ITV launched an immediate riposte. Leslie Hill, chairman of the ITV Association, said: 'It is completely wrong to unpick one small bit of the Broadcasting Act (which set up the safety net).'
He said the ITV franchises had taken into account revenue from Channel 4 when making cash bids for their 10-year licences. He said if changes were made then a comprehensive review of the system was needed to include bids payable to the Treasury.
Channel 4's chairman, Sir Michael Bishop, said the channel was the victim of a piece of 'rogue legislation and a nonsense which must be dealt with immediately'.
He is asking the Department of National Heritage to pilot new legislation through Parliament to completely remove the formula, which is boosting ITV company profits, before the end of the year. Marjorie Mowlam, Labour's national heritage spokeswoman, said any change should not permit Channel 4 to be privatised.
Under the Broadcasting Act of 1990, Channel 4 became a public corporation, owned by government and with a remit to make programmes which innovate and appeal to minority tastes. Channel 4 opposes privatisation and says ITV would also suffer 'because it would create monstrous competition' for it.
Under the current formula Channel 4 pays the 15 ITV franchise holders half its profits over a base line of 14 per cent of television net advertising revenue: in return ITV has to make up any shortfall if Channel 4's share falls to a band of 14 to 12 per cent. In 1993, the payment amounted to pounds 38.2m: in 1994, it is expected to total pounds 50m and rise to pounds 55m in 1995. Channel 4 said that its prospects have been transformed in the past 18 months by selling its own airtime instead of relying on ITV to do so.
Mr Grade said yesterday that the original safety net formula was hastily produced, without discussions with Channel 4. Central ( pounds 5.7m), Carlton ( pounds 5.6m), Meridian ( pounds 4.2m), and LWT ( pounds 4.2m) are the major gainers under the deal.
The Radio Authority, which awards commercial licences, has decided to use the vacant frequencies of 105 to 108 FM which become available in 1996 for a combination of city stations and community radio, rather than a fourth national rock station.
This deals a severe blow to the development of further national commercial radio stations, and is especially disappointing to Richard Branson's Virgin 1215. It is on medium wave and had sought a better FM frequency to help boost its listening figures of 3.2 million.
Some 600,000 people signed a petition in favour of a national music station. The Radio Authority chairman, Lord Chalfont, said the decision 'offers the most flexibility of potential licencees and the greatest choice for listeners'.