Communications Bill

Public Bill Committee, 14 January 2003.

Standing Committee E

Clause 193 - Functions of OFCOM in relation to the BBC

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No.22, in

clause 193, page 171, line 12, at end insert—

'( ) the BBC Charter;'.

Peter Atkinson (Conservative, Hexham)

With this it will be convenient to discuss the following:

Amendment No.43, in

clause 193, page 171, line 17, at end insert

'and to enforce the terms of the BBC Fair Trading Commitment as currently drafted'.

Amendment No.149, in

clause 193, page 171, line 23, at end insert—

'(2A) In exercising their functions under this section OFCOM shall consult with and have regard to the views of persons providing services and facilities other than the BBC who, in their opinion, are likely to be affected by the BBC's services.'.

New clause 18—BBC statements of programme policy—

'(1) Any agreement made (whether before or after the coming into force of this section) between the BBC and the Secretary of State to regulate the provision of the BBC's services shall include (and in the event the agreement does not so include shall be deemed to include) an obligation on the BBC—

(a) as soon as practicable after the coming into force of this section and subsequently at annual intervals to prepare and publish a statement of programme policy for each of the BBC's services; and

(b) for the BBC to monitor its own performance in the carrying out of the proposals contained in the statements.

(2) Every statement of programme policy must include—

(a) proposals for securing that during the following year—

(i) the public service role of the BBC and the BBC's services will be fulfilled;

(ii) the functions, duties and obligations of the BBC and the BBC services as set out in the Charter and Agreement will be fulfilled;

(iii) such other matters as OFCOM may determine from time to time;

(b) a report on the performance of the BBC in the carrying out, during the period since the previous statement, of the proposals contained in that statement.

(3) The BBC shall comply with subsection (4) in the case of a statement of programme policy containing proposals for a significant change.

(4) This subsection requires the BBC—

(a) to consult OFCOM before preparing the statement; and

(b) to take account, in the preparation of the statement, of any opinions expressed by OFCOM.

(5) If it appears to OFCOM that a statement of programme policy has been prepared by the BBC in contravention of a condition imposed under subsection (4), the BBC must—

(a) revise that statement in accordance with any directions given to it by OFCOM; and

(b) publish a revision of the statement in accordance with any such directions only after the revision has been approved by OFCOM.

(6) A change is a significant change for the purposes of this section if it is a change as a result of which the service would in any year be materially different in character from in previous years.

(7) In determining under this section whether a change is a significant change—

(a) regard must be had to any guidance issued by OFCOM;

(b) the changes to be considered include any changes that, together with any proposed change for a particular year, would constitute a change occurring gradually over a period of not more than three years; and

(c) the previous years with which a comparison is to be made must be those immediately preceding the year in which the change is made, or in which the changes comprised in it began to occur.

(8) It shall be the duty of OFCOM—

(a) from time to time to review the guidance for the time being in force for the purposes of this section; and

(b) to make such revisions of that guidance as they think fit.'.

New clause 19—Duty of OFCOM in relation to the BBC's new services—

'(1) Prior to the Secretary of State approving under the Charter or the Agreement the provision by the BBC of any new service or changes to an existing service whether or not a broadcasting or programme supply service it shall be the duty of OFCOM to prepare and publish a report commenting on whether the proposed new service or changes to the existing service will satisfy the objectives set out in subsection (2).

(2) The objectives referred to in subsection (1) are—

(a) the new service or the changes to the existing service are compatible with the BBC's primary public service role as set out in the Charter and Agreement and that it shall further any or all of the public purposes of the BBC or any of the services it provides as set out in those documents;

(b) that the value to the public of the new service or changes to an existing service will be proportionate to the likely impact on the market;

(d) that the new service or the changes to the existing service will represent value for money for licence fee payers.

(3) It shall be the duty of OFCOM—

(a) as soon as practicable after the end of the period of twelve months beginning with the commencement of this section; and

(b) as soon as practicable after the end of each subsequent period as may be selected by OFCOM for the purposes of this section

to satisfy, for that period, the review and reporting obligations of subsection (4).

(4) The review and reporting obligations are—

(a) an obligation to carry out a review of the extent to which new services provided by the BBC and changes to existing services—

(i) comply with the terms of the approval granted by the Secretary of State for such new services or changes to existing services; and

(ii) satisfy the objectives set out in subsection (2);

(b) an obligation to prepare a report on the matters found on the review.

(5) In this section

''Charter'' means the Royal Charter for the Continuance of the British Broadcasting Corporation—May 1996 and any renewal or replacement thereof;

''Agreement'' means any agreement made (whether before or after the coming into force of this section) between the BBC and the

Secretary of State to regulate the provision of the BBC's services and the carrying on by the BBC of other activities for purposes connected with the provision of those services.

(6) In this section for the purposes of the review and reporting obligations of OFCOM ''new services'' shall mean all new services approved (whether before or after the coming into force of this section) by the Secretary of State under the Charter or the Agreement.'.

New clause 20—OFCOM review duties in relation to BBC's services—

(2) The objectives referred to in subsection (1) are—

(b) that the value to the public of the new service or changes to an existing service will be proportionate to the likely impact on the market;

(d) that the new service or the changes to the existing service will represent value for money for licence fee payers.

(3) The BBC shall—

(a) as soon as practicable after the coming into force of this section and subsequently at annual intervals prepare and publish a statement of programme policy for each of the BBC's services; and

(b) monitor its own performance in the carrying out of the proposals contained in the statements.

(4) Every statement of programme policy must include—

(a) proposals for securing that during the following year—

(i) the public service role of the BBC and the BBC's services will be fulfilled;

(ii) the functions, duties and obligations of the BBC and the BBC's services as set out in the Charter and Agreement will be fulfilled;

(iii) such other matters as OFCOM may determine from time to time;

(b) a report on the performance of the BBC in the carrying out, during the period since the previous statement, of the proposals contained in that statement.

(5) It shall be the duty of OFCOM as soon as practicable after the end of the period of twelve months beginning with the commencement of this section and thereafter at such periods as OFCOM may determine to prepare and publish a report which must—

(a) comment on the extent to which new services provided by the BBC and changes to existing services—

(i) comply with the terms of the approval granted by the Secretary of State for such new services or changes to existing services; and

(ii) satisfy the objectives set out in subsection (2);

(b) comment on the extent to which the BBC has—

(i) fulfilled any statement of programme policy made by it;

(ii) made an adequate contribution towards the satisfaction of the general purposes of public service television broadcasting in the United Kingdom set out in section 256(4);

(c) specify the changes which in the opinion of OFCOM are required to the agreement between the BBC and the Secretary of State to ensure that the BBC fulfils the statements of programme policy referred to in subsection (3) and that the BBC makes an adequate contribution to public service television broadcasting in the United Kingdom.

(6) In this section—

''Charter'' means the Royal Charter for the Continuance of the British Broadcasting Corporation—May 1996 and any renewal or replacement thereof;

''Agreement'' means any agreement made (whether before or after the coming into force of this section) between the BBC and the Secretary of State to regulate the provision of the BBC's services and to carrying on by the BBC of other activities for purposes connected with the provision of those services.

(7) In this section ''new services'' shall mean all new services approved (whether before or after the coming into force of this section) by the Secretary of State under the Charter or the Agreement.'.

New clause 29—Power to confer further functions on OFCOM relating to the BBC—

'(1) The Secretary of State may by order amend this Act to such extent as he considers appropriate to give effect to the provisions of—

(a) any Royal Charter granted to the BBC after the commencement date;

(b) any licence granted by the Secretary of State to the BBC after that date;

(2) In subsection (1) ''the commencement date'' means the date of commencement of section 193.

(3) An order under this section shall not be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House.'.

Andrew Lansley (Conservative, South Cambridgeshire)

Good morning, Mr. Atkinson. This is the first occasion in the new year that we have had a chance to welcome you. We have been busy since you have been away from us, and we have reached clause 193. As members of the Committee will be aware, the clause's purpose is to bring the BBC into Ofcom's remit under the BBC Ofcom agreement that is to be made, and amended, between the Secretary of State and the BBC.

Amendment No. 22 would insert a reference to the BBC charter in clause 193(1). That would imply that if Ofcom's functions in relation to the BBC were set out in the BBC charter, rather than elsewhere in the Bill or under the agreement, they would be functions of Ofcom in relation to the BBC.

Several other amendments and new clauses are grouped with the amendment, and if I may, I shall take the liberty of making several general points about the BBC now rather than trying to intervene as we go along. It might be helpful if I thank the Minister for a copy of the proposed amendments to the agreement. I now understand why it is intended that we should finish voting at 7 pm or 7.30 pm: so that we can spend the evening looking at the papers for the following day's Committee—that was my experience last night. I shall try to cover several points relating to the amended agreement as we go along.

I did not table the amendment to diminish the BBC's activities—on the contrary. Many members of the Committee might share my view that the BBC has successfully used the licence fee to stimulate creativity

and to sustain the quality of broadcasting during recent years. That is not distinct from other broadcasters, but in addition to other broadcasters. I do not want the BBC to be a broadcaster of last resort. If the BBC's purpose is to spend the licence fee, which is a large amount of money, I would want the licence fee to be used not as a substitute for the activities of others, but to provide broadcasting quality, innovation and creativity rather than broadcasting that follows others and fills gaps that might emerge. If we are applauding the BBC's activities, as things stand, and if the BBC's role is defined, in part, as meeting broadcasting needs that are not met successfully by others. BBC Freeview is a good example of that role and of how the broadcasting environment can be improved by the BBC's use of licence fees.

The BBC should deliver quality, creative and innovative broadcasting that is intended to satisfy a wide range of viewers, notwithstanding the fact that viewers often receive broadcasting from other sources. That extends not simply to the production of programming material but specifically to the controlling of networks. There is a danger that we see the BBC as a programme producer but not necessarily as a channel provider, which it must be. In a multichannel world, it will become increasingly difficult for viewers and listeners to have access to pre-prepared networked channels that offer a range of broadcasting as distinct from the niches, each of which may have specific commercial justification.

If we have free-to-air broadcasting, there is everything to be said for it being apart by way of delivering networks. That would demonstrate innovation and creativity not only in the content of programmes but in the way in which they are interleaved into a network, and viewers and listeners would be given the opportunity to mix tastes in ways that stimulate a wider interest in broadcast material.

Michael Fabricant (Conservative, Lichfield)

My hon. Friend is making an interesting and powerful point as eloquently as ever. Does he agree that one problem with the BBC operating in its own environment outside the control of either the Independent Television Commission or Ofcom, at least under this particular pillar, is that rumours begin which, whether or not they are true, cause unhappiness among viewers? For example, it was rumoured that political and religious programmes would be sidelined onto digital channels. Both those things were feared but were untrue. If there were a clear understanding that an outside agency such as Ofcom would control that issue, such rumours would not arise.

Andrew Lansley (Conservative, South Cambridgeshire)

I understand my hon. Friend's point. I share his view that, not only were those rumours untrue, they were never likely to be true. Therefore, we should be careful not to structure legislation or organisation around rumours. He makes a fair point about the extent to which the public, as providers of the licence fee, can be assured about the independent regulatory structure under which the licence fee is spent and such services are provided.

Having expressed my appreciation of the BBC's role, we should all be aware of the risks associated with its position in broadcasting. Later in the Bill, we will discuss the wider structure of broadcasting, of which the BBC occupies a substantial share. With due regard to my hon. Friend's recent remarks, we must be careful to be accurate, but because of that share it is possible rather than proven to claim that the BBC is capable of cross-promotion to an extent that gives it anti-competitive benefits in the broadcasting marketplace.

It is possible that the extent of the BBC's commercial exploitation could be a distortion of competition in the marketplace—I especially recall the issues put to me in relation to schools programming and the supply of educational material by the BBC. The BBC clearly occupies a dominant position in the marketplace, but as we have seen elsewhere in the Bill and will later discuss, dominance per se is not an offence. However, the constraints and regulatory oversight required in relation to such a position ought to give us pause for thought.

Amendment No. 43 relates to incorporating the enforcement of the BBC fair trading commitment into the functions of Ofcom. I have every sympathy—as, I suspect, do the Government—with what that amendment is trying to achieve, but I am not convinced that the amendment is the way to achieve it. There is a risk that we might elevate the BBC fair trading commitment to the point where it is regarded as the ultimate expression of the BBC's obligations in relation to the avoidance of distortions or anti-competitive effects. It is not that; it is merely the BBC's full and comprehensive expression of how it intends to meet its competition obligations and of other measures that it seeks to impose internally to meet another range of impartiality and related objectives.

Michael Fabricant (Conservative, Lichfield)

Does my hon. Friend agree that, when public money is involved, there is a locus for Government legislation similar to that which amendment No. 43 would create? Rightly or wrongly, there have been concerns about the BBC competing improperly and about cross-funding with public money, namely the licence fee. A recent example that has been brought to everyone's attention is that of the History Channel saying that UK History, which is a joint venture by the BBC and Flextech, improperly uses programming within the BBC archive, paid by the licence fee, to support a programme channel that is supported by advertising and is in direct competition with private companies such as the History Channel. I do not agree with that argument, but I believe that the principle of the amendment should be enshrined in the clause.

Andrew Lansley (Conservative, South Cambridgeshire)

My hon. Friend makes a good point worthy of discussion, but if his point were proven in the terms in which he describes it, in my view that would be a case for action under competition powers rather than under the fair trading commitment. That is not to say that the fair trading commitment does not embrace such matters; however, the fair trading commitment is merely the BBC board of governors' expression of how it intends to meet its competition

obligations. If there were cross-subsidy between licence-fee funded activity and commercial activity in a form that could give rise to a distortion of competition, that would be a proper cause of action by Ofcom under its competition powers, and those powers are already available to Ofcom under the Bill. In that sense, I want to part the issue of competition. I do not think that the question of whether Ofcom is able to regulate the BBC's activities in relation to competition is a deficiency. The issues are wider, and are principally to do with the public service remit of the BBC and how that is regulated.

My main point relates to the structure of the legislation and an anomaly that arises from the following fact: Ofcom has a responsibility under tier 3 to consider the public service obligations as a whole, and should examine regularly the extent to which each of the public service broadcasters contributes successfully to the achievement of the public service obligations. It should make recommendations and comments on that, too. However, there is a substantial distinction in the way in which public service broadcasters other than the BBC are required to respond to Ofcom's recommendations. If they do not satisfactorily amend their statements of programming or their programming activity to meet public service obligations, Ofcom has powers to act. It seems that the BBC is required, under the agreement, to consider Ofcom's recommendations. I do not know to what extent we attach significance to them, but I detected differences in drafting between the way in which the agreement expresses such matters and the Bill's description of them. For example, under section 5(c)(3) of the amendments to the agreement, the corporation is required to consider the guidance given by Ofcom and the reports that were previously published, as distinct from the requirement to take account of them under clause 258. If I were a lawyer, I am sure that I would note a difference between those two conditions.

It is interesting—[Interruption.] I am glad that the hon. Member for Ellesmere Port and Neston (Mr. Miller) is staying with me. At least someone is. I refer to another difference between section 5(c)(3) of the amendments to the agreement and the Bill. Under clause 258(4)(c), other public service broadcasters are required to

''take special account of the most recent such reports''

published by Ofcom under clauses 256 and 344. However, under the amendments to the agreement, the BBC is technically required merely to consider the reports previously published by Ofcom without specific reference in the most recent reports or to any requirement to take special account. That is slightly surprising, given that the intention of the draft amendments was precisely to reflect in the agreement the obligations that were placed on other public service broadcasters under the Bill. Perhaps we shall find out the reason for such a difference when the Minister responds. It is not my principal argument, but I wanted to illustrate the extent to which there is scope for differences between the agreement and the BBC,

and the impact of the Bill as it affects other public service broadcasters.

Far more significant is section 13(b)(2) of the agreement, which is itself subject to the approval of the Secretary of State under article 3(b) of the charter or conditions under article 24(1) of the royal charter relating to the public television services that have been approved. That points to the reflection in the agreement of the fact that the so-called backstop powers to lay conditions and to require the BBC to comply with the public service obligations as seen by Ofcom lie not with Ofcom, but the Secretary of State. The Government claim that that is necessary because of the special character of the BBC. I am not worried that that will give rise to a proper recognition of the BBC's character, but that it will lead over time to increasing risks of a divergence between the BBC's interpretation of its proper role in the public service broadcasting ecology and Ofcom's view. Therein lies the danger.

There is every reason for the BBC and other public service broadcasters to be subject to Ofcom's overall view about the structure of public service obligations and how the respective public service broadcasters can meet them. It will be difficult enough for Ofcom with the frequency with which it will review the position in fast- changing public service broadcasting activity to be able to keep up with the ways in which the BBC may change how it discharges its broadcasting obligations.

How do we go about things then? It would be temping to say that, at this stage, we should rewrite the Bill so that the BBC is put under Ofcom for tier 3 purposes. I have resisted that temptation, perhaps because I am a ''small c'' conservative as well as ''large c'' Conservative, but it seems to me that the purpose of the BBC charter is to provide assurances—until the charter expires at the end of 2006. It is intended that there should be benefits associated with avoiding Parliament's desire to micro-manage the structure of the BBC and in allowing it to operate substantially independently, except where we require it not to do that. Let us work within the structure of the Bill and the structure of charter renewal. However, we must also ensure that there is no risk that our intentions could be frustrated, in two or three years time, or at some subsequent charter renewal, because we did not future-proof the Bill against the intentions of Parliament.

If we do not make amendment No. 22, there is a risk that that might happen. Under the charter, the BBC might not make all the agreements that are required, or may be required in future, to hold it to its public service obligations. It would have the freedom to avoid making those agreements. The will of Parliament might be frustrated thereby. I want to future-proof the Bill. I want to do the things that the Government say they want to do. They say that they do not want to pre-empt charter renewal. The best way to do that is to enable changes in the charter to give rise to functions for Ofcom. Perhaps the best example of that would be if back-stop powers, such as the approval of television services, were to be transferred

from the Secretary of State to Ofcom. It seems more likely that such a thing would be done through the charter than through the agreement or subsequent agreements. It would, therefore, be desirable if clause 193 referred specifically to the functions of Ofcom that are required in the charter.

I am contemplating a direction that is not purely theoretical, but practical in relation to the next charter renewal. During proceedings on the Bill, there is a great temptation to debate the structure of the BBC after charter renewal in 2006. That might seem premature, but it is not. We should not to try to decide what the charter should say about the BBC, but we should be aware of how the BBC might change in three or four years' time, and after the next charter.

What is pointing us in such a direction? The BBC and its board of governors have recognised the nature of the difficulty that everyone, including politicians, has distinguishing between the board of governors and the management and executive. If we cannot be confident that the BBC board of governors is independent and able to regulate the executive and the management, the BBC's regulatory structure falls down. That is precisely why the BBC has introduced some of the changes reflected in recent documents, such as ''BBC Governance in the Ofcom Age'', which is especially relevant. That is, however, a halfway house.

It seems perfectly obvious that the BBC board of governors has won a degree of independence that would not be recognised as sufficient in the outside world or by other broadcasters. The problem is that, when the BBC is approached by individuals or other broadcasters who have complaints or grievances, its explanations and responses often simply reinforce the view in the minds of the complainants that it is an organisation of which the governors are the showcase, rather than the independent regulators.

If the BBC's governors are to be independent from the BBC, they must be more so. We should begin to contemplate whether the charter should set up a structure for the corporation in which there are two entirely distinct entities related to the different functions of acquiring and spending the licence fee, and providing high-quality broadcasting services. Those two functions should not be regarded as being performed by only one organisation. The board of governors should be the trustees of the licence fee, the purpose of which—as the Secretary of State put it—is to provide

''venture capital for the nation's creativity''.—[Official Report, 3 December 2002; Vol. 395, c. 787.]

New clause 29, which was tabled by my hon. Friends, points us in that direction.

If the licence fee is venture capital for the nation's creativity, it should be acknowledged that the nation's creativity is not confined to the BBC, but spreads wider than that. One cannot fund the nation's creativity simply through the offices of the BBC, or even through its procurement of independent programming and supply. We must therefore contemplate whether the use of licence fee resources should be spread wider than the BBC. That fits neatly

with an argument that I have presented elsewhere: it is fine for the BBC board of governors to have responsibility for the licence fee and to use that overwhelmingly to procure the networks and services of the BBC, but it should not be required to do solely that. It should be free to do other things that are consistent with stimulating creativity, innovation and quality in broadcasting services and with the objectives of public service broadcasting.

However, one cannot be both the purchaser and the regulator of services. There is a clear distinction between the role of the BBC board of governors to spend the licence fee and buy services and promote high-quality broadcasting and Ofcom's function to act as an independent regulator, which would enable it to provide a structure of public service obligations to which it responds.

Peter Atkinson (Conservative, Hexham)

Order. The hon. Gentleman is trespassing on to the subject of public service funding. That is addressed in new clause 30, which is not grouped with the amendments that we are discussing.

Andrew Lansley (Conservative, South Cambridgeshire)

You are very kind to correct me, Mr. Atkinson. I was thinking about this matter either too early this morning or too late last night, so you may well be right.

Peter Atkinson (Conservative, Hexham)

I am right.

Andrew Lansley (Conservative, South Cambridgeshire)

In any case, Mr. Atkinson, you will understand that my purpose is to reflect the structure of the argument relating to charter renewal.

Peter Atkinson (Conservative, Hexham)

Just to make things clear to the hon. Gentleman, I am simply issuing a warning shot. He should not start to trespass on to the subject of funding, which is addressed in new clause 30, not in new clause 29. I understand the case that he is trying to make, but it would be helpful if he were to confine his comments to the new clauses that have been selected.

Andrew Lansley (Conservative, South Cambridgeshire)

Thank you, Mr. Atkinson. I understand what you mean. I was trying to move back within order, and I will try again to do so now.

My intention was simply to say that in charter renewal there is every prospect that—for reasons to which I referred but will not go on about—the roles of the BBC board of governors and Ofcom might be distinguished. The BBC board of governors now exercises third-tier responsibilities in respect of matters such as due impartiality and accuracy and the other things that were left out in the agreement from the list in clause 307. Clause 307, which is about applicable programme standards, mentions ''due impartiality'', ''due accuracy'' in news and matters relating to sponsorship and advertising. Those things are regulated not by Ofcom but by the BBC.

It is clear that the board of governors will no longer have that role in relation to third-tier responsibilities, and the Secretary of State will not necessarily have some of the back-stop powers, including the approval of services, that are currently included in the charter. Those powers would more appropriately be given to Ofcom. If that is the case, and if the charter is to contemplate major restructuring of the BBC and of the

responsibilities of the board of governors, it seems excessive to rely on the agreement to achieve that.

In 2006, when we are in the midst of charter renewal and those issues are being discussed, a major change may be being contemplated. However, it will be perfectly clear that that change cannot be accomplished without new statutory provision. Another Broadcasting Act will be required. I was not present for the passage of the Broadcasting Act 1996, but other members of the Committee were. As I understand it, one of our objectives in considering this Bill is to ensure that another Broadcasting Act is not required in three or four years' time. It has been six and a bit years since the last one and, if we get this Bill right, it should be a good deal longer before the next one.

If we get the structure of this legislation right, it will be sufficiently flexible to take account of charter renewal. If there might be a major change in the charter that would otherwise require changes to the statutes to give power to Ofcom, it seems to me that it would be far better if the legislation that we are dealing with now allowed for the charter itself to give functions to Ofcom in relation to the BBC. That is entirely consistent with the Government's argument that we want to be flexible and not pre-empt charter renewal.

I am coming to the same conclusion from a different direction. The Government are saying that we should not pre-empt charter renewal by thinking about charter renewal. I am saying that we should not pre-empt charter renewal but that it is necessary to think about it. We have to think radically about it if we are to anticipate what might happen. The best way of drafting legislation is always to think of the exceptional cases and the more radical future changes. That will allow us to get the degree of flexibility right.

Although amendment No. 22 appears opaque—as most of my amendments do—I think that it serves a valuable purpose and will allow the legislation to be sustained through the next charter renewal, not fall at that first hurdle.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I begin by congratulating my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) on the reasonable and persuasive way in which he moved his amendment. The Bill commands support on both sides of the House, as has been demonstrated on Second Reading and during many of our Committee proceedings to date. However, if there is one issue that gives rise to great disagreement between the parties, it is the BBC. There are various ways in which to address the problem that we have identified—that the BBC is to be outside the full extent of regulation by Ofcom. My hon. Friend has advanced one of those ways in amendment No. 22, and several other Opposition amendments have been grouped with it. The overall intention of the amendments is to subject the BBC to the same external scrutiny and regulation as other broadcasters will be subjected to as a result of the Bill being passed.

I should spend a little time outlining the purpose of each of the amendments that we have tabled. Amendment No. 43 deals with the BBC's fair trading commitment. My hon. Friend is right that the fair trading commitment represents just one aspect of the BBC's activities. The amendment would focus Ofcom's role of examining the BBC on a particular area of activity that might give it undue prominence. I therefore accept my hon. Friend's argument that amendment No. 43 on its own is insufficient.

Nevertheless, amendment No. 43 addresses a specific concern, and one that has been growing in recent months. A vast number of new BBC services have been launched—new television channels and radio stations, and extensions into internet publishing. Each such launch has given rise to concern that the BBC—with the enormous resources at its disposal and the strength of its name—will provide unfair competition to existing commercial operators who are already supplying the market that the BBC is seeking to move into.

Brian White (Labour, North East Milton Keynes)

Is the hon. Gentleman saying that there should not be UK History as well as the History Channel? Is not the fact that there are two of them proof that there is competition in that market?

John Whittingdale (Conservative, Maldon and East Chelmsford)

I want to come on to examine each of the various new services that have given rise to concern. However, the hon. Gentleman has mentioned one of them, I am saying that the decision about whether the launch of UK History will provide the consumer with additional services and is a worthwhile use of the BBC's activities should be subjected to some kind of external regulation. The debate about whether it is appropriate is interesting, and it is inevitable that it will creep into our discussion. However, we are currently addressing whether the existing mechanism for examining applications by the BBC for new services is sufficient, and whether it is likely to produce confidence among the commercial providers that those new BBC services are not going to offer unfair competition. Our view is that the existing mechanism is deficient and that it does not afford such confidence to commercial operators. This matter is now generating widespread concern right across the board among all those who are commercially involved in publishing, broadcasting and the provision of communication services.

As my hon. Friend the Member for South Cambridgeshire said, amendment No. 43 is focused on the BBC's fair trading commitment. That commitment is a robust statement: it sets out specific requirements with regard to the BBC's commercial activities that are designed to ensure that it does not put the licence fee at risk or compete unfairly with its commercial competitors. We welcome that commitment, but we feel that it is deficient in the area of the enforcement and adjudication of complaints. It is extraordinary that this legislation will mean that decisions about whether the BBC has abided by the terms of its fair trading commitment will still ultimately rest with the BBC itself.

There is now a widespread view that the BBC board of governors has failed to enforce the fair trading commitment and that there must be an independent arbiter who is seen to act impartially—and who is not part of the organisation against which a complaint has been made.

Kim Howells (Labour, Pontypridd)

I am sure that the hon. Gentleman is aware that there have been attempts to challenge the BBC's right to become involved in some of the new services that he has mentioned. In 1997, BSkyB challenged the right of the BBC to use licence payers' money for BBC News 24 under the terms of the European treaty. The court found that the BBC was entitled to use that money. The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) already mentioned the various competition agencies: why are they not sufficient to ensure that the BBC acts properly in terms of competition rules and law?

John Whittingdale (Conservative, Maldon and East Chelmsford)

Just because something happens not to be in breach of European law does not necessarily mean that it is right. The hon. Gentleman is correct. There are other safeguards in terms of both European law and competition and fair trading legislation. The BBC has made the case vigorously that, like every other broadcaster, it is subject to scrutiny by the competition authorities. That is correct. The fair trading commitment imposes obligations on the BBC that go beyond those contained in competition legislation. It is quite possible that the BBC may not be in breach of competition legislation, but it may be breaching the terms of its fair trading commitment. That area is the most difficult to arbitrate and there needs to be some kind of independent scrutiny. Many of the complaints that are being made by a variety of independent commercial organisations lie in that area.

BBC News 24 is an interesting example. The hon. Gentleman is quite right that it was found not to be in breach of EU law. That is not to say that News 24 has not raised some serious questions. That became very apparent when the Secretary of State commissioned Richard Lambert to carry out an independent review of its operation. That in itself raised serious questions. I should like to come back to the question of BBC News 24 because it is another example of a news service provided by the BBC, which has led to concerns about the impact it has had on existing commercial services.

Simon Thomas (Plaid Cymru, Ceredigion)

Before the hon. Gentleman moves on, would he like to reflect on what he has just been saying about the fair trade commitment with the BBC? He is seeking to set a standard that he is not applying to other broadcasters. The Bill would create a sort of Murdoch Channel Five link-up, which I cannot see following any fair trade standards as are now set out in the BBC's voluntary charter. Would he also accept that there is now independent scrutiny? Independent auditors now report directly to the governors within that framework. Have there not therefore been improvements within the BBC on the workings of its fair trade commitment?

John Whittingdale (Conservative, Maldon and East Chelmsford)

The hon. Gentleman says that I

am trying to impose a higher more demanding standard on the BBC than that which applies to other broadcasters. Absolutely. The BBC takes £2.5 billion of public money, which is not available to other broadcasters. The justification for having a state-funded, state-licensed BBC should be that it provides services that are not otherwise available in the commercial sector. That justification needs to be constantly examined. If, as is now happening, the BBC is extending its activities into areas that are already served—not just could be served—by commercial broadcasters, it raises strong grounds for concern. Yes, of course the BBC should be subject to much stricter safeguards than other broadcasters. That is the price it must pay for the fact that it enjoys £2.5 billion of public money raised by criminal sanction through the licence fee. I make no apology for that.

Kim Howells (Labour, Pontypridd)

Criminal sanction?

John Whittingdale (Conservative, Maldon and East Chelmsford)

The Minister expresses some surprise when I say criminal sanction, but I invite him to visit some of the people who are currently in prison because they did not pay their licence fee. They understand what I mean by criminal sanction.

Andrew Lansley (Conservative, South Cambridgeshire)

I entirely accept the point my hon. Friend makes. But is there not a risk associated with adopting the fair trading commitment as the basis for Ofcom's regulatory oversight? In fact, the fair trading commitment includes provisions concerning how the BBC brand is used. That would seem to be integral to the management of the BBC and its oversight by the board, rather than something that should be dealt with by an external regulator. The problem is that the BBC has lumped some things together under fair trading that are probably the subject of regulatory oversight and some that are properly the function of the BBC.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am not sure whether I go along with my hon. Friend the Member for South Cambridgeshire. The BBC brand is an enormously powerful emblem to attach to a product. One comes across that brand in all sorts of curious places. For example, if one buys compilation albums of recent chart hits, one will find that the BBC has its own branded series of albums that are based on ''Top of the Pops'', which compete directly with the Now series and the Hits 2002 series. Is that a proper use of the BBC's resources and should the BBC be competing in that market? The BBC has an asset in ''Top of the Pops'' and it is right to exploit that to get value, but whether the BBC needs to be as involved in the publication as it is, or whether it could make that asset available, is an interesting question. I am unhappy that such questions should rest with the management of the BBC, because it is giving rise to concern among commercial producers who offer competing products.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I am not sure that the BBC's ''Top of the Pops'' albums are something new. The BBC used to make those when records were black vinyl things.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The hon. Gentleman is entirely right. I have some of those black vinyl things and the ''Top of the Pops'' greatest hits 1973 nestles

somewhere at the back of my record collection. I accept that in some ways that activity is not new. However, that is not to say that that should not be subject to some scrutiny, since rival commercial products have arrived more recently. Just because the BBC has always done something, that alone is not a justification for it to continue. If it becomes apparent that the commercial sector is capable of providing services, I do not see why the BBC should not withdraw gracefully and say, ''This is no longer a public service remit, since the commercial sector is able supply it and we should, perhaps, reconsider.'' I digress. I have not begun my speech. I will speak to the specific new clauses that we have tabled before I move on to some of the specific examples that hon. Members are already tempting me to discuss.

New clause 18 would cover the BBC's statements of programme policy. It is intended that Ofcom should be able to monitor the BBC's public service promises and how those are delivered, so that it can fulfil the duty, which is imposed on it under clause 3, to secure a wide range of quality broadcasting services. The new clause concerns the publication of annual statements of programme policy and annual reviews. As a part of the third tier self-regulatory arrangements, the Bill currently provides for the licensed public service broadcasters—ITV, Channel 4 and Channel Five—to publish annual statements that set out how they intend to deliver their public service remits. We will debate that later on. The new clause also requires that there should be annual reviews that report on how actual performance has matched the promises made. In anticipation of that requirement, the commercial public service broadcasters—Channels 3, 4 and Five—have been producing statements and reviews since 2001. The Bill gives Ofcom powers to act if statements propose any ''significant'' change to the service that might affect the quality or quantity of the public service programmes that are provided. Ofcom will have the power to direct the broadcaster to restore missing promises to ensure that there is no dilution of the public service remit over time. However, the Bill provides no comparable requirement for the BBC to do any of those things.

The Government have published the revised BBC agreement, which covers the necessity of statements and reviews, but it is not as stringent a requirement as would result if the responsibility were given to Ofcom. The Government have also accepted the recommendation of the scrutiny Committee that the agreement should relate to individual services and not only to the corporation's domestic services as a whole. That is welcome. As a result, the BBC has voluntarily begun to issue statements of programme policy, although we await a review of whether promises have been delivered. There is still a huge anomaly, however, between the regime of scrutiny for the BBC and that which will apply to the other public service broadcasters.

Ofcom has a back-stop power to ensure that the public service output of the commercial channels

cannot be materially altered over time. That is a useful safeguard, and it is curious that there is no comparable statutory provision covering the public service remits of the BBC channels. Indeed, the BBC should be subject to regulatory requirements at least as strong as those that apply to commercial broadcasters. Public service broadcasting is the BBC's raison d'être. If it is beginning to dilute its commitment to public service broadcasting—that it is doing so is a widely held belief—that is grounds for real concern and makes it imperative to have some external scrutiny to arbitrate on such matters.

We must carefully examine the role of the BBC's governors. Under both the existing regime and that introduced by the Bill, the governors are still asked to ensure that the remit is met and to scrutinise the BBC's output to ensure that it delivers on its promises. In a modern multi-channel system, it is indefensible that we still expect the BBC to act as judge and jury on complaints against it. Some degree of independent scrutiny must be introduced.

To digress slightly, the hon. Member for Ceredigion (Mr. Thomas) mentioned external auditing. There has been some movement in that direction, but it has not been sufficient. I will not be tempted to discuss another new clause that we have tabled, but we will seek to amend the Bill to have the BBC come under the scrutiny of the National Audit Office—a suggestion that has received wide all-party support. I hope that the hon. Gentleman will support that measure at the appropriate stage.

The purpose of new clause 18 is to make it a statutory requirement that the BBC agreement provision on statements and reviews reflect the obligations that will be imposed on other broadcasters as part of the Bill. Specifically, the statements and reviews must relate to the BBC's individual services. Annual statements must show how the BBC's public service role and specific charter and agreement obligations will be fulfilled. If any significant change is proposed, Ofcom should be consulted and its opinions taken into account. If that does not happen, Ofcom should have the power to direct the BBC to revise its proposals accordingly. The criteria for significant change must be the same as those that are to be applied to other broadcasters under the Bill.

Some people would say that the existing regulatory regime has worked well and that it is unnecessary to bring in extra obligations. However, to date, the record of the BBC governors does not inspire confidence. Some of the statements that have appeared in the governors' contributions to the annual report have not been particularly stringent in their analysis, nor have they been critical of the services overseas that they are responsible for overseeing, even when a huge variety of outside observers are expressing increasing concern about whether the BBC is still delivering the high-quality public service programming that it was set up to deliver.

Mention has already been made about BBC News 24. The Secretary of State was sufficiently concerned that she felt it necessary to ask an independent outside

examiner to look into the BBC's record in the provision of BBC News 24. If the Secretary of State considered that worry about the channel was sufficiently important to appoint an outside arbiter to undertake an investigation, it is not entirely clear why that argument should not apply to the other activities of the BBC. We want a permanent Richard Lambert in the form of Ofcom to carry out such scrutiny to ensure that there is no unfair trading and no breach of the public service remit, and to increase generally the confidence that is lacking in the current regulatory regime.

Michael Fabricant (Conservative, Lichfield)

If the amendment and new clause were accepted, does my hon. Friend agree that it would not be the role of Ofcom to micro-manage? The Richard Lambert suggestion regarding breaking news was an example of that.

John Whittingdale (Conservative, Maldon and East Chelmsford)

No, it would not be the job of Ofcom to micro-manage. Such matters should be conducted as part of the annual review. While we have said that it should look at individual services, it must have a view of the entire output of the BBC to see whether it matches the policies and delivers the public service remit. On top of that, there is a role whereby individual services should be examined specifically if they cause worries about unfair competition.

It is worth our considering some of conclusions reached by Richard Lambert in his report. He said that, for a service that has already cost the licence fee payer £220 million and, which even now still has an unclear public service brief, BBC News 24 seems to have attracted only ''perfunctory'' attention from the governors in successive annual reports. He points to the central paradox in the role of the BBC governors, which makes their position untenable. He said in his report:

''On the one hand, they are the main instrument by which the BBC is rendered accountable. On the other, they are often regarded''—

now comes the point made by my hon. Friend the Member for South Cambridgeshire—

''as part of the management of the Corporation. When it comes to News 24, the Governors seem to have put themselves in the latter category.''

Many people would consider that the governors are often regarded as much more a part of the overall management structure—not only of BBC News 24—than the independent scrutineers and arbiters that are so necessary. As a result, they have not always delivered on the requirement to protect the public interest.

In the past two years, there have been a number of doubtful programme developments on the main BBC television services. We have talked about new services and some of the channels being launched on digital television, but some of what has been happening on the main analogue BBC 1 and BBC 2 television channels is giving rise to real concern. I do not want to spend too long on the subject, but an important part of the regulation of the BBC relates to whether it is delivering on its public service remit. As my hon. Friend the Member for South Cambridgeshire says, that issue is not covered in the Bill, yet there is a growing chorus of concern about dumbing down.

Of course the BBC should not seek to provide ghetto programmes deliberately created to attract the minimum of viewers. It needs to concentrate on providing high quality public service programming that is likely to inspire an interest in a large number of viewers. However, there seems to have been a reduction in programmes on many of the subjects that people regard as core to public service broadcasting, such as current affairs, news, documentaries, and arts.

The Minister for Tourism, Film and Broadcasting has expressed some trenchant views on the state of art in this country, and a lot of us rather applaud those views, but if people are to have the opportunity to make a judgment about controversial artistic works, it is important that the main public service broadcaster shows programmes that enable them to do so. I shall quote two of our most distinguished arts broadcasters. Joan Bakewell recently said:

''There used to be lots of arts around on major channels. There isn't now. That's clearly the case. When they put arts on BBC One, it's Sister Wendy and Rolf Harris. It's like further education with a popular teacher. It isn't a place you go for intellectual enlightenment. That's putting it kindly.''

Sir Jonathan Miller, with whom I do not always agree, although in this case he has a point, said:

''Unless you have a programme about how to decorate your house or chop up vegetables, it is impossible to get anyone in the BBC to commission your programme.''

We have to take that concern seriously. I have mentioned two distinguished figures in the arts world who are very critical of the extent to which arts programming is diminishing on the main public service broadcaster. One need only consider the fate of ''Omnibus'' to understand that it is diminishing.

As for current affairs programmes, one could lapse into nostalgia on the subject. ''Weekend World'' and ''World in Action'' were some of the great names that come to mind when one considers current affairs programming on the BBC—

Kim Howells (Labour, Pontypridd)

They are all in the Lords!

John Whittingdale (Conservative, Maldon and East Chelmsford)

They are, and most of them are sitting on the Labour Benches. That is a sign of the high regard that the Government have held for such programmes. It is hard to say that the current affairs output of the BBC is of similar quality—one has to look very hard to find such quality now. ''Panorama'' is still good and sometimes produces authoritative investigative journalistic programmes, although sometimes it does not. Although it is clearly the flagship current affairs programme, it has been relegated to late on Sunday night. I consider myself a current affairs junkie, but I have to work pretty hard to work up enough enthusiasm to switch on ''Panorama'' at 10.30 pm on a Sunday.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The hon. Gentleman has just made an important point. Comparing the way in which the BBC functions with how its commercial competitors do, he listed two current affairs programmes that were both on ITV and have now gone. The one current affairs programme that he names that is still running is on the BBC. Perhaps it is not on at an ideal time, but the BBC has maintained its flagship current affairs programme, whereas the independents have lost theirs.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The hon. Gentleman is correct in pointing out that those two were flagship programmes for Granada. My point was that current affairs generally seem to be worse served today than they were some time ago. The BBC has the prime responsibility for that, although the ITV channels still have a public service remit, which we shall consider later. Indeed, the fact that we shall have a specific opportunity to discuss the public service remit in the Bill as it applies to Channel 3, but no opportunity other than this to talk about the BBC is itself significant.

Although ''Panorama'' still exists in name, many people would point to the prominence that it now has compared to the prominence that it had previously, and to the quality of some of its reports. There has been a considerable reduction on what once existed. The fate of the main evening news is relevant, too. I could never quite understand why the BBC chose to move its news so that it clashed directly with the main commercial channel's news. That was carried out at very short notice, and broadcasting the two main channels' news bulletins simultaneously cannot have been in the interests of promoting greater understanding and interest in news and current affairs among the public.

John Greenway (Conservative, Ryedale)

Does my hon. Friend agree that the debate is really about the fact that there was virtually no public debate on the governors' decision to sanction moving the news from 9 o'clock to 10 o'clock? In contrast, there was a massive public debate about moving ''News at Ten'' on ITV to 11 o'clock and then back to 10 o'clock, simply because the Independent Television Commission had powers that clearly did not exist in respect of the BBC. Is not that the issue that we are trying to address with the new clauses?

Peter Atkinson (Conservative, Hexham)

Order. Before the hon. Member for Maldon and East Chelmsford replies, I must warn the Committee that the debate on the examples is in danger of overtaking the debate on the substance.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I take your warning, Mr. Atkinson, but it is difficult to debate why the BBC should come under Ofcom without pointing to some of the consequences of recent decisions that have been taken without an independent arbiter. I hope that you will accept that I am not deliberately straying from my amendments. I regard these arguments as central in terms of why the amendments are necessary.

The point raised by my hon. Friend the Member for Ryedale (Mr. Greenway) was entirely right. He referred to the governors' decision to sanction moving the main evening news bulletin. The fact that they did not say anything could be taken as their agreement, but it seems extraordinary, as my hon. Friend suggests, that that decision went through on the nod, although the decision about the ITV news provoked considerable public debate.

John Greenway (Conservative, Ryedale)

And a Select Committee inquiry.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Indeed.

There is a real danger that the rest of the Committee stage will be taken up with debating my next point, but there is great strength of feeling in the House about the BBC's coverage of Parliament and politics generally. I have received assurances from the head of news and current affairs—as, I am sure, have other hon. Members—that the new BBC political programmes will offer at least as much coverage as those that went before. However, many of us regret the passing of ''On the Record'' and ''Despatch Box'', and we will look with a critical eye at some of those new programmes. The idea that politics can be lumped into a slot late on Thursday night and that that somehow delivers the BBC's political remit raises real concern.

Brian White (Labour, North East Milton Keynes)

Is not the hon. Gentleman falling into the trap of assuming that our values in this place are the values of most people outside? One reason why politicians and politics have fallen into disrepute is that we carry on pretending that there was a golden age of ''Panorama'' and other current affairs broadcasting, rather than dealing with real issues and real people outside.

John Whittingdale (Conservative, Maldon and East Chelmsford)

As I said, there is a danger that we shall get into a debate about the role of the coverage of Parliament and similar issues, but I shall resist that temptation. Yes, political programming must be relevant and interesting, but it is a retrograde step to conclude that that can be achieved only by not showing the men in grey suits who have been elected to the Westminster Parliament and by substituting for them the stars of stage and screen giving their political views.

Part of the BBC's job is to make Parliament interesting, and to persuade people that what happens in this place matters and that they should take account of what is said during debates and of what happens during our proceedings. Simply saying that nobody is interested in Parliament anymore is a desperately defeatist view and I hope that that is not the case; I do not believe that it is. The BBC cannot fail to be aware of concerns. It has heard them from almost every hon. Member because all of us have an interest in ensuring that our proceedings receive proper coverage. We shall look critically at the BBC's political coverage during the next few months to try to ensure that its prominence is not reduced.

Andrew Lansley (Conservative, South Cambridgeshire)

My hon. Friend's examples work well to illustrate a particular argument, especially those examples relating to changes concerning the evening news programmes. They illustrate that amendments do not bite on such issues concerning approvals of, or changes to, services because those issues are covered by the charter and by the Secretary of State. My hon. Friend illustrates the discontinuity between how we might change the regulatory structure of the Independent Television Commission carried forward into Ofcom and the regulatory oversight of the Secretary of State. Those things are substantially different. We will not be able to influence such changes of services unless we reach back into the charter, either in the way in which my hon. Friend proposes or the way in which I do.

John Whittingdale (Conservative, Maldon and East Chelmsford)

My hon. Friend uses my argument to promote his amendment. I have huge

sympathy with his amendment. All the amendments in the group are designed to achieve the same overall objective; to bring the BBC's activities under external scrutiny and independent monitoring, which does not currently exist. I do not hesitate to support his amendment to give Ofcom a remit in the delivery of the BBC charter, and I hope that he will support our amendments in the same way.

I have talked mainly about mainstream BBC activities but it is relevant to examine other services, and especially digital services.

Simon Thomas (Plaid Cymru, Ceredigion)

I am sure that the hon. Gentleman has struck a chord with several people by bemoaning what has happened to the BBC during the past few years. Will he reflect that the BBC is governed by its governors, who are appointed by the Secretary of State? He seems to have little faith in that body of people and wants to replace it with Ofcom, which is also a body of people appointed by the Secretary of State. What credibility has the suggestion that Ofcom will be more amenable to his views on the BBC than the present BBC board of governors? In fact, I would have thought that the present BBC board of governors has views closer to his than those of the new Ofcom body.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Obviously, to some extent, we have to rest on the competence and independence of the appointees to Ofcom. The difference is that people who represent Ofcom are outside the BBC. A large part of the problem arises from the dual role of BBC governors. On the one hand, they are supposed to be external scrutineers and arbiters of complaints, but on the other hand they are the senior management tier of the BBC. There is a fundamental conflict between those roles. That should be addressed and that is why I would welcome scrutiny by an independent body as a significant improvement to the current regime; although, admittedly, that body would still be made up of appointees of the Secretary of State.

I want to say a little about several new services that have been launched recently. The BBC has been accused by several people in the industry of using the licence fee for services that are not universally available because they go out on digital only, and that those could be provided as easily by the commercial sector. The public service value of the new BBC 3, which is supposedly a youth channel, was somewhat unclear to begin with, and the Secretary of State initially withheld her approval until the BBC gave greater assurances that the channel would be distinctive and not simply replicate existing services. There are still concerns that BBC 3 looks awfully like some of what Channel 4 and E4 currently produce. I wonder whether, when the Secretary of State approved the channel, she knew that BBC intended to show ''EastEnders'' on BBC 3 24 hours before it was on the main channel, and therefore only to the minority who had access to digital television.

Michael Fabricant (Conservative, Lichfield)

I sympathise and agree with the general thrust of my hon. Friend's comments. However, he must forgive me, but following his argument, would he say that it was wrong to launch colour television on BBC 2 when at the time BBC 2

was available only to a small number of viewers? If it is not started somewhere, it will never take off.

John Whittingdale (Conservative, Maldon and East Chelmsford)

My hon. Friend is right. That is a crucial question, but the question is whether BBC 3 is starting anything new and innovative or is simply replicating something that already exists and is provided by a commercial channel. The Secretary of State was right to impose strict requirements on the BBC to ensure that BBC 3 was going to be new and innovative and a demonstration of public service broadcasting. However, my hon. Friend should understand that some are still concerned about whether it is doing that, especially considering what we are seeing in BBC 3's schedules; that includes the example of ''EastEnders'', which could hardly be described as new. I should be interested to know whether that aspect of programming policy was debated in the Secretary of State's discussions with the BBC on the launch of BBC 3 or whether she discovered it by reading the newspapers a few weeks after she approved BBC 3, as did the rest of us.

Andrew Robathan (Conservative, Blaby)

My hon. Friend says that ''EastEnders'' is not new. I do not know whether he has ever watched it, but I have. It is certainly not innovative, so does he think that the BBC is demonstrating a public service by broadcasting it?

John Whittingdale (Conservative, Maldon and East Chelmsford)

Actually, often yes. I am not as a devoted viewer of ''EastEnders'' as I would perhaps like to be, although the new sitting hours may give us an additional opportunity to rush home to watch it. My hon. Friend should know that I recently participated in a competition with five other hon. Members, which was organised by the ''PM'' radio programme. We were asked whether we could recognise various celebrities who appeared on television, and I was the only one who knew who Little Mo was. My ''EastEnders'' credentials are pretty good, and I think that the programme often represents high-quality public service programming and sometimes gets flak unfairly. If I made up a list of BBC programmes that were a long way from public service broadcasting, ''EastEnders'' would not be high on it.

I am happy to defend ''EastEnders'', but I do not want to be diverted too much from the main thrust of my remarks. We need to consider the current regulatory regime. Certainly, the existing requirements are failing to inspire confidence. As for compromising the role of the governors, the amendment is designed to help them by clarifying what is, at the moment, a terribly ambiguous role. The point of the amendment is not to remove all responsibility from the governors; they will still have an important job as trustees of the public interest at the highest level within the BBC. However, it is unreasonable to continue to expect the governors to act as the BBC's defendant, judge and jury when it comes to assessing how well the BBC is measuring up to its remit. That has to be the job of an outside regulator with a duty to survey the whole of the public service terrain.

That is the purpose of new clause 18. It would allow Ofcom to do its job properly, and allow the corporation to stay at arm's length from the Government, which we agree is desirable. At the moment, the Secretary of State has to carry out a lot of the requirements that we would like to be passed to Ofcom. Giving the responsibility to Ofcom would add to the safeguards ensuring that there is no undue interference from Ministers in the activities of the BBC. It would increase public confidence if the BBC's public service remit were protected both by the governors internally and by a degree of outside scrutiny.

Kim Howells (Labour, Pontypridd)

I have been listening fascinated to that tremendous defence of heavily regulated public service broadcasting. From the point of view of someone who believes in competition as a major element in all that, may I ask the hon. Gentleman what role the BBC governors would have in the scenario that he has painted for us?

John Whittingdale (Conservative, Maldon and East Chelmsford)

They would, I hope, be internal regulators monitoring the activity of the BBC. They would flag up concerns and try to ensure that people did not have grounds to complain to the external regulator.

The BBC's case is a bit like that of British Telecom. Clearly, British Telecom needs a very strong chairman and board to oversee its activities, but that is not to say that it should not also be subject to a degree of external regulation. We spent some time talking about British Telecom in our discussions on the earlier half of the Bill. The parallel is quite close. If the provisions in the second half of the Bill, which is to do with broadcasting, were applied in the first half of the Bill, the effect would be that Ofcom would regulate all the mobile telephone companies and all the alternative fixed-line providers such as Colt, Thus and Energis, but the biggest player in the market, British Telecom, would be wholly outside the scope of the regulator. That is clearly ridiculous, both for telecoms and broadcasting.

I have talked about new clause 18. I shall now move on to new clause 19, which is complementary to new clause 18. New clause 19 would give Ofcom a formal role in the approval and monitoring processes for applications for new BBC services. It would give Ofcom the ability to comment on significant changes made to long-standing BBC services such as BBC 1 and BBC 2. Given the complexity of the BBC's status under the royal charter, the Secretary of State will retain final responsibility for approving new services and changes to existing services.

However, it seems sensible that, before approval is given by the Secretary of State, Ofcom should be obliged to: prepare and publish a report commenting on whether the proposed service would, for example, be compatible with the BBC's primary public service role as set out in the charter and the agreement; say whether the new service would provide a level of value to the public proportionate to its likely impact on the

market; say whether the service would be universally accessible and free at the point of use within a reasonable period; and say whether it would represent value for licence fee payers. New clause 19 would also give Ofcom a duty to review from time to time the performance of new or altered BBC services to ensure that they continue to comply with the terms of the approval that was granted by the Secretary of State.

As I said, the clamour of concern about some recently launched BBC services has grown louder and louder. Those new services have come about because of digital technology and because the Government decided to allow the BBC an exceptional and extremely substantial increase in the licence fee to fund a massive digital expansion. As a result, the number of BBC services has risen in the past few years from two television channels and four radio stations, as well as the local network, to eight core television channels and eleven national radio stations—not to mention the BBC's expansion into online and interactive services, and all the channels that it now makes available through commercially funded operations and joint ventures, such as UK Gold. It was inevitable that that a huge increase in the number of BBC services would lead to questions in the public mind about what monitoring had taken place and what scrutiny had been given to applications to ensure that they represented proper activity for the BBC and a sensible use of licence fee payers' money—especially when many of the services are still accessible by only a minority of the population.

In earlier discussions on the Bill, we have talked about digital switchover and the importance of encouraging people to access digital television. I strongly support that. However, the fact that everybody has to pay for services that only a minority of people can receive raises serious questions and leads inevitably to complaints from some people who have to finance services that they are completely unable to watch.

The Government have put in place a more robust and effective oversight of the approvals and review processes for new BBC services. In particular, the previous Secretary of State for Culture, Media and Sport, the right hon. Member for Islington, South and Finsbury (Mr. Smith), announced details for a new process for approving BBC plans for licence fee-funded services. Under that process, third parties, including regulators, are consulted prior to decisions on new services. Newly approved services are also subject to periodic review. That is obviously a welcome development.

The approvals process has been applied to the stream of applications that has come in from the BBC—including, for instance, applications for its new children's channels, for BBC 3 and for BBC 4. The case of BBC 3 in particular has led to additional safeguards being put in place. In a pretty much unprecedented move, the Secretary of State sought assistance from the Independent Television Commission to assess the potential impact of BBC 3 on the commercial operators. That development was welcome and very much in the right direction.

Although it makes sense that the Secretary of State and ultimately the Parliament oversee the charter and the licence fee, we do not feel that the Secretary of State should have control over the consultation and review process. It seems to us to make more sense that Ofcom, as a regulator of the broadcasting industry that has the staff and expertise to carry out its work quickly and effectively, be given the responsibility. In spite of the robustness of the Secretary of State's response to the initial BBC 3 application, there is still widespread suspicion that there is a very close relationship between the BBC and the Department for Culture, Media and Sport and that that closeness sometimes represents a conflict of interests. A system of cosy deals is perpetuated—deals that are in the interests of the BBC and the Department rather than of the licence fee payer and the viewer.

Is it right that Government Ministers with a direct political interest in the type of news coverage that the BBC provides should have a direct role in the oversight of the process? Is that not another area in which it would be much more sensible for the BBC to be subject to external regulation?

I will not repeat what I have said about some BBC services, but it is worth quickly considering one or two other examples. In many ways, BBC 4 represents what the BBC should be about. It is certainly public service programming, but as an illustration of the dangers that arise even when the BBC is providing high-quality arts programming of the sort that we believe to be desirable, I draw the Committee's attention to a report that appeared before Christmas in the Financial Times. Entitled ''Martyr's fate for Classics channel'', it stated:

''Digital Classics blamed the launch of BBC4 this year for its decision to close its UK digital classical music television . . . The company which ran up losses of £12.3 million . . . for the year to June 30th, said the BBC's free digital cultural channel had 'distorted the digital market'.''

The chief executive of the company stressed that the company's anger was directed more at the Government for allowing the BBC to launch such a channel than at the BBC itself. He said:

''Think of us as a Christian martyr after someone let a lion out.''

That is not to say that the BBC was wrong or the Government were wrong to approve BBC 4, but it is an illustration that, even in such an area, there will be an impact on commercial providers that may, as the case of Digital Classics demonstrates, put them out of business. That, too, is why it is all the more important that there is an external body that will examine complaints from commercial organisations that consider that they will be jeopardised by the activities of the BBC.

Simon Thomas (Plaid Cymru, Ceredigion)

The hon. Gentleman gave a tenuous example of the potential impact. Although I do not for one moment doubt that the BBC operates in a competitive market and is competing against commercial operators, is it not an attraction to switch over to digital that there is a wide range of public service broadcasting under the BBC brand? Is it not also the case that the majority of people watch BBC and ITV programmes on satellite, not those niche channels to which the hon. Gentleman referred an hour and a quarter ago? He is arguing against himself.

It is the BBC going digital that will, in time, create the revolution from which commercial companies will benefit.

John Whittingdale (Conservative, Maldon and East Chelmsford)

There are two separate points to be made. Obviously, each individual channel needs to be examined to see whether it represents a good use of public money and whether the benefit outweighs a potential impact that each channel may have on an existing commercial company. That needs to be examined carefully and should be subject to external regulation.

I have never argued that the BBC should not be on a digital platform. To encourage digital switchover, it is essential that the main public service broadcaster be on digital. If the hon. Gentleman thinks that I am saying that the BBC should not have invested in digital channels, he has not understood my argument. I am saying that such channels are bound to have an impact and that they should be subject to external scrutiny.

I shall briefly outline some other examples of the wide concern that has been expressed. I have mentioned BBC 3, BBC 4 and BBC News 24. Recently, the BBC has launched its children's channels, CBBC and CBeebies. I occasionally watch them, too—I have two small children, so I experience the channels under duress in most cases. There is a role for public service broadcasting in children's programming, and some people argue that it is even more important that we have public service broadcasting in programmes that are designed for children, rather than the diet of Japanese animated features involving extreme violence, which my children seem to prefer.

Some of the BBC's output gives rise to concern. During Christmas, I watched a programme called ''Cavegirl'', which was originally screened on the digital channel, but which has now moved into the main BBC output. The programme raised several concerns about the type of person who is likely to watch it, given that it consists mainly of a very young girl who lives in neanderthal times and wears very little clothing. I cannot quite see how that fits in with the public service remit. The Times reported that when the controller of CBBC was asked

''why it was necessary for the characters to wear fur bikinis, he said: 'They are wearing the clothes of the time. It is completely authentic.' ''

The title of that article was ''CBBC's saucy Stone Age provokes outrage''. The clothes did not look particularly authentic to me.

With regard to children's programming, concerns have been raised about the impact on existing children's channels, of which there are now a considerable number. Some of them provide high-quality programming without advertising. Currently, eight children's channels are available on digital television, and many of the providers of those channels have been deeply concerned not just about the programming itself, but about the way in which the BBC exploits that programming by producing associated products. If one visits toy fairs, one discovers BBC-branded merchandise from

programmes such as the Tweenies and the Teletubbies—even McDonald's are moving into something called ''Tweenies Happy Meals.''

The BBC has been open about its aims. When CBBC was launched, its controller said:

''Our objective in year one is to become the number one kids channel''.

I am unsure whether that should have been the main objective of the BBC's children's channels. I think that its objective should have been to provide high-quality and desirable educational programming as an alternative to the Cartoon Network, and not necessarily to compete with the Cartoon Network. That is another example of a BBC activity that is causing concern.

I will not discuss BBC News 24 again, but my hon. Friend has talked about the launch of the UK History channel. That looks almost identical to the existing History Channel, which has been around for a long time. The BBC's magazine said that the channel would be launched in

''direct competition with the History Channel and Discovery Civilisations.''

Whether it is desirable to have another history channel is debatable, but it must be scrutinised to determine whether it will have a detrimental commercial impact on existing providers. That has been left to the BBC to determine. When the BBC was given approval for its joint ventures with Flextech under the UKTV umbrella, it was originally intended that there should be only eight such channels. However, two years ago, the Government suddenly decided to remove that limit, and to allow the BBC to have any number of these joint venture channels. That decision was taken without any consultation or publicity, and the existing commercial TV channel providers were surprised when they suddenly discovered that one of the restraints on the BBC had been removed.

Brian White (Labour, North East Milton Keynes)

I am curious about the hon. Gentleman's argument. One of the reasons that Ofcom was set up was to examine competition issues; that comes out of the European directive on telecoms. However, the hon. Gentleman is arguing that there should be a commercial monopoly, and that there should not be competition from the BBC with regard to some of these individual programmes. Is he arguing that Ofcom should endorse a commercial monopoly?

John Whittingdale (Conservative, Maldon and East Chelmsford)

It is not a monopoly because there are several competing providers—I said that there were eight existing children's channels, for instance.

I am not arguing that the BBC should not be given approval: I am saying that serious questions are being raised about the impact of these new BBC channels, and that the existing regulatory structure is insufficient to convince people that those concerns are being properly addressed. Therefore, the purpose of our amendments is to give people the confidence that there will be sufficient external scrutiny.

While I am on the question of UKTV and the joint ventures, there is an interesting question about whether Ofcom will have responsibility for regulating and monitoring those channels. UKTV is a joint venture between the BBC and commercial broadcasters, so perhaps they should be subject to a degree of external regulation. Currently, however, the BBC seems to be under no obligation to supply information to a regulator, and there is concern that costs associated with providing those channels will be hidden by the BBC, perhaps to make it appear that UKTV is in better shape than it really is. Ofcom will need to address that.

While going through these examples, I must touch on the BBC's activities on the internet. Last week, the Government finally approved the online digital curriculum, despite the huge concerns expressed by the existing providers of educational software that that would drive them out of the market. The safeguards put in place by the Secretary of State may or may not prove sufficient, but again that is an example of where it would have been far better to have external scrutiny.

I draw the Minister's attention to the remarks of the chairman of the British Internet Publishers Alliance:

''While there is properly a migration path for some BBC services from broadcast to internet distribution, the lack of clear boundaries to the Corporation's amply funded activities has engendered a . . . degree of market distortion and uncertainty that the commercial sector remains severely disadvantaged. It is extremely difficult to compete with a body enjoying both protection from normal commercial disciplines, and peerless opportunities for cross-promotion from existing broadcast activities.''

I have not gone into the question of cross-promotion, although it was mentioned. The BBC constantly promotes other BBC operations on its main channels. It would cost millions of pounds for ordinary commercial broadcasters or publishers to purchase the amount of television exposure that the BBC provides for its own products, yet the BBC is under no constraint in this respect.

ITN, among other organisations, has expressed particular concern about the fair trading commitment. It points to a number of examples of BBC Worldwide flouting that commitment by promoting BBC world news. One instance is its promotion in the United States. There is talk of a joint venture with an American broadcaster on the promotion of in-flight news services for British Airways and on-board news for the Heathrow express rail link. Each of those services is offered by BBC World free of charge or with big discounts to squeeze out commercial operators, even though the fair trading commitment explicitly forbids such practices.

When people have complained about unfair competition from the BBC, all too often they have finally received a letter back from the Secretary of State saying, ''We have asked the chairman of the board of governors of the BBC whether licence fee payers' money is being used to subsidise unfair competition with commercial providers, and we have been given an absolute assurance that it is not.'' That is simply not sufficient. It does not inspire confidence to say that the governors have been asked whether they are cheating and they say that they are not.

I shall conclude by quoting Mr. David Liddiment, a well known figure in the broadcasting world, who recently gave up his post as ITV director of programmes. He said that, as a result of the Bill,

''BBC governors will remain judge and jury of the corporation's activities, almost entirely outside the jurisdiction of new regulator Ofcom.''

The Government seem determined not to close that gaping hole in a good Bill, and all the evidence shows that that may be a mistake. He continues:

''If the BBC is, as it claims, the most regulated broadcaster in Britain, this must happen invisibly, because I can't see it. There's little evidence of the governors having an objective perspective on the organisation for which they are accountable.''

I believe that the case we have made for bringing the BBC under Ofcom's remit is almost unarguable. That case is not just supported by us, but by a wide range of people in the broadcasting and political worlds, and on Second Reading a number of Government Members supported it. If the Government are not persuaded of our argument, I shall be disappointed, but there is a fall-back and I point the Minister in the direction of new clause 29.

New clause 29 is designed to provide a mechanism in future, whereby the Government could extend Ofcom's remit to take in the activities of the BBC. My hon. Friend the Member for South Cambridgeshire said that there was a fear that when the charter was to be renewed people might say, ''Actually the BBC needs to be brought under external regulation. Ofcom has proved itself, and we think that that should happen''. He argued that they would say, ''Not another broadcasting or communications Bill. The last thing we want to do is to open all that up again and have primary legislation. There is all the competition in the legislation Committee, and the earliest possible time for Parliament to reconsider these matters is at least two or three years hence.'' There would be real obstacles to obtaining the time to revisit such matters in the House.

New clause 29 would give the Secretary of State powers to lay an order at a future date that would allow Ofcom to take on the regulation of the BBC. I hope that the Minister has been persuaded by the power of our argument that Ofcom should take on that role. If he is not willing to accept that case, perhaps he will at least consider new clause 29, which would provide the mechanism at some future date to bring the BBC under the external regulation that I believe it desperately needs. If the new clause is introduced, we would not need to go through this process again, and hon. Members would not have to listen to me speak for as long as I have spoken today. I am happy to support the amendments.

Nick Harvey (Liberal Democrat, North Devon)

The BBC is a unique, large broadcaster. No other broadcaster has a funding flow like the BBC, nor could any aspire to that. In return for that huge sum of money, the BBC has a wide public service remit, so we should regard it as unique. The BBC is not, in any sense, a creature of the market. That is not to say that it exists or operates in splendid isolation, but it cannot be regarded as simply another player in the market. The BBC is, perhaps, a market maker and others have to react to that.

I believe that the BBC, including the content of its programmes and the fulfilment of its public service remit, needs far more external regulation than any other television broadcaster. We must ask ourselves where that regulation should logically come from and how it should be put in place.

There has been much criticism of the current BBC governors from the hon. Member for South Cambridgeshire in his opening remarks and from the hon. Member for Maldon and East Chelmsford. The board of governors seems to be in a cosy relationship with BBC management. The governors are almost inside the BBC. A constant refrain from the hon. Member for Maldon and East Chelmsford was that the BBC should be subject to external regulation. The governors of the BBC are supposed to constitute external regulation, but many of us accept that that is not what they do. To that extent, some of the criticisms are right and I echo those made by the hon. Member for South Cambridgeshire.

We will get the opportunity to visit all the relevant issues and consider what constitutes suitable governance for the BBC in the future when we debate the royal charter, which must be renewed at the end of 2006. The new charter must put in place something significantly different. The current royal charter may arguably have served the BBC well over the decades, but it looks increasingly antiquated in the modern, vastly changed broadcasting market. However, such issues will be debated at a later stage.

We must decide whether inadequacies in the existing arrangements are best dealt with by placing the BBC entirely under Ofcom. To arrive at a view, we must consider what Ofcom is and what it will do. Earlier in our proceedings, we debated whether the general duties of Ofcom should include a responsibility to address issues of citizenship. The Minister objected to the word ''citizen'' because it could be confused with issues of nationality or immigration. Fair enough, let us not worry about the terminology. However, many of us—I was pleased that the Conservatives were also arguing the case—said that Ofcom should have responsibility for the public interest.

Ofcom should not only be responsible for commercial and competition considerations and for examining the interests of the consumer. Its concerns should be wider and include the public interest. The Government resisted that idea, and the Bill as drafted does not include a public interest remit for Ofcom. If responsibility for patrolling the huge funds that come annually from licence fees and policing the performance of this vast public service remit is to be placed on Ofcom as the Bill is currently drafted, we will be putting responsibility in the hands of a body with no wider public interest remit. That would be a stupid thing to do.

The hon. Member for Ceredigion challenged the hon. Member for Maldon and East Chelmsford to explain why he had such a preference for transferring responsibility from BBC governors appointed by the Secretary of State to Ofcom staff appointed by the Secretary of State. That is a good question. At least

BBC governors have a precise public service remit and a specific responsibility to examine all the cultural issues—for want of a better way of putting it—that make up the BBC remit. Ofcom will have none of that—it is essentially an economic regulator. The content board that will examine some cultural issues is a subsidiary activity of Ofcom, and by no means its primary activity.

Brian White (Labour, North East Milton Keynes)

Does Ofcom not have a duty under the Bill to examine the ecology of television and to produce reports on that? Given that there is a public service ethos, does that not go against what the hon. Gentleman suggests?

Nick Harvey (Liberal Democrat, North Devon)

It is one responsibility but it is nowhere near sufficiently comprehensive or detailed to equip Ofcom to examine the BBC's entire performance on its public service remit. I am glad that Ofcom has the responsibility—it should have it—but that is a world away from giving it detailed nuts-and-bolts tools to regulate the BBC. It is right that Ofcom has the ability to present reports and to make recommendations about the impact of the BBC's activities on the broadcasting ecology. Both the Secretary of State in Parliament and the BBC governors should pay heed to reports that Ofcom produces about the impact of the BBC's activities on the overall broadcasting sector. That does not necessarily make Ofcom a fit body to patrol all the BBC's activities.

Ofcom is a new body that is yet to get up and running. It will bring together five existing regulators and will use three relatively new pieces of legislation. It is unproven in every sense. After several years of operation, it might prove itself and be capable of taking on that role after a refinement to its remit. However, it would be a huge gamble to give it responsibility at its outset for something as huge and precious as the BBC.

A couple of months ago, I had a meeting with a Taiwanese gentleman with responsibility for cultural industries. I suspect that one or two other hon. Members might have met the gentleman because his diary secretary was nothing if not a little persistent. He told me that the Taiwanese were at the forefront of the digital revolution, that they have cable in virtually every home and that almost every home has multi-channel viewing. They are thoroughly pleased with themselves about the hardware developments that they have made. However, they realised that they made a significant mistake: they liberalised all their content and all their culture industries in one fell swoop. Consequently, they allowed foreign owners into their television companies and consolidation of their television companies, both of which we will come on to discuss. They also allowed Americans, especially, to buy into their film and music industries.

In a short time, the number of films produced in Taiwan each year had plummeted to a tiny fraction of what it had been. The amount of music produced had plummeted and the amount of Americanisation of the content of their television programming had grown exponentially. After the gentleman had related the sad

tale, he said that the one defence that we in Britain have against such things is the BBC. He said, ''Whatever you do, for God's sake protect that at all costs and do not simply hurl it to the market.'' The implications of the arguments advanced by the hon. Member for Maldon and East Chelmsford are that exactly that would happen and the mistake that the Taiwanese official warned me about would be made.

Michael Fabricant (Conservative, Lichfield)

Does the hon. Gentleman take comfort in the fact that Broadcasting & Cable magazine, which is published in the United States, said over Christmas that although American television programmes were shown at prime time by European commercial broadcasters 10 years ago, they have now been relegated to off-peak times? The magazine was bemoaning the fact that the Americanisation of overseas broadcasters is becoming less, not more, prevalent.

Nick Harvey (Liberal Democrat, North Devon)

I sincerely doubt that that is true in the global context. The hon. Gentleman's specific point may bear examination but, nevertheless, the growth of American culture to the point almost of worldwide takeover is a phenomenon that cannot seriously be queried.

Michael Fabricant (Conservative, Lichfield)

What about the French?

Nick Harvey (Liberal Democrat, North Devon)

I do not suggest going quite as far as the French in protecting ourselves from that takeover, but I take the hon. Gentleman's point.

Some of the arguments that we heard during the previous contribution were contradictory. What do we want from the BBC? Do we want it to do the things that the market either is not doing or cannot do? If that is what we want, we have to accept that the BBC will become a ghetto—a sort of cranks' corner. Some of the specific cases that the hon. Member for Maldon and East Chelmsford mentioned seemed contradictory. For example, he said that the BBC used to produce ''Top of the Pops'' vinyls, but that he could see no need for it to do so any longer, because others could do it. He then said that ''EastEnders'' was a first-class example of public service broadcasting and that he would not want, at any cost, to see it go. I cannot see the difference between the two cases. Clearly, the commercial sector is perfectly capable of producing high-quality soap operas. If we start applying the logic that the BBC should only do things that others cannot or do not do, we would not allow the BBC to produce shows such as ''EastEnders''. We must have a clear idea of what we want the BBC to do.

The hon. Gentleman bemoaned the passing of various current affairs programmes and said what a shame it was that ''Panorama'' had been downgraded. He mentioned another couple of programmes; my hon. Friend the Member for Sheffield, Hallam (Mr. Allan) pointed out that they happened to be ITV programmes but we understood the point that the hon. Gentleman was making. Does he not accept that, unless BBC1 is producing the populist programmes that he bemoans, by the time it comes along with ''Panorama'' or with its coverage of Parliament—which the hon. Gentleman also considers to have been downgraded—there will not be anyone tuned in to

watch them? The logic of the BBC building an audience through popular programming is perfectly sound. In an era in which more and more television viewing will become, because of multiple channels, à la carte, there is nevertheless real value in having a high quality menu fixé.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The hon. Gentleman is advancing an argument that I have heard from the BBC on a number of occasions—the argument being that the only way in which one can get someone to watch an informative and educative programme is by putting on something very popular immediately beforehand. I have always regarded that as a somewhat patronising argument. I am not sure that it even applies now because, with the development of multi-channel television and things such as TiVos and VCRs, scheduling is no longer in the hands of programme makers, but in the hands of the viewer who can choose when he wishes to watch a programme. I think that that is a very positive development.

Nick Harvey (Liberal Democrat, North Devon)

I do not disagree with the hon. Gentleman but I am not sure that the situation is as positive as he makes out. I do not feel patronised when the BBC or any other channel presents a trailer of something that is coming up. Some of the best programmes that I have ever seen I discovered by accident because I happened to have been tuned in to the particular station when the programme came on. Even in this multi-channel era, and even in the era of the new technologies that the hon. Gentleman describes, a great deal of channel loyalty still exists. People will go to particular channels because they have enjoyed programmes there before and want to find out what is coming up in future. I am not suggesting a restriction of choice but, if people have 500 or more channels to choose from, and if all viewing is done by people choosing what they want, when they want it—which they must be allowed to—people will never find some of the best programming. Serendipity makes for some of the best TV viewing. If we do not collect top-quality programming in particular places, there is a real risk that audiences will not be built and that people will never find that programming. If the hon. Gentleman cannot see the ongoing value of mixed channels such as BBC1 and ITV 1 and others in the multi-channel era, I am very surprised. I do not believe that it is offensive, or demeaning to consumers, that those sorts of channels should lead them into watching other things.

The BBC, by definition, distorts the market. Everything it does distorts the market. It has what the market might reasonably view as a completely unfair stream of money. It does not have to tout itself in the advertising market with its ups and downs. Every time that it begins a new service it distorts the market. We had an exchange a few minutes ago about the History Channel and the challenge posed to it by UKTV. We welcome competition. It was no bad thing for a second history channel to come into being, but each time the BBC introduces a new service it distorts the market.

If the responsibility for deciding what the BBC should be allowed to do rests with a body whose primary responsibility is to ensure fair competition, that body will inevitably conclude that more and more of what the BBC does should not be allowed and that in virtually no circumstances should it be allowed to commence a new service. Ofcom, whose primary responsibilities are to ensure fair competition, cannot make decisions about whether a new service is in the public interest. The Secretary of State is much better placed to make those decisions than an economic regulator who has not even been given a responsibility to ensure public interest considerations.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The hon. Gentleman suggested earlier that one or two or my remarks were contradictory. He seems to be saying that he thinks such matters should rest with the Secretary of State and that Ofcom should not have responsibility, at least at this stage, yet on Thursday he issued a press release, the first line of which was:

''OFCOM should be asked to keep the BBC under constant review from day one''.

His argument is somewhat contradictory because that is precisely what new clause 19 is designed to achieve.

Nick Harvey (Liberal Democrat, North Devon)

The hon. Gentleman is quite deliberately taking what is essentially a commercial operation by the BBC, which I do believe should be observed by Ofcom, and suggesting that that is my approach to the entire range of the BBC's public service activity, which it is not. The Bill provides for Ofcom to have some oversight of BBC activities. As the hon. Member for Milton Keynes, North-East (Brian White) observed some time ago, Ofcom is also expected to present reports about the impact of the BBC's activities on the general broadcasting ecology, all of which is entirely right. The press release should be seen in that context.

Overall responsibility for the wide public remit that the BBC is expected to fulfil is not a matter that ought to be dealt with primarily by Ofcom. Ultimately, the Secretary of State, who has a brief to consider cultural issues, should make those decisions. It is absolutely right that, when approving any new service, the Secretary of State should have on her desk a report from Ofcom about the impact it will have on the market and on the broadcasting ecology, to take up that phrase. That is infinitely preferable to the decision being made by Ofcom with a note on its desk from the Secretary of State about the cultural issues. The BBC has its public service remit and the market has to respond to what the Secretary of State decides it should be allowed to do in fulfilling that remit and using the money it has from the licence—not the other way around.

The governors appear too cosy—as though they are half inside the BBC. The fact that some people can refer to the chairman of the BBC board of governors as the ''chairman of the BBC'' proves that in the public perception and in journalistic shorthand that relationship sometimes appears to be far too close. In future, it will be far healthier for the BBC to have a board of directors like any other company or

organisation, and for an organisation more closely resembling an inspectorate to make regulation. Such an inspectorate would be equipped with public service duties and the wherewithal to examine whether the BBC is fulfilling its public service. It would not be in the least like an economic regulator, which does not have the appropriate remit to fulfil this work.

Individually, some of the amendments are superficially quite attractive. Collectively, however, it is clear that the Conservatives are trying to create a situation in which Ofcom could, on the nod, be given responsibility for the BBC at some point in future. I am especially unhappy about that. Such a proposal should necessitate a proper, full, vigorous debate in Parliament. We would certainly need to go right back to the beginning and reconsider Ofcom's general duties, and to write into those duties public interest responsibility that it does not currently have. We should not be able to do that easily or by sleight of hand. This is a fundamental issue, which should make us return to the drawing board.

The amendments should be resisted in general. It would not be in the public interest for such responsibility to be given by the back door. We must wait until the charter renewal process has been concluded. If it is then thought to be right to extend Ofcom's remit over the BBC, primary legislation will required. That does not mean that we must have a Bill with as many clauses as this one. It could be a perfectly controllable, small Bill, but there is no justification for responsibility being conferred by the back door, which the amendments would do.

Simon Thomas (Plaid Cymru, Ceredigion)

This morning's debate has proved that debating television does not make good television.

Michael Fabricant (Conservative, Lichfield)

We are being broadcast.

Simon Thomas (Plaid Cymru, Ceredigion)

We are, but presumably by radio, not by television.

We have had an interesting debate, but I did not find any of the arguments made by the hon. Member for Maldon and East Chelmsford enticing until the last three minutes of his speech when he discussed new clause 29, which appears to have some merit in that it at least tries to look to the future. The new clause tabled by the hon. Member for South Cambridgeshire is similar.

However, I did not find the general tenor of the remarks made by the hon. Member for Maldon and East Chelmsford at all attractive. He began by saying that we all agreed with Ofcom. I remind him that the reason that we voted on Second Reading—I do not know if he was present—was that there was a reasoned amendment standing in my name. Some of us are, in fact, not too keen on Ofcom, which we regard as too much of an economic regulator whose remit is not sufficiently in the public interest. The Committee has had that debate, but has not resolved to give Ofcom a public interest role.

That supports the view of the spokesman for the Liberal Democrats, the hon. Member for North Devon (Nick Harvey), who said, rightly, that it

would be a retrograde step to import into the Bill such a role for Ofcom when the whole reason for Ofcom, as set out in clause 3, is simply

''to further the interests of consumers in relevant markets, where appropriate by promoting competition''.

I do not see how the BBC, as the public sector broadcaster in the United Kingdom, fits comfortably within that Ofcom remit. I accept the hon. Gentleman's arguments that, if we were to include the BBC in Ofcom's remit, we would have to discuss again the numerous aspects of Ofcom.

I will give an example from the Welsh perspective. It is perhaps ironic that a Member from Wales should defend the BBC governors after the Anne Robinson affair, but we forgive and forget. With the development of Ofcom and the challenges of devolution during the past few years, the BBC has focused more on the public interest, especially with the role of the BBC governor for Wales, the Broadcasting Council for Wales and similar institutions in Scotland and Northern Ireland. Therefore, there is huge public interest outwith the Bill, which we earlier decided not to include in the Bill's framework but is retained by our main public sector and interest broadcaster. We would be remiss if we tried de facto to sweep away what remains a strong public accountability role in the BBC by making the changes in question.

I accept that that public accountability role can be obtuse on occasions. The hon. Members for Maldon and East Chelmsford and for South Cambridgeshire gave several examples of where that role has been blurred in the past and how the governors' non-executive role has become executive as they have become bound up in the management of the BBC. It is valid to work with the BBC on that point, and the corporation says that it has examined the difficulties and is trying to overcome them. The charter renewal process gives us an avenue by which we can ensure that that happens.

Another concern with the framework of Ofcom is that we are centralising extremely important industries—broadcasting and telecommunications—in the hands of a small regulator with no representative role. It will have simply a technocratic and specialist regulatory role. I have spoken about those concerns on several occasions as the Bill has passed through the House, and I do not want to see that spread over to the BBC, so that the whole lot goes down. If Ofcom sails as a wonderful ship and does not become the Titanic of the broadcasting and telecommunications industry, the BBC may want to get on board. However, if as I suspect there is public and parliamentary disquiet about some of Ofcom's decisions, we will find as parliamentarians that we have no influence over Ofcom and we might regret putting our other public sector broadcaster on that ship. No matter how obtuse and opaque it remains on occasions, the BBC is a more obviously democratic and accountable body than any other broadcaster that will come under the aegis of Ofcom because of the charter renewal process, the role of the Secretary of State, and the appointment of governors, many of whom represent interests, regions and nations in the United Kingdom.

For those reasons, I will resist the Conservative amendments. It is important that we do not include the BBC in Ofcom's remit at this stage. I accept that the renewal process may change the circumstances, and we may need to examine the point again. However, like the hon. Member for North Devon, I think that that would be a fairly simple piece of work, which would surely also include changing some aspects of Ofcom. We have decided not to do that, but instead to embark on a way of working with Ofcom that involves a particular regulatory framework and economic regulation. The BBC would not sit well within that.

We must have public accountability for the BBC. Some of the examples given by the hon. Member for Maldon and East Chelmsford were relevant, and I accept that even those that I thought were not relevant had some public disquiet behind them. Perhaps there is a certain unhappiness in the lack of conservatism—if I can use that phrase—as people see things change about them. Familiar programmes disappear and new ones come on air, but in five years the new programmes may be as familiar to us as the old ones, and we must give the BBC some freedom to manage its programme schedules. I was struck by a certain element of micro-management that I thought crept occasionally into the hon. Gentleman's remarks. Nevertheless, this is not the Bill that can regulate the BBC as a public interest broadcaster. I hope that the Government will reject the amendments that were tabled by the official Opposition.

In conclusion, I had a sneaking feeling that, if all the amendments tabled by Conservative Members were accepted, it would be a lot easier to privatise the BBC and get rid of the licence fee.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I think that precisely the reverse is true. I believe that, if the BBC were allowed to continue outside the regulation of external scrutiny, with all the huge resources at its command, growing dissatisfaction will support those who look for more radical options. The BBC is making a huge mistake. By staying outside Ofcom, it will make it easier for people to argue the case for a more fundamental change to be made to its structure than we are considering now under the Bill.

Simon Thomas (Plaid Cymru, Ceredigion)

I am sure that the hon. Gentleman's views are genuinely held. I take them as a vote of confidence in the BBC and that he is trying only to do the very best for it by tabling such amendments. However, even those comments have not persuaded me to support them.

Michael Fabricant (Conservative, Lichfield)

During discussions on the Office of Communications Act 2002 and so far on this Bill, I agreed with 90 per cent.—if not 100 per cent.—of what the hon. Member for Ceredigion has said. However, I disagree with him profoundly now. I am surprised that such a disagreement has occurred. As my hon. Friend the Member for Maldon and East Chelmsford said, we disagree with the line being taken by the Government in this respect, but, on the whole, we support the Communications Bill. It is logical that, when there is convergence of technology, there is convergence of

various regulatory bodies. That is the Bill's raison d'être.

While rising to support the amendments tabled by my hon. Friends the Members for Maldon and East Chelmsford and for South Cambridgeshire, I do so not to condemn the BBC, but to praise it.

Andrew Robathan (Conservative, Blaby)

Bury it!

Michael Fabricant (Conservative, Lichfield)

No. As my hon. Friend the Member for Maldon and East Chelmsford said, by supporting the amendments, we will strengthen and preserve the BBC. Let me say a few good words about the corporation before I go into detail about the amendments. The BBC distorts the market, but in a good way. Although ITV is suffering a falling audience, BBC 1 and BBC 2 are increasing not only their market share, but their total reach—the number of hours viewed each week. Of course we can criticise the organisation at a micro-level, but I disagree with my hon. Friend, because the BBC is achieving the right balance between presenting programmes of value and worth that he would identify as such, while also providing programmes that are of a more popular nature.

Incidentally, the two sorts of programmes are not always mutually exclusive. I am not a great follower of ''Neighbours'' or ''EastEnders''. Incidentally, it is interesting that ''Neighbours'' is unpopular in Australia. It was to be taken off in that country, and the only reason it continues there is because it pulls in such a huge audience in the United Kingdom. Such programming contains stories of morality, and that is of value. Again, I disagree with my hon. Friend the Member for Maldon and East Chelmsford: such programmes can lead people to watch programmes that might be viewed as being of greater worth, such as the news.

I remember when, in the 1970s, Professor Andrew Ehrenberg, who was then at the London school of economics, produced a good report that analysed in detail viewing and listening habits in the United Kingdom and the United States. Then, as now, there was clear evidence that, despite the vast number of channels available, people tended to watch the next programme that came on. Despite the existence of TiVo and of VCRs, which many people still cannot operate, people view programmes in the order in which broadcasters present them.

Some £2.5 billion of public money goes into the funding of the BBC. That investment generates more overseas and UK correspondents than ABC, CBS, NBC, CNN and Fox News have together. The BBC is not just the biggest broadcasting newsgatherer in the UK, it is by far the biggest broadcasting newsgatherer in the world. That is only possible thanks to the means of funding that we currently enjoy—the licence fee. It will be a long time before any other form of funding can replace that. Right or wrong, so long as the BBC is publicly funded, that distortion—it is a good distortion—needs to be addressed. There is also distortion in the Bill and that represents the only profound difficulty that the major parties have with each other.

Even if the Minister cannot adopt the amendments and new clauses, I hope that he can show the flexibility that his Department of Trade and Industry counterpart demonstrated by saying that he had heard the arguments and would return with amendments that reflected the fact that the arguments were overpowering. The amendments should be adopted to protect the BBC. Time and again, when the BBC is criticised—whether for its programming policy within a channel, for its distribution of programmes between channels, or on a question of fair trading—what is needed is a visible external, independent arbiter. My hon. Friend the Member for Maldon and East Chelmsford gave an excellent example of why that should be when he spoke of the similarity between the BBC and a big organisation like BT plc. BT plc has a board of directors and that board is appointed by the shareholders. The BBC has a board of governors that is appointed by the funders—the public fund the BBC though the licence fee and they elect the Government and the Secretary of State, who appoints the governors.

I do not see why, if the Government, rightly, take the line that from time to time independent arbiters must control the activities of the board of directors of BT for the greater public good, the BBC board of governors should not also be controlled by independent arbiters, namely, Ofcom. I do not envisage that Ofcom will intervene on many occasions. People often complain of competition—both the Plaid Cymru and the Liberal Democrat spokesmen and the hon. Member for Milton Keynes, North-East have said that. There is nothing wrong with competition. I do not disagree with my hon. Friend the Member for Maldon and East Chelmsford, because I know that he supports competition. However, he gave a couple of examples, including the History Channel. The complaints made by the History Channel are, in my view, spurious. Nevertheless, there will always be doubt when the BBC is its own arbiter.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

Standing Committee E

Clause 193 - Functions of OFCOM in relation to the BBC

Peter Atkinson (Conservative, Hexham)

I remind the Committee that with this we are taking the following:

Amendment No. 43, in

clause 193, page 171, line 17, at end insert

'and to enforce the terms of the BBC Fair Trading Commitment as currently drafted'.

Amendment No. 149, in

clause 193, page 171, line 23, at end insert—

New clause 18—BBC statements of programme policy—

(a) as soon as practicable after the coming into force of this section and subsequently at annual intervals to prepare and publish a statement of programme policy for each of the BBC's services; and

(b) for the BBC to monitor its own performance in the carrying out of the proposals contained in the statements.

(2) Every statement of programme policy must include—

(a) proposals for securing that during the following year—

(i) the public service role of the BBC and the BBC's services will be fulfilled;

(ii) the functions, duties and obligations of the BBC and the BBC services as set out in the Charter and Agreement will be fulfilled;

(iii) such other matters as OFCOM may determine from time to time;

(b) a report on the performance of the BBC in the carrying out, during the period since the previous statement, of the proposals contained in that statement.

(3) The BBC shall comply with subsection (4) in the case of a statement of programme policy containing proposals for a significant change.

(4) This subsection requires the BBC—

(a) to consult OFCOM before preparing the statement; and

(b) to take account, in the preparation of the statement, of any opinions expressed by OFCOM.

(5) If it appears to OFCOM that a statement of programme policy has been prepared by the BBC in contravention of a condition imposed under subsection (4), the BBC must—

(a) revise that statement in accordance with any directions given to it by OFCOM; and

(b) publish a revision of the statement in accordance with any such directions only after the revision has been approved by OFCOM.

(6) A change is a significant change for the purposes of this section if it is a change as a result of which the service would in any year be materially different in character from in previous years.

(7) In determining under this section whether a change is a significant change—

(a) regard must be had to any guidance issued by OFCOM;

(c) the previous years with which a comparison is to be made must be those immediately preceding the year in which the change is made, or in which the changes comprised in it began to occur.

(8) It shall be the duty of OFCOM—

(a) from time to time to review the guidance for the time being in force for the purposes of this section; and

(b) to make such revisions of that guidance as they think fit.'.

New clause 19—Duty of OFCOM in relation to the BBC's new services—

(2) The objectives referred to in subsection (1) are—

(b) that the value to the public of the new service or changes to an existing service will be proportionate to the likely impact on the market;

(d) that the new service or the changes to the existing service will represent value for money for licence fee payers.

(3) It shall be the duty of OFCOM—

(a) as soon as practicable after the end of the period of twelve months beginning with the commencement of this section; and

(b) as soon as practicable after the end of each subsequent period as may be selected by OFCOM for the purposes of this section

to satisfy, for that period, the review and reporting obligations of subsection (4).

(4) The review and reporting obligations are—

(a) an obligation to carry out a review of the extent to which new services provided by the BBC and changes to existing services—

(i) comply with the terms of the approval granted by the Secretary of State for such new services or changes to existing services; and

(ii) satisfy the objectives set out in subsection (2);

(b) an obligation to prepare a report on the matters found on the review.

(5) In this section

''Charter'' means the Royal Charter for the Continuance of the British Broadcasting Corporation—May 1996 and any renewal or replacement thereof;

''Agreement'' means any agreement made (whether before or after the coming into force of this section) between the BBC and the Secretary of State to regulate the provision of the BBC's services and the carrying on by the BBC of other activities for purposes connected with the provision of those services.

New clause 20—OFCOM review duties in relation to BBC's services—

(2) The objectives referred to in subsection (1) are—

(b) that the value to the public of the new service or changes to an existing service will be proportionate to the likely impact on the market;

(d) that the new service or the changes to the existing service will represent value for money for licence fee payers.

(3) The BBC shall—

(a) as soon as practicable after the coming into force of this section and subsequently at annual intervals prepare and publish a statement of programme policy for each of the BBC's services; and

(b) monitor its own performance in the carrying out of the proposals contained in the statements.

(4) Every statement of programme policy must include—

(a) proposals for securing that during the following year—

(i) the public service role of the BBC and the BBC's services will be fulfilled;

(ii) the functions, duties and obligations of the BBC and the BBC's services as set out in the Charter and Agreement will be fulfilled;

(iii) such other matters as OFCOM may determine from time to time;

(b) a report on the performance of the BBC in the carrying out, during the period since the previous statement, of the proposals contained in that statement.

(a) comment on the extent to which new services provided by the BBC and changes to existing services—

(i) comply with the terms of the approval granted by the Secretary of State for such new services or changes to existing services; and

(ii) satisfy the objectives set out in subsection (2);

(b) comment on the extent to which the BBC has—

(i) fulfilled any statement of programme policy made by it;

(ii) made an adequate contribution towards the satisfaction of the general purposes of public service television broadcasting in the United Kingdom set out in section 256(4);

(6) In this section—

''Charter'' means the Royal Charter for the Continuance of the British Broadcasting Corporation—May 1996 and any renewal or replacement thereof;

New clause 29—Power to confer further functions on OFCOM relating to the BBC—

'(1) The Secretary of State may by order amend this Act to such extent as he considers appropriate to give effect to the provisions of—

(a) any Royal Charter granted to the BBC after the commencement date;

(b) any licence granted by the Secretary of State to the BBC after that date;

(2) In subsection (1) ''the commencement date'' means the date of commencement of section 193.

(3) An order under this section shall not be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House.'.

Michael Fabricant (Conservative, Lichfield)

What I was saying before we were so rudely interrupted by the new hours was that the History Channel had made a number of complaints to the BBC, saying that UK History represented unfair competition. I said this morning that I thought that it was perfectly fair for the BBC to use its own facilities, provided that it used them fairly, not unfairly, in a competitive market. The judgement as to whether that is unfair should ultimately rest not with the BBC, but with an independent outside organisation such as Ofcom.

The question of whether the BBC should be allowed to compete arose in this morning's debate. I think that the BBC should always be allowed to compete, as long as it does so in a fair environment. My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) made some remarks regarding BBC News 24, and I must say that I disagree with them; it would have been odd indeed had the BBC not launched such a programme channel. The BBC has some 50 bureaux overseas. If I may make a brief plug, my former company—in which I now have no financial interest, as I sold all my shares in it before I became a Member of Parliament—equipped the BBC bureaux with radio studios in Los Angeles, Washington, New York, Sydney, Moscow and

elsewhere. The BBC has something like 250 foreign correspondents, either based at a bureau or moving around.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I do not think that there is too much difference between us. I hope that my hon. Friend accepts that it is important that, when the BBC decides to launch a new service, it should be distinctive. I shall give an example from radio, in which I know that he is very interested. Both Radio 1 and Radio 3 are matched by commercial stations in the form of Classic FM and, for instance, Capital. Those stations concentrate on a mass audience, but the BBC stations concentrate on a distinctive public service agenda that is slightly different. The same should apply to the difference between BBC News 24 and UK History and their independent alternatives.

Michael Fabricant (Conservative, Lichfield)

I agree with my hon. Friend, but I believe that News 24 is distinctive. Its style is very different to that of ITV's 24-hour news service and Sky News. My only criticism is of the rather weird representation that was made to the Department for Culture, Media and Sport by Richard Lambert, who said that BBC News 24 should be more similar to Sky News. I had to smile, because one of the recommendations made was that BBC News 24 should have breaking news like Sky News. The next day, when I was watching BBC News 24, up came ''Breaking news''. Now, hardly a minute goes by on BBC News 24 without ''Breaking news'' on our screens.

BBC News 24 provides a distinctive and separate service. Are we the ones who should be the judge, ultimately? No. Should the BBC be the judge when there is an argument? The answer must be no if justice is to be seen to be done. However, I certainly agree with my hon. Friend the Member for Maldon and East Chelmsford about cross-promotion. Let us be clear: Radio Times is a nice little earner, and is good for the BBC because the money it makes goes back into the corporation and goes towards the funding of programmes. However, as my hon. Friend the Member for Maldon and East Chelmsford said, there must be fair competition under the terms of the BBC's commitment, because not an hour goes by when there is not cross-promotion on BBC 1—and, to a lesser extent, on BBC 2—for Radio Times. Radio Times is in competition with other programme journals, so there is an argument that a notional fee should be paid for the advertising or promotional time that is made available to it on BBC 1 and BBC 2—although I am unsure to whom the fee should be paid, as the money would appear to go around in a complete circle.

John Whittingdale (Conservative, Maldon and East Chelmsford)

My hon. Friend raises the interesting issue of cross-promotion. The best current example of that is the huge resources that the BBC is putting into advertising Freeview and the digital channels that are now available on it. It justifies that by saying that the intention is to encourage digital take-up. ITV Digital also carried BBC digital channels when it was in operation, but I do not recall the BBC ever promoting ITV Digital, even though one could equally well argue that, in the cause of digital

switchover, it would have been right for the BBC to do so.

Peter Atkinson (Conservative, Hexham)

Order. Before the hon. Gentleman replies, I have a couple of requests. Can we keep interventions brief, and can we keep the noise level down? These proceedings are being broadcast, and if hon. Members talk all of the time it is difficult for the broadcasting authorities and Hansard to hear what is going on.

Michael Fabricant (Conservative, Lichfield)

Thank you for those remarks, Mr. Atkinson: I know that the BBC will be particularly interested in re-broadcasting my speech.

My hon. Friend has made an important point. I am unsure whether I would agree with him that the BBC is at fault in promoting Freeview because I believe that that was a clever initiative by the BBC. Although Freeview is a joint venture between the corporation, Crown Castle—which is the old transmission division of the BBC—and Sky, the BBC pulled the whole thing together, and it is to be congratulated on that. As I said in an earlier sitting, the Independent Television Commission was right to decide that Freeview should have the digital terrestrial licence, because people will only have an incentive to buy digital units if free-to-air programming is provided.

My hon. Friend asked the perfectly reasonable question of who should be the final arbiter. Justice needs to be seen to be done: the BBC ought not to be seen to be its own judge and jury, even when they are right—which is more often than not, I suspect. With regard to that, I will offer one example involving a constituent. Mr. Ian Payne of Lichfield wrote to me about the Nicky Campbell show on Radio 5 Live. He thought that someone was advocating paedophilia, and Fraser Steel, the BBC's head of programme complaints, responded by producing transcripts of what was said. In my judgment, his reply was reasonable. However, the final paragraph states,

''I do not feel able to uphold Mr. Payne's complaint. Thank you for writing and giving me the opportunity to address your constituent's concerns'',

which is fine, but that is now the end of the matter. If Mr. Payne feels that the BBC is still at fault, there is very little that he can do. There is the Broadcasting Standards Commission, but it does not have very sharp teeth. The BBC needs to be seen to be under the same auspices as any other responsible organisation—such as ITV or British Telecom—that will come under the general auspices of Ofcom.

My hon. Friend the Member for Maldon and East Chelmsford rightly mentioned the BBC brand, again in connection with free trade. Arguments might arise regarding that. I used the BBC brand when the BBC was beginning to become commercial. In the 1980s, my company supplied and installed radio studio systems—among other things—and we needed to provide training. In the end, the large number of people to whom we were providing systems prevented our engineers from providing training. I remember visiting the BBC's training centre in Wood Norton, near Evesham, and suggesting that people there might like to do the training in return for payment. At the time, an individual there—I shall not mention his

name—said, ''Yes, I think it's a great idea, but hush it up and don't tell the BBC in London because they'll probably stop it.''

People from Uganda, Indonesia and other countries came to the BBC and stayed at Wood Norton. They received magnificent certificates that had gold emblems with the BBC motto, ''Nation shall speak peace unto nation'' at the top. The certificates were in the installation, maintenance and operation of MBI broadcast systems studio equipment. MBI was my company and I thought, ''What an endorsement that was.''

Peter Atkinson (Conservative, Hexham)

Order. It may be an endorsement of the company but it is not in order. May I ask the hon. Gentleman to come back to the subject? If he looks at clause 193, he will remember that we are talking about functions of Ofcom in relation to the BBC.

Michael Fabricant (Conservative, Lichfield)

Yes.

My hon. Friend the Member for Maldon and East Chelmsford is right because the BBC name has huge value. The BBC should be congratulated because the name is a mark of quality, but it must be used wisely.

Chris Bryant (Labour, Rhondda)

I think that is it.

Michael Fabricant (Conservative, Lichfield)

That may well be it. The disadvantage of lunch is that it rather destroyed my train of thought, although all I had for lunch was soup.

The issue is simply this: when public money goes into a licence fee that is given to a public organisation, the organisation must be publicly accountable. Although the Minister will no doubt tell us that the Secretary of State is the person to whom the BBC is ultimately accountable, I argue that a distortion is created.

The BBC is right to compete in various areas, including its radio and television channels, and to be distinctive. However, there is always a tension in the corporation between trying to provide programmes that are popular, thus justifying the BBC's existence by achieving an audience, and trying to provide programmes that people ought to hear in the old Reithian tradition. Either extreme promises nothing but doom for the BBC. If it merely provided programmes that people ought to hear but achieved only tiny audiences, there would be a call of people saying, ''Why should we pay a licence fee when the BBC is pulling in only a small audience?'' I commend the BBC because although it is not the only public service broadcaster—ITV, Channel 4 and Sky News are public service broadcasters in different ways—it is getting the balance right by achieving a larger share of the television audience than ITV while broadcasting programmes such as ''Newsnight'', which nobody mentioned this morning and has not been dumbed down. Such a programme could not be sustained on any other television station.

As I said this morning, I come not to bury the BBC, but to praise it. I come to protect the BBC as well. As my hon. Friend the Member for Maldon and East Chelmsford said, ultimately bringing the BBC under

the powers of Ofcom in every respect—not only some respects—would protect it from complaint. Even if the BBC is right not to uphold complaints made against it, there will always be a suspicion that it is not to be trusted because it is its own judge and jury. That criticism could not survive in the environment that would be created by the amendments and new clauses.

Kim Howells (Labour, Pontypridd)

The hon. Member for Lichfield (Michael Fabricant) began by giving us a good impression of Marlon Brando playing Antony in a Hollywood version of the play. He raised the issue of ensuring an effective means of complaint at the BBC, which was a good place to start in this wide-ranging, excellent debate. That is why we have given Ofcom the ability to fine the BBC if it breaches Ofcom's programme codes.

I was impressed by the knowledge of programmes and music cited by the hon. Member for Maldon and East Chelmsford—we must not forget to mention East Chelmsford—even if he sounded a little like Jim Branning from ''EastEnders'' at times.

There has been a full debate this morning on clause 193, the amendments and a range of issues relating to the BBC. I will first respond to points made by hon. Members, then talk about specific amendments and finally make some general observations.

Although I agree with the tone of the remarks made by the hon. Member for North Devon (Nick Harvey) about the separation of the BBC governors and Ofcom, I must correct one point. Ofcom's duties are wider and are not confined to consumers. It is responsible for securing

''the availability . . . of a wide range of television and radio services''

and public standards as set out in clause 3.

Building on what the hon. Member for Ceredigion said, Ofcom also has a principal duty in relation to the radio spectrum. Those may be small remarks but they bear making.

The hon. Member for South Cambridgeshire (Mr. Lansley) made some interesting points. I assure him that the language and structure of the agreement are framed in a way that preserves the core responsibilities of BBC governors in regulating the qualitative aspects of the BBC's services. It is fully consistent with the policy stated from the outset of preserving the fundamental nature and constitution of the BBC. There has never been any intention of the BBC being regulated by Ofcom at tier 3. The BBC will be expected to consider Ofcom's reports and guidance issued for tier 3 purposes, but will not be subject to formal Ofcom enforcement such as will apply to the licensed broadcasters, as the hon. Gentleman made clear.

The hon. Member for Maldon and East Chelmsford made some extensive and enlightening comments, but at the heart of those comments was a problem—I hesitate to call it a misunderstanding, because the hon. Gentleman has a brilliant mind and could not possibly have misunderstood what has been drafted in the Bill. I am happy, however, to clarify the issues that he

raised. The BBC's commercial channels, such as UK History, will be fully regulated by Ofcom on the same basis as all other commercial channels. The agreement that we have discussed covers the BBC's public services, but not the commercial channels. The BBC's commercial services are subject to UK and EU competition law.

This is a good moment to cover the interesting points about UK History that were raised by the hon. Members for Maldon and East Chelmsford and for Lichfield. UK History is a commercial channel that is funded by a joint venture with the BBC's commercial arm, BBC Worldwide, and Flextech. The licence fee is not used, either directly or indirectly, to subsidise that venture.

Michael Fabricant (Conservative, Lichfield)

I am grateful to the Minister for clarifying that point. However, the argument goes that UK History, a BBC Worldwide-Flextech joint venture, pays a certain sum of money for BBC archive material that is used in its programmes and that that is not a commercial sum. The ultimate judge of that situation is the board of governors of the BBC, not an external organisation such as Ofcom.

Kim Howells (Labour, Pontypridd)

I thank the hon. Gentleman for making that point. I was about to make it myself in a slightly different way.

As a commercial channel, UK History is allowed to compete in the market in the same way as any other channel, but it must compete fairly. As the hon. Gentleman said, there is talk of the price that is being paid for what be might considered the raw materials. Flextech is required to purchase programmes at fair market rates from BBC Worldwide and other distributors and it is not allowed to get programmes free of charge, or to purchase any BBC programme below market price. That situation is regulated by competition law and it is also covered in the BBC's own fair trading agreement.

The hon. Member for Maldon and East Chelmsford raised the issue of news coverage. I assure him that if the BBC proposes a reduction in the proportion of news in peak time, or in general, an agreement will require Ofcom approval. The hon. Gentleman also raised the issue of BBC News 24. He rightly pointed out that Richard Lambert was appointed by the Secretary of State to review BBC News 24 and to report to her as part of the review of the original approval of the service. Mr. Lambert's role was entirely consistent with the principle that the approval of new BBC services, and the review of those services under the terms of the Government's public commitment, is a matter for the Secretary of State, who is answerable to Parliament. The BBC News 24 review was not a response to particular concerns about that channel. That was a part of the rolling programme of reviews of BBC digital services that was announced in February 2000 as part of the licence fee settlement.

Michael Fabricant (Conservative, Lichfield)

I am sorry to pursue the point, but I return to it because it is important. I do not personally suggest that programmes were sold at a discount, but let us make one thing clear. There is no set market rate for programmes; one does not have to

pay so many pounds per minute for a history programme. When one buys shares in a private limited company, the market rate is the price at which the seller decides to sell. Will the Minister tell me who makes the judgment about whether the market rate was paid? The judgment is made by the BBC. Although the market rate was probably paid, I am saying that the argument exists because there is no clear formula. The judgment should be made by an independent third party.

Kim Howells (Labour, Pontypridd)

The hon. Gentleman knows that I have always had a great interest in competition and competition law. If there is a dispute about price, about price fixing, or about a cartel that is operating, it is entirely possible and proper for the parties to approach the Director General of Fair Trading to investigate the situation. I have not heard of such an investigation and I have not heard about injured parties going to the Director General of Fair Trading, but I have heard lots of rumours from people who are a bit cheesed off about the fact that that is a good service. That is a serious point. We have spent much time in discussing competition law and in ensuring that, at long last, we have a competition authority with some teeth. I hope that we will not try to undermine its authority by ensuring that it cannot investigate matters of controversy in the way that I would assume that it would investigate any complaint that was made about purchases from or by the BBC.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Does the Minister accept that, although a commercial broadcaster can make a complaint about a potential breach of competition law, which would then be investigated by the Office of Fair Trading, the obligations on the BBC, as placed on it by the fair trading commitment, go beyond competition law? A potential breach of the fair trading commitment might not be a matter for investigation by the competition authorities but, nevertheless, it should be investigated by an outside regulator. At present, it would be a matter for the governors.

Kim Howells (Labour, Pontypridd)

Like the hon. Member for South Cambridgeshire, the hon. Gentleman raises interesting points about the fair trading agreement. If the hon. Gentleman will bear with me for a little while, I will try to deal with those points.

The Government have undertaken that Ofcom will be consulted on any proposed new public services and on reviews of any such services. However, the formal role that new clause 19 envisages for Ofcom would confuse the responsibilities of the Secretary of State and the regulator. That would strike at the heart of the principle that the Bill should not interfere with the BBC's direct relationship with the Secretary of State and, through her, with Parliament. Given the BBC's status as a publicly funded body, we believe it essential that that relationship be preserved.

I will turn to specific amendments and to the points that the hon. Member for Maldon and East Chelmsford has just raised. Amendment No. 22 would allow Ofcom's functions in relation to the BBC to be contained in the BBC charter. However, in practice, the power would not be exercised, as the charter is not the appropriate place in which to set out

those provisions. The agreement between the BBC and the Secretary of State, rather than the charter, will set out the obligations on the BBC in respect of which it is intended to give Ofcom a role.

Amendment No. 43 seeks to extend Ofcom's functions in relation to the BBC to enforcement of the BBC's fair trading commitment. In accordance with the royal charter, the commitment is currently enforced by the BBC's board of governors. The hon. Gentleman finds that arrangement unsatisfactory. However, amendment No. 43 would give Ofcom the function of enforcing an internal BBC document. That would, of course, be inappropriate. We will therefore resist the amendment. I found myself agreeing with the hon. Member for South Cambridgeshire's comments on amendment No. 43. I agree with his analysis: we should not elevate the fair trading agreement into something that it is not.

United Kingdom and European Union competition law applies to the BBC as to other broadcasting organisations. The Bill gives Ofcom concurrent powers with the OFT to apply competition law to broadcasting and related activities. Ofcom's functions in that respect are fully set out in part 5 of the Bill.

The BBC's fair trading commitment is there to ensure that commercial activities within the BBC comply with competition law and support the BBC's core purpose as a public service broadcaster. The commitment, along with the BBC's commercial policy guidelines, underpins compliance with the law, but is not a substitute for it.

Amendment No. 149 seeks to give Ofcom a duty to consult interested parties in carrying out its functions in relation to the BBC. Although there are some instances, elsewhere in the Bill, where we impose specific obligations on Ofcom to consult, there is no general duty for Ofcom to consult. Imposing a general duty in clause 193 would therefore lead to an inconsistency. Without amendment No. 149, Ofcom would, as a reasonable body, still have the power to consult at any time, and it would be expected to do that when it was appropriate.

New clause 18 seeks to apply similar regulatory requirements to the BBC regarding the production of statements of programme policy that are applied to licensed broadcasters under clauses 258 and 260. The proposed new clause includes a new requirement for the BBC to report annually on its own performance against each statement and it would also oblige the BBC to consult Ofcom and take account of its opinions before including in a statement anything that would make a significant change to the character of any service. For that to be achieved, the BBC's agreement would be required to contain provisions along those lines. The new clause would also oblige the BBC to revise, in accordance with Ofcom directions, any statement that appears to Ofcom to have been made in breach of the obligation to consult and take account of its opinions.

Clause 5(c) of the published proposals for amending the BBC agreement includes an obligation on the BBC to prepare and publish annually statements of programme policy. Clauses 256 and 344 of the Bill would require the BBC to consider Ofcom guidance and recent Ofcom reports before preparing programme policy statements.

Michael Fabricant (Conservative, Lichfield)

Does the Minister not accept that the word ''consider'' leaves things incredibly open and gives the BBC no protection if people accuse it of rightly, or more probably wrongly, of not having considered an issue fully?

Kim Howells (Labour, Pontypridd)

No.

Michael Fabricant (Conservative, Lichfield)

Why not?

Kim Howells (Labour, Pontypridd)

The basis of our approach is that the BBC should stand within the regulatory regime for licensed broadcasters to the extent that that is consistent with the general principle that is set out in the White Paper. The board of governors should retain responsibility for the delivery of the BBC's remit. The effect of the new clause would, however, be to transfer the authority to approve significant changes to the character of any BBC service to Ofcom. We believe that the BBC agreement should not be amended to include the provisions that are set out in new clause 18.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the Minister, but will he respond to something that I mentioned that some time ago and explain precisely why the wording of paragraph 5(c)(3) of the proposals for amending the agreement does not specifically reflect the wording of clause 258?

Kim Howells (Labour, Pontypridd)

I have only just got into what the hon. Gentleman said, but I will consider that and, if there is a difference, I will try to get back to him. I have not been able to pick up on that since he mentioned it first thing this morning, but I will certainly consider that.

Andrew Robathan (Conservative, Blaby)

I wonder if, for the record, the Minister will illuminate something that has been bothering me today. Why did we only receive that document late last night? Why does the Minister's letter say that it was not possible to provide it sooner? It is still not finished and it refers to technical matters that still need to be settled. Why could we not have had the document last week, or even earlier, and why should it suddenly be so imminent that it had to be delivered late last night? I received my copy at seven o'clock yesterday evening.

Kim Howells (Labour, Pontypridd)

I can only apologise to the hon. Gentleman and to the Committee for the late delivery of the document. We wanted to ensure that it contained the maximum amount of information and it took a lot of preparing. I hope that, given the new working arrangements in the House, the hon. Gentleman had time to read it.

Andrew Robathan (Conservative, Blaby)

After 10.30 pm! In fact, after 11 pm!

Kim Howells (Labour, Pontypridd)

I apologise again for the late delivery. We wanted to ensure that that the document contained as much information as possible in order to give the Committee an indication of our thinking.

John Whittingdale (Conservative, Maldon and East Chelmsford)

For the record, the Minister has suggested that the new working hours make it easier for the Opposition to scrutinise the business of the Committee. However, a 9 o'clock start makes it harder for us to do that, because it reduces the amount of time that we have to prepare, unless we are prepared to stay up all night. Thank you for your indulgence, Mr. Atkinson.

Kim Howells (Labour, Pontypridd)

I hear the hon. Gentleman's heartfelt plea. If I had known that we would not get past the first set of amendments by the end of the morning session, I would not have been reading at 1 o'clock this morning.

I turn now to new clause 19, which would bring the process for approving new BBC services within the statutory framework by including provisions in the Bill. Prior to the Secretary of State approving any new BBC service, Ofcom would be required to prepare a report on whether the proposed service satisfied certain objectives. There would also be a duty on Ofcom to review any new BBC service one year after its commencement and periodically after that. I am resisting new clause 19 because it is inappropriate for the procedure for approving new BBC services to be contained in the Bill. The BBC is established by royal charter and, generally speaking, is not regulated by statute. That is a general principle in our policy with regard to the BBC. Notwithstanding the relevant point that was made by the hon. Member for South Cambridgeshire when he said that we should do it now and future-proof it, I remember saying in the paving Bill, which provided for the setting up of Ofcom, that I thought that the proper place for those debates will be at the time of charter renewal. I beg to differ with the hon. Gentleman on that. The requirement to seek the Secretary of State's approval for new services is set out in the royal charter and agreement, and is one of the features that give the BBC its unique position. There is no corresponding provision in the Bill.

The procedure used by the Secretary of State in the approval of new BBC services is set out in the Department's published administrative guidelines for public services. Indeed, some of the detail in the new clause is based on those guidelines. I emphasise that Ofcom will have an important role in the approval process for new BBC services. It has been made clear that the Secretary of State will consult formally with Ofcom on any new BBC service proposals and on any reviews of existing BBC services. The Secretary of State has already made a commitment to carry out an independent review of the BBC's new digital services in 2004, in which it is expected that Ofcom will be involved.

New clause 29 would give the Secretary of State a Henry VIII power to amend the Bill after it is enacted, when the Secretary of State considers it appropriate to do so in order to give effect to any new BBC charter, licence or agreement. We believe that that change is unnecessary, as the policy relating to the BBC, generally speaking, is set out in the charter and the agreement, rather than the Bill. No amendment of the resulting Act would be necessary in practice to enable the charter or agreement to have effect. In so far as it is

the intention of the amendment to enable the current system of regulation of the BBC through charter and agreement to be turned into a statutory regime by incorporating the substance into the Act, I expect Parliament to be given the opportunity to debate fully, in the context of fresh primary legislation, any amendment to the Act that would have such far-reaching effects.

Michael Fabricant (Conservative, Lichfield)

Perhaps the Minister enjoys our debates in Committee.

Andrew Robathan (Conservative, Blaby)

As we all do.

Michael Fabricant (Conservative, Lichfield)

Indeed. The real reason for rejecting the amendments and the new clauses is because he wants another Ofcom Bill in three or four years' time. Does he not think that there is a real danger of that happening and that the timetable of BBC charters will end up being the tail that wags the dog, in that Parliament will have to introduce a new Bill each time there is a new BBC charter?

Kim Howells (Labour, Pontypridd)

I lost the hon. Gentleman halfway through that. The short answer is no. I am fully aware that many have argued that we should bring the BBC fully under Ofcom. There are strong reasons why we have not done so. We need a regulatory framework that will balance two needs. First, there is a need for the BBC to be independent of Government for the programmes that it makes, but to be accountable to Parliament. That is not easy to arrange. Secondly, there is a need to ensure that the BBC is covered by the same obligations as all other public service broadcasters. The mechanism that we will use to balance those needs is the agreement between the BBC and the Government. Under that agreement, the BBC undertakes to be bound by the same rules as other broadcasters and, for the majority of the provisions in the first two tiers of regulation, to agree its targets and quotas with Ofcom, and to be subject to Ofcom's sanctions if it does not reach them.

Under the framework provided by the charter, and under the agreement with the Secretary of State for Culture, Media and Sport, the governors are responsible for ensuring that the BBC meets all its statutory and other obligations. That framework protects the BBC's creativity and independence, but also ensures that the BBC is accountable to Parliament. I do not need to remind the Committee that the BBC, unlike the other broadcasters regulated by Ofcom, is spending public money to pursue its goals. We politicians must be able to account for how that public money is spent. There is another broadcasting company, S4C, that spends public money, but we shall come to that subject shortly.

What we are proposing preserves the special position of the BBC and its constitutional relationship with Parliament, but also creates a fairer system that treats other public service broadcasters similarly.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The Minister has stressed that the governors' role is to act as a watchdog to ensure that the BBC abides by the terms of the agreement. Is he satisfied that the governors have displayed sufficient independence and objectivity to date in dealing with complaints about potential breaches of the agreement?

Kim Howells (Labour, Pontypridd)

I certainly will not trawl through history to find examples where I think that the governors have been either weak or strong. However, some of the recent changes certainly strengthen the role of the governors and their ability to act as a proper regulatory body in relation to the management executive of the BBC. Our proposal will strengthen that further.

We are not letting the BBC off the hook. The existing core responsibilities of the BBC governors, including the responsibility to uphold and protect the BBC's political and editorial independence, will be retained. However, the BBC will be subject to new external requirements monitored and enforced by Ofcom. It will be subject to the same standards and quotas at tiers 1 and 2 as other public service broadcasters, and Ofcom will be able to fine the BBC if it does not meet its obligations.

I hope that I can convince the hon. Member for Maldon and East Chelmsford that the BBC is now a much more modern organisation. Gavyn Davies has responded to criticisms about how the BBC is run and about the fact that it is both judge and jury on its affairs. He introduced a number of reforms in February 2002 that have enhanced the role of the governors in preparation for the new regulatory system, and has given the governors a more clearly defined role from that of the BBC executive.

The Government have also had a role in making the BBC a more transparent organisation. The BBC has been open to much more external scrutiny since the licence fee settlement in February 2000, which included a package of reforms on transparency, fair trading and accountability. I am familiar with the criticisms about the BBC in respect of its commercial activities. Indeed, the conditions placed upon approvals for new BBC services, including the approval given last week to the BBC's digital curriculum, show how sensitive the Government are to the need to protect the commercial market from unfair, publicly funded competition. It is important not to confuse issues. The BBC should, and does, try to generate as much income as it can from effective exploitation of its product, and, indeed, the Government have encouraged that. The BBC's own fair trading commitment is sometimes referred to as though it was the only way in which the commercial impact of the BBC could be regulated. That is wrong. The BBC is subject to EU and UK competition law and, as a competition regulator, Ofcom will share with the Office of Fair Trading the economic regulation of the whole sector, including the BBC.

The BBC's own fair trading rules go beyond the protections of the law, and it is right that the governors, who drew up the rules in the first place, should oversee them. In the light of that, and before my voice gives out, I hope that the amendment will be withdrawn.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the Minister for testing his voice to its limits in order to respond to a wide-ranging, informed and constructive debate.

May I pick up two points? The first relates to the fair trading commitment and the oversight of the BBC relating to competition powers. I commend paragraphs 212 to 215 of the Joint Committee's report to anybody who has not read them, although I shall not rehearse them at length. They represent nothing that is inconsistent with the Government's understanding of the application of competition powers to the BBC. The Minister and I are as one in believing that the fair trading commitment is the BBC governors' own document. However, that does not mean that asserting that the BBC is subject to EU and UK competition powers and authorities is sufficient because the report sets out that the way in which competition powers are applied to an undertaking that has substantial public service obligations is particularly complex.

The BBC, as an undertaking, is able to behave in a way that would not be possible if it were a properly commercial operation, but only to the extent justified by its public service obligations. The clarity with which those obligations are spelled out is instrumental to competition authorities' ability to undertake scrutiny. That is why Derek Morris from the Competition Commission made it clear when he came to see us that he would find greater clarity helpful. That brings us back to the question of the inconsistency of the way in which public service obligations throughout the ecology of public service broadcasting will be managed. They will not be managed by Ofcom alone. Ofcom will manage public service broadcasters other than the BBC. However, obligations will be established by the BBC governors and the Government under the royal charter. BBC governors will interpret them and Ofcom will scrutinise and report. There is scope for substantial discontinuity if the two organisations do not work with sufficient co-operation.

That brings me back to amendment No. 22. I understood the Government's argument to be that the amendment will not do because the charter is not the appropriate place. I am loathed to accept the word ''appropriate''. The royal charter is a competent place to spell out the functions of Ofcom in relation to the BBC. There is no constitutional bar to doing that in exactly the same way that the Secretary of State's functions in relation to the BBC are established in the royal charter. There is a risk that if we went down that route, the way in which the charter is renewed could lead to circumstances in which the BBC believed that the agreement was inconsistent with the charter.

We have not dwelt on the fact that the agreement is agreed with the BBC, and not simply mandated to the BBC. If we leave it open for the BBC to interpret the charter in an agreement with the Government in order to determine the extent to which it is subject to Ofcom, that might not be 100 per cent. on all fours with the intentions of Parliament and the interpretation of the Government. If it were necessary for Ofcom to undertake substantive functions in relation to the BBC at charter renewal, such as giving Ofcom responsibility for the approval or review of services, it would be more competent if that were in the charter, not the agreement.

It is better to future-proof the legislation by acknowledging the possibility that Ofcom would have functions by specifying them in the charter than for them to have to be set out subsequently in the agreement. That is not to say that amendment No. 22 is intended to place the BBC wholly under Ofcom or to diminish the accountability of its governors to Parliament for the exercise of the licence fee. I shall not dwell on that again because you, Mr. Atkinson, would rule me out of order if I were to do so, but the point of my diversion into the future use of the licence fee was to make it clear that it is possible that Ofcom would have functions in relation to the BBC that are consistent with its functions in relation to other public service broadcasters, but that the BBC board of governors would continue to have the sole responsibility for the dispersal of the licence fee, and for accounting for the proper use of it in purchasing public service obligations.

Although I have great respect for the way in which the Minister tried to answer the debate, I regret to say that he has not satisfactorily responded to the reasons why amendment No. 22 was tabled, and the desirability of having the flexibility in future to incorporate Ofcom's functions directly into the royal charter, and to bear on the BBC in that way. Therefore, I wish to press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 16.

Andrew Robathan (Conservative, Blaby)

On a point of order, Mr. Atkinson. I wish to draw your attention to an extraordinary situation: we could easily by now have reached and passed clause 228, and yet earlier on Government amendments that were dated today were delivered to me and other hon. Members, one of which relates to clause 228. Is that not extraordinary, Mr. Atkinson, as you could not possibly have selected that amendment if we had reached clause 228 by then?

Peter Atkinson (Conservative, Hexham)

Whether amendments are tabled by the Government or the Opposition is not a matter for the Chair, and the speed at which the Committee operates is up to the Committee—and after this morning's performance the chances of us reaching clause 228 are very slim.

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 301, in

clause 193, page 171, leave out lines 30 and 31 and insert—

(a) required by OFCOM; and

(b) proportionate to the costs incurred by OFCOM in relation to the exercise of its functions in relation to the BBC; or

We will surprise you now, Mr. Atkinson, by being brisk. The purpose of amendment No. 301 is straightforward. As subsection (4) is currently structured, the payments to Ofcom by the BBC in respect of its functions relating to the BBC are left as a matter for agreement. The amendment devises a new payment structure that is more similar to that which would apply between Ofcom and other public service broadcasters. Its second paragraph states that Ofcom can require the payment of sums that are

''proportionate to the costs incurred by OFCOM in relation to the exercise of its functions in relation to the BBC''.

Therefore, that is cost-related, and instead of requiring there to be an agreement with the BBC, leaving it that if the BBC has a dispute over the matter, it can take it to the Secretary of State. The amendment is pretty straightforward. Such matters need to be specified in the Bill and the amendment would ensure that the procedure is specified more accurately.

Kim Howells (Labour, Pontypridd)

I will also be brief. The amendment is unnecessary. The existing wording will have the same practical effect, but in terms that accord better with the general approach taken by the clause. It leaves the amount to be settled by agreement between the BBC and Ofcom. Clearly, Ofcom will have no incentive to charge the BBC less than a proportionate amount and, if the BBC considers that it is being charged more than that, it can ask the Secretary of State to fix the amount. In doing so, the Secretary of State would look to fix a fair and reasonable sum that is proportionate to the costs that Ofcom incurs in performing its BBC-related functions.

Andrew Lansley (Conservative, South Cambridgeshire)

As I suspected, the way in which measure will work is exactly in line with amendment No. 301, but propose not to set it out in the way that we prescribe. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 302, in

clause 193, page 171, line 31, at end insert—

'(4A) It shall be the duty of the BBC to provide OFCOM with any information which OFCOM may reasonably require for the purposes of carrying out their functions under the agreement mentioned in subsection (1)(a) or other functions under this Act.'.

We are dealing with the supply of information, which is a slightly different theoretical point from the previous amendment. It is not set out in the Bill, but comprised within the amendments to the agreement that were supplied to us yesterday. I do not dispute that the way in which the agreement is structured will place the same duty on the BBC to furnish information to Ofcom. My problem is that, when we are clear that that is a requirement on the BBC that flows directly from the provisions of clause 193, it is better to set it out in the clause and place that duty on the BBC in specific terms, not leave it to be set out in the agreement. The amendment is simple, and I hope that the Minister may incline towards it.

Michael Fabricant (Conservative, Lichfield)

I support the amendment. It is important that the BBC is perceived to be co-operating with Ofcom, particularly in the light of the Government's stubborn refusal to accept the recommendations, amendments and new clauses that we debated earlier. Gavyn Davies and Greg Dyke are good news for the BBC. I applaud their attempts. I am not looking for a consultancy, but there is definitely a change in ethos from when John Birt was at the BBC. It is a matter of perception. The Bill is not explicit, although the obligations may be implicit on the BBC to provide information. However, the amendment would make it clear to third parties that it is obliged to co-operate in every way with Ofcom.

Kim Howells (Labour, Pontypridd)

We recognise the need for Ofcom to have all the information that it requires to carry out its function in respect of the BBC. A clause will therefore be inserted into the revised agreement to place a general duty on the BBC to co-operate with Ofcom and to furnish it with any information that it may reasonably require in connection with its functions under the clause. I am referring to clause 13A of the proposals attached to my letter to members of the Committee. I hope that they have read it. It is in line with the general principle that regulation of the BBC will be set our in the agreement. It recognises the BBC's distinctive constitution and preserves its special relationship with Parliament.

Andrew Lansley (Conservative, South Cambridgeshire)

I shall not press the amendment to a Division. It would be better if it were accepted, however. If the Government consider it, they may realise that provisions in the Bill, such as penalty provisions, could otherwise have been in the agreement. The question of where to draw the line is a matter of judgment.

It would be better if some of the basic provisions needed to support clause 193 were included in that clause rather than elsewhere or in the agreement. However, I will not press the matter and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 193 ordered to stand part of the Bill.

Clause 194 - Functions of C4C

John Whittingdale (Conservative, Maldon and East Chelmsford)

We should pause for a moment to examine Channel 4, because it is obviously another major player in the broadcasting environment. Channel 4 has always attracted controversy. It was created by a Conservative Government to provide more choice for viewers, and in particular, to cater for minority audiences who might not otherwise be provided for by the existing three terrestrial channels. It is just over 20 years since Channel 4 went on air, and in most of that time it has fulfilled its remit very successfully.

Michael Fabricant (Conservative, Lichfield)

Does my hon. Friend recall that when Channel 4 was established, there was originally a levy on ITV to help subsidise the new channel, because

it was generally assumed that it would be a loss-making operation? The reverse has proved to be true. Will my hon. Friend join me in congratulating Michael Grade, who sadly is no longer working in television, on achieving that success?

John Whittingdale (Conservative, Maldon and East Chelmsford)

I will join my hon. Friend in congratulating Michael Grade. Many hon. Members will recall that one of the sections in the Broadcasting Act 1996 removed the obligation for funding arrangements for Channel 4. As my hon. Friend said, there had previously been a provision in law whereby it appeared that Channel 4 would be able to receive money from the ITV companies. However, the new channel proved so successful that the reverse occurred and Channel 4 found itself paying money to the ITV companies instead of receiving it. There was a great deal of lobbying from Channel 4 at the time claiming that the provision was unfair, so the matter was dealt with in the 1996 Bill.

Although Channel 4 was commercially successful and profitable during the 1990s, it also succeeded in meeting its remit of providing for minority audiences. In doing so, it was bound to attract controversy and sometimes get things wrong. Channel 4 has a history of showing controversial programmes that have attracted criticism—sometimes in tabloid newspapers. Hon. Members may recall programmes such as ''The Tube'', ''The Word'' and so forth over the past 20 years.

At the same time, there have been many innovative programmes that have extended choice and have been generally welcomed. I will mention only a few—Alan Bleasdale's ''GBH'', Dennis Potter's ''Lipstick on Your Collar'' and ''Traffic'', which has now been made into an extremely successful Hollywood film.

Kim Howells (Labour, Pontypridd)

And cricket.

John Whittingdale (Conservative, Maldon and East Chelmsford)

The Minister reminds me of the extremely important contribution made by Channel 4 to the televising of cricket. Michael Grade was responsible for many excellent programmes.

In the main, I have resisted the temptation to attack Channel 4 for specific programme decisions. With a remit to cater for minority audiences, there will always be some controversy, and most of the time, Channel 4 has taken brave decisions. Although I have not always liked some of the programmes made, that is not a reason for not screening them. The programme that attracted the most controversy in recent times was the edition of ''Brass Eye'' on paedophilia, which led to a huge number of complaints—not least from hon. Members who found themselves on the programme without having been told that it was satirical and not a documentary. I was not entirely happy about the programme, and it was of course condemned fairly vigorously by the ITC. However, that is not to say that Channel 4 was wrong to commission the programme. ''Brass Eye'' broke a lot of new ground in satirical current affairs and I would not say that that particular edition should not have been screened.

In the past few weeks, Channel 4 has sent me a video of ''The Autopsy'' because I was not able to see the original transmission. That programme attracted a lot of controversy in the tabloids, because when it was

screened there was a question mark over whether Channel 4 was participating in an illegal act. I was therefore not wholly happy with the decision to screen. I have now watched the programme, and although it was fairly distasteful in parts, it was not as sensational as I had feared. Indeed, in some respects it was positively tedious. Nevertheless, the decision to screen the programme was always going to provoke controversy.

Most recently, Channel 4 showed a Chinese performance artist eating a baby. That was clearly going to appal a large number of people. Nevertheless, if this was happening in China, it is arguable that Channel 4 was performing a public service in drawing attention to the extraordinarily tasteless idea of entertainment that some people seem to have in China.

Michael Fabricant (Conservative, Lichfield)

Does my hon. Friend agree that one of the roles of public service broadcasters is to innovate? Sometimes, when a broadcaster innovates it has to take risks. It will not always get things right but it is nevertheless to be commended for its innovations.

Peter Atkinson (Conservative, Hexham)

Order. Before the hon. Gentleman rises to answer that point, I point out to hon. Members that we are beginning to debate specific examples rather than the functions of Channel 4. I ask the hon. Gentleman to bear that in mind.

John Whittingdale (Conservative, Maldon and East Chelmsford)

I will bear that in mind; I have nearly exhausted my examples.

I agree strongly with the point that my hon. Friend raises. When tempted by tabloid newspapers to react vigorously and condemn Channel 4 for some of its programming decisions, I have resisted the temptation when possible—first, because I do not like to condemn a programme until I have seen it, and, secondly, because I feel that Channel 4 has a duty to be controversial and sometimes to upset people. If people are upset they can hit the off button, or at least turn over to another channel.

Simon Thomas (Plaid Cymru, Ceredigion)

The hon. Gentleman may have given a false impression. He described the Chinese performance as ''entertainment'' but I think that Channel 4 described it as ''modern art''. The hon. Gentleman may want to put that point to the Minister later.

John Whittingdale (Conservative, Maldon and East Chelmsford)

That is an interesting distinction, which the Minister is well qualified to address—I look forward to hearing him. Channel 4 screened that programme as a documentary. It was designed to draw attention to what may best be described as cultural differences. In China the endeavour was apparently regarded as artistic but was also, I presume, designed to entertain.

Much of Channel 4's success has rested on its finding and bringing to the attention of viewers in this country some of the most successful American examples of drama and comedy. Comedy programmes include shows such as ''Frasier'', ''Seinfeld'' and ''Friends''. The Minister has rightly drawn attention to ''The West Wing''. The proportion of viewers for that show may be higher in the House of Commons than in the country at large, but it is nevertheless a brilliant example of extremely good

American drama. Another example is ''Malcolm in the Middle''. ''Six Feet Under'' is the latest import, and that too is innovative. We will discuss later the merits of American television in relation to British television. Nevertheless, Channel 4 has demonstrated that American television can be of a high quality.

On the role of Ofcom, and in respect of Channel 4 and its proposed functions, the Bill restates the original purposes of Channel 4 and especially its remit to cater for minority audiences. I am seeking to press that point. Channel 4 performed that function successfully for a long time and it was able to meet its remit and return a profit. In the last couple of years, however, things have gone badly wrong.

It is worth contrasting the following facts. In 1996, the year in which we had a debate on Channel 4 during the progress of what became Broadcasting Act 1996, Channel 4 made a profit of £134 million on a turnover of around £500 million. Last year, however, Channel 4 made a loss of £28 million on a turnover of £700 million. During the past six years there has been a staggering deterioration in Channel 4's profitability. The new chief executive is rightly seeking to address that issue, and he has taken some difficult decisions. He will have found on his arrival that there had been an enormous increase in staffing numbers.

It is worth contrasting the following: Channel 4 originally employed 600 staff and commanded some 10 per cent. of the television market; that market share has not increased, but the number of people working for Channel 4 has doubled to around 1,200 staff. In order to improve efficiency, which has eroded, the new chief executive has had to cut some jobs.

My hon. Friend the Member for Lichfield referred to the fact that Channel 4 had, when it was profitable, previously paid ITV under the old funding formula. That formula was removed in 1996 and some would argue that as a consequence, Channel 4 found itself with a lot more money and decided to extend into other services. That context is central to clause 194, which gives Ofcom a role in looking at other services that Channel 4 provides and at other functions that go beyond its provision of the service that we know and love.

Michael Fabricant (Conservative, Lichfield)

Does my hon. Friend not share my perplexity at the lack of symmetry in the Bill? Channel 4 is a publicly owned body, but unlike the BBC, it is responsible to Ofcom.

John Whittingdale (Conservative, Maldon and East Chelmsford)

Channel 4 and the BBC are slightly different creatures, but I agree with my hon. Friend. It is curious that the state-owned minnow in the pool should be subject to regulation by Ofcom, whereas the state-owned shark is outside that. My hon. Friend makes a good point.

I want to touch briefly on what Channel 4 has done in the past few years to extend the scale of its activities, especially in moving into new channels and online activities. The previous chief executive of Channel 4 is quoted in the 2000 annual report as saying:

'' 'If we are to maintain our salience in that fast-growing multi-channel environment and bring the values of innovative culturally diverse programming to a new generation of viewers who, to a great extent, are passing traditional public service broadcasting by, then

we not only need to invest to maintain the quality of the main channel but we also have to extend the range and quality of what we offer.' ''

That was his justification for Channel 4's spending much of the extra resources that suddenly became available on E4, the new digital version of Channel 4, FilmFour and on Channel 4 Interactive.

On the financial performance of Channel 4, the main Channel 4 terrestrial channel made a profit of £36 million last year. What went horribly wrong was that the digital activities grouped into what is called 4 Ventures lost £65 million. The overall effect was that, according to the earnings for interest and tax, Channel 4 slipped from being £34 million in the black in 2000 to being £28 million in the red in 2001. The majority of those losses came from three activities: the satellite channel E4, which recorded an operating loss of £37 million; Channel 4 Interactive, which lost £14 million; and the FilmFour channels, which lost £11 million.

{**1**}Those three activities are used by comparatively few people. Very few people log on to 4 Interactive. Similarly, FilmFour has a relatively small number of subscribers. Even E4 does not perform well most of the time. In the viewing figures for the past two years, there are three big spikes when the numbers of viewers of E4 jump—in August 2000, August 2001 and, roughly, August 2002. What was shown on E4 in those periods was ''Little Brother'', the programme associated with ''Big Brother''. It appears that E4's success is driven by the fact that it is able to offer more time to those who wish to watch ''Big Brother''. Indeed, it had 24-hour coverage.

I am told that some people watch E4 to see the residents of the house asleep. I once found myself doing so, and I could not believe that time on television was being spent broadcasting six people asleep in bed. I thought that something must have been about to happen, so I stayed viewing. To my great disappointment, absolutely nothing happened. ''Big Brother'' attracted huge controversy but has been a fantastic success, and was groundbreaking television when it was first shown. Its novelty value might have worn off somewhat but, extraordinarily, the most recent series of ''Big Brother'', ''Big Brother 3'', recorded the highest viewing figures yet. Some 7 million people watched as the final eviction approached. I do not criticise ''Big Brother''—although whether it was a welcome development in British television is debateable. Channel 4 was prepared to take the risk when many people did not think that ''Big Brother'' would work, and it proved to be an extremely successful decision.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The hon. Gentleman has stressed the idea of risk taking several times, and one of the key features of Channel 4 is that it is a public corporation that can take risks. My understanding of Conservative policy was that the Conservatives wanted to privatise Channel 4 and put it entirely into the private sector. Will the hon. Gentleman clarify that point, so that we can

understand where he is coming from with regard to Channel 4?

John Whittingdale (Conservative, Maldon and East Chelmsford)

The hon. Gentleman is right. Six years ago I tabled an amendment to the 1996 Broadcasting Bill to privatise Channel 4. I remain of the view that at that time, there was no reason why a successful privatisation could not have been achieved. Channel 4 was clearly demonstrating that it was possible to meet its remit and be profitable at the same time. On that basis, I thought there was no reason why it should not be privatised. Sadly, as I have described, circumstances have changed. If we were to privatise Channel 4 now, I am not sure that there would be a huge queue of buyers. Certainly, privatisation of Channel 4 is not something to which I would attach particular priority now. Circumstances may change, but the jury is out at the moment.

Michael Fabricant (Conservative, Lichfield)

Will my hon. Friend confirm that under clause 194, as was the case under the old Independent Television Commission, the programme requirements will remain the same no matter who owns Channel 4?

John Whittingdale (Conservative, Maldon and East Chelmsford)

That is absolutely clear. The raison d'être of Channel 4 is its remit to cater for minority audiences, and I strongly support the continuation of that, whatever the ownership structure. However, that is not a debate for today.

I have described why Channel 4 has found itself in financial difficulties compared with the much better situation of four or five years ago. Those difficulties are attributable to the decision to provide additional services—in particular, digital channels and interactive services. Under clause 194, those activities will be subject to scrutiny by Ofcom. Ofcom will be asked to consider whether those activities are affecting the performance of the main channel. It is certainly arguable that they are, because they are making Channel 4 a loss-making corporation. That clearly has knock-on effects on programme budgets and other facets of the main channel. Is the Minister happy that Channel 4 has branched out as it has? Does he foresee Ofcom taking any particular interest in those other activities when it takes on its new responsibilities?

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I wish to raise a couple of issues to do with clause 194 and the functions of the Channel 4 Corporation. What I say will follow on from the comments of the hon. Member for Maldon and East Chelmsford. I echo his praise of Channel 4, which has demonstrated the strength of the public service broadcasting ethos in the UK. We do not have bland television. Many places end up with bland television because they have an entirely deregulated market without the positive regulation—if I may put it that way—that exists when there is a public service remit. In those places, the tendency is towards a middle ground that is meaningless and blancmange-like. In some countries, I have sat through the output of 20 bland channels—and it tends to be the mainstream channels that end up that way. Channel 4 has certainly bucked that trend.

I shared some of the disquiet about ''The Autopsy'' and I used the off button, which is my censor's mechanism. Having said that, I am too squeamish to

watch ''Casualty'', so watching an autopsy was completely out of the question.

Chris Bryant (Labour, Rhondda)

What about ''Scrubs''?

Richard Allan (Liberal Democrat, Sheffield, Hallam)

''Scrubs'' is all right because it is about people, and those people do not get cut up. As long as there is no blood, I am okay.

The proposed new sub-paragraph 4 of paragraph 1 of schedule 3 to the Broadcasting Act 1990, as laid out in clause 194 of this Bill, seeks to put into the 1990 Act the deregulatory advances that have been made in respect of Channel 4. It will do so by giving Channel 4 the power

''to borrow money'',

''to carry on activities . . . through Channel 4 companies''

and

''to participate with others in the carrying on of any such activities''.

That makes flesh in the legislation what has happened as Channel 4 has evolved. It has become like any other corporation and will borrow money and enter into all kinds of commercial agreements.

The hon. Member for Maldon and East Chelmsford mentioned FilmFour. There is the FilmFour that provides pay television channels, but there is also the FilmFour film production company, which has produced some of the best films that I have seen in years. I often watch a film, think it brilliant, and then see the FilmFour name at the end. A lot of its film production has been in the regions and nations of the United Kingdom, rather than being simply London-centric. FilmFour has been a very important company in breaking away from the Hollywood model, and what I might call the Elstree model—the London-centric notion of film production. FilmFour has done us proud.

I would like to explore with the Minister the relationship that will exist between the Channel 4 Corporation—I can see that the intention is to give it a fair degree of latitude—Ofcom as the regulator, and the Government. As we will see in clause 197, the Government must approve any borrowing by Channel 4. The scope of activities permitted under the clause will depend on Channel 4's finances, which may well depend on borrowing.

The hon. Member for Maldon and East Chelmsford referred to losses made through digital services. Anybody who set up a digital service made losses during its first few years. The usual business model is to borrow against an expectation of future profits.

There are two potential checks on the Channel 4 Corporation operating its powers under the clause. The first check will be whether Ofcom considers that C4C's proposals are permitted in the regulated framework and the second check will be whether the corporation can get the Government's borrowing approval to access the cash that it needs. There is a three-way decision-making process. Will the Minister tell us how the Government intend the Channel 4 Corporation to work within the remit of the clause and subsequent clauses? How will the decision-making process work? Will he tell us how confident he is that ventures such as FilmFour, especially, can continue to be successful?

Kim Howells (Labour, Pontypridd)

I shall be brief, because I know that there is a lot of business that we have not dealt with. The clause sets out the ancillary functions of the Channel 4 Corporation.

The purpose of the clause and of schedule 9, which the clause introduces, is to modify C4C's powers and to ensure that all its ancillary activities are appropriate, connected with its primary functions and not unfairly subsidised. C4C's primary functions are defined as securing the continuing provision of Channel 4 and the fulfilment of the public service remit for that channel as set out in clause 257.

I agree with points that were made about the great asset that Channel 4 is to this country. It undertakes brave programme making and contributes to the film industry. Our film and television industries are further apart than those in any other advanced nation. That is a shame, and Channel 4 made real efforts to bring the two disciplines together, which it sometimes did successfully. There are many reasons why its great venture failed to a certain extent, but I am glad that Channel 4 continues with a reduced film-making venture at the moment.

We want C4C to remain free to undertake other activities, including such new ventures as E4 and FilmFour, if it is satisfied that there is a sufficient nexus with the primary functions. The clause allows Channel 4 to carry out any activities that appear appropriate in association with carrying out its primary functions and connected, other than in mere financial terms, with activities undertaken by it for the carrying out of those functions.

In order to reinforce the point that activities must have a nexus with the primary functions, we are removing Channel 4's existing free-standing powers in relation to qualifying companies. Channel 4 will, however, remain able to carry out activities through Channel 4 companies and to participate with others in carrying out any such activities, if they meet the other requirements of the clause.

The provisions will protect Channel 4's primary functions while ensuring that it has the flexibility to adapt and develop in response to a changing broadcasting economy.

Question put and agreed to.

Clause 194 ordered to stand part of the Bill.

Schedule 9 agreed to.

Clauses 195 and 196 ordered to stand part of the Bill.

Clause 197 - Borrowing limit for C4C

John Whittingdale (Conservative, Maldon and East Chelmsford)

I shall be brief. Can the Minister explain why it is necessary to include clause 197? Although Channel 4 is a statutory corporation, it has always operated in the commercial marketplace and it has no public funding. Throughout its 20-year history, it has been able to borrow from the banks on a straightforward commercial basis whenever that has been necessary. The clauses that we have just approved

put in place some safeguards to ensure that Channel 4 does not abuse its position, but it is not clear to me—or to Channel 4, I think—why it is necessary for the Bill suddenly to impose a borrowing a limit on it.

Michael Fabricant (Conservative, Lichfield)

Will my hon. Friend give way, before he finishes his speech and sits down?

John Whittingdale (Conservative, Maldon and East Chelmsford)

I am halfway down already, but yes.

Michael Fabricant (Conservative, Lichfield)

My hon. Friend saves me from having to make what would have been a very brief speech. Does he not agree that there is also a slight risk that if the Government set the spending limits—[Interruption.] The Division Bell is ringing. What shall I do?

Peter Atkinson (Conservative, Hexham)

As there is a Division in the House of Commons, I suspend the Committee for 15 minutes. If there are two Divisions, I will suspend it for half an hour.

Sitting suspended for a Division in the House.

On resuming

Michael Fabricant (Conservative, Lichfield)

I shall begin at the beginning, Mr. Atkinson, with your indulgence.

Does my hon. Friend the Member for Maldon and East Chelmsford agree that, if the Government set spending limits—and I agree that such limits may not be necessary because of provisions in the foregoing clauses—there is a danger that Channel 4 will not have the freedom to invest in digital or other projects that it might otherwise have?

John Whittingdale (Conservative, Maldon and East Chelmsford)

Obviously, that will depend on the level at which the borrowing limit is set. Theoretically, it is possible. At this stage, my contribution to the debate is in the spirit of inquiry. Why is it necessary to impose a borrowing limit?

Andrew Lansley (Conservative, South Cambridgeshire)

I rise to share with my hon. Friend the Member for Maldon and East Chelmsford my perplexity at the Government's move in this direction. Elsewhere, the public sector is moving, if one can describe it as such, towards the deregulation of borrowing powers. Local authorities and national health hospitals are moving towards less constraint on their borrowing. However, they are in the public sector and C4C is not. Although it is a state-owned corporation, it is a private sector body behaving in a commercial way.

I am not sure that I agree with the hon. Member for Sheffield, Hallam (Mr. Allan) who linked clause 197 to clause 194. Although the amendments to schedule 3 of the Broadcasting Act 1990 include a reference to borrowing money, that is not a new reference. Schedule 3 already allowed the corporation

''to do things incidental or conducive to''

the discharging of its functions including the borrowing of money, although it may be construed that that power allows the borrowing of money to do

things beyond its primary functions. That is not necessarily true.

Channel 4 already had the power to borrow money without the consent of the Secretary of State—or, presumably, the approval of the Treasury. Curiously, it does now. That is inherently undesirable, not because the level set would necessarily represent a considerable constraint on Channel 4—that would not be the Government's intention—but, if the Government set a borrowing limit, the markets may hold that the Government are standing behind that level of borrowing, which is clearly not their intention.

The Government should set borrowing limits only when the Government have an implied responsibility for that level of borrowing and for the prudence of the borrowing undertaken by a body. That is not the Government's responsibility in this case. Technically, the clause represents the introduction of a new regulatory burden on Channel 4, which is inherently undesirable, if it has any effect at all.

Kim Howells (Labour, Pontypridd)

The clause allows the Secretary of State to provide by order for a limit on the borrowing that C4C are allowed to take. Channel 4 must not borrow money if the effect of that would cause the amount of its outstanding borrowing to be, or remain, in excess of the prescribed limit. It is right for the Government to ensure that Channel 4's financial arrangements are within some overall constraints. The treatment of Channel 4 is consistent with the treatment of other public bodies. The setting of a borrowing limit is a proportionate and flexible alternative to the existing financial safeguard—a power under section 27 of the Broadcasting Act 1990 for the Secretary of State to give directions to Channel 4 about the use of the reserve fund, including requiring the whole or part of it to be paid into the consolidated fund, which clause 196 will repeal.

The measure is prudential. It is not intended to compromise the independence of Channel 4 or how it operates. Channel 4 has been fully consulted in determining the level of the limit, which will be £200 million—well above Channel 4's existing level of borrowing—and will continue to be consulted in preparing the order. We believe that that is a proper thing to do.

Question put and agreed to.

Clause 197 ordered to stand part of the Bill.

Peter Atkinson (Conservative, Hexham)

Before we move on to clause 198, I wish to say that, for the convenience of the Committee on the next two sections, the first being on Welsh matters and the second on Gaelic matters, I will allow a wider than normal debate on the first clause so that members of the Committee can contribute. For subsequent clauses, I shall be more draconian in making sure that hon. Members remain within order. If that suits the Committee, it will help the debate.

Clause 198 - Function of OFCOM in relation to the Welsh authority

Huw Irranca-Davies (Labour, Ogmore)

I will not detain the Committee for long, as there are other important debates to be had, not least that of my hon. Friend the Member for Western Isles (Mr. MacDonald). I hope some of my words about S4C and Welsh language provision will be of inspiration when it comes to his amendment, too. It goes without saying that the importance of S4C is recognised within the clauses. Last year—a highly successful year—when it celebrated its 20th anniversary, it had more than 700,000 viewers per week on average. Clause 199(2) states:

''The Welsh Authority shall have the function of providing television programme services of high quality with a view to their being available for reception wholly or mainly by members of the public in Wales.''

Part of the purpose of my speech is to seek the Minister's guidance and reaffirmation of the interpretation of the clauses. The interpretation is that S4C is primarily serving the people of Wales. There is also a large population outside Wales that demands its services, including the provision of facilities such as the internet to the Welsh diaspora. It is not as well established as that of my Scottish colleagues, but nevertheless is significant.

Michael Fabricant (Conservative, Lichfield)

The hon. Gentleman may be wrong about that. I was walking in southern Chile this summer and I came across a Chilean citizen who spoke fluent Welsh. I was up a mountain at the time.

Huw Irranca-Davies (Labour, Ogmore)

I am pleased to note the hon. Gentleman's observation; perhaps it is the exception that proves the rule and there are many more of us out there.

Clause 199, together with clause 200, which is entitled ''Powers to provide other services'', provide a flexibility under discussion and order by the Secretary of State to extend the penetration of the Welsh language public service broadcasting. I emphasise public service broadcasting, because an important aspect of the clauses is S4C's function as a public service provider in line with that provided by the BBC. Clause 200 also allows the provision of complementary services, such as extending the internet provision or whatever other technology comes along. The importance of the clause is that it allows S4C to plan ahead for new developments in technology and new ways in which to reach its target audience, which I hope will be ever expanding and will be increasingly inventive. It is an empowering clause and I should welcome the Minister's thoughts on it.

Clauses 200 and 201 together allow S4C to continue its excellent work in providing an international showcase for top-quality Welsh language production. The Minister has already alluded to the fine work that has been done by Channel 4 in film and television. S4C also leads the way in the showcase in Welsh language production. Welsh actors, directors and producers

overseas still recognise that S4C spends 95p of every pound in Wales on home-grown talent.

On 24 January, the Welsh language film ''Eldra'' will open in Los Angeles, promoted by the American Academy of Film and Television in recognition of its worth. We sometimes underestimate what we do in our own backyard. S4C productions have had more Academy nominations than Sean Connery—[Hon. Members: ''Hear, hear!'']—and I say that with much respect to my Scottish colleagues. I have touched a sympathetic note. Given that the primary focus of S4C will continue to be the audience in Wales, I invite the Minister to comment on the fact that the Welsh-speaking audience is big in Wales. That may be the main audience, but it is becoming increasing national in the United Kingdom and international. The clause will enable S4C to reach out to that audience.

Michael Fabricant (Conservative, Lichfield)

Not long ago, I saw a S4C film that had been made in Welsh, Yiddish and English. Does the hon. Gentleman agree that producing films in Welsh encourages the growth of the Welsh language in Wales as well as among the Welsh community in Patagonia?

Huw Irranca-Davies (Labour, Ogmore)

Yes, I do agree. As one who, over 30 years, has never kicked the habit of trying to learn Welsh, I welcome such comments. I have not tried to learn Yiddish, yet.

The discussions about funding of the S4C's effort to reach its core target audience and to extend it will continue. It is for S4C to put its case, as it strongly does. Clause 202 enables S4C to argue the merits with the Secretary of State over time. Indeed, it allows for funding above the retail price index to be granted if the right hon. Lady sees fit and if appropriate arguments are advanced. That additional clarification is welcome.

Clauses 199 and 200 apply good common sense to the existing provision of S4C2. Under current legislation, S4C2 has wall-to-wall coverage of the proceedings of the National Assembly of Wales. In legislative terms, that is regarded as a commercial venture. The Assembly may be many things and riveting to hon. Members and many people at home, but to describe it as a commercial venture is stretching the bounds of possibility. Clause 199(5) and clause 200(3) recognise the nature of S4C and S4C2 as public service deliverers. I would feel more comfortable as we watch it on monitors in the parliamentary estate and I thoroughly recommend it to my colleagues. There may not be a great take-up at the moment, but I still recommend it.

I may wish to return later to other aspects of S4C coverage, but clauses 198 to 203 make a genuine attempt to create an appropriate balance between accountability and flexibility. We must recognise the public service ethos of S4C and put it on a similar standing to the BBC. That is to be applauded. I invite my hon. Friend to confirm my interpretation of the clauses and the importance of S4C or, alternatively, to disabuse me of my errors of interpretation.

Simon Thomas (Plaid Cymru, Ceredigion)

Before I speak in more general terms—as you have guided us to do, Mr. Atkinson—I wish to ask the Minister to say a little about clause 198 when he replies to the debate. That clause is

entitled, ''Function of OFCOM in relation to the Welsh Authority''—that is to say, to S4C. I understand that the clause is intended to establish that the relationship between S4C and Ofcom is similar to that between the BBC and Ofcom, and I am thankful that no amendments have been tabled that are designed to change that relationship. However, I would like the Minister to confirm that that is the clause's intention—or to elaborate on that—so that the Committee can have a better understanding of how this public service broadcaster will fit into the Ofcom regulation.

As the hon. Member for Ogmore (Huw Irranca-Davies) said, the other clauses on the Welsh authority—clause 199 and so forth—put S4C on a better footing to meet its new challenges. It is 20 years old. Some of us remember the first night that it was broadcast: I was sitting in the hall of residence at Aberystwyth university, where hundreds of students had gathered around one small television screen, such was the impact of having a television channel in our chosen language for the first time—that is why I sympathise with some of the later amendments on Scotland. This has been a long time coming, and it has made a big difference in Wales.

Chris Bryant (Labour, Rhondda)

There are four Welsh Committee members, and we might hear from all of them on this subject.

As the hon. Gentleman knows, many people in Wales would rather have Channel 4 than S4C—or, at least, they would like to have both channels—because Welsh is not their preferred language. That is the issue about which I receive the most letters. What would he suggest to those people in Wales?

Simon Thomas (Plaid Cymru, Ceredigion)

I take issue with the hon. Gentleman in one respect. I come from the Cynon valley, which is next to the Rhondda valley—as he knows—and I come from a non-Welsh-speaking background. My knowledge of the people in south Wales leads me to believe that they would not rather have Channel 4 if that were to lead to the demise of S4C, but I agree that they would like to have a choice. In the context of the framework of this Bill, we are discussing how that choice will be delivered—and that is what digital broadcasting is increasingly delivering.

The hon. Gentleman will undoubtedly be unhappy with the access to satellite or cable in the Rhondda valley, just as I am unhappy with it in my constituency, but that is the reality of what is facing us. He will also appreciate that the English speaking people in Wales have not so far had a unique television channel dedicated to their needs, but that that is increasingly being made available on digital by BBC Choice—and by BBC 2W in Wales. Moves are afoot that are improving the lot of English speakers in Wales, as well as that of Welsh speakers.

I want the even-handed approach that has been adopted so far to continue, with support from all parties, from the Conservatives—although they had to be persuaded a little bit to establish S4C, having

turned back on their original manifesto commitment—to the present Government that have put forward these new clauses that improve the position of S4C and to any incoming Government in the Welsh Assembly, which I hope will work with the economic structure of which S4C is now a part. Before the hon. Member for Rhondda (Mr. Bryant) intervened, I was about to describe the difference that S4C has made to Welsh economic and cultural life.

We will shortly receive the results of the census in Wales, which will give us a figure for the number of Welsh speakers for the first time in 10 years. There are strong indications that it will show a slight increase in the number of Welsh speakers; if that is the case, it will be the first time in a century that we have been able to reverse the trend. It will have come about almost entirely because of the increase in educational opportunities and the fact that many English-speaking parents choose a Welsh language education for their children. They choose for their children to be brought up in a bilingual atmosphere; for example, a third of children attend Welsh language education in the Rhondda-Cynon-Taf area. S4C has played a role in normalising the Welsh language—''normalising'' is the term used by linguists—from a fringe language that was used only in chapel, farm or pit in some areas of Wales, to a thriving, modern European language. The bilingual experience reflects more closely the reality of modern Europe than the monolingual experience of England. S4C's role in promoting that has been crucial. However, S4C has not just done a cultural job, it has also done a huge economic job and some 2,000 people are employed in Wales as a direct result of that.

The hon. Member for Ogmore mentioned some of S4C's real, significant achievements in the field of film production, although he did not talk about cartoons. S4C is heavily involved in multilingual international cartoon production. Cartoons are either produced originally in Welsh and then dubbed, or made back-to-back in Russian, English and many European languages. S4C's ''Sali Mali'', a Welsh child's favourite cartoon character, is being exported to Korea and I hope that that peace-loving character can do something to help the present situation there.

The Welsh language film ''Hedd Wyn'' was the first to have been nominated for an Oscar. That was the equivalent of Wales winning a rugby match against England. Wales gained kudos from the fact that a film made in a 2,000-year old Celtic language that had been ignored for a long time was in contention for an Oscar for the best foreign language film. That kind of thing changes a speakers' perception of their own language. Their language should not be downgraded or treated badly; it should be passed on to the next generation. That is the huge change that S4C has made.

On Sunday night I had the privilege of meeting Gwynfor Evans. Committee Members will know that Gwynfor Evans was the leader of Plaid Cymru during the campaign for S4C. He threatened to starve himself in order to change the mind of a Government who had backtracked on their original commitment. At the moment, Gwyn is in hospital in Aberystwyth. He is 90 years old, but he still follows our debates and he is

aware of what is happening to his child—his plentyn—which is how we in Wales think of S4C. He was keen to know what was happening to the Bill and he was keen carry on with the work that had already been established.

S4C is not just about the Welsh language and Wales—it is the window through which Channel 4 went into Wales. It was always a curious thing to watch S4C, although not so much lately since its productions have become more Channel 4-like. In the early days, S4C specialised in rural antics and nice, homely dramas, which would cut at 9 o'clock, perhaps to the latest scandalous episode of ''Brookside''. That was quite amazing. S4C somehow managed, in its early days, to contrast its more traditional mode of television production and the cutting-edge stuff from England and still succeed in making its way in the Welsh language.

There has been a two-way traffic. Not only has S4C brought Channel 4, and its films, into Wales and given a different perspective in the Welsh context, but it has produced much home-grown talent that has gone to England. Huw Edwards, who reads the BBC news, started as a newsreader on S4C, Ioan Gruffydd—''Hornblower''—started on S4C as a Welsh language actor and now he is a heartthrob in teenage girls' bedrooms throughout England and Wales and Siân Lloyd, with the weather map, also started on S4C. [Interruption.] I do not know if she has joined the Liberals. We will not go down that path.

I hope that the Committee will agree with me that S4C has enriched the cultural diversity of the United Kingdom. I am sure that developments in Scotland and, in time, in Northern Ireland, will do likewise. My questions to the Minister on the clause are similar to those of the hon. Member for Ogmore, and I hope that the Minister will respond to them. It is an obvious step forward to have S4C 2, or Sianel Pedwar Cymm Dau, recognised as a public service. Broadcasting the proceedings of the Assembly could only be a public service; I do not think that anyone would willingly undertake it as a commercial venture. S4C should be congratulated on broadcasting it, and on doing so with its money and no additional funds.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The hon. Gentleman referred to the coverage of the Welsh Assembly. We should give credit to S4C for achieving that. By comparison, the Scottish Parliament could not find anyone to broadcast its proceedings, as it did not have a broadcaster. It had to resort to webcasting, which has its benefits but is nothing like as good as having stuff broadcast across the airwaves.

Simon Thomas (Plaid Cymru, Ceredigion)

The hon. Gentleman is correct. I was just going to mention how different the experience has been in Wales due to the fact that there was a broadcaster ready to broadcast.

It was not a done deal that S4C would take the job. Why should S4C broadcast the proceedings of the National Assembly? The Assembly is bilingual, so its proceedings would not necessarily count as a Welsh language programme. S4C has therefore had to create a whole milieu—programmes, commentators and so forth—around the broadcasting of the Assembly to

create the right atmosphere. The only thing that can be said against the broadcast—and it is not S4C's fault—is that it has not increased interest in the National Assembly. That is nothing to do with S4C, I am sure; we need to address something deeper in our political psyche.

Now that we have accepted S4C Dau—or S4C 2—as a public service, I wonder whether the Minister would elaborate on the other sorts of service that S4C could deliver. The hon. Member for Ogmore mentioned a website; that certainly is an idea to take forward. At the moment, the best Welsh language website is undoubtedly that of the BBC. S4C might have a future role in relation to that, and international viewing and webcasting, too.

Clause 200 mentions new services that S4C would be empowered to undertake.

Peter Atkinson (Conservative, Hexham)

Order. If the hon. Gentleman wants to raise particular technical points, I would ask him to wait until we discuss the appropriate clause. To clarify what I said earlier, I am happy to have the kind of wider debate that the hon. Gentleman is taking part in, but it would help if he would leave his technical points until the appropriate moment.

Simon Thomas (Plaid Cymru, Ceredigion)

Thank you, Mr. Atkinson. In that case, I will wait until we debate clause 200 before I make my point.

I should like to consider the future of S4C, and in particular its financial security, which is covered by clause 202. It is very welcome that any lack of clarity about the Secretary of State's powers to increase funding for S4C have been removed by the new clauses. As I understand it, it is now permissible for S4C to have a higher than RPI increase in its funding. Permissibility is one thing; receiving more funding is another. In relation to Scotland, the comment was made that because the funding for Scots Gaelic programmes has not had an automatic RPI increase, it has decreased in real terms over the years. That has not happened to S4C; its funding has kept pace with inflation.

The problem is that S4C has had to cope with the digital revolution. It had to produce a new channel—S4C Dau—to deal with the National Assembly, produce other digital programmes available on digital, terrestrial or satellite, and invest heavily in extra programmes. S4C is making more programmes in the Welsh language than ever before. It is certainly making more than were envisaged 20 years ago and more than were being delivered even 5 years ago. Yet it has not had a penny piece of additional funding. That is not a bad thing in itself because S4C might be able to cope with the additional demands. However, the broadcaster has identified about £3 million as the real-terms shortfall of what its position would have been without digital, although it now has to cope with the new digital services.

It is worth reminding the Committee that S4C is the only public service broadcaster that has not received an increase above and beyond its usual increase to take specific account of digital broadcasting. The BBC received considerable extra sums for digital broadcasting and did very well out of it. We debated

whether that was good or bad and whether it was competitive earlier. Channel 4 invested heavily in digital and has gone a little into the red as a consequence. S4C is concerned that there could be deleterious effects in the next year or so on the standard of programming in Wales if the funding formula does not include some recognition of the additional costs of digital broadcasting.

I have detected an effect on S4C's programmes, although that is only a personal view from the programmes that I watch. I have huge admiration for the hon. Member for Maldon and East Chelmsford because he seems to remember every programme that he has watched during the past 20 years. I can rarely remember titles although I have a vague knowledge of programmes that I have seen over the years. It would be too strong to suggest that a panic is coming into S4C, but a bit of stress is being introduced. There is not so much a decline in programme standards. Some programmes are trashy because they are meant to be. That is the range that we get, and it is good that we get trashy programmes in Welsh. We do not want all the programmes to be chapel programmes; we want trashy programmes because it is important to attract people to watch.

There is a little bit of stress in S4C. The evening schedules have been changed but I do not think that all the changes are totally voluntary. S4C has tried to chase a declining market because it is losing viewers, especially for key programmes. Rearranging schedules in order to attract and keep viewers is a positive response to that.

There will be medium-term difficulties—two or three years down the line—if S4C does not get a little additional help to pay for the digital explosion and expansion. There are also extra services that the hon. Member for Ogmore mentioned such as webcasting or better internet services.

Michael Fabricant (Conservative, Lichfield)

The hon. Member for Rhondda said that people still want to watch Channel 4 in English. Does the hon. Member for Ceredigion think that the Welsh authority has a role in helping to fund the roll-out of Freeview digital terrestrial television, which might allow that to happen? That is more technically possible in some areas than installing satellite or cable.

Simon Thomas (Plaid Cymru, Ceredigion)

I accept the hon. Gentleman's views about technical possibilities but financial possibilities are rather limited. I do not think that S4C's authority would want to spend in such a way. The hon. Gentleman might not know that when viewers in Chile, Argentina or England, in particular, choose to have S4C on their digital television, S4C has to pay for that. That is why it does not press so hard to expand its services via satellite dishes to England. That might be a reason why we have not seen the expansion that is possible in the City of London, for example. There are tens of thousands of people of Welsh descent there who might want to access S4C—if only for the rugby.

The hon. Gentleman reminded me of something of which it is worth reminding the Committee. Many members of the Committee, unlike him, will not have seen S4C. They will not have seen the subtitles in English, and will certainly not have seen the subtitles in Yiddish. They will not know that 76 per cent. of S4C's programmes are subtitled in English. That means that it is not quite so easy to say that English speakers do not have any access to S4C programmes. Also, it does not follow that people will not have access to Channel 4 programmes. They will be on at a different time—perhaps at 2 o'clock in the morning. However, VCRs, if not yet DVDs, are now pretty widespread in the Welsh valleys. It is important to remember that S4C is not a closed Welsh language service that English speakers cannot access. They can access the many programmes that were originally English programmes on Channel 4; and at least three quarters of programmes have subtitles in English on page 889.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

Can the hon. Member for Ceredigion tell the Committee about the position of Freeview subscribers in Wales? Do they get S4C and Channel 4? Is Freeview an adequate solution? In many parts of Wales, digital terrestrial television is not ideal.

Simon Thomas (Plaid Cymru, Ceredigion)

I understand that people can get Freeview, but not in all parts of Wales. However, I am technologically illiterate on the matter.

Michael Fabricant (Conservative, Lichfield)

I may be able to assist. Relay transmitters are, generally, not transmitting digital terrestrial television. In Wales, it is relay transmitters, rather than main transmitters, that fill in the gaps caused by the topography. Digital terrestrial television needs to be spread among relay transmitters.

Simon Thomas (Plaid Cymru, Ceredigion)

I am grateful to the hon. Gentleman for explaining that—although I might have suspected the reason.

Andrew Robathan (Conservative, Blaby)

I do not want to detract in any way from the hon. Gentleman's views on S4C and its popularity, but I do not want him to get carried away with the idea that people of Welsh descent in London and Westminster, for instance, are dying to watch it. I am of Welsh descent and I can honestly say that nobody in my family—which is mostly around London and Leicestershire—has ever expressed a great desire to see S4C in London.

Simon Thomas (Plaid Cymru, Ceredigion)

We should lock the hon. Gentleman in the cottage below Cader Idris where his hon. Friend goes on holiday. He should watch S4C compulsorily for weeks; I am sure that that would change his mind. However, I would promise him that I would not put the National Assembly for Wales on, so he would be okay.

I hope that the Minister will be able to respond positively on the additional services that S4C will be able to undertake and on the possibility of making a business case for additional funding for S4C to deal with the challenges of digital broadcasting.

Parmjit Dhanda (Labour, Gloucester)

At long last it is my turn. I am not a Welshman, but it is important that we have non-Welshmen talking about S4C. My constituency is very close to Wales and I have

contributed to the Welsh economy. Recently, I was having a few drinks on a night out in Aberystwyth and who should I find propping up the bar but the hon. Member for Ceredigion, no less.

Chris Bryant (Labour, Rhondda)

He is stalking you.

Parmjit Dhanda (Labour, Gloucester)

I can promise the hon. Gentleman that that was not the case.

The Minister may well remember an adjournment debate in November 2001 on sport on television. Many people in my constituency of Gloucester are rugby mad and, I would say, play better than the Welsh or anybody else at the moment. The rugby club is riding high at the top of the league and is doing well in the Heineken Cup. During the British Lions tour, people were unable to watch matches on terrestrial television in most of the United Kingdom but they could watch them on S4C. People therefore made the trip 20 minutes or half an hour down the road to watch the games. I was immensely grateful to S4C for that.

In Gloucester, there is a big displaced Welsh community. The hon. Member for Ogmore and the hon. Member for Ceredigion have mentioned a similar thing in London and many other big cities. It is important that S4C is available to those people.

Clause 200 is a welcome addition to the Bill. We may not watch S4C 2 on a daily basis, but it is good that it will no longer require an ITC licence and that the Welsh Assembly will be broadcast as part of a public service. We should encourage people to participate and be involved in politics, whether by listening to us, here in this Room, or in the House of Commons, the House of Lords or the Scottish Parliament. It is important to provide that service if possible.

Michael Fabricant (Conservative, Lichfield)

The hon. Gentleman raises an interesting and powerful point that nobody else has mentioned. He will notice that sound services are referred to in clause 200(9) and will no doubt be aware that the BBC has launched new digital radio channels. The Bill enables S4C to launch a series of Welsh digital radio channels. Would he welcome that?

Parmjit Dhanda (Labour, Gloucester)

Yes. I was going to elaborate on the point about digital services, which ties into clause 202. I am sure that S4C feels that it does not receive the same degree of support as other public service providers. I wish to flag up that point to the Minister, who will surely wish to comment. He will probably say that, unlike most other public services, S4C can make money by advertising.

I will curtail my remarks to give the Minister the opportunity to answer contributions to the debate

while the points are still fresh in his mind. I welcome the clauses relating to the Welsh authority because they are good for S4C and for television in the United Kingdom generally.

Kim Howells (Labour, Pontypridd)

I welcome the opportunity to say a few words about the Bill generally, but I shall stick to clause 198 because we will deal with each clause in turn.

I add my compliments to those paid by my hon. Friends the Members for Ogmore and for Gloucester (Mr. Dhanda) and the hon. Member for Ceredigion on S4C's performance. It has been a remarkable story and the source of a great deal of creative employment in Wales, which is something we have badly needed. It is an institution of which we should be very proud. Indeed, I enjoyed being part of the 20th birthday celebrations. I attended a glittering premier in Cardiff of a film made by S4C—I was even given a free drink.

Michael Fabricant (Conservative, Lichfield)

Was it Welsh?

Kim Howells (Labour, Pontypridd)

It may well have been.

The film was about the Mabinogion, which may be one of the films to which the hon. Member for Ceredigion referred when he talked about S4C's productions being sent around the world in a great many different languages.

The Government have made it clear that their intention is for the Welsh authority, like the BBC, to remain self-regulating on matters such as impartiality and the fulfilment of its Tier 3 remits. However, we propose that the authority should, again like the BBC, be subject to regulation by Ofcom in relation to negative content requirements and industry-wide quotas and obligations.

The clause provides that Ofcom's functions will include the regulation of the Welsh authority to the extent provided in the Bill and in part V of the Broadcasting Act 1996. Provisions in the 1996 Act relate to the functions of the Broadcasting Standards Commission to which the Welsh authority is already subject and which will be exercised by Ofcom in the future. There will be an opportunity to discuss in detail the clauses that set out Ofcom's other regulatory functions in relation to the Welsh authority, if the Committee so desires.

Question put agreed to.

Clause 198 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Jim Murphy.]

Adjourned accordingly at one minute to Five o'clock till Thursday 16 January at five minutes to Nine o'clock.