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Lord Lipsey: My Lords, I do not believe that the amendment is well advised, for two reasons. First, we are moving from the old world of broadcasting to a new world of broadcasting. Some of us like that more than others, but that is what is happening. In the days when ITV had guaranteed revenues and spectrum shortage and did not have to pay for its licences, we did not have to worry much about economic conditions getting in the way of its public service obligations. I hope that we will never have to do so in future, but we are in the world of greater competition, so it is sensible to have some sort of safety valve built into the Bill. The clause is a safety valve.

It worries me that, at every stage, this House has displayed a lack of confidence in Ofcom. The noble Lord, Lord Phillips of Sudbury, was as coherent as ever in inventing a transparent device that a company might adopt to get round the provisions and saying that Ofcom would not be able to do anything about it. The clause is quite clear that such a matter is left to the opinion of Ofcom; it would see through such a device like a shot. The provision is wise and I hope that the Minister will not accept the amendment.

Lord Crickhowell: My Lords, the noble Lord, Lord Phillips, will know that no one has been a stronger advocate of public service remits and the need to protect and strengthen them than me, and I have supported other amendments that he has tabled. He will also know that I have not always agreed with the noble Lord, Lord Lipsey. However, I have a certain sympathy with the view that he has just expressed.

I could not quite understand the argument of the noble Lord, Lord Phillips, that we would allow a loophole for financial incompetence. That is certainly not how I read the clause. Having lived through some difficult times in the industry, in the days when I was a director in it, I believe that there should be an escape clause under the discretion of Ofcom for general economic conditions. It will not be in anyone's interest

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if Ofcom is forced into an action that might bring down a perfectly good company or organisation, which is doing its best and would normally, over a period, be able to meet the conditions but is facing a temporary situation in which it cannot. Such situations have arisen, and no doubt will arise again in future, when a company cannot do so for reasons entirely outside its control.

I hope that Ofcom will have a certain amount of discretion. I am not a lawyer, and I do not have the noble Lord's expertise in this matter but, as I read the clause, there is some discretion given. Therefore, I am slightly puzzled by his amendment.

7.30 p.m.

Lord Phillips of Sudbury: My Lords, I am grateful to the noble Lord for giving way. However, the very point to which he refers is in the Bill, and I would leave it in the Bill. Ofcom does have to have regard in particular to the general economic and market conditions. I do not seek to strike that from the Bill. However, as the noble Baroness, Lady Howe, said, this is a second provision which is particular to the particular company. It is that which seems to me to drive a coach and horses through the strength of these enforcement powers.

Lord Crickhowell: My Lords, I have made my point. I do not wish to add anything further.

Lord McIntosh of Haringey: My Lords, Amendment No. 31 relates to the circumstances in which Ofcom may choose not to impose direct regulation on a broadcaster in the case of a serious failure either to fulfil the broadcaster's own public service remit or to make an adequate contribution to the overall public service remit. The Bill provides that Ofcom's enforcement powers can be used only if it considers that the broadcaster's failure is serious and is not excused by economic or market conditions. Enforcement powers include removing the broadcaster's self-regulation—in the third tier of the public service regime—and imposing direct regulation on that broadcaster.

Amendment No. 31 would prevent Ofcom considering whether a broadcaster's failure either to fulfil its individual public service remit or to make an adequate contribution are excused by economic or market conditions. So it would reduce the circumstances in which Ofcom could exempt a broadcaster under Clause 268(2)(a) to those in which the failure was not considered to be serious. Under Clause 268(2)(b) Ofcom also has to determine whether the situation requires the exercise of its enforcement powers. As the noble Baroness, Lady Blackstone, explained, it would not be realistic or reasonable for Ofcom to ignore the impact of economic and market conditions on the ability of licensed broadcasters to fulfil their remits.

All licensed broadcasters operate in a commercial market, as the noble Lord, Lord Crickhowell, said. They are affected by external economic conditions. Concern was expressed both in Committee and on

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Report that the double reference to "economic and market conditions" in Clause 263 might allow economic and market conditions to become Ofcom's overriding consideration when making a judgment about using enforcement powers. I shall set out again why that would not occur.

Under subsection (2)(a), Ofcom will consider whether the failure of the provider is serious and whether or not that failure is excused by economic and market conditions. I should make this clear because the noble Lord, Lord Phillips, made a great point about subsidiaries and the possibility of a broadcaster starving the service of funds. The question is whether the failure is excused by economic conditions specific to the broadcaster. We do not think that Ofcom would conclude that the failure was excused if the failure was caused by the broadcaster's incompetence. We are still looking at economic or market conditions.

Under subsection (2)(b), Ofcom will determine whether the situation requires the exercise of its powers, having regard to a number of matters including the general economic and market conditions affecting broadcasters. "General economic and market conditions" in subsection (3) therefore relates to Ofcom's decision on whether or not to exercise its enforcement powers. The reference removed by this amendment concerns the nature of a provider's failure to fulfil the public service remit.

The combined effect of those two provisions is that Ofcom can consider whether the specific failure of the provider is excused by economic or market conditions and can decide—taking into account a number of factors, one of which is the general economic and market conditions affecting broadcasters across the board—whether to take enforcement action. We do not accept that these provisions give economic and market conditions too great an influence over Ofcom's enforcement powers.

I should make it very clear that the issue of whether or not a failure can be excused by economic or market conditions will be judged by Ofcom, not the broadcaster. The enforcement process must have due regard to the realities of the marketplace in which commercial broadcasters have to operate. However, it is not intended to provide an easy get-out for broadcasters wanting to escape their public service obligations. I am confident that Ofcom will not regard it in that way.

In short, I believe that the Bill as it stands formulates Ofcom's enforcement powers in a sensible way and that it would not be right to remove the existing reference to economic or market conditions.

Lord Phillips of Sudbury: My Lords, before the Minister sits down, I should like to ask a question, an affirmative answer to which would go some way towards reassuring me. Where Ofcom is looking at a broadcaster in order to form an opinion on whether its failure to comply with public service broadcasting standards is excused by economic or market conditions, what will be the position if it turns out to be a subsidiary which has not been incompetent but

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whose parent company—the media group or holding company—has simply not provided sufficient capitalisation for it to undertake programming that meets its public service broadcasting requirements? Would that bring the individual broadcaster within the net? Would that excuse the broadcaster or would it not? I feel sure that the Minister will see my point. I know from my own professional life that a great deal of extreme financial cunning is employed in such groups. What if it were possible to construct financially a set-up whereby the financial problems of the subsidiary could not be taken back to the parent company for the purposes of this clause?

Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Phillips, has repeated at length the argument that he used in his original speech. My answer is "No". The question is whether the failure is excused by economic conditions specific to the broadcaster. It does not matter whether it is a subsidiary or a parent company. Ofcom will not allow someone to get round their obligations by setting up a subsidiary and starving it of funds.

Lord Phillips of Sudbury: My Lords, I take that last reply to mean "Yes" and not "No"—that Ofcom could take account of the parent company's conduct in deciding whether the wholly-owned subsidiary had an excuse. That is of considerable solace. I hope that the Minister is right in that. I suspect that it may be a passage of Hansard that is pored over. As I detect little support from other Benches, with reluctance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.


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