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Broadcasting Act 1990

Volume 228: debated on Thursday 8 July 1993

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Arbuthnot.]

10.1 pm

I am grateful for this opportunity to initiate this Adjournment debate on the operation of the Broadcasting Act 1990.

I am pleased that the bongs have sounded as usual tonight for ITN's much-admired "News at Ten", and long may they continue to do so. The early-day motion that I tabled supporting the continuation of "News at Ten" has attracted the signatures of more than 90 hon. Members. That is an understatement of the strong feelings that exist on both sides of the House.

ITV chiefs should bear that in mind, as well as the Select Committee report, before reaching a final decision on the future of "News at Ten". They would be unwise to ignore Parliament's views, because I believe that the country wants "News at Ten" saved for the future. Parliament has a wider responsibility, however, to consider developments in ITV as a whole and to engage Ministers in examining the working of the Broadcasting Act 1990, notwithstanding the short period of its operation.

As a former television producer, I want to speak up tonight for ITV's millions of viewers and for its employees, who are dedicated to maintaining its standards of public service broadcasting. Unquestionably, we still have one of the best broadcasting systems in the world. When ITV was introduced, some thought that the BBC's standards would be impaired. The opposite occurred. British television has been greatly enhanced by regionally based ITV.

The reason for disturbing the ITV system with the 1990 Act was not that its programmes needed improving or that its management needed shaking up—although both might have been true in certain respects. The reason was the application of mistaken dogma to ITV at a time when it was flourishing and rightly regarded as a pillar of public service broadcasting. However, the Government and the then Prime Minister thought that ITV could be improved if the old way of doing things were discarded and if its franchises were merely sold to the highest bidders, who would then have to recoup the price that they had paid irrespective of the resulting quality of service.

What Mrs. Thatcher wanted was to take an industry that was already in the private sector and to privatise its values and ethos even further. She was only partly restrained in doing so by her then broadcasting Minister, the right hon. and learned Member for Putney (Mr. Mellor). Making a colossally incompetent Bill into a temporarily less destructive Act will be his epitaph, or at least one of them.

The right hon. and learned Gentleman managed to inject into the Act a bit of the old world of public service broadcasting to mitigate the new system of pure financial return. However, this legislative cocktail did not strike the right balance, and now the commercial pressures created by the Act are starting to come into sharp conflict with ITV's public service commitment. That conflict between market forces and public interest lies behind the attempt to axe "News at Ten". It is also reflected in a host of similar, albeit less prominent, scheduling decisions throughout the ITV companies.

Hon. Members have drawn attention, for example, to worrying developments in Granada Television and other ITV companies, whose cuts in programme-making capacity, it is feared, will affect the companies' ability to fulfil the conditions of their licences. Undoubtedly there is mounting pressure on a range of programmes—not just news but all factual programming, documentaries, education, regional arts, minority entertainment and many others, which are popular but which may not maximise audience share and advertising revenue, and therefore help ITV to compete with its rivals.

As yet, ITV is far from collapsing. This year, £515 million is being spent on the programme schedules. In most parts of the country, viewers are still seeing the programmes that they are used to on ITV. Nevertheless, there is a growing recognition of a threat to ITV, and a real danger of a downward spiral of programme quality, brought on by the commercial burdens on ITV.

When the highest-bid ITV auction was carried out in 1991, the present Prime Minister passed immediate judgment on it. He said:
"I don't think it has been an optimum success."
When asked whether the system should be abandoned, he added:
"We will have to wait and see."
I doubt whether his confidence has grown since then.

After an inauspicious start, three developments have taken place to frustrate the intention of the Broadcasting Act to protect public service broadcasting on ITV. First, the ridiculous auction has resulted in franchises costing between £2,000 and £43 million apiece, producing an income for the Treasury, and a huge fixed cost for the companies, of £231.6 million per annum. Advertising revenue is available to cover these purchase costs, although it also has to cover programme making.

Secondly, the recession has been deeper and longer than anyone expected, and that has drained ITV of anticipated income. Thirdly, and most important for the long term, the competition to ITV from satellite, cable and Channel 4 has grown faster than many predicted. The satellite and cable systems now reach more than 3 million homes and have sources of income, such as subscription television, that are denied to ITV. Those systems, along with Channel 4, are eroding ITV's market share, thereby threatening to reduce its advertising revenue year on year.

Further rapid technology changes will greatly accelerate the spread of this competition. In 1989, when the Act was being considered, digital technology seemed to be at least a decade away, yet BSkyB is planning to use digital technology in Britain in two years' time. That will bring films almost on demand. Pay-as-you-view television will be here in profusion. In 1989, high-definition television on a commercial basis was seen as the technology of the 21st century. It could now be the technology of the mid-1990s.

This is the crux of the issue. As ITV loses revenue due to technology-driven and unregulated competition and rivalry from Channel 4, the ITV companies will be forced to cut costs. Because of their high fixed costs, chiefly the franchise bids, the axe will fall on programme budgets. That will weaken the programme schedule, depressing audience ratings and revenue still further, creating the danger of a descending spiral of programme quality.

What should Ministers be doing to respond to that threat? First, the Government must recognise that the problem exists. The Secretary of State for National Heritage—I am glad that he has joined us for the debate —told me last month that his job is merely to listen to the debate. That is not encouraging. It is necessary for him to think again and carry out a thorough review of the Broadcasting Act, which should take place in tandem with a review of the BBC's charter and the subsequent legislation.

The review needs to embrace a number of aspects of the operation of the Act. First, it needs to examine the possibility of reducing the cash burdens on ITV created by the franchise auction. At the moment, that is planned for 1999. Consideration should be given to bringing that forward by two or three years. Next, the review should look at the balance of regulation between ITV and the satellite and cable systems in order to put competition on a fairer basis. BSkyB has almost no public service obligations placed on it, whereas ITV has a requirement, for example, to carry 51 per cent. British or European originated production.

The review also needs to look carefully at Channel 4. Paradoxically, Channel 4's success has been a worry for ITV ever since the Broadcasting Act separated it from the ITV system. Channel 4 has taken full advantage of its licence conditions, which are looser in some respects than ITV's, and its flexible remit to provide a service that is able to compete advantageously with channel three. The problems posed by that for ITV need to be examined by Ministers. I am not inviting the Government to consider privatising Channel 4 because of its success or to eye the money it makes to ease the Treasury's current problems. Perhaps the Minister will reassure us on those matters.

Last but not least, there is the issue of ITV's business structure. At the beginning of next year, under the Boradcasting Act, it will be permissible for large ITV companies to merge with smaller ones, but not with each other. Foreign companies of any size will be able to take over British companies, large and small. We are all rightly concerned at the impact that mergers can have on the regional identity of our television stations. Most Members of Parliament, including myself, are instinctively hostile to them. When Yorkshire Television tried to swallow up Tyne Tees during their merger last year, I campaigned to ensure that the interests of the viewers in my constituency and throughout the north-east were not sacrificed precisely because of that concern for regional identity and production.

As a result of the way in which the industry is structured and the way in which the Broadcasting Act operates, financial reality is driving the major ITV companies towards consideration of mergers. In the face of overseas competition, which operates without restraint on merger and acquisition, the pressure to reduce costs and overheads through coming together is now becoming inexorable. I regret that, but at present it is a commercial fact. The risk is that, in the absence of a level playing field, we may end up with the bizarre situation in which foreign-based companies have a significant advantage over home-based ones. At the very least, it now merits serious scrutiny by the Government.

Any changes must, however, preserve the regional licences, production and local identity of ITV. Yorkshire Television's crude attempt to absorb Tyne Tees shows the fragility of local identity and control and the immense dangers of giving excessive latitude to ITV companies. However, the prompt intervention of the Independent Television Commission in the north-east—we have seen the ITC acting again over ITN's "News at Ten"—proved how firm regulation can protect the interests of regional viewers. In this as in other matters, a strong role for the ITC to protect the public and regional interest needs to be upheld. Such interest, the maintenance of programme standards and the whole ethos of public broadcasting must underlie any review of the Broadcasting Act 1990.

The crisis in ITV is not yet on us, but it is not far off. The Act, born in prejudice, must now fit new realities as well as maintain the traditional standards of British broadcasting. I hope that the Minister will state how the Government intend to proceed. I am sure that he shares my concern and my commitment to the strengthening of public licence broadcasting on ITV. That would certainly reflect the reputation and record of the Department of National Heritage to date. I hope that he will respond vigorously and imaginatively.

10.16 pm

I congratulate the hon. Member for Hartlepool (Mr. Mandelson) on his good fortune in securing the debate. I also congratulate him on the thoughtful way in which he presented his comments. As he will discover, I do not agree with all that he said, but it is nevertheless excellent that such sharp and well informed comments should be directed at the Broadcasting Act 1990 and, indeed, at all Acts, from time to time. I am sure that nothing but good can flow from it.

As the hon. Gentleman rightly said, the subject is extremely topical. It is also a very large subject, as the Broadcasting Act 1990 is one of the longest passed by the previous Parliament. It has 10 parts, 204 sections and 22 schedules. The hon. Gentleman has, fairly enough, concentrated on a few issues and I begin by setting them in context.

The Act was a significant move towards deregulating what had hitherto been a highly regulated industry. There were good reasons for it: it was in line with the Government's general policy of trying to remove unnecessary shackles in the operation of commercial enterprises. Moreover, conditions were changing. In the past, it had been thought necessary to regulate broadcasting fairly closely, but, with the possibility of many more services, a new framework had to be created to take account of those changes.

By the late 1980s, it was clear that more services could become available through satellite and cable television and through the BBC releasing some radio frequencies so that more independent radio stations could be opened. The old framework, the cosy duopoly of the BBC and the Independent Broadcasting Authority, could not cope with the likely multiplicity of services; nor could it accommodate the move towards a global market for broadcasting services. Services may now be transmitted to one country by an organisation based in another country, using a satellite owned in a third country for reception in a fourth country, or, indeed, on another continent.

The aims of the Broadcasting Acts were to create diversity, choice and competition in the provision of broadcast services. It set out to create a new pattern for broadcasting, opening the way for many more services. It created two new regulatory bodies, the Independent Television Commission and the Radio Authority, to licence broadcasting services.

The Act has enabled a huge range of services to be licensed. At one end of the scale there are the terrestrial television services available throughout the United Kingdom, the new national independent radio services and the satellite services. At the other end of the scale are the local delivery services to bring television and radio services to 1,000 or more homes through a cable or microwave system, and the Radio Authority's restricted licences, which allow local events to be covered by a temporary radio service in a limited area.

The Act also establishes different levels of regulation for different types of service. For programmes it sets out standards of taste, of decency, of accuracy and of due impartiality for all services licensed by the ITC and the Radio Authority. Most services are regulated more lightly than would have been possible in the past.

Only Channel 4, and S4C in Wales, are required to broadcast programmes as public services of information, education and entertainment. Channel 4 has to ensure that it broadcasts programmes likely to appeal to tastes and interests not catered for on ITV and has to encourage innovation and experiment in the form and content of programmes. S4C has to ensure that a substantial proportion of its programmes are in Welsh.

Channel 3—ITV—is no longer required to provide programmes as public services, although the Act places some public service obligations on Channel 3 licensees. Those include providing programmes calculated to appeal to a wide variety of tastes and interests, regional programmes, religious programmes, programmes intended for children, and news and current affairs.

I shall now make some specific points, the first of which concerns the competitive cash bidding for ITV licences. Not all licences under the Act are awarded by competitive bidding. Licences awarded in that way are those that are potentially the most valuable—the licences for Channel 3, Channel 5 and the new national independent radio services. As the licences constitute permission to use a public asset—the frequencies—for commercial purposes, it seems right that the Treasury and the taxpayers should receive their share. That was the purpose of the bids.

For ITV there was a quality threshold, too, and some applicants fell at that hurdle. Not all the successful applicants had been the highest bidders. Whatever the criticisms, the process was open and the criteria for applications were known. That seems preferable to the awards behind closed doors that were a feature of the earlier arrangements. The same processes will not happen again. ITV licensees will be able to renew their licences after six years, but the ITC can withdraw licences if promises are not kept.

With regard to the ownership of ITV companies, there is a balance to be struck between conflicting objectives. There are economies of scale to be achieved if fewer but larger organisations provide a service, but there are also benefits in competition. Those benefits are obtained by allowing a number of organisations to compete in providing a service and by preventing concentrations in the ownership of the media in any area.

During the passage of the Broadcasting Act, the Government were persuaded to provide for a period of stability when the new ITV licences came into force. That was the background to the so-called moratorium, which is due to expire at the end of the year. It does not prevent all takeovers, but it means that any takeovers or mergers have to be approved by the ITC.

The Broadcasting (Restrictions on the Holding of Licences) Order 1991, made under the Act, prevented Channel 3 licensees from acquiring two licences in contiguous areas as part of the initial award of licences. It did not prevent subsequent mergers. However, the order designates nine areas with the largest advertising revenues, and the licensee for one large area cannot hold the licence in another large area. That licensee can, however, own a licence in a smaller area, a 20 per cent. interest in another large licensee, and a 5 per cent. interest in the holders of other regional licences.

Concern has been expressed, both by the hon. Member for Hartlepool tonight and by other hon. Members on other occasions, about takeovers from organisations based in other EC countries. Any organisation taking over an ITV company will be hound by its licence conditions, including those requiring local programmes and local programme production.

There is a debate between the licensees as to whether it would be desirable for those ownership restrictions to be relaxed further or whether the moratorium should be extended. My right hon. Friend the Secretary of State—here with us tonight—met representatives of all the ITV licensees on 14 June so that they could put their views to him face to face. It was a very helpful meeting, and my right hon. Friend is now reflecting on what was said to him on that occasion. I am not able this evening to say what the outcome of those reflections will be.

The hon. Member for Hartlepool, mindful of the interests of his constituents, has been concerned—and he properly expressed that concern this evening—about the merger of Tyne Tees and Yorkshire Television. This merger was allowed by the ITC under the provisions of the Act. I understand that, earlier this year, the commission held a series of meetings with representatives of Yorkshire and Tyne Tees and is now satisfied with the new arrangements for the structure of the companies, with two organisations operating under a hold company.

The hon. Gentleman was concerned about the regional programming in the Tyne Tees area and the continuation of programme production there. The commission clearly shares his anxieties. As he knows, the main provisions on regional programming and production are set out in the licences that the commission has issued. It is for the commission to monitor compliance with those licences and there is every indication that it intends to take those duties extremely seriously.

Under the terms of the Act, the commission will in future include in its annual report to Parliament an assessment of the extent to which the holders of ITV licences have failed to comply with the conditions included in their licences. The first of those reports should be available to the House next summer. I understand the hon. Gentleman's concern about job losses in the Tyne Tees area—that concern is entirely right and proper—but in the longer term inefficient concerns will not survive. The restructuring of broadcasting is creating new opportunities, as well as job losses. There has been an increase in independent production companies and facilities companies.

Let me now deal with the question with which the hon. Gentleman began his speech—ITN and "News at Ten". ITN has been nominated by the ITC as the news provider for Channel 3 under the terms of the Act. Both sides of the House were agreed that it was important that Channel 3 schedules should include high-quality programmes of national and international news, which could compete effectively with the news services provided by the BBC.

In the past, ITN was wholly owned by all the ITV companies. The Broadcasting Act requires that ownership should be more varied. No one can have more than a 20 per cent. interest in the nominated news provider, and the holders of regional ITV licences taken together should have less than a 50 per cent. interest. Obviously, time has to be allowed for changes in the ownership of ITN, and those requirements do not come into effect until the end of 1994.

Earlier this year, ITN was taken over by a new consortium, which included a number of ITV licence holders and also Reuters. One of the major partners in the consortium was Carlton Communications and the chairman of Carlton Communications is Michael Green, who is also the chairman of Carlton Television, holding the weekday Channel 3 licence and now the chairman of ITN.

I understand that, when the bid was made, it was considered by the Office of Fair Trading. My right hon. Friend the President of the Board of Trade subsequently concluded that there was need for a reference to the Monopolies and Mergers Commission. There are, of course, many other providers of broadcast news services, including the BBC, Sky News and CNN for those who receive cable services, as well as the independent radio services.

I do not intend to comment at any length on the view that Mr. Green should stand down as chairman of ITN just because he is a declared supporter of and donor to the Conservative party. The Act requires news programmes to be presented with due accuracy and impartiality. It also requires due impartiality on matters of political or industrial controversy or relating to current public policy. We can expect the commission to monitor compliance with those requirements.

During the past two weeks, considerable concern has been expressed in the House and elsewhere about the timing of the main evening news bulletin on ITV. My right hon. Friend the Prime Minister wrote to the chairman of the Independent Television Commission expressing his concern about the proposed changes in the timing and stressing the importance of ITV providing a high-quality news service, and providing effective competition with the BBC in peak hours. The Leader of the Opposition also wrote.

The National Heritage Select Committee, which by chance was examining witnesses from the ITV companies last week, produced, with commendable speed, a report with its views on the proposals for changing the scheduling of the main news bulletin. In the face of that barrage, it is hardly surprising that the ITV companies are planning to discuss the issue at their annual meeting with the ITC on 14 July.

The main responsibility for monitoring the implementation of the provisions of the Broadcasting Act which governs ITV rests with the Independent Television Commission. Those provisions came into effect only at the beginning of this year.

The Act establishes a new relationship between the commission and, the ITV companies. Until this year, the commission was the broadcaster, providing a public service of information, education and entertainment, with programmes supplied by the ITV companies under contract. Now the ITC is a regulator and the ITV companies operate under licences which it has issued.

It is understandable that it will take some time for that relationship to settle down. In the past few months, there has been some jockeying for position and some flexing of muscles on both sides, but the commission seems determined to be an effective watchdog.

We shall keep the working of the Act under review, but it is far too early to consider major amendments. Amending the Act will not alter the changes in the global market—

The motion having been made after Ten o'clock and the debate having continued for half an hour, MADAM SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes to Eleven o'clock.