Community Radio Order 2004

– in the House of Lords at 11:00 am on 16th July 2004.

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Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, community radio is a new tier of very local radio. We discussed it at considerable length during the passage of the Communications Act 2003. We believe that it will increase access by communities to broadcasting opportunities, increase education and life-long learning opportunities, increase training and work experience, and improve social inclusion. "Community" as defined here can mean geographical communities, communities of interest or a combination of both. Such services can be an invaluable addition to the radio ecology, supporting and complementing the commercial sector and the BBC.

It would be wrong to undervalue the role of local commercial radio, which provides an invaluable and popular service in the areas that it serves. It is more popular than BBC local radio and strongly contributes to an area's sense of identity. It gets involved in a wide range of socially worthwhile activities, on-air and off-air, whether it be large stations such as Capital supporting the very successful Help a London Child fund, or small stations, such as Lincs FM becoming involved in the Lincolnshire road safety partnership.

So we do not underestimate or undervalue the important role of local commercial radio. But we believe that there is also room for an additional tier of very local radio services along the lines of community radio. Properly introduced and regulated, community radio will complement existing commercial radio stations rather than compete with them. Community radio can provide a pool of talent for the commercial sector and vice versa; encourage very local advertisers who may grow into the local commercial stations as their business expands; and serve audiences which are different to those served by the commercial sector. Above all, to have any real and lasting value, community radio must be distinctive from commercial radio.

It is clear from the pilot stations set up under the 28-day licences that community radio can, and does, provide a service which is, in the main, distinctive from existing commercial services. Desi Radio services the Punjabi community of west London; Resonance FM aims to engage people in culture, music and radio art; Bradford Community Broadcasting runs training courses and encourages local people to present their own programmes and become actively involved in all aspects of the station.

The Government have announced that they will provide £500,000 to support community radio in each of the next two years. The money will primarily be used to assist stations with their core start-up costs. Grants will be awarded by Ofcom, which will also be responsible for regulating the entire sector. The noble Lord, Lord Rodgers, is no longer in his place, so he cannot take the point that I hope that it will do so with its usual light touch.

The Communications Act 2003 allows the Government to make an order that modifies the radio provisions of the Broadcasting Act 1990, so that they apply differently in some respects to community radio services. That is what this order does. In effect it says, if you are dealing with community radio, you read the existing legislation with the modifications set out in this order. The order sets out what characteristics community stations must have. They must be primarily for the benefit of the community or communities they serve, and must deliver social gain, which is defined in the order. It means, for example, that stations must provide services to otherwise under-served groups; encourage discussion and expression of opinion; strengthen links within the community; and provide education and training opportunities. Community radio services must be not-for-profit, or non-profit distributing. Any profits must be ploughed back into the station or the local community that it serves. A community radio station must provide opportunities for the community to which it broadcasts to become involved in the running of the station and the production of programming. It must be properly accountable to the community it serves. Those characteristics will ensure that community radio stations are distinct from local commercial radio services.

In addition, the order places certain restrictions on ownership. In particular, it ensures that community radio licences cannot be held by the commercial radio sector, to ensure that the two sectors remain distinct. The order also provides that no one can hold more than one licence, to prevent the development of chains. Licences for community radio services will be limited to five years, which should provide enough security for a licensee, while providing adequate opportunities for new entrants.

The order also sets out a number of restrictions relating to the funding and location of community radio services. A community radio service must not take more than 50 per cent of its funding from any one source. That is based on the conclusions of the independent evaluation that a mixed funding model is best. It stops stations falling under the influence of a dominant funder, which should make them less vulnerable to changes in funding. The order sets out restrictions on the location of stations and the extent to which they can take advertising and sponsorship. They are as follows: no community radio stations are to be licensed where they would overlap with a commercial radio station with a potential audience—a "measured coverage area", to use the jargon—of up to 50,000 adults; a community radio station will not be allowed to take any advertising or sponsorship if it overlaps with a commercial station with a measured coverage area of between 50,000 and 150,000 adults; and where advertising and sponsorship is allowed, there will be an upper limit of 50 per cent of total income from these sources. The order also places a duty on Ofcom to "have regard to" the effect that the provision of a community radio service would be likely to have on the economic viability of any other local sound broadcasting service.

The measures strike the right balance between the interests of the community radio sector and the commercial radio sector. Taken together, the measures would affect only a relatively small percentage of the population, some 13.5 per cent. Only 0.9 per cent of the population would be prevented from having a community radio station in their area.

That is very much the opening position. We have formally asked Ofcom to conduct a review of the community radio sector two years after the first community station is licensed. If that review concludes that the restrictions are unnecessary or too burdensome, we will remove or modify them by bringing forward a further order for Parliament's approval. In short, this order is not necessarily the final word on the subject. Once we have better knowledge of how the two parts of the sector are developing, we will revisit the restrictions in this order to see if they are still necessary.

This is a historic day in the long journey of community radio. I pay tribute to the work of the Community Media Association, and in particular to Steve Buckley, who has been instrumental in getting us to this point. I hope that community radio will be an exciting and important development, not just in UK radio, but also in UK society more generally. Anthony Everitt, in his evaluation of the pilots, said that community radio,

"promises to be the most important new cultural development in the United Kingdom for many years".

I share his optimism, and I hope that the House will approve the draft order before it. Finally, I assure the House that I am satisfied that this draft order is compatible with convention rights. I beg to move.

Moved, That the order laid before the House on 15 June be approved [23rd Report from the Joint Committee].—(Lord McIntosh of Haringey.)

Photo of Baroness Buscombe Baroness Buscombe Shadow Minister, Home Affairs

My Lords, I thank the Minister for his full explanation of the provisions of the draft order. The purpose of the order is to establish a licensing framework for the creation of a new form of local analogue radio.

Community radio, as the new regime is to be known, was first mooted in the communications White Paper in 2000. The aim of the initiative is to encourage local community participation and involvement through educational and social inclusion. That does not displace the importance of local commercial radio stations, and we want to be optimistic on these Benches, and we hope that the two regimes can work to complement each other and provide additional support and information for local communities. Local community radio stations will be run as not-for-profit organisations, and they aim to provide benefits including regeneration and community co-operation through local participation.

A pilot scheme was established in February 2002, and since its creation it has been subject to an independent evaluation to assess its effectiveness in supporting social cohesion in local communities. As a direct result of the pilot scheme's success, the policy was implemented by the Communications Act 2003. The order facilitates the creation of a new tier of local radio.

The debate on the merits of community radio is not new. During the passage of the Communications Act, your Lordships debated its significance on a number of occasions. There is no doubt that a need and wish exists for community radio in local areas, however, question marks remain over funding and competition. In Committee, I expressed a concern about the possible cost implications for Ofcom:

"We are, in principle, supportive of community media, particularly community radio. But I continue to question how Ofcom can carry out a duty to promote community media with regard to cost. Where will the money come from? That is a difficult question which may put Ofcom in an impossible position".—[Hansard, 23/6/03; col. 107.]

Furthermore, more general questions exist about how community radio should be funded. The Explanatory Memorandum states that the cost to the public or the Exchequer will be none, yet on 5 March the Secretary of State for Culture, Media and Sport announced that £500,000 had been made available for community radio stations. The Minister has begun to answer that question in his opening speech today.

The amount of revenue raised by national advertising is likely to be minimal. The local market will be of central importance if a community radio station is to survive. Sponsorship can also provide an alternative funding mechanism by offering substantial and sustainable long-term revenue for these radio stations. However, we remain unsure whether those two revenue streams alone will provide a solution for the future. How does the Minister envisage that local community radio stations will fund themselves after the initial grant has been exhausted?

I echo the concern of my honourable friend the Member for Henley regarding competition for licences. When this draft order was debated by the Second Standing Committee on Delegated Legislation on 13 July, he expressed concern regarding competition for licences. In essence, we do not want community radio to be in a position where it can compete unfairly with local commercial stations. The example that he referred to was simply that state-funded radio stations would be in an extra-special position of having been subsidised by the listener through tax and then offered advantageous advertising rates. While we welcome the creation of community radio, any funding proposals and competition concerns require detailed evaluation to ensure that the objectives of this initiative are fully met.

Today, the Minister referred to balance. That is the key. We will need to see in the coming months and years whether the balance has been correctly achieved in the funding and financing of these community stations, and to see if they can thrive and develop.

The debate in another place was interesting and at times amusing. It considered the possible types of community stations that might be successful in obtaining a licence. Examples were given of "Hound FM" for those who are pro-hunting, which is one that I would probably listen to; and another suggestion for "Vardy FM" for the pro-creationists. While it was lighthearted on one level, an underlying serious concern was expressed among honourable Members regarding the kinds of community stations that might seek and be successful in obtaining a licence. We will want to watch carefully how Ofcom manages the often difficult process of deciding whether a licence should be granted. Indeed, the Minister in another place referred to Ofcom needing on occasion to make "very fine decisions".

The Minister in another place also referred to community radio being on an "open journey". I think that that is right. We welcome the order with these concerns attached with regard to funding, and we hope very much that community radio will be sustainable and will develop for all the very good reasons outlined by the Minister in his opening remarks. I am also grateful to him for referring to the need to revisit the workings of the order to ensure that the balance that has been struck within the order is right for the future benefit of community radio and, indeed, all local radio.

Photo of Lord McNally Lord McNally Shadow Minister (Broadcasting), Culture, Media & Sport, Deputy Leader, House of Lords

My Lords, I should like to associate myself with the Minister's congratulations to the Community Media Association and to Steve Buckley on his part in what is now a successful campaign with the bringing forward of this order. My remarks will balance those of the noble Baroness, Lady Buscombe, in that I too welcome the early review by Ofcom of the order, but perhaps for slightly different reasons.

In truth, much of the early hope and idealism of commercial radio—that we would have genuine locally owned and rooted stations—has disappeared under the forces of the market which holds such sway within Ofcom. The reason that community radio has enjoyed so much support is that it has met a very real need by getting back to the grassroots participation that was there to a certain extent at the birth of commercial local radio, but which amalgamations, consolidations and takeovers have virtually removed. During the passage of the Communications Bill we forecast that eventually there would be only two or three large commercial owners of local radio stations.

However, that does not mean that local commercial radio stations do not fulfil a valuable local function. As the Minister said, many have identified that that makes good business sense. Nevertheless, something has been lost in all the hubbing and central scheduling of local commercial radio services. I know that the Commercial Radio Companies Association feels sensitive about this and produces statistics to show just how local commercial local radio still is, but the case for community radio has developed as commercial radio has taken on a new structure.

One of the central recommendations made by the Puttnam committee was the hope that the Government would take this matter forward. Moreover, the Government's own evidence to Puttnam was that they saw how the potential of such radio stations would help to increase active local community involvement and would,

"provide a nursery for future broadcasters and satisfy demand for access to broadcasting resources from specific communities, whether based on locality, ethnic or cultural background or other common interests".

We welcome the order as the fulfilment of a Puttnam recommendation and a promise made by the Government during the passage of the Communications Bill.

My only worry concerns the response to this order by the Commercial Radio Companies Association, quoted by the Minister in another place, Estelle Morris. It stated that it welcomed the order because it,

"sets out an excellent framework for a new tier of radio, and CRCA looks forward to watching the new Community Radio sector flourish".—[Official Report, Commons Second Standing Committee on Delegated Legislation, 13/7/04; col. 19.]

I say only this to the Minister: when a trade association issues that kind of welcome to a government measure, he should approach it with the same scepticism as when a civil servant says, "I think you're being awfully brave, Minister". The CRCA is very pleased and I congratulate the association on being one of the most effective trade bodies in the sector, but there are worries that the Government have bought too much of its case. As it stands, the order places far too many restrictions on community radio. Commercial radio is a big and robust industry comprised of some of the most powerful and wealthy media organisations in the world. There is grave doubt whether community radio needs the kind of over-protection given by the order. I hope that Ofcom will review realistically how much protection community radio needs

I regret the restrictions on coverage of 50,000 to 150,000. They affect me personally because in St Albans, Radio Verulam will be caught by them. There we have what I think is the perfect ecology for local broadcasting. We have Radio Verulam, a community station; Chiltern Radio, which is a commercial station; and Three Counties Radio from the BBC. Between the three stations a distinct and competitive service is provided, which is as it should be. I do not see why one should be restricted by an order of this kind.

I too question the money, but again for a quite different reason. I understand that the money was creatively recycled from the outgoing Broadcasting Standards Council, and well done for doing that, but if community radio is to be restricted on raising money in other ways, it is incumbent on the Government to put real funds into the development of those services beyond this commitment. Given its wide social remit, perhaps other departments could be equally creative in lending their support. I am thinking, for example, of the Office of the Deputy Prime Minister, which seems to have lots of budgets that could be used in this way.

So while I give a general welcome to the order, I urge Ofcom to question whether the extra protection is really necessary. I also urge the Minister to find some real money to act as a counterbalance to the restrictions being brought in. I welcome too the ban on chains because I feared that what has happened to commercial radio could also happen to community radio: the big boys would gobble up the stations one by one, bringing them into their consolidated groups. It is essential that community radio remains community-based, with the outlined restrictions placed on it with regard to ownership, profitability and so on. We welcome this fulfilment of a promise, but the potential of community radio will be much greater if we move ahead imaginatively.

One final question: in this age of rapid technology change, what about community television? Are the Government turning their mind to that issue?

Photo of Lord Davies of Coity Lord Davies of Coity Labour

My Lords, I welcome the order and the statement of my noble friend in support of it, particularly with regard to the revisiting of its development. I received a communication this morning, which I am sure many other noble Lords also received, from the Community Media Association, which welcomes the order. However, it has some small concerns which I should like to put to the Minister.

The association believes that the conditions included in the new order will mean that a large number of communities will be severely restricted in their ability to achieve financial sustainability, and others will not be allowed to have community radio at all. It welcomes the existing small community radio fund of half a million pounds, to which the Minister referred, which may help to support some initial costs; however, it feels that a much larger fund is required to make community media truly viable.

I shall home in precisely on the areas of concern. The association feels that a substantial community media fund should be created and that the restrictions on programme sponsorship and advertising should be viewed as a temporary measure and the subject of serious review. I hope that the Minister will be able to answer those questions.

Photo of Lord Desai Lord Desai Labour

My Lords, I was not going to speak, but after what the noble Lord, Lord McNally, and my noble friend Lord Davies have said, I wish to add a few words to the debate.

The noble Lord, Lord McNally, said that there was a market philosophy in Ofcom which caused commercial radio to be the way that it was. The philosophy of the market makes small commercial radio companies not viable, and that is why large companies take them over. There is nothing new in that.

If we believe in a free market philosophy, we should not put restrictions on community radio's power to seek advertisements. The big beasts of commercial radio should not support market distortions, and it seems to me that community radio is stuck with a market distortion. I join with the two noble Lords who have spoken before me and agree that, as soon as possible, the restrictions on community radio accepting commercials and the measured coverage area criteria should be removed. There should be a level playing field, and community radio should not be hobbled at its origin.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, in a sense, the debate reflects the one which took place during the preparation of the order. I do not think that it is any secret that the Commercial Radio Companies Association would have wished for there to be no government funding for community radio; and I do not think that it is any secret that the Community Media Association would have wished for there to be government funding but no restrictions on community radio. In the end, we have a deal, as the noble Lord, Lord McNally, said, which satisfies the Commercial Radio Companies Association and, to some extent but not completely, satisfies the Community Media Association. Let me read from the introduction of its memorandum on the subject:

"The CMA welcomes the draft community radio order as an important first step in introducing a vibrant community radio sector in the United Kingdom. The draft order is a long-awaited addition to the UK communications environment. It is a tribute to many years of hard work and the achievement of scores of community media organisations across the United Kingdom".

I endorse that; it is certainly the case.

The noble Baroness, Lady Buscombe, came to the issue a little from the point of view of the Commercial Radio Companies Association, although she was fairly objective in her approach. She pointed out the difference between our first memorandum, in which we said there would be no government funding, and the subsequent announcement in March this year that there would be government funding of half a million pounds in each of two years. Yes, there is a difference: we changed our minds, and the thrust of the debate today has indicated that we were right to change our minds.

The noble Baroness asked about other sources of funding, particularly after the first years when the grant is exhausted. There will be, of course, charitable funding, local funding of various kinds and, in most cases, advertising funding. If I were a community radio station, I would look for funding from the Department for Education and Skills for my educational work; I would look for European Social Fund funding; I would look for local cultural funding; and I would look for urban regeneration funding. There are all kinds of creative things that one can do to secure the continuing viability of community radio stations, which is what we all want.

The noble Baroness asked about protection against unfair competition, and she acknowledged that we had achieved a balance. She is right, of course, and we shall watch the issue with care. I say that not only to the noble Baroness, Lady Buscombe, but to the noble Lord, Lord McNally, and to my noble friends Lord Davies and Lord Desai. Ofcom has powers to counter any unfair anti-competitive practice. However, we all hope that, with the powers we have put in place, community radio will expand and attract significantly more audiences than even the successful pilots.

I said in my opening remarks that a complete ban on community radio applies to less than 1 per cent of the population of this country, and even the partial restrictions apply to only 13.5 per cent. For the remaining more than 85 per cent of the population, there are no restrictions at all on community radio.

We have struck a balance; we have something which has been welcomed, with varying degrees of enthusiasm, by both sides. Let us get it started; let us see it work. That is my wish for community radio in this country because I believe, as do my noble friends, that it is enormously important.

The noble Lord, Lord McNally, said a final word in relation to television. We are engaged in spectrum planning for digital switch-over and we are looking for slots for local services, to make them as flexible as possible. There are existing analogue local commercial services but, if there is spectrum available, we shall have to make decisions about commercial services and community television services, if possible. It is a legitimate debate, but it is probably for another day.

On Question, Motion agreed to.