rodgers, made a similar point. The Advertising Advisory Committee will be a committee of BCAP and will act as an independent sounding board. All of that is set out in paragraphs 41 to 50 of the memorandum of understanding. It will be funded by BASBOF, the board of finance. As the noble Lord, Lord Rodgers, said, the two boards of finance will have responsibility for the appointment of the chairman of the Advertising Advisory Committee. He is right in saying that Ofcom will have no right of appointment and no veto. I am sure that he is right in thinking that it would be desirable for Ofcom to exercise a light touch in expressing views about the appointment of a chairman. Ofcom, during the six or seven months in which it has been constituted, has consistently declared its intention of exercising a light touch. I am sure that the noble Lord, Lord Rodgers, can be reassured on that point.
The committee will consist of the independent chairman, appointed by the chairman of the ASA with independent panel involvement and in consultation with Ofcom, the chairman of BCAP and four to six independent expert or lay individuals who can represent the interests of citizens and consumers in relation to the requirements of Section 3(1) of the Communications Act 2003. This is where I come back to the question of the noble Baroness, Lady Buscombe. The ordinary members will be appointed by the chairman of the Advertising Advisory Committee together with the chairman of ASA(B), the chairman of BCAP and an independent assessor from Ofcom, which will have observer status. It sounds a bit complicated, but given that the bodies will be in the same building and the chairmen will be the same person, I think that it will work OK. 1519 The noble Lord, Lord Thomson, gave a valuable historical summary of these matters, for which I am grateful. He will know, but perhaps the House needs to be reminded, that regulation of broadcast advertising has an even longer history than that of the Advertising Standards Authority, which was set up only in the 1960s, whereas self-regulation of broadcast advertising was set up when ITV started in 1955.
The noble Lord, Lord Borrie, helpfully drew attention to the fact that the ASA observes the Nolan principles and has the appeals procedure to which I referred in my opening remarks. He reminded the House, which was necessary, that Ofcom's ultimate sanction is ensuring that the obligations are placed on broadcasters in the licences that Ofcom issues.
I hope that I have given enough assurance to the noble Lord, Lord Rodgers, on his concern for the independence of the Advertising Standards Authority. I can certainly assure him that there are no grounds for any interference in the operations of the Advertising Standards Authority as constituted. As I said, Parliament has a form of input into Ofcom and the Advertising Standards Authority, in the sense that the Secretary of State, who is responsible to Parliament, has the power of direction, particularly in a case where Ofcom and the Advertising Standards Authority were to disagree. That is very much a backstop power, and it was agreed by Parliament at the time of the passage of the Communications Act.
I believe that I have responded to the other questions about the appointment of the chairman. Again, I am grateful for the support for the order.
On Question, Motion agreed to.