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Lord Thomson of Monifieth: My Lords, I speak without the expertise of either of the noble Lords, Lord Aberdare and Lord Prys-Davies. However, speaking from the Front Bench of the Liberal Democrats I wish to make it clear that we strongly support the case that has been made so persuasively and so thoroughly by both the noble Lords who have spoken. I speak, of course, on behalf of my noble friend Lord Geraint.

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I have said on earlier occasions that the Welsh fourth channel, S4C, is a remarkable achievement in public broadcasting. It is perhaps even more remarkable in its way than the fourth channel itself, which we shall discuss in a moment or two, because apart from being a great broadcasting achievement S4C was also a great political achievement. It ought to be properly cherished because of the special role of the Welsh language within the Welsh nation. In those circumstances it is rather worrying that the new formula, as proposed, appears to provide a disadvantageous base line for the funding of S4C compared with its previous position. It would result in S4C being less well off--as I understand it--than under the original estimates of the Department of National Heritage.

Given what we know about the broadcasting advertising market, I am not quite sure why the Government felt it would be an advantage to S4C to move from an advertising-based formula to an RPI-based formula. All the experience of commercial broadcasting over recent years--indeed of broadcasting generally--has shown that the RPI of broadcasting tends to be significantly higher than the general RPI for the nation as a whole. S4C is right to be concerned about that aspect of the matter. We await with interest the Minister's remarks on the case that has been put so strongly by both noble Lords who have spoken on this matter.

As regards the other amendments which relate to the future digital provision, here again it is fair to say that Wales is a special case in that there is a political dimension to these issues--over and above the purely broadcasting dimension--which needs to be taken into account by the Government in seeking to ensure that the scattered Welsh-speaking population in the remoter areas of Wales will be able to enjoy the benefits of the diversity of digital broadcasting when that is provided. S4C had political origins rather than broadcasting origins. The Government would be wise to take careful note of those anxieties.

4.45 p.m.

Lord Inglewood: My Lords, the noble Lord, Lord Prys-Davies, and my noble friend Lord Aberdare have most clearly and helpfully set out the rationale for these amendments. I have explained to your Lordships' House on previous occasions the case for moving to an RPI-based formula. I am glad that this approach is implicitly accepted in the noble Lord's remarks in proposing the amendment. The issue which the amendment specifically addresses concerns the precise base figure to be used and the amounts of money involved.

We believe that in changing from one formula to another the fairest approach is that the base figure on which the Bill's provision is indexed is the last payment under the 1990 Act formula. Therefore Clause 67 of the Bill provides that in the amended Sections 61(2) and (3) what is defined as the "prescribed amount"--that is, the base figure for the new formula--should be the amount paid by the Secretary of State to the Welsh Authority for the year 1997 under the 1990 Act.

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We do not believe that S4C's predictions for total national advertising revenues for 1996--we are only some two months into the year--should lead the department now to commit itself to paying the maximum provision we have taken to meet our current statutory obligations. This provision may, of course, be an overestimate--it would be wrong to budget on any other than a prudent basis--and does not necessarily represent the actual amount of meeting the current statutory obligation which must be the proper basis for any future arrangement. Of course I fully recognise S4C's desire to have a firmer basis on which to plan future funding and to achieve as much money as it can. However, the Government do not accept the case for the amendments which have been tabled.

The noble Lord, Lord Prys-Davies, has explained that Amendment No. 156A is intended to retain the current system whereby S4C receives its statutory funding in a single lump sum every January. It will probably not surprise the noble Lord that we are not keen to continue a system which arose from what was, candidly, an error in the 1990 Act. S4C is almost unique in government in receiving Exchequer payments at the beginning of the year rather than being drawn down on the basis of need throughout the year. We therefore intend to restore S4C's funding to the system that was originally envisaged, and that is consistent with prudent financial management of public spending.

Amendment No. 160 would allow the public funding provided for S4C to be increased in respect of expenditure necessary to promote and encourage the acquisition of digital receivers by viewers in Wales. As your Lordships know, multiplex licences will be awarded to applicants whose proposals for investment in the transmission infrastructure and for encouraging the take-up of receivers at least meet the minimum requirements established by the ITC. In this respect, assuming that S4C were to accept the guaranteed place being offered to it on the multiplex carrying Channels 3 and 4, S4C would need to contribute to the costs of meeting each of those requirements.

The funding arrangements in the Bill already allow for some extra provision with regard to the first part--that is, transmission costs. This is in line with the position in the 1990 Act. S4C will also, of course, be able to use its public funding to meet the costs of broadcasting S4C Digital, including measures to promote receiver take-up which will be taken forward in partnership with the other broadcasters on the multiplex. But I cannot see why S4C should be given any extra funding to meet these other costs which other broadcasters, including the BBC, will need to meet from their existing sources of revenue. It seems to me that there is a line to be drawn with regard to what might legitimately be seen as an extra call on taxpayers' money. It is a line which is sensibly drawn with transmission on one side and all the costs of mounting a digital service on the other.

I wish to emphasise that we have had a useful and constructive debate with S4C. I appreciate that the remarks that I have just made may be disappointing

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to S4C. However, I hope that what may be perceived as a disappointing reply will not in any way get in the way of continuing the debate that we have had hitherto.

Lord Prys-Davies: My Lords, I am disappointed with the Minister's reply. Clearly it was a considered reply. His words will be studied carefully by the officials of S4C and their advisers. However, I believe the Minister left the door open to the possibility of S4C having further discussions with the department to see whether it can meet some of the Minister's anxieties. With those few words, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 157 had been withdrawn from the Marshalled List.]

[Amendments Nos. 158 to 161 not moved.]

Clause 69 [Application of excess revenues of Channel Four Television Corporation]:

Lord Thomson of Monifieth moved Amendment No. 162:

Page 60, line 17, at end insert--
("( ) After subsection (3) there is inserted--
"( ) The percentage stated in subsections (1)(a) and (3)(a) of this section shall be zero for the years 1998, 1999, 2000, 2001 and 2002.".").

The noble Lord said: My Lords, I apologise for rising time after time. The Minister kindly indicated to me that once I had moved this amendment there might be something he would like to say to your Lordships before the rest of the debate takes place. We live in hope and look forward to that. I hope it will meet the convenience of other Members of your Lordships' House that that should take place.

In that spirit I wanted to say before I move this amendment how grateful we are for the decision of the Government, announced at the Committee stage at col. 622 of Hansard, to cap at an appropriate level the statutory reserve fund of Channel 4. This should have the welcome effect of releasing significantly more funds to Channel 4 to spend on programmes. Whatever arguments we have in a moment about other timetables for dealing with Channel 4, I hope the Minister might be able to confirm that this welcome capping and the release of these funds could take place once this Bill has become an Act of Parliament and need not await the end of 1997.

The amendment seeks to take account of the various views that were expressed in the debate at Committee stage. It seeks to offer what I hope will be regarded as a constructive and conciliatory compromise between those of us who felt that the right course was to abolish the existing funding formula for Channel 4 after the end of 1997 and let it stand on its own feet as it wishes to do. The view of the Government and, I am bound to say, of the ITC is that the special remit of Channel 4 in a much more competitive world may still require a statutory safety net.

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This amendment seeks to end the subsidy from Channel 4 to the Channel 3 companies, the ITV companies, from the beginning of 1998, the date which is already in the 1990 Act when a change can be made. It also seeks to maintain the position in which neither Channel 4 will subsidise the ITV companies, nor, indeed, will Channel 3 subsidise Channel 4 in any way if circumstances change during these years until the end of the current ITV franchise period in the year 2002. By that time the future of digital television will be at least a little clearer than it is at present. It is always dangerous to forecast the future, but there may very well be proof one way or the other of how robust the rather special Channel 4 remit, with its audience limitations, is in attracting revenue in a multi-channel, multi-competitive broadcasting age.

I recognise that the Government's present Clause 69, and indeed the position of the ITC, would allow the formula I have in my amendment to be implemented by the Government from 1998 onwards, if that was the Government's will. But I think there are great advantages in seeking now to put this formula for the funding on the face of the Bill. It will provide certainty for both Channel 4 and the ITV companies from the moment the amendment is passed and prevent the continuing bad blood that there has been between them over this issue becoming a running sore within the independent television system for the years that lie ahead. That is the main thrust of the arguments behind the amendment that I have moved.

Without going over the ground that we covered in the Committee stage, perhaps I may make one or two additional comments about the background. It is wholly understandable that recipients of subsidy resist giving up that subsidy. That is, of course, the position of the ITV companies. They resist giving up the subsidy as stubbornly as the Treasury has been resisting giving up any possible loss of revenue from a sensible reform of the broadcasting system. However, the figures show conclusively that by the end of 1997 the ITV companies will have received in the first five years of their franchise more than they ever estimated in their bids they would have received over a period of 10 years. If at the end of 1997 the grotesqueries of the bidding system leave any individual company short of its 10-year forecast, then, as those of your Lordships who followed the Committee stage of the Bill know, Channel 4 has undertaken to reimburse them.

I do not think that it can seriously be argued in any sort of equity that an enterprising company like Carlton Television, for example, with profits of £122 million should go on receiving a £22 million subsidy from a minority channel. The concern about these matters, as so often, has been particularly concentrated by the big TV companies on what they profess to believe to be the interests of the smaller regional TV companies. It is, of course, familiar to all in your Lordships' House that hard cases make the best persuasive arguments. It is a pretty fallacious argument.

We have been arguing the interests of the smaller regional companies very vigorously this afternoon and the Government have recognised that in Clause 66. The smaller regional companies for the most part, although

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there may be an occasional exception, receive a comparatively small amount of Channel 4 advertising revenue, and fortunately in the present circumstances most of them are pretty profitable these days.

That quite apart, some of the larger ITV companies have been using the argument to their weaker brethren, and using it to those of us who may be more gullible in your Lordships' House, that if the ITV companies are to be left without this ongoing subsidy from Channel 4, then this will put the present charging in the network system at risk and may prevent the regional companies from having the resources to fulfil their regional obligations. It has been put forward by Granada Television--that well-known hotel company that now has a television company as well--that its regional programming might be somewhat cut back if there had to be all these changes. It is a totally bogus and slightly disreputable argument, because both the network discount arrangements and even more positively the regional programming arrangements are written into the licences of the larger television companies. Neither the network discount nor the regional programming arrangements can be damaged or reduced except with the consent of the ITC. For my part, I am ready to recognise that the ITC is a totally adequate watchdog in these matters provided it gets the reinforcement of a decent Broadcasting Bill.

It is for all these reasons that I put before your Lordships' House this compromise amendment on the future of the financial arrangements between Channel 4 and the ITV companies. I beg to move.

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