Tories press ahead with sale of Channel 4 to finance tax cuts

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The Conservatives intend to press ahead with the privatisation of Channel 4, a move that will provoke fury from the opposition and broadcasters alike in the run-up to the election.

City and film industry sources say the Heritage Secretary, Virginia Bottomley, is considering announcing the sale at the Tory party conference in Bournemouth next week.

Channel 4 is a public corporation financially linked to the ITV companies. Privatisation might raise as much as pounds 2bn, which could be put towards tax cuts.

The sale would also delight Conservative right-wingers and the Daily Mail, which have been fiercely critical of Channel 4's alternative output, including its Red Light Zone sex series last year and, most recently, Dyke TV, three hours of lesbian programming late on Saturday night.

Conservative Central Office would neither confirm nor deny the plans yesterday; nor would the Department of Heritage. Labour, however, lined up behind film-makers and promised to fight a sell-off tooth and nail.

"We are absolutely opposed to it. Channel 4 makes a valuable contribution to public service broadcasting and that position would be undermined if it were privatised," said Jack Cunningham, the Shadow Heritage Secretary. A month ago, Michael Grade, Channel 4's chief executive, also pledged to fight privatisation plans "with every breath in my body".

Since then, however, rumours have steadily gained ground in political circles that the Tories would announce the sell-off in the Queen's Speech in November. Political sources say bringing that forward to Bournemouth would help Mrs Bottomley side-step criticism over the funding problems facing the Millennium exhibition in Greenwich, her department's major current project. Merchant banks in the City are already jockeying for roles in what could be the last big privatisation before the general election. "Every merchant bank in the City can see fat fees," said Mr Grade yesterday. "We're implacably opposed to it. We can see no reason to change a successful formula."

One leading investment bank is already hatching a plan which would involve the sale of the whole of Channel 4 to a European-American joint venture involving either established film production companies or even Hollywood studios. The partners, it hopes, would be of sufficient stature to persuade Mr Grade to drop his opposition.