Blair would allow Murdoch to take over Channel 5

Tony Blair will risk fresh controversy about his relationship with Rupert Murdoch this week by ignoring warnings from a Parliamentary committee over plans to allow the media tycoon to extend his empire in Britain.

The Joint Committee on the Draft Communications Bill will argue strongly on Wednesday against the "creeping Americanisation" of British TV and they will attack proposals that would let Mr Murdoch take over Channel 5.

But senior Government figures have made it clear the Prime Minister will personally sanction an overturning of the findings of the committee.

Mr Blair will argue that it is "untenable" to allow European-based businesses, but not American ones such as Murdoch's Fox TV and AOL/Time Warner, to take over British TV companies.

But such a decision by Mr Blair to reject the findings of the committee would go directly against his original idea to set up the joint body to scrutinise the plans. The proposals were so controversial that the Government decided it wanted a cross-party committee of experts to come up with a reasoned analysis.

The Prime Minister's intervention will inevitably fuel suggestions he is determined to minimise criticism in the billionaire's powerful stable of News International newspapers during any future euro referendum debate.

The Independent revealed on Saturday that the committee, which is led by the Labour peer, Lord Puttnam, would take a hard line against the plans.

After three months of deliberation, the committee has rejected plans to allow companies from another country to take over commercial broadcasting licences, as well as the proposed change in rules to permit large newspaper groups to buy the Channel 5 station

Its report points out that Britain has not been able to get a reciprocal agreement to allow British firms to take over US TV stations. It recommends that Ofcom, the new super-regulator, should review the matter before any final decision. Mr Murdoch has a controlling stake in BskyB and is head of News International, owner of The Sun, News of the World, the Times and Sunday Times.

Further acquisitions of TV companies, such as Channel 5 or even parts of the ITV network, would entrench his position as the leading media mogul in Britain.

Worries about his power base were heightened when Sky joined with the BBC to take over the ITV digital licence following the collapse of the company.

Following frequent speculation that Mr Murdoch would be barred from further expansion, the Government surprised observers when it announced its plans to let him take on Channel 5 in the draft Communications Bill proposals earlier this year.

The joint committee will also call for Ofcom, whose new chairman Lord Currie was attacked as a Labour "crony" last week, to replace BBC governors in overseeing its competition with commercial broadcasters. Evidence given to the committee includes testimony from former American TV executives who claim that companies such as Disney will attempt to use British schedules as a "dumping ground".

The joint committee, which also features Lord Hussey, the former BBC chairman, as a member, will state that US firms would engage in a "determined and sophisticated attempt" to shift away from British-based programmes.

The report will claim that the Government's arguments on media ownership "lack force" and are based on "an untested aspiration" to make Britain among the most liberal marketplaces for television in the world. Government sources counter that the committee is guilty of "anti-American prejudice" and argue that the changes would boost investment.

Mr Murdoch prompted raised eyebrows when he visited 11 Downing Street to meet Gordon Brown, the Chancellor, last year. In an interview last month, the media mogul made clear that his views on the euro had not changed.

He told the Financial Times: "The central issue is one of sovereignty. If you give up control of your currency, you are going to give up control of your tax system just as night follows day."