Sky favour for Murdoch followed Heseltine lunch

MATHEW HORSMAN

Media Editor

The Government introduced a controversial amendment to the Broadcasting Bill lifting restrictions on Rupert Murdoch's BSkyB, the satellite broadcaster, within two weeks of a lunch meeting between Mr Murdoch and Michael Heseltine.

A spokesman for the Deputy Prime Minister confirmed yesterday that Mr Heseltine had lunch with Mr Murdoch six weeks ago. It is believed they discussed an offer from Mr Murdoch to provide satellite dishes for every school in Britain, in return for government support over Mr Murdoch's plans to introduce digital satellite services in the UK. That would involve the launch of a new digital satellite, capable of providing a full range of televised programming.

The possibility of a backroom deal has angered Labour MPs and could spark renewed debate over the Government's new Bill, it emerged last night.

Last month, soon after the lunch, the Government introduced an amendment to the Bill that would remove restrictions on Mr Murdoch's BSkyB that prohibit it from owning more than 20 per cent of a domestic satellite service.

Lord Donoughue, the Labour peer who led the Opposition in the Lords' debate on the Bill, said last night: "I saw at the time that this [the amendment] was a major concession to Sky, although I didn't know what was behind it. Now we apparently have the answer."

The Government said the amendment was technical. A spokesman for the Department of National Heritage, which is sponsoring the Bill, said: "There is no direct connection [between the amendment and any deal between Mr Murdoch and Mr Heseltine]. We are not aware of any lobbying on this issue."

A spokeswoman for News International, Mr Murdoch's UK newspaper company, said: "We are pleased that the Government apparently agrees digital satellite is the fastest, quickest way to develop the information superhighway." She said she could not comment on the substance of discussions between Mr Murdoch and Mr Heseltine.

A Murdoch insider downplayed the issue. "There's this great belief that there are political deals going on all the time, and that they all involve Mr Murdoch. Sure we lobby, everyone lobbies."

Mr Heseltine's office said he had been "looking at all the options, cable and satellite among them, to connect schools to the information highway."

The spokesman said he could not say what Mr Heseltine and Mr Murdoch discussed. The Government has been looking at ways of expanding the advantages of the information highway to more people. Its efforts were redoubled following the controversial deal between BT and the Labour Party last autumn under which BT would connect schools, h ospitals and public institutions in return for the freedom to offer broadcast services over its telephone lines under a Labour government.

Lewis Moonie, the Labour MP who will jointly handle the Opposition's role in the Commons debate on the Bill, starting next week, said: "I can't read Murdoch's mind but I certainly know about Heseltine, and he is desperate to be seen to be doing something about education and computers."

As reported in the Independent last month, the controversial amendment was aimed at removing domestic satellite from the list of services which large newspaper groups are barred from controlling. Other items on the list include ITV licences and national radio.

Only publishers controlling more than 20 per cent of the UK national press had been caught by the original clause. This takes in Mr Murdoch's News International - owner of the Sun, the News of the World, the Times and the Sunday Times - and the Mirror Gr oup, which publishes the Daily and Sunday Mirror, Daily Record, the People and which owns 43 per cent of the Independent and the Independent on Sunday.

BSkyB is currently a non-domestic broadcaster, because it uses the Astra satellite, based in Luxembourg. By launching its own UK-based service, it could provide up to 200 channels directly to UK homes, freeing up space on Astra to use for its continental pay-TV operations, in league with Bertelsmann and Canal Plus, with which it has formed a strategic alliance. Analysts say BSkyB could thereby extend its current dominant position into the digital age.

The amendment also allows the Mirror Group to launch a domestic satellite service. But David Montgomery, chief executive of MGN, said last night: "There is only one company that could afford to launch such a service, and that is Sky. It smacks of politic al impropriety."