Bragg claims Channel 4 has lost the plot claims Bragg

War on the box: Broadcasters' anger boils over in advertising subsidy row

ITV and Channel 4 declared open war yesterday over the funding formula which forces Channel 4 to pay ITV a large proportion of its advertising income.

Channel 4 has long campaigned to end the formula, which is reviewed at the end of 1997, but ITV says it relies on the money. Between 1993 and 1997, Channel 4 estimates it will have had to pay pounds 300m.

The disagreement boiled over on the eve of the new Broadcasting Bill, when Melvyn Bragg, chairman of Border TV, said on behalf of the ITV barons that Channel 4's chief executive was "a mad Lewis Carroll figure - it's as if he is in Plunderland".

He described Michael Grade as a Dorian Gray pretending to keep to his remit to cater for interests not served by other terrestrial broadcasters, but really chasing ratings. "He puts on a sober mask of public service but inside, up in the attic, its real expression seems to be commercial lust."

Channel 4 had cut its arts, news, documentaries, drama and news output and increased its American shows, Mr Bragg claimed at the launch of the ITV report on the funding formula. "Channel 4 has lost the plot, and if it doesn't watch out it will lose its role."

His comments were backed by Leslie Hill, chairman of ITV, who said Channel 4 should continue to pay the subsidy to ITV after 1997. "Channel 4 portrays itself as a plucky little channel being sucked dry by the fat cats, but that isn't the truth."

ITV argues that between 1982 and 1993, it sold Channel 4 airtime and subsidised it by a total of pounds 430m at today's prices.

Since the 1990 Broadcasting Act, Channel 4 has been allowed to sell its own airtime. But the Act says it must pay ITV half the advertising income it generates over and above a figure representing14 per cent of the total advertising sold by the two channels. In 1993 that extra income was pounds 38m, in 1994 it was pounds 57m and this year pounds 74m.

Mr Grade replied that Mr Bragg was making a series for Channel 4. "Talk about biting the hand which feeds you."

The ITV report was "one of the funniest scripts to come out of ITV in a long time", he added. "It's a triumph of greed over reality, the last desperate throw by ITV to fabricate an argument which says they should hang on to money they never expected to get."