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Lord Sheldon: My Lords, I speak to Amendments Nos. 104A, 105A and 105B in the names of the noble Lord, Lord Barnett, and myself.

Amendment No. 105A relates to subsection (3), which gives powers to Ofcom to regulate BBC services and impose penalties in respect of contraventions of those regulations. Subsection (5) proposes penalties of 250,000. I find that astonishing. We are threatening to fine the BBC as though it were a bunch of crooks. To my mind, it is the greatest public service that we have seen in the past 100 years. To start dealing with it in this way is an insult.

The purpose of the amendment is to make people realise what the Bill proposes. The governors have to submit to Ofcom's views. As I said in an intervention, would any of us prefer to be on Ofcom rather than a BBC governor? I should not have thought that that was so for the majority of the Members of this House. They would be subordinate to Ofcom's views. These are people of principle and standing; they are people of great merit. I refer to the noble Lord, Lord Hussey, my noble friend Lord Barnett and the noble Baroness, Lady Hogg. In the past, there have been many other great people. It is proposed that Ofcom will decide what they should be doing rather than those who have

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at heart the public interest. We do not know who the members of the Ofcom board will be. But we do know the standing of the governors of the BBC. That is a most important aspect.

The suggested penalties are ludicrous. It is a matter we shall need to deal with. We should be chastising not the BBC, but the way in which some of these matters are dealt with. Ofcom has a very distinguished chairman but I do not think that it will have the same level of distinction among the ordinary members of the board.

Over the past many years, the standards of public service broadcasting have undoubtedly been set by the BBC. It has had an enormous effect on the whole of public service broadcasting. If any of the other channels or stations deviate too strongly, the comparison is made. Others cannot stray too far. That has had an effect on the broadcasting system in this country.

Regulations can provide a number of loopholes. The United States is a good example. In the United States people are exploiting all kinds of loopholes in a way that I hope we shall not see in this country.

Amendment No. 111 deals with the National Audit Office. I am considering its effectiveness. What does the National Audit Office do?

6.15 p.m.

Lord McIntosh of Haringey: My Lords, if my noble friend Lord Sheldon, will forgive me, Amendment No. 111 is not in this group of amendments.

Lord Sheldon: My Lords, I thank my noble friend for pointing that out. I shall speak to those other matters later.

There are those who feel that the principled actions of the BBC and the way in which it operates curtail its opportunities in this area. Of course, the BBC has been the great defender of our standards. It has earned the envy of many countries and many broadcasting systems in the world and the appreciation and gratitude of many others. I look forward to seeing some qualitative contribution from my noble friend who is to respond on such matters and I look forward to a considered reply in answer to my points.

Lord McNally: My Lords, as ever, it is a great pleasure to follow the noble Lord, Lord Sheldon, on these matters. He has a vast experience of public service and public sector management. In an earlier debate I mentioned that this morning I had the great pleasure of listening to Pat Mitchell, the president and chief executive officer of Public Broadcast Service (PBS) in the United States. I came away renewed in my determination that in our deliberations on this Bill we should ensure that the great tradition of public service broadcasting, of which the BBC is the iron pole, should be retained when our deliberations are over.

I cannot support the amendment tabled by the noble Lord, Lord Gordon. I am not as worried as he appears to be about rival regulators. There may have been a

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time when there was genuine concern about piling such a wide range of responsibilities on a single regulator, particularly when the regulator on whom one is to pile the responsibilities is as yet totally untried. As many people say, we have a great national asset, a world asset, in the BBC. It is one of the strongest brand names in the world. It seems to me to be extraordinary that with such an asset we should contemplate moving it lock, stock and barrel to a regulator whose prime responsibility is not the defence of public service broadcasting but regulation of a commercial sector. The main merits of those chosen for Ofcom are their understanding and skills in managing and regulating a private sector.

Lord Gordon of Strathblane: My Lords, I thank the noble Lord for giving way. In the light of that, does he agree that if the BBC is ever to come under Ofcom, it is much better for it to come under Ofcom at the beginning rather than later on?

Lord McNally: My Lords, quite the contrary. I want to see some performance from Ofcom. I shall need much persuading when we come to charter review. I tend to agree with the noble Lord, Lord Sheldon, that from time to time the governors come in for a fair amount of criticism, but for over 80 years the system has not served this country too badly. I have said at various times during the course of the Bill that if hospitals and transport performed half as well as the BBC, the Government would have no problems in defending public services or the public sector.

So I am not persuaded. We must await the charter review. I am worried that even then we will get from the commercial sector a kind of "whine of the week" about the activities of a too-successful BBC. I am worried about placing limits on what the BBC should do. Imagine if this measure had been in place with the BBC and colour television or the BBC and digital. The BBC has been over the years an admirable innovator. As we heard earlier, it has an outstanding record in research, development and training.

I want to see those assets well protected. I want to see a little track record from Ofcom before I even contemplate handing over to an untried regulator a public body that is working extremely efficiently and with considerable public approval. I also think—perhaps we saw it again yesterday in the little spat in the Foreign Affairs Select Committee in another place—that we must be careful to retain what has been one of the pieces of genius in the structure of the BBC: the buffer between the BBC as a public service broadcaster and the politicians of the day in power. We must defend that buffer carefully.

With his usual skill, the noble Lord, Lord Lipsey, has enticed me a little along the way, because I want to see the BBC constrain itself in its commercial operations. There was a tendency for a while in the BBC to be beguiled by the idea of its entrepreneurial zeal and its commercial activities. It is better that it stands its credibility on its public service commitment.

But as I said before, there is a catch-22 for the BBC. Let us not forget that the settlement negotiated with the Government asked the BBC to maximise its

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commercial operations. Therefore it is a little harsh, when the BBC does maximise its commercial operations, to say, "Oh well, now we're going to restrict you because you're doing that too well".

We find the government amendments acceptable, but we have reservations about trying to jump the gun and make decisions too early on matters that are best left to charter review.

Lord Bragg: My Lords, I have a few brief observations. I think that finally, whether it is in three, five or six years, the BBC will be under Ofcom and the people who run Ofcom will be every bit as distinguished as those who run the BBC. I suspect that they will be the same sort of people, from the same sort of background and with the same sort of experience. The logic goes in that direction if Ofcom is to achieve what everyone in the House wants it to.

But not yet, as was said on a more dramatic occasion. The time to do that is at the BBC Charter review, when a great deal of scrutiny should rightly be brought to bear on the BBC, and the idea of it being in Ofcom would be appropriately considered there—I agree with my noble friend Lord Lipsey. I also agree with the noble Lord, Lord McNally, that by that time we will be able to see the colour of Ofcom's coat and how it has matched up, because the BBC governors on the whole have done a very good job and everyone in the House who supports the BBC—as I do—wants to ensure that it is going into good hands.

I agree with my noble friend Lord Lipsey on commercial interest. The noble Lord, Lord McNally, is absolutely right: the BBC was enjoined to carry on more commercial activities. It has done so very well—people think it has done so too well—but it is in areas that overlap with other areas of legitimate commercial activity. There are legitimate complaints of infringement and of the BBC being unduly favoured in market after market. We cannot walk away from that.

Although I am friends with many of the people who run the BBC—Greg Dyke the director general is one of my best friends, I am pleased to say—they cannot walk away from the fact that it is hitting other organisations hard, from publishers to other broadcasters, some of which have just as much public service responsibility. I am sorry to keep hammering the point, but they have just as much public service responsibility and public service grit as the BBC does. Channel 4 and ITV often outmatch the BBC in their public service devotion. We agree that they took their lead from the BBC. But, although the BBC sets, and is, the standard, it is not the only one. The others have continued in many areas when the BBC has stepped out of its public responsibility for a while.

Commercial overspill into other areas, which my noble friend Lord Lipsey discussed, should be examined and Ofcom is the place to do that. I fail to see how the governors can possibly be in a position to regulate it. They will follow what the Government have enjoined them to do—to commercialise their activities as much as possible—and they will let the hounds loose to do so. The BBC has developed some lean whippets over the past few years for that purpose.

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But they must be reined in differently. Things change, and the kaleidoscope comes up with colours that we do not always want. I agree with my noble friend Lord Lipsey on that point.

The governors have done a very fine job. They are principled, intelligent and dedicated. Nevertheless, as my noble friend Lord Gordon of Strathblane said, it is extremely difficult to be responsible for the organisation as overseer and executive. Without casting any blame—it is a matter of human conduct and not blame—the governors get on very well with the executives and back them to the hilt time and again. How many times have the BBC governors backed the executive? Five thousand? How many times have they publicly said, "No, the executives were wrong. We object"? Two, three or four? That is how it is bound to be when people work together so closely. In the increasingly expansive, difficult, complicated and internationalising world of television and radio such togetherness—almost collusion—will no be more acceptable—

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