Music industry to tax downloaders

£30 'licence fee' set to revolutionise illegal file-sharing

Internet users could face an annual charge of up to £30 to download music, under plans to be unveiled today that aim to tackle illegal file-sharing.

Ministers are backing proposals that would enable millions of broadband users to pay an annual levy which would allow them to copy as much – previously illegal – music from the internet as they wanted. The money raised would be channelled back to the rights-holders, with artists responsible for the most popular songs receiving a bigger slice of the cash.

John Hutton, the Business Secretary, and Andy Burnham, the Culture Secretary, will unveil a package of proposals, beginning with thousands of prolific downloaders receiving letters warning them they are breaking the law by copying music and sending it to friends. The Government sees that move as the last chance for internet service providers (ISPs) to get a grip on the growing problem of piracy.

In the longer term, Mr Burnham is supporting calls from sections of the music industry for a yearly levy of £20 to £30 to be imposed by ISPs on customers who want to share music.

They believe it would prevent criminalising large sections of the public, while helping to compensate the music industry for lost sales. If successful it could be extended to cover films and television programmes.

An estimated 6.5 million broadband users unlawfully download files every year, which the industry warns has resulted in a slump in CD and DVD sales. About 95 per cent of music downloads from the internet are thought to be illegal.

Peter Jenner, a veteran music industry figure who now manages the singer Billy Bragg, who has championed the plan for an annual charge, said last night that the idea was attracting growing support.

He said the cash raised by including the top-up in the fees paid to ISPs could match the current £1.2bn turnover of the British record industry. Mr Jenner said: "If you get enough people paying a small enough amount of money you can turn around the wheels of the music industry."

Ministers believe strong action is required to get a grip on internet piracy, although they strongly support ISPs and the industry working together to tackle the problem rather than the Government forcing through legislation. ISPs and the music industry will announce today that 12,000 letters will be sent over the summer to repeat downloaders warning them they are breaking the law. They hope the shock tactics will deter internet users from illegal file-sharing.

The Government will also announce consultation on other ways of combating internet piracy, with a view to final decisions later in the year after studying the impact of the warning letters. Legislation could be in place by next spring.

As well as an annual levy set by ISPs, the Government will also float the idea of a "three strikes and you're out" policy adopted in France under which people who illicitly download or share music are disconnected after ignoring two warnings.

Other alternatives include requiring ISPs to disclose the identities of regular downloaders, a move they warn would be costly and could breach data protection controls. They could also be ordered to install filters that would prevent downloading.

Ministers accept there are considerable practical problems in controlling online activity and are wary of imposing expensive regulations on internet providers. But they say the scale of the problem, and its impact on Britain's creative industries, means doing nothing is not an option.

A Whitehall source said: "Both ISPs and the music industry need to take responsibility for this issue. But we need action as the industry is suffering."

A memorandum of understanding has been signed by the BPI, which represents hundreds of record companies, and the six largest internet providers. It commits them to work together to achieve a "significant reduction" in illegal file-sharing.