ITV gets set for pounds 88m payout by Channel 4

Channel 4, the public service broadcaster, will write a cheque for pounds 88m payable to the ITV companies in three weeks' time, with Michael Green's Carlton Communications, the leading Channel 3 broadcaster, set to receive about pounds 28m.

The payments are due under the controversial Channel 4 funding formula, which obliges the fourth channel to pay any excess it earns from advertising revenues over and above 14 per cent of total qualifying revenue in the terrestrial television sector. Last year, pounds 74m was paid out by Channel 4.

Carlton's share, which relates to its Central and London weekday franchises, represents just under 10 per cent of estimated 1997 pre-tax profits, according to media analysts.

Lesser amounts are due to other ITV companies, depending in part on their share of national advertising revenues. HTV, for example, is in line to receive pounds 6.4m.

The Independent Television Commission, which adjudicates the payment, declined to comment last night. An announcement is expected within a few weeks. Channel 4 also declined to comment, saying it would await a formal announcement from the ITC.

The system was put in place to ensure that ITV companies were compensated for guaranteeing the viability of Channel 4 when the service was launched in 1982. Michael Grade, the chief executive of Channel 4, has led a vociferous campaign to abolish the funding formula, which he says reduces the channel's flexibility in planning for future programming.

The system is expected to be reformed in 1998, with payments reduced to zero. ITV companies have argued strenuously against the reforms.

Channel 4 insiders said last night the payments were "iniquitous" and again called on the Government to make a formal pledge to reduce the payments by 1998.

Critics of Channel 4 say the payments are necessary to ensure that the channel maintains its commitment to "alternative" programming. The commercial success of the channel has been helped by hit series imported from the US, which in turn have allowed it to bid even more for programmes. This year, the programme budget is set to rise by 17 per cent to pounds 320m, roughly on a par with BBC2.

Channel 5's chief executive, David Elstein, long a critic of Channel 4, said last night that the fourth channel should have its remit changed to ensure that it provided an alternative programming service to both ITV and the new Channel 5 service.

The phasing out of the funding formula is expected to coincide with a rebalancing of cash payments made by ITV companies to the Treasury, as part of their licence requirements. Companies which made high bids under the 1990 Broadcasting Act will be permitted to renegotiate the payments with the ITC.