EU has "doubts" over £14m C4 grant plan

The European Commission is investigating the government's planned £14m grant to help Channel 4 switch to digital.

The body today said it had "serious doubts" about whether the proposal complied with European competition law.

Tessa Jowell announced the cash donation in June, saying it would be funded from TV Licence proceeds.

Channel 4 chief executive Andy Duncan said the grant was "important transitional help", while it was interpreted as an early example of "top slicing" from funds previously earmarked for the BBC.

"The commission will investigate whether this subsidy threatens to distort competition in the Single Market," the EC said in a statement.

Competition commissioner Neelie Kroes said: "The commission is firmly committed to encouraging the digital switchover process, which has many advantages for consumers and innovation. However, it needs to make sure that any state support does not distort competition unduly."

The commission revealed that a rival commercial broadcaster, whose name was not given, had complained about "possible financial assistance" as long ago as August 2006.

Its statement continued: "The commission has serious doubts as to whether the proposed aid to Channel 4 meets the criteria of the commission's 2001 Broadcasting Communication that is, that the aid is necessary and proportional and does not overcompensate Channel 4.

"In particular, the information provided so far by the UK does not enable the commission to assess whether, given the costs of its digital switchover obligations, and taking into account its commercial revenues, Channel 4 will have in the short term a net public service cost which would allow it to receive state aid."

A Channel 4 spokesman said: "This is a step we always recognised the commission might decide to include in the process. As their statement makes clear, this is a specific proposal to examine the government's plan to fund Channel 4's switchover costs and they do not oppose state funding for broadcasters in principle."