Sky and 21st Century Fox: Proposed Merger

Lord McNally Excerpts

Thursday 16th March 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am obliged to the noble and learned Lord for repeating the Statement made in the other place. On this side of the House we welcome the decision that has been reached, that having been minded to go ahead with a full referral, the Secretary of State today confirmed that that is what she is doing. That is entirely right and appropriate. It is perhaps worth mentioning in the process, as alluded to in the Statement, that 21st Century Fox also welcomed the referral. That needs no further comment from me.

The two grounds on which the referral is made are broadcasting standards and the question of being a fit and proper person. I will deal with them both and ask a couple of questions around them. The broadcasting standards ground is a relatively new departure in this area because previous referrals have been done on much narrower grounds. Broadcasting standards is a very broad term but I welcome this. It is right that the consideration of this merger, since it involves a global media company, needs to engage with all areas that might affect the plurality of sources of information but also the entertainment and other features of the broadcasting world today. Will Ofcom have the power to investigate all corporate governance issues affecting 21st Century Fox, including anything that may arise from the phone-hacking scandal, any cover-up of illegality at News International, the rehiring of people responsible for corporate governance failures and ongoing sexual harassment claims currently being heard by a grand jury in the United States which, if proved to be the case, might lead to withdrawal of that company’s licence to broadcast there?

Secondly, plurality is a term that probably needs to be reinterpreted as technology has moved on considerably since the first time this issue was raised in the events of 2010-11. The work done at that time by Ofcom, which involved a 40-day period of investigating similar but not necessarily the same issues, resulted in a report provided to the Secretary of State. The Secretary of State has the power to publish that report but, as far as I can understand, that has not yet been published. Can the report now be made available, since it clearly bears on the issues before us? Whether or not it is published, can and will the issues raised in that report by Ofcom with the then Secretary of State be considered in the work going forward at this point?

I welcome Ofcom’s announcement that it will conduct the assessment under the fit and proper regulations at the same time as the other work it has been commissioned to do, so that we have a timetable of 40 days. That may prove a bit challenging given the amount of material that must be covered but it is important that we do so. The question of the “fit and proper” assessment is undefined in the legislation and it may be that there are, as we discussed in the Digital Economy Bill before your Lordships’ House, questions raised about exactly what tests are required for this. In some ways, it may be appropriate to reconsider those, and we may be able to find time in the remaining stages of that Bill to do so. Today, could the noble and learned Lord confirm that while the report issued after the fit and proper assessment at the time of the last merger investigation was largely couched in terms of directorial duties, this report will deal with not only individuals but the corporate structures within which they operate and that the level at which “fit and proper” persons are concerned will be adjusted to make sure that it covers the responsibilities inherent in a corporate as opposed to an individual structure?

Many of the questions I raise today and which are raised more generally by the approach that the Government are taking—which, as I said, we welcome—would have been considerably aided had they been informed by the work that could have been done under part 2 of the Leveson inquiry. That has been delayed and, for reasons that the Secretary of State gave at a recent meeting in this House, cannot be reopened until such time as judicial processes going forward are complete. I understand that and do not seek to raise any questions about it. But I put it to the noble and learned Lord that the issues that are likely to be part of that review will be germane to what we are discussing today, and I wonder if he has any comments on that.

Finally, on the question of powers, the founding document for the investigations being announced today is the Enterprise Act 2002. The current thinking is that sufficient powers to carry these out are available to Ofcom and the CMA under the different regulations that affect them. But will the Minister confirm that the Ofcom investigation has the power to obtain documents and compel witnesses to appear before it? That power is available to the CMA but may not be explicit in the regulations that are operating this investigation.

[Lord McNally]

My Lords, I, too, welcome the Statement and the way that the Secretary of State is approaching her responsibilities in this regard. The big problem is that we have been here before. In many ways, we are dealing with an issue that we have faced many times—since the end of the war there have been five royal commissions on the press, and Leveson—and yet we still have these concerns about power and influence.

I am still haunted by the word that Mr Murdoch used at the height of the hacking scandal when he appeared before the Select Committee and said it was the humblest day of his life. I always thought that that was an odd word to use. It is not humbling, it is not regretting, it is not “I am going to mend my ways”. In fact, everything that has happened since has warned us that there has been no change in the approach.

Can the Minister tell us what were the points that Fox contested? It would be interesting to know how it contested what we thought a week ago was a very good Statement. As the noble Lord, Lord Stevenson, said, where does this sit in the timetable of other decisions to be made about Leveson 2 and about setting up one of the great prizes of Leveson—a genuine, low-cost arbitration system under Section 40? It is important that we look at this in a holistic way, not a siloed way. I also worry about the 40-day time limit. We should not put false timetables on these decisions because we will be stuck with them for a very long time.

I welcome the Secretary of State’s emphasis on her assurances about respecting her quasi-judicial authority. Will the Government also guarantee that any meeting or communication between Mr Murdoch and the Prime Minister, or their emissaries, is made immediately public, as well as the record of any meetings that do take place? There is a long record of Mr Murdoch having access outside the direct ministerial responsibilities, in all the jurisdictions in which he operates.

The wording of the Statement gives us confidence but will the Minister assure us that we are in a process which is going to satisfy somebody he will be well aware of—the man or woman on the Clapham omnibus? When we get to the end of this process, will it feel right? Will it smell right? Will it look right? If it does not, we will have created another problem that we will have to face further down the road.

[Lord Keen of Elie]

I am obliged to noble Lords for their observations on this matter. I will begin with a number of points raised by the noble Lord, Lord Stevenson; first, the question of commitment to broadcasting standards. When one is looking at broadcasting standards, one can have regard to broadcasting by way of television and radio within the statutory context but of course when actually applying a test of commitment, one is looking much more broadly at the behaviour of a particular party. That would include their behaviour in the context of news media, newspapers and other related conduct. This is not a narrowly defined issue. Commitment to broadcasting standards will embrace the conduct of a party. A party includes corporate parties and their relevant behaviour but also of course the behaviour of a controlling shareholder of a corporate party, or even a shareholder with less than a majority interest but a material controlling interest in a corporate entity. I seek to reassure the noble Lord that the question of commitment to broadcasting standards is approached on what, I suggest, is a broad basis.

With regard to plurality and the publication of reports, I understand that the last report was published in December 2010. We will publish reports arising out of this intervention, albeit I understand that they may have to be redacted to some extent on the grounds of commercial sensitivity.

On the question of a fit and proper person being undefined, clearly there is a crossover between “fit and proper” and the question of the commitment to broadcasting standards. As I understand it, that is why Ofcom has expressed confidence in being able to respond to the Secretary of State by reference to not only commitment but the fit and proper test that applies under the Broadcasting Acts of 1990 and 1996.

With regard to Leveson part 2 there is little I can say, as the noble Lord, Lord Stevenson, anticipated, in view of the undertakings given to the court pending the final disposal of the application for judicial review—an application, I would add, which was made not by this Government but against them. As regards the powers of Ofcom under the 2002 Act, it has expressed the view that it has sufficient powers. But I note that it does not, in the context of discharging its duty with regard to fit and proper under the Broadcasting Act, have the power to compel the attendance of witnesses. Nevertheless, where it requests their attendance or the provision of documents and witnesses and documents are not provided, that has a material bearing upon its assessment of commitment to broadcasting standards. Somebody who is not prepared to answer simple questions about how they would discharge their obligations as a licensee would throw into doubt whether they have a true commitment to those standards. That may appear a little circular to the noble Lord but it is essentially an effective mechanism by which Ofcom can control this process.

Coming to the observations of the noble Lord, Lord McNally, I am not going to enter into a debate about the definition of “humbling”. Nevertheless, it appears on the face of it that what occurred had hit home not only with the corporate structure—the shareholders—but with individuals who held those shares. It simply would not be appropriate for me to identify the contested points made to the Minister at this stage. The Secretary of State is going to carry out a quasi-judicial process, on the advice of Ofcom and the CMA. We have to await the outcome of that process. The noble Lord mentioned the 40-day time limit. Again, that is a statutory provision and Ofcom is confident that it can adhere to that time limit. We therefore feel that it is appropriate.

As regards guarantees with regard to meetings, I am not aware of any meetings being planned or proposed by Mr Murdoch. A quasi-judicial decision will be made by the Secretary of State and the noble Lord, Lord McNally, may accept my reassurance that there is no question of inappropriate contact from any party with the Secretary of State pending the determination of that decision. With regard to the gentleman and lady on the Clapham omnibus—as originally invented, I believe, by Lord Denning—we will have to await their response to this process. But we have confidence in Ofcom and in the CMA, and we will see in due course whether it is necessary to take this on to a phase 2 inquiry at the instance of the CMA. I am obliged to noble Lords.

Sky and 21st Century Fox: Proposed Merger

Lord McNally Excerpts

Monday 6th March 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am obliged to the noble and learned Lord for repeating the Secretary of State’s Statement in another place. I am also very grateful to the Secretary of State for coming at what I think must be the earliest possible moment, because she said that she received notification of this only on Friday 3 March. It is very good that she was able to come so quickly. I also put on record our thanks to her for attending a meeting convened by the noble and learned Lord last week where a number of Peers from all sides of the House were able to ask her questions and examine a bit more closely some of the issues that relate primarily to the Digital Economy Bill but also to this subject.

My first question is about who is caught by the quasi-judicial mode, which was mentioned several times by the noble and learned Lord. The Statement refers to the Secretary of State and the Government. Will the noble and learned Lord confirm or deny whether that is departmental Ministers in DCMS or whether there are any other Ministers involved? I will be interested to know to what extent we are able to ask questions and gain answers over this period, which may last a number of weeks.

An important point is that the Statement does not cover the corporate structure which we are now facing with this proposed merger. We know that 21st Century Fox indicated on 9 December that it was making a takeover approach for Sky. It already owns just over 39% of Sky shares, so it is the balance of the shareholding. We know that, after a period of pre-discussion and debate, the European Commission was formally notified of the bid on Friday 3 March. It is important to get it right because there have been changes since we were in this process six years ago. 21st Century Fox is one of two successor companies of News Corporation, which was split up in 2013. It is important that we recognise that Fox is the legal successor of News Corporation and deals primarily with the film and television industries and another company, new News Corp, is a new company focused on newspapers and publishing that was spun out of News Corporation. In the UK, new News Corp owns the Sun, the Times and the Sunday Times. The point is that, although the corporate vehicle under which the acquisition is being made is 21st Century Fox, it is common understanding that the same principles are involved on both sides of that split and therefore the inquiry needs to take account of that. From what the Secretary of State has said, I think there is a willingness to go a little bit further than the straightforward 21st Century Fox approaching Sky. I will be grateful if the noble and learned Lord can respond to that at this stage.

The Secretary of State made the point that there are two dimensions to the inquiry that she is minded to look at. One is plurality. The point was made that, if this bid is successful, it will put an even greater amount of media power in the hands of the Murdoch family in particular and the people involved. Ofcom therefore needs to look at the whole of the group of Murdoch companies in assessing whether the Sky takeover would threaten media plurality. That is a very important aspect in relation to what I have just said about the ownership and control of the family companies that are involved.

The world has changed since 2010-11 when we last looked at this, and Ofcom will need to range much more widely across the media and look at not just newspapers and traditional news delivery through broadcasting but at social media, news aggregators and others from which news is taken. This is quite a substantial change in operation, and I will be grateful if the noble and learned Lord has any observations on whether the resources that are available to Ofcom will be sufficient to cope with that new approach and challenge.

The second ground on which the Secretary of State says she is minded to intervene is on commitment to broadcasting standards. I notice that this section of the Statement is quite carefully phrased. The convention is to refer to the fit and proper test required under the Broadcasting Acts for those who hold a broadcasting licence. Sky holds a broadcasting licence and therefore the controllers of Sky have to be fit and proper persons. The narrow point here is the extent to which that is focused as a process on individuals who may or may not be the named licence holders or on the corporate structure within which they operate. I would be grateful if the noble and learned Lord can confirm that the intention, even though it is not explicit in the Statement, is to look at not only at the individuals but at the corporate structure within which they operate because clearly there are issues on both sides of that.

This is a very important issue, which we will return to in a few days when we understand more about the European intervention notice and whether or not that has been called, and also the extent to which Ofcom will report and whether or not that Ofcom report will lead to further work by the CMA. It is important we get some of the facts on the table now, and I look forward to hearing further from the noble and learned Lord.

[Lord McNally (LD)]

My Lords, from these Benches, I welcome both the speed and tone of the Statement from the Secretary of State. She has been careful to keep to the legal niceties, although any reading of this would welcome what she considers the merits of the case, particularly, as has been said, her emphasis on media plurality and the commitment to broadcasting standards. These were at the heart of the debate we had over a decade ago—putting into legislation the right to intervene on public interest grounds—led by my noble friend Lord Puttnam, with the support of the noble Lord, Lord Lansley.

It is important to remember that, if anything, the arguments we had then which finally persuaded the then Government to accept the public interest test have got stronger over the last decade, in no small measure because of the behaviour of companies and organisations in which Rupert Murdoch has had an influence. We now face that problem again. Does the noble and learned Lord agree that this is still a major issue with the Murdoch empire in particular, and given the need to take on board how these companies change their structures without really ever changing the spider at the heart of the web?

The other, equally important point, as has been said, is the changes in broadcasting and media over the last decade. Mr Murdoch may play a big part in many ways, but he will soon be a small player compared to some of the giants wandering the media jungle. Does the Minister agree that the danger is that, if we get this wrong, we will set precedents which, when those big boys come along, will leave us in a very weak position in defending the very principles the Secretary of State so eloquently expressed in the Statement?

[Lord Keen of Elie]

I am obliged to the noble Lords, Lord Stevenson and Lord McNally, for their observations, and will seek to respond to some of the points they have raised. The noble Lord, Lord Stevenson, asked “whose court”, as he put it, deals with this quasi-judicial decision-making process. It will be for the Secretary of State to carry out that process, with the appropriate officials advising her. It will not involve other government departments or Ministers; it will be her decision and her decision alone that instructs this matter. I hope that reassures the noble Lord as to how the process will be carried on.

As for the corporate structures and the past involvement of News Corporation, as the Secretary of State indicated in the Statement, when we address the question of commitment to broadcasting standards, account will be taken of past breaches of those and of behaviour and corporate governance failures, including those relating to News Corporation.

Ofcom, of course, has a fit and proper person test, but that applies in respect of broadcasting licences rather than this issue. It is a different test to the one that will be considered with regard to the merger, but it is important to bear in mind that the same evidence may of course be relevant to both tests. As the Secretary of State set out in her letter, she considered that a number of relevant matters warranted further investigation, including facts that led to the Leveson inquiry, for example, and the question of corporate governance at the News of the World. It will be open to Ofcom to look at all relevant areas—none are being ruled out in this context. The ultimate question will be whether the bidder shows a genuine commitment to broadcasting standards, which will raise very real and relevant questions with regard to past behaviour.

The noble Lord, Lord McNally, asked whether we might be in danger of setting an unhealthy precedent, given the other tests that may be put before us in due course by other media outlets. With respect, I do not consider that this decision-making process involves the setting of precedents. Each of these proposals will be considered on its individual, stand-alone merits. I hope that provides some reassurance to noble Lords.

Rehabilitation of Offenders (Amendment) Bill [HL]

Lord McNally Excerpts

2nd reading (Hansard): House of Lords
Friday 27th January 2017 Lords Chamber

[Lord McNally (LD)]

My Lords, the noble Lord, Lord Ramsbotham, has explained the Bill in his usual thorough and clear way. It is my great pleasure to support the Bill and the noble Lord’s suggestion that the Government could envelop it in their wider programme of reform.

On 17 March I will stand down at the end of my term as chairman of the Youth Justice Board. That will bring to an end seven years of association with the Ministry of Justice, half of it with the MoJ as Minister here in the Lords and half as chairman of the Youth Justice Board. I say that because the two points I want to make are relevant to each of the jobs I have done.

Looking at the speakers list today, I see I am flanked by four speakers who have been extremely influential as mentors during my time at the MoJ: the noble Lord, Lord Ramsbotham, himself; the noble Lord, Lord Carlile of Berriew; the noble Earl, Lord Listowel; and the noble Lord, Lord Dholakia. I suppose I should add a fifth, the noble Baroness, Lady Chakrabarti, who is now on the Labour Front Bench, although I am not sure she was a mentor during that period; she was more of a menace—in the most constructive way.

One of the things I am most proud of is Section 139 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. Unlock described it as positive but not perfect, and of course that is perfectly true. The fact is, though, that the reforms were as much as we could get our coalition partners to agree to. I was deeply influenced in my attempts by the noble Lord, Lord Dholakia, who had been pressing for more radical reforms. The truth is that my reforms were an exercise in the art of the possible. As the noble Lord, Lord Ramsbotham, explained in his introduction, the truth is that over the period both major parties lost enthusiasm for any more radical reform.

However, today gives us an opportunity to test the water to see if there is an appetite in government for further reform. We know the matter is in front of a number of bodies. At present, for instance, the Justice Committee is completing an inquiry into youth criminal records, and it is that particular area that I want to address in my remarks. Its activities follow the recommendation of the Carlile committee on court reform. I hope that my noble friend—I think I can still refer to him as that, although we now seem to be separated by quite a gulf; but not, I hope, in attitudes—will refer to that in his speech, because the Carlile report was an important help to government in charting their way for reform.

It was also a key recommendation in the review conducted by Charlie Taylor into the youth justice system. The Secretary of State is at present considering next steps for youth justice reform. I urge her to keep in mind that the youth justice system is not simply the junior branch of the adult criminal justice system. The Taylor review is clear that we should develop a distinct approach to treating childhood offending. “Children first, offenders second”, is the mantra that Charlie Taylor advocated. It has been the guiding light of the Youth Justice Board both in the community and in the secure estate over the board’s 17 years of existence.

There is a strong case for following the logic of the Taylor report and the Government accepting the Carlile recommendation for the expungement of criminal records at attaining the age of 18, excluding homicide, serial sexual offences and other violent crime. As the noble Lord, Lord Ramsbotham, explained, this is not woolly liberalism, but sound common sense, as is the continuation of anonymity for young offenders who come before the courts. All the evidence shows that resettlement into a job is the best way to avoid reoffending. I pay tribute to companies such as Timpson, National Grid and many others in the private sector who are willing to take on ex-offenders. The existence of a criminal conviction can undo years of successful rehabilitation work.

The Government are bound to say today that they are awaiting the outcome of a number of cases before the court regarding disclosure, and the findings of the Justice Committee inquiry, but I hope that the noble and learned Lord will acknowledge that the impact of the 1974 Act has been beneficial, but that it now suffers the problems of age and that we need the kind of widespread reform of criminal records advocated by Nacro, Unlock and the Standing Committee for Youth Justice.

About two years ago, I went to Bucharest for a conference on treatment of youth justice, and I was genuinely surprised and shocked—perhaps I should not have been—by the number of colleagues from other parts of Europe who said to me, not in a hostile but in an understanding way, “Of course, we know that yours is a punitive and penal policy towards young offenders, whereas ours is welfare based”.

I hope that we are moving in the direction of a welfare-based approach to young offending. Charlie Taylor is right: they are children first, offenders second. Of course victims have to be protected, but I remind colleagues of the key findings of the report to which the noble Lord, Lord Ramsbotham, referred. It stated:

“This report examines how childhood criminal records”—


those acquired under the age of 18—

“are treated in 16 jurisdictions. Of all the areas we looked at, the system in England and Wales is one of the most punitive. A criminal record acquired by a child in England and Wales can affect that person for longer, and more profoundly, than in any other jurisdiction under consideration … The overall environment is such that a childhood criminal record, even for a relatively minor offence or misdemeanour, can have severe implications during childhood and beyond into adulthood; this can affect an individual’s education, employment and other prospects for years to come”.

That is the wrong that I hope that the Bill moved by the noble Lord, Lord Ramsbotham, begins to right, and I look forward to a positive response from the Minister.

Imprisonment for Public Protection Sentences

Lord McNally Excerpts

Tuesday 11th October 2016 Lords Chamber

[Lord Keen of Elie]

In the past year, 512 have been released into open conditions.

[Lord McNally (LD)]

My Lords, as the Minister who saw the abolition of IPPs through this House, can I assure the Minister that it was the wish of Parliament at that time to see an end to IPPs? His replies today show the same immobility which so frustrated me as a Minister. There will be IPP prisoners well into the next decade unless Ministers and the Parole Board take advice from those informed with a welter of information. With his reputation, I ask the Minister to take a close look at some of the facts he has given to the House today, because he will find that they mask the fact that many thousands of prisoners will remain under these schemes long after Parliament intended them to end. The reason why so many distinguished lawyers now call for this to end is that it is not only an injustice to the individual but is now doing real, serious damage to our criminal justice system.

[Lord Keen of Elie]

The facts are the facts. There is mobility and we are moving in the right direction. There is an increasing reduction in the number of IPP prisoners who are held. Let us remember that the test is whether these prisoners will represent a high or very high risk of serious harm to others when they leave prison. There is a necessary balancing act between the interests of society as a whole and the very great problem which these dangerous prisoners present. We are conscious of that and have provided further resources to the Parole Board. In light of the Osborn decision in the Supreme Court, we have taken forward the requirement for oral hearings, and we are doing everything in our power to ensure that this prison population is reduced. Let me add one further point. In 2012, when the IPP sentence was abolished, there were put in its place some seriously increased sentences for dangerous offenders, including the extended determinate sentence. If those sentences had been applied to this present cohort, it is not easy to say that they would be released in the foreseeable future.