Some MPs and peers fear Murdoch might want to buy Channel 5

The move comes after talks between ministers and Labour peer and film maker Lord Puttnam, as the government faced a potentially large rebellion in the House of Lords.

Lord Puttnam says he will drop his own amendment calling for a "plurality" test - intended to ensure there is real choice and diversity in the UK's media.

Believe me, those forces that are out there, in the words of the Terminator: 'They will be back' Lord McNally

In return, the government has agreed to draw up its own "plurality" test.

Lord Puttnam says calls for big newspaper groups and media moguls to be prevented from buying Channel 5 become "redundant" if the test is as "strenuous" as he hopes.

That would mean new regulator Ofcom would be able to recommend take-overs be blocked "in the public interest" - even if they would not create a monopoly.

Distortion safeguard

Explaining the test, Lord Puttnam told BBC News Online: "For the first time this delivers the concept of the 'public voice'."

It would prevent an individual or corporation getting too much control of the media and distorting that public voice, he said.

The peer also said protection of the content of television programmes had been strengthened since the bill was first unveiled.

That meant it would be "churlish" to press for non-EU companies to be barred from buying ITV companies.

Potential Labour rebels are likely to follow Puttnam's lead

Concerns about big newspaper groups like Mr Murdoch's News Corporation or Lord Rothermere's Daily Mail and General Trust, have been at the heart of arguments over cross-media ownership.

Existing rules, which the government wants to relax, mean anyone who controls more than 20% of the national newspaper market is prevented from controlling a terrestrial television licence.

Lord Puttnam headed up a special committee to examine the bill before it went before Parliament and many Labour backbenchers are likely to follow his lead.

Untouchables

But Liberal Democrat peer Lord McNally said the plurality test alone would make takeovers by newspaper giants "difficult but not impossible".

He said he still believed Mr Murdoch could buy into Channel 5.

"This bill was authorised in Number 10 where Mr Murdoch has had worrying influence," he told BBC Radio 4's Today programme.

While he praised Lord Puttnam for his "Herculean efforts" to make the bill a better piece of legislation, Lord McNally warned: "Believe me, those forces that are out there, in the words of the Terminator: 'They will be back'."

He added: "In the long term, those media moguls will come a calling and Ofcom have got to be like Eliot Ness and the Untouchables - they have got to fight hard."

Defeat fears?

Lord McNally said he would still be moving amendments on Channel 5 ownership and non-EU buyers.

He argued the media was not like a "can of beans" and instead national identity and culture is at stake.

The effectiveness of the plurality safeguard would not be known until one of the big conglomerates tested it out, he said.

"I think if the government had not made this concession then it would have lost on all three amendments," said Lord McNally.

Buscombe applauded a government "climbdown" over ITN

That could have caused damaging delays and a "ping pong" battle between MPs and peers at the end of the parliamentary session in the autumn, he argued.

A source at the Department for Culture, Media and Sport instead said the government had always argued the bill already protected the public interest angle.

The plurality test was a "belt and braces" job, said the source.

"It reassures people that they are not going to be watching rehashed low quality programmes from abroad," he said.

The Conservatives have argued the government had not gone far enough in liberalising the media industry.

ITN ownership change

Tory shadow culture minister Lady Buscombe says there is no reason to fear Americanisation of the British media because commercial companies cannot afford to ignore consumer demand.

Wednesday is the final day in the report stage of the Communications Bill, which is designed to modernise regulation of the media industry.

The Conservatives won a concession from the government when Culture Minister Lord McIntosh announced that ITV would be allowed to buy the ITN news service outright.

Under current laws ITV can only own 20% of ITN and the bill originally only raised that limit to 40%.

The government will keep the power to reintroduce those restrictions if necessary.