'Murdoch should not buy C5'

Rupert Murdoch should not be allowed to buy Channel 5 and other non-European companies should not be given the go ahead to make a bid for ITV, the influential parliamentary committee chaired by Lord Puttnam has recommended.

It says the government should not lift existing restrictions on American companies owning UK broadcasters such as ITV and Channel 5 and should leave the decision to the new super-regulator Ofcom.

The joint media select committee set up to investigate the proposals, chaired by Lord Puttnam, has found the decision by the culture secretary, Tessa Jowell, to recommend that ownership restrictions be lifted was based on "largely unproven expectations".

It says the decision should be left to Ofcom rather than decided by the government of the day and recommends the ban on US companies, including Rupert Murdoch's News Corp, should remain in place for now.

Lord Puttnam had made it plain ahead of today's report that he was opposed to the relaxation of foreign ownership rules.

But he was expected to propose a compromise - that the ownership restrictions could be lifted when America returned the favour and allowed British companies to buy US TV and radio stations.

However, the committee has gone further and says that the matter is an issue for regulators, not for politicians.

"We recognise that reciprocity was an important way to widen market access and increase economic opportnities. Nevertheless, as matters stand, we do not view the argument on reciprocity as pivotal," it says.

It explains that if the committee was opposed to the relaxation of the rules on economic grounds it would not view the absence of reciprocal arrangements as a reason for the restrictions to remain in place.

"In the light of its experience, Ofcom would be able to facilitate a decision by Parliament based on evidence, rather than a decision based on largely unproven expectations as would be the case at present."

Puttnam's committee's opposition means the government could now be heading for a major clash with the House of Lords - at the weekend Tony Blair made it plain that the ownership clauses in the communications bill were government policy and not "negotiable" proposals.

It also says that the new communications bill should be modified to give Ofcom, the new media and telecoms regulator, a tighter grip over the BBC.

"The bill should be amended to place beyond doubt Ofcom's powers over the BBC in relation to competition law," said Lord Puttnam, summing up the committee's findings.

"Proposals in the agreement relating to the BBC should mirror the provisions of the bill more fully" he said, and "the government should set its initial proposals for the conduct of charter review before the bill is considered by parliament".

The extent to which the BBC should be regulated by Ofcom has been a topic of extensive debate ever since the draft proposals were published earlier this year.

The recommendation that it should be more tightly monitored by the regulator and that the conditions of its charter renewal, due in 2006, should be set out now will please commercial competitors worried about the BBC's dominant position.

The influential committee, which has taken evidence from every major media and telecoms group, said the bill was in many ways welcome but that it had "given rise to unease on several grounds".

It recommends a new plurality test should be inserted into the enterprise bill, due to replace the Competition Act when it comes into force later this year, before existing restrictions on quality and diversity are abandoned.

"At the heart of our conclusions and recommendations about media ownership is the proposal for a new plurality test to be used in connection with mergers and takeovers across all media," said Lord Puttnam.