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Finally, I want to point to the strong defence in this Bill of the principle and practice of support for public service content in broadcasting, both nationally and locally. The provision of high quality UK content-and news in particular-is the clear preference of the public. It reflects the fact-not universally acknowledged, I grant you-that a purely free market for media simply will not produce or preserve the plurality, diversity and impartiality of local news content that people demand. Keeping this function of our media strong means recognising that market pressures and structural changes are putting pressure on commercially provided news in the nations, regionally and locally. Some element of public support is needed if this provision is to be preserved.

The Bill sets out a revised remit for Channel 4. This refreshed remit underlines the Government's clear and continuing commitment to Channel 4 and to public service broadcasting more generally. But it also makes clear what the Government expect from public service broadcasters-that they help advance the development of a well informed, well educated and socially cohesive society. As an additional way of doing this, the Bill also creates the power in Ofcom to support independently funded news consortia to provide regional and local news services. The Government have announced their preference to maintain in the next broadcast licence fee settlement the existing top-up element and to use it to fund the new consortia. However, the multi-year funding settlement with the BBC is crucial to the BBC's independence, so we do not intend to make a decision on this until nearer the 2013 rollout date.

There are serious implications in this work for Ofcom. The Bill creates an adapted remit for Ofcom in three important ways. It requires Ofcom to balance its primary focus on consumers and competition with a new additional focus on ensuring investment in the long-term strength of Britain's communication infrastructure. It also requires Ofcom to take a new forward role in ensuring that the British media market produces the right mix of impartial national and local news. This expanded role is critical and must be well defined and defended. It requires Ofcom to take a new role in shaping our response to online copyright infringement.

There are some in the commercial sector who believe that the future of British media would be served by cutting back the role of the media regulator. They take

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this view because they want to commandeer more space and income for themselves and because they want to maintain their iron grip on pay-tv-a market in which many viewers feel they are paying more than they should for their movies and their sport. They also want to erode the commitment to impartiality-in other words, to fill British airwaves with more Fox-style news. They believe that profit alone should drive the gathering and circulation of news rather than allowing a role for what they call "state-sponsored journalism". The Government and this Bill reject this world view, and I hope that the whole House, including the Conservatives, will make it clear today that they think likewise, and that notably they will support Ofcom's efforts to ensure that consumers are getting a fair deal in the pay-tv market.

Ofcom represents an important means of securing media standards, strong public service content and investment in the future infrastructure of the digital economy. In my view, Ofcom should be strengthened, not emasculated as some Conservative spokesmen have suggested.

Although this Bill is broad in the scope of issues on which it touches, every measure has a simple but powerful objective: to equip this country to get the very best out of the digital economy. I look forward to hearing the views of noble Lords today and to engaging with them in Committee. I beg to move.

3.54 pm

Lord Fowler: My Lords, I am responding first from this side but I should perhaps make it clear that the views I set out are mine alone and, probably to its relief-do not bind my party in any way. This is also not a bid to move from here to the Front Bench. I know this will come as an enormous disappointment to your Lordships, but I have already made more political comebacks than the noble Lord, Lord Mandelson.

Lord Mandelson: Impossible!

Lord Fowler: That is about right; on reflection, he has made rather more.

In any event, I was rather put in my place at the State Opening. The cameras roamed over those of us waiting and, I am told, for a moment or two dwelt on me, which noble Lords might think was rather good-and it might have been had the BBC commentator not chosen to add the remark:

"Ah, there's a face from the past".

So my first complaint about the Bill is that it does nothing to curb the excessive salaries paid to BBC commentators.

In introducing the Bill, the Secretary of State wisely left to one side some of the rhetoric he uses outside this House, particularly the charge that this party has entered into some kind of pact with Mr Murdoch and News International. Given that his old boss travelled half way round the world to gain Murdoch's support, that seems a rather fanciful criticism. Yet it is useful to recall this because in the Bill there are a number of

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commercial interests at stake. The House will need to be precise in defining what is the public interest. That is the acid test.

This is a major Bill, dealing with a wide variety of issues from how you strengthen the communications infrastructure, on which the noble Lord dwelt, to digital security and public service broadcasting. In principle, I agree with much of it. However, the Bill is also behind time. In their Creative Britain paper, the Government committed to having legislation in place on illegal file-sharing by April 2009. That was not an aspiration; it was, in their words, a commitment. Self-evidently, the Government have fallen behind on that timetable. An election looms and the position is made no easier by the lack of detail in many of the clauses of the Bill. We should certainly make all speed with it, but not at the price of letting through bad legislation. That would not be carrying out our duty.

I will deal, briefly, with three aspects of this Bill. First, and most contentious, is illegal file-sharing. The United Kingdom has a real interest in seeing the creative industries develop and prosper. Films, music, broadcasting, publishing and video games already make an enormous contribution to the economy. The exact scale of that contribution depends on definition, but the Government estimate that the sector contributes some £60 billion per year to the British economy and that the creative sector has grown at twice the rate of the economy generally. To put it in more manageable terms, the music industry estimates that they account for more than 100,000 jobs. The film industry employs an estimated 35,000 to 40,000. Broadcasting employs another 50,000. Those jobs are not just actors, writers and directors; they are the scene-makers, the plasterers who work at Pinewood, the skilled animators who have produced everything from Wallace and Gromit to Fantastic Mr Fox and the skilled engineers who work in the post-production studios. It is not just artistic talent that is employed in these industries. There is a wide range of technical skills and skills at the highest level. In other words, these are serious industries making a serious contribution to the United Kingdom economy.

These industries also depend on innovation, new ideas and the willingness to back those new ideas with investment and with risk capital. Most films that are made never get shown in the cinema. Many films make a loss for the investors who have backed them. But the incentive always is that those who have created and financed the content should have the opportunity of reward for their initiative. They back their judgment. "Slumdog Millionaire" is a prime example of that. That is why illegal file-sharing piracy is such a threat to the creative industries. It means that legitimate business aims are undermined. If you have invested heavily in a film only to find that this is being distributed free on the internet, clearly your whole business plan is put at risk.

The Select Committee on Communications, which I chair, has been taking evidence from the film industry. One piece of evidence which sticks in my mind was from James Clayton, the chief executive of Ingenious Investments. He said:

"One of the films we co-financed recently was 'Wolverine', a spin-off of the 'X Men' series, released at the start of May. Shortly before release in April, a partially completed version of

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the film found its way onto the web. It was downloaded four million times and Fox, who are our partners on the film, estimate that it probably knocked $20 million to $30 million off the box office".

That is the kind of challenge that such producers face.

The internet has achieved many good things, but it is equally clear that it has made that kind of abuse possible. It is clear that public interest heavily argues for action to be taken to prevent such abuse taking place. I understand that there are other views. We have all been inundated with advice on this matter. If you go to a recent BBC blog, you will see that three pages of what was intended as an objective discussion of the position was followed by 23 pages of comment, mostly from people who were passionately opposed to action being taken. The argument is that the Bill is illiberal, that file-sharers are those who spend most in the legitimate commercial market and that the industries would help themselves by making more material available legally and legitimately, which is an important argument to which I shall come in a moment.

Against that, as far as the music industry is concerned, the British Recorded Music Industry says,

Many of the figures who gave evidence to the Select Committee on Communications also warned very much of the dangers. Tim Bevan, the head of Working Title Films and the chairman of the UK Film Council, made very much the same point. David Kosse, the president of Universal Pictures International, said:

"We would perceive piracy as the number one threat to the industry for everyone-studios, independents, everyone around the world".

It seems to me that that is the case, and that it is not just films. It can be books and video games, and Premier League football, which is free-to-air in China and then transmitted here. Too often, what we are talking about is theft and a kind of theft which can have a devastating effect on industries where Britain is a leader and where the challenge is to develop more. We are also talking about organisations transmitting illegally and getting advertising revenue as their reward. We would be mad not to take some action in this respect.

Obviously, the crucial question is how we do that. I think that the step-by-step approach set out in the Bill is correct. We will have to examine the implications in Committee and seek to obtain more detail at times, as the British Library has argued. My support is also subject to two qualifications. The industries must take action of their own to make their products accessible, legitimately and legally. What the music industry has now done, perhaps belatedly, is encouraging. Today there are now 35 legal music services available in the UK.

My other qualification has to do with camcorder crime. Here, there is no sensible argument of justification. It simply means a small team going to one of the first performances of a film, recording it and then putting it on the net. Specific legislation is enacted in a number of other European countries but here the Government's position is that we must wait to see whether the Fraud Act covers it. A test case is imminent, we are told. We

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will have to see the outcome, but if it is not covered then I think that there will be a very strong case for specific legislation.

The second area, to which I turn briefly, is public service broadcasting. I declare an interest as a lifetime member of the NUJ and a past chairman of two regional newspaper companies. No one should be in any doubt about the crisis we face in regional news. ITV has been quite frank. It cannot afford to produce regional news programmes-in spite of the big audiences it attracts-and it intends to withdraw them. As it stands at the moment, we face the prospect of a return to the 1950s, with the BBC having a monopoly of regional television news. I say return to the 1950s but it is actually worse than that. At that time there was a thriving regional press. There were strong morning regional papers as well as big circulation evening papers. There has been a steady decline since then and the position has markedly worsened. Competition from the internet for advertising, particularly houses and jobs, has hit the regional press, as too has the financial crisis of the past few years. The result is that the whole industry is fighting for its future.

Faced with that position, the Communications Select Committee proposed a reduction in controls on newspapers taking a stake in regional television and also contestable funding in which a news consortium could bid for public funding. Ofcom shared its view. I would not have financed digital switch-over in the way it has been financed. I would have preferred it to be, and I think it would more properly have been, social security spending, but that advice was ignored. Licence fee money has been used. There is an estimated £130 million a year underspend. That is one option for the public funds that would be required without going back to the taxpayer, but it is not the only one. It would be possible, for example, in the longer term to use the money the Government are going to get from the sale of analogue spectrum-there will be very real value to them in that in spite of switch-over.

We will have to look very carefully at this in Committee, but on the principle of public support, there is nothing new. Broadcasters such as ITV have received an implied subsidy from the analogue system from which we are moving. Competition was limited; the financial benefit was undoubted. As for the BBC, which opposed the use of licence fee money in this way, in my view the public interest requires a more generous response from it. I do not want to see a BBC regional monopoly.

My third area is the proposals affecting Channel 4 and ITV. I welcome the abandonment of the Government's plan for putting Channel 4 and BBC Worldwide together in a new company. I never thought that made sense and it was a piece of institutional engineering that was not going to work. I hope that instead there can be a more meaningful partnership between the two companies. I also welcome the fact that Channel 4 has been given an explicit duty concerning film. I welcome the liberalisation of controls on ITV. I make one point about this. The significant feature of the changes proposed for ITV and Channel 4, covering Clauses 21 to 28 of the Bill, is that they have been proposed only a few years after the Communications Act 2003. The Act is being amended to bring it up to date.

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Changes are much more difficult to make with the BBC. The BBC is controlled by royal charter. It sounds very grand, but actually it means that a deal is done between the Government and the chairman of the BBC. There is no vote in Parliament and the charter, as the Minister said, lasts for 10 years. The implication is basically this. Most people now agree that the corporate governance arrangements for the BBC are a mess. There is no chairman and there is a fatally divided structure between the main organisations in the BBC Trust. It is not only I and my committee who have said that; Mr Bradshaw, the Secretary of State, makes entirely the same point. However, because it has a royal charter, we cannot do what we can do with ITV and Channel 4.

Technological change is taking place in a time of severe economic turbulence. Broadcasters are having to adapt rapidly and policy makers are having to be flexible. Against that background, an agreement setting down BBC policy 10 years in advance seems to be wildly out of date.

In general, I welcome the Bill. My criticism is that too much is left to regulation; my concern is that some fundamental issues about the media and communications, especially with regard to the BBC, have not been tackled; and my warning would be that if we want efficient and modern industries in the new digital age, after the election these issues will need to be tackled by the incoming Government with new legislation.

4.10 pm

Lord Razzall: My Lords, in the debate over the past 10 days on the gracious Speech, a number of criticisms were made of the Government's proposals-particularly that they were either blatant electioneering or had no chance of becoming law. However, this Bill is the exception to those criticisms, as from all sides of the House we welcome it and hope that in its appropriately amended form, after it has been subjected to the scrutiny that your Lordships always give, it will get passed through another place and become law before the election. That is the view of my party and, from listening to the remarks of the noble Lord, Lord Fowler, also of the Conservative Opposition.

The Minister was right in using this opportunity to put on record the importance of the creative industries. Statistics are always difficult in this field but, if we take the film industry, radio and television, the music industry, book publishing, computer software and video games, let alone the explosive growth in the mechanisms to deliver the software to people's homes, the creative industry probably represents not far off 10 per cent of British GDP. So when we debate these issues, we are talking not of minority industries but about industries that already represent a significant part of British industry and are likely to be the fastest growing element of British GDP, as public sector expenditure shrinks.

We on these Benches give a gentle welcome to this Bill, which has had a long gestation period. It is very nice to see the noble Lord, Lord Carter of Barnes, in his place for this debate. During his period as-I shall not use the expression of my noble friend Lord

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McNally-a GOAT, we had several debates in your Lordships' House on the paper that has ultimately resulted in the Bill. The noble Lord, Lord Fowler, made a valid point in asking why it has taken so long to get to this position. He had some implicit and explicit criticism of the Government, which I share. We could apply some element of blame to the creative industries themselves. Although they have pressed for a considerable length of time for a lot of these provisions to be enacted, when they could have reached agreement and made it easier for the Government they have taken some time to do so. Even now, we may find it necessary for Ofcom to impose a code on the online infringement of copyright, because the industry will not be able to come up with its own code to be franked by Ofcom as the Bill requires.

It is particularly unfortunate that the code on the online infringement of copyright to which the Minister referred has not appeared in any form in draft that we could consider when looking at the Bill. I know that colleagues on all sides of the House have significant reservations on the human rights issues in relation to potential infringement. It would be easier for those concerns to be dealt with if we had a draft code to deal with the mechanisms under which penalties would be applied to individuals. We are clearly not going to have that code in draft, so we will have to do the best we can as the Bill proceeds.

I shall deal primarily with the second part of the Bill on the online infringement of copyright. Other issues will be taken up by my noble friends Lady Bonham-Carter of Yarnbury and Lord Clement-Jones. However, we will support the first part of the Bill, under which obligations are imposed on Ofcom to promote appropriate levels of investment in electronic communication networks and also to promote appropriate levels of investment in public service media content. We believe it is the right thing to do.

When we get to Committee, however, we would like to revisit the role of the National Audit Office in the scrutiny of public service content providers for the purposes, as the Bill says, of ensuring efficiency. Those of us with long memories will remember that my noble friend Lord Sharman, right at the beginning of the debate on the BBC's corporate governance, raised the involvement of the National Audit Office as an auditor of the BBC. His proposals were resisted. I sometimes wonder whether the resistance in involving the National Audit Office really goes to the desire of the BBC particularly to prevent the public disclosure of the talent salaries, which is a matter of significant public interest, almost on the same level as bankers' salaries, but we shall see. We will return to that when the Bill comes to Committee.

The major issue, and in our view likely to be one of controversy, is the online infringement of copyright. It is clearly a major problem. Many people suggest that they know the answer to the numbers and it is obviously very difficult to say how much online copyright infringement actually goes on in the UK, but the general suggestion is that about 6.5 million people-if you can have "about" 6.5 million people-in the United Kingdom share copyrighted files regularly. That is about 10 per cent of the UK population. It is generally

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thought that 95 per cent of music downloads in the UK are illegal, and it is suggested that up to 25 per cent of the world's online television piracy takes place in the United Kingdom. In 2007, an estimated 78 million illegal downloads and streams of films took place in the UK. We may dispute the statistics, although I understand that Mr Bradshaw does not, and we may all take them with a pinch of salt. Nevertheless, I think there will be common ground that this is a major issue. In the impact assessment on the Bill, it is suggested that if a reduction of 55 per cent in illegal downloading took place as a result of the measures to be introduced, there would be an annual revenue increase to the creative industries of about £200 million per annum, so this would be a very significant step.

Which business sectors are affected by these proposals to ban or restrict illegal file-sharing? First, there are obviously the internet service providers and the mobile network operators. Six of the internet service providers represent over 90 per cent of the market, but the mobile network operators are beginning to become more significant. Secondly, we have the creative content industries where there are rights holders-primarily in films, TV, music, video games and software. Then we have some element of the book publishing industry; the introduction of structures such as Kindle obviously gives the opportunity for more significant illegal downloading.

In broad terms, I share the view of the noble Lord, Lord Fowler, in that we support the provisions of this Bill. As always, however, the devil will lie in the detail and from these Benches we shall be applying three principles in looking at these provisions. First, we accept the point that the noble Lord, Lord Fowler, made; to use copyrighted material without the appropriate payment is actually theft, and we have no sympathy for the suggestion coming from certain quarters that all information on the internet should be free, irrespective of the copyright position. Although many 18 year-olds-or even 17 year-olds-would take that position, we do not think that that is the correct position to take.

That leads me onto the next test. Again, I think that the noble Lord, Lord Fowler, mentioned this-it might have been the Minister-but we think that education in this area is very important. There is a whole universe of people out there who genuinely believe that everything on the internet is free. They do not realise that they are in breach of copyright when they download music or a film, so the industry and the Government need to work together to ensure that there is proper education on that. The third and most fundamental point is that penalties must be subject to the principles of natural justice, so that no unfair measures can be taken against an individual and, more particularly, that each individual must, under the process, be seen to be innocent until proved guilty.

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