Murdoch's Sky news spreads to Channel 5

He owns four of our national newspapers, the studio behind our most popular films, and the set-top boxes that bring digital TV into millions of our homes. Now, Rupert Murdoch is to extend his control of Britain's media after the Government gave its strongest hint yet that it is prepared to allow him a foothold in terrestrial television.

The Secretary of State for Culture, Tessa Jowell, says she is willing to "listen to the arguments" for easing the restrictions faced by foreign investors. Her comments come on the eve of Mr Murdoch's first incursion into British terrestrial TV. Sunrise, the Sky News current affairs programme, will be broadcast simultaneously on Channel 5.

Ms Jowell's remarks are bound to increase fears that ministers are preparing to lift the ban on non-European companies buying British terrestrial broadcasters. This would enable Mr Murdoch, an Australian-born US citizen, to secure a stake in either ITV or Channel 5.

Ms Jowell said: "I'm willing to listen to the arguments about relaxing the rules on foreign ownership, subject to reciprocity, in circumstances where diversity and plurality can be assured. If you are going to have a consultation, you don't shut down the difficult issues at the beginning."

Nick Harvey, the Liberal Democrat media spokesman, last night warned that Mr Murdoch would be over TV networks "like a rash" if he were given any more freedom.

Mr Murdoch, whose British-based media operation is headed by News International, publisher of The Sun, the News of the World and the Times titles, faces two principal barriers to his expansion into free-to-air TV.

Current media rules prevent any individual or organisation that owns 20 per cent or more of the national newspaper market from holding more than a 20 per cent stake in a terrestrial TV broadcaster. Mr Murdoch is also barred from owning such a company by the restrictions faced by foreign businesses, though some lawyers believe this is less of a problem, as he owns only 36 per cent of satellite company BSkyB and it is listed in London.

Nevertheless, if the Government were to allow Mr Murdoch to gain a share in Granada or Carlton, or in Channel 5, said to be his favoured target, it would be seen as helping him cement his status as the most powerful figure in the British media. As well as BSkyB, which currently boasts more than 5.5m UK subscribers, his News Corporation already owns News International, book publishers Harper Collins and film studio 20th Century Fox, whose recent blockbuster movies include Titanic and Planet of the Apes.

Two months ago, Channel 3, a consortium led by BSkyB, was narrowly beaten by ITN in the battle to win the latest ITV news contract. Mr Murdoch won his consolation prize when he successfully bought the rights to produce a replacement for Channel 4's long-running Big Breakfast.

The Office of Fair Trading two weeks ago threatened to fine BSkyB up to £700m for an alleged breach of competition laws over the prices it charges other pay-TV operators for its film and sport channels.