Keynote address to the CBI Annual Conference, Birmingham
Monday 8 November 2004
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Ladies and Gentlemen, it's a
great pleasure to be asked to address the CBI.
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The Â鶹ԼÅÄ owes a great debt to British business. For
the Â鶹ԼÅÄ was founded not by government or by some public body, but actually
by a group of hard-headed British businessmen who got together in the
1920s.
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They came from the leading-edge hi-tech sector of their
day – manufacturing wireless sets. And they'd had a brainwave.
They'd realised they were much more likely to persuade people to buy
their products if they had something worth listening to.
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So they set up the Â鶹ԼÅÄ, hired an energetic young man
called John Reith to run it and, 82 years ago, almost to the day, the
first Â鶹ԼÅÄ programmes went out.
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But what started essentially as a marketing device rapidly
mutated into something else.
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Radio spectrum was a scarce commodity, and the new company
was granted a monopoly.
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This was seen as the best way of making sure this scarce
commodity was used to serve the widest public interest. Thus was born
the concept of public service broadcasting.
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Monopoly became duopoly. Duopoly became multi-channel.
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Multi-channel became the digital highway. And, 80 years
on, the Â鶹ԼÅÄ faces a very different set of circumstances from those that
gave it birth.
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The Â鶹ԼÅÄ was built on spectrum scarcity. But today spectrum
is plentiful.
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The public policy question therefore is: How can the
Â鶹ԼÅÄ's exceptionally privileged position continue to be justified in
this new, highly populated landscape?
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I have no doubt that it can – that's why I took
the job. But I also have no doubt that as the landscape changes, so
the Â鶹ԼÅÄ itself must change.
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Let me start with the case for the Â鶹ԼÅÄ in an age of
spectrum plenty.
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Fundamentally, that case is the same it's always been
– that the Â鶹ԼÅÄ significantly adds to the quality of life in the
UK.
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And it does it in ways that the market, left to itself,
would do less well or leave undone.
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Let there be no misunderstanding. I am not here to question
broadcasting delivered by the market. My family were among the founders
of commercial television where I spent most of my broadcasting career.
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I'm proud of what I achieved in ITV, in America and
at Channel 4.
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But there is no doubt that, as the commercial broadcasting
market fragments and competition intensifies, the freedom of manoeuvre
that I and my generation enjoyed is fast disappearing.
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Those were the days of the ITV advertising sales monopoly,
when your sales director never came in on a Wednesday because it mucked
up both weekends.
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Commercial television still does wonderful things, but
the surest route to success these days is to avoid risk: to find predictable,
commodity programming, to clone the last successful format – and
minimise investment in news and current affairs.
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The Â鶹ԼÅÄ is free from those pressures. Its secure funding
enables it to break new ground, to take risks, to push the boundaries.
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That ability – indeed that duty – to take
risks is under threat everywhere else in public service broadcasting.
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We're now seeing even Channel 4 starting to forecast
a moment when its advertising revenues will no longer be strong enough
to support its risk-taking public service content without public subsidy.
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But our secure funding, like all privilege, brings responsibilities
too.
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The first is to make sure we run the Corporation as
efficiently and as effectively as any good business. More on that in
a moment.
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The second is to return a dividend to the public whose
licence fees support the Â鶹ԼÅÄ. A dividend not in cash.
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But a dividend nevertheless of real and measurable value
to the public, both as individuals and as citizens.
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That's why the Â鶹ԼÅÄ sets out to build public value in
five distinct ways:
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By supporting informed democracy with trusted and impartial
news;
Enriching the cultural and creative life of the United
Kingdom by bringing talent and audiences together to break new ground;
By building a society strong in knowledge and skills;
By enabling communities of place and interest to take
root and flourish;
And by showcasing British culture abroad, and providing
the world's most trusted international news and information service.
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I've sat on many boards, mostly in the listed sector.
I'm very comfortable with the idea of creating shareholder value.
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The board I now chair at the Â鶹ԼÅÄ has just as clear
an idea of the value it expects the Â鶹ԼÅÄ to create as the board of any
FTSE company.
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With no 'bottom line' the Â鶹ԼÅÄ must have a measure for
success or failure.
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Public value is our measure - the sum of all those
values I've just outlined:
Democratic value;
Cultural and creative value;
Educational value;
Community value;
Global value.
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To ensure the Â鶹ԼÅÄ is delivering public value - as in
any business - you have to start by being clear about what it is you
want your people to achieve.
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To be polite, this has been a bit of a grey area inside
the Â鶹ԼÅÄ of old.
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But in June I announced a series of far reaching governance
reforms to ensure the Governors make their judgements on independent
evidence, not just on that provided for them by management.
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In the past, Governors have tended to rubber-stamp management
proposals, with little thought given to the Â鶹ԼÅÄ's impact on a complex
and competitive media market.
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Not any more.
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In a major departure from the past, the Governors are
now implementing a system of service licences for every Â鶹ԼÅÄ channel
and service.
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These licences will set out, for the first time in the
Â鶹ԼÅÄ's history, remits, conditions and budgets.
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They will provide clear objectives against which the
Governors can judge performance and hold Â鶹ԼÅÄ management to account.
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Any proposed new service, or significant change to existing
services, will also have to pass a public value test.
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This will include an independent review of its potential
impact on the market – and here's a novelty – before any decision
is made.
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I do not believe in the simplistic notion that public
value resides only in the traditional high ground – news, religion,
the arts and so on, important as they are.
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The Â鶹ԼÅÄ does not exist as a mechanism for dealing with
market failure.
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It exists to deliver public value across the widest
range of genres – because that's what our 24 million licence payers
expect.
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All the recent research, including Ofcom's, shows that
licence payers have a very broad definition of public service broadcasting.
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It includes British comedy, sport, drama, natural history,
and soaps.
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The difference with the Â鶹ԼÅÄ is that we must earn our
audiences, not buy them.
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For the Â鶹ԼÅÄ, no programme should ever be a commodity.
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The natural instincts of the Â鶹ԼÅÄ, honed over many years
of political threats and Charter Review processes, is to adopt a policy
of what I call 'confess and avoid' – in its day, an effective way
of maintaining the status quo – once thought to be the sole purpose
of the Corporation!
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I want to take this opportunity to place on record that
from here on in: what we say we'll do, we will do. Confess and act.
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For example, the Governors have put in place a new strategy
for our pioneering online services at bbc.co.uk.
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The Â鶹ԼÅÄ has played a key role in driving adoption of
the web and in the evolution of the vibrant online market that we have
stimulated. We are very proud of that.
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But this market has now reached relative maturity. A
different approach is needed.
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Today we are publishing our response to the Graf Review
of Â鶹ԼÅÄ online services commissioned by the Secretary of State.
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That review suggested that some of the remits for our
services were too widely drawn. We accept that.
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And today we're publishing new, much more tightly drawn,
objectives.
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They focus on how bbc.co.uk can be made more distinctive,
and deliver more public value, in this developing and growing market.
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Where the Â鶹ԼÅÄ is creating content that does not clearly
contribute to our core public purposes then we have redirected resources.
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The Â鶹ԼÅÄ's new Director-General Mark Thompson spoke in
Edinburgh recently about "moving the weight of spend and airtime
towards the genres and the content that build public value in a clear
and demonstrable way".
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In the case of new media, we've reviewed our portfolio
of websites and closed some sites down because they would not meet our
new test of public value.
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There are further closures and spending reallocations
within online to come as we specify what we won't do as well as what
we will.
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By the end of the year, ten per cent of the online budget
will have been freed up.
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This will be reinvested in sites that, in the Governors'
view, generate demonstrable public value.
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We also want to make the Â鶹ԼÅÄ a friendlier, less arrogant
partner for other players in this market.
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So we are committing bbc.co.uk to work more closely
with the independent sector and, for the first time, the Governors are
setting an external production quota.
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I hope that the Graf Review marks both a beginning and
an end.
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The beginning of a new willingness by the Â鶹ԼÅÄ to respond
constructively to valid external criticism.
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But also the end of the necessity for Government to
call in outside reviewers.
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We are in the process of implementing far-reaching reforms
of the Â鶹ԼÅÄ's own system of governance.
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One of the acid tests for those reforms is that our
own review processes are shown to be rigorous enough and transparent
enough that no Secretary of State ever again feels it necessary to launch
another external review of the Â鶹ԼÅÄ.
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Last week, the Culture Secretary, Tessa Jowell, was
making headlines about the Â鶹ԼÅÄ Governors. She said the status quo was
"unsustainable".
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I agree. I think the old system was unsustainable too.
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On the day I became Chairman six months ago I made it
clear that the Â鶹ԼÅÄ's system of governance needed radical reform.
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I found that plans for change were already being formulated
by the Governors. We're now putting those proposals – plus a few
more – into effect.
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We are not awaiting the outcome of the Charter Review
debate, the need for reform is just too pressing.
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Our aim is not to demolish the Â鶹ԼÅÄ's constitution which
has served the independence of the Â鶹ԼÅÄ so robustly.
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Rather it is to make the Board more clearly independent
of management and ensure we have the objective evidence we need to make
our judgements in the wider public interest.
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For the first time, the Board is now supported by a
dedicated Governance Unit which provides advice to the Board, independent
of management.
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To underline the point, the Governors are responsible
for managing the staff of the Governance Unit, including their pay,
conditions and performance reviews.
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Its first director is now in post – recruited from
outside the Â鶹ԼÅÄ.
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And for the first time, the Â鶹ԼÅÄ Governors will be located
apart from Â鶹ԼÅÄ management.
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We're about to start packing our bags in preparation
for a move to separate premises, located between Broadcasting House
and White City.
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Our independence from management will be underlined
by the powerful symbolism of physical separation.
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It's sometimes said that there's a fundamental design
problem with a system that asks Â鶹ԼÅÄ Governors to be both cheerleaders
and regulators.
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Of course there is a potential contradiction. But it's
not significant – as long as the Governors don't confuse championing
the Â鶹ԼÅÄ with championing the management of the Â鶹ԼÅÄ.
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But some, of course, argue that the Â鶹ԼÅÄ Governance system
is beyond reform. They want it scrapped.
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One suggested replacement is the Channel 4 model, with
a board made up of senior executives and independent non-executives,
answering to an outside regulator. Perhaps to Ofcom. Or perhaps to a
brand new regulator, focused solely on the Â鶹ԼÅÄ Â– OfBeeb.
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Well, as a former chief executive of Channel 4 myself,
I don't see how that model applies to the Â鶹ԼÅÄ.
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The reason is simple - and fundamental. Channel 4 receives
no public money.
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The supervisory structure appropriate to a commercial
broadcaster – albeit one with some public service obligations -
is not right for the Â鶹ԼÅÄ which receives nearly three billion pounds
in public money.
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The scale and character of the licence fee investment
demands a supervisory structure that is both detached and engaged: detached
enough to take an objective and informed view of strategy and spending
and wider public value considerations; but engaged enough and experienced
enough to be able to offer ongoing support and advice to management
as they spend that public money.
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The Â鶹ԼÅÄ has unique funding arrangements and has to fulfil
unique expectations. It demands a unique governance system.
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The Governance debate still has some way to run. Where
should the balance be struck between engagement and detachment?
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It may well be that in the past the governance system
of the Â鶹ԼÅÄ did lead to too much engagement. But it seems to me that
the Ofbeeb proposal may lead to too much detachment.
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There are serious practical issues too. Say an Ofbeeb
was set up.
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The Â鶹ԼÅÄ would still need a board. Presumably this would
consist of senior management plus non-execs. People with wide experience
in public and corporate life. People not unlike the present Governors.
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Meanwhile, down the road the new Ofbeeb is open for
business. Its board, presumably, consists of senior management plus
independent non-execs. People with wide experience in public and corporate
life. People not unlike the present GovernorsÂ…
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Only, of course, the Ofbeeb board has no control whatsoever
of the budgets and appointments that are now in the hands of the Â鶹ԼÅÄ
"inside" board.
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Ofbeeb, lacking the authority of the present Governors,
who have full strategic control over budgets and appointments, is left
to hunt for new levers with which to exert control post facto.
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It feels like a recipe for conflict, for muddle, for
duplication of effort, and for significant additional cost – to
be borne, presumably, by you and me, the licence fee payers.
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Worst of all, in the event of a disaster, where would
the proverbial buck stop? Right now, the final destination of ALL bucks
is unmistakably my desk. But with TWO boards?
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All my experience at board level in the public and private
sector has led me to this understanding: governance is not the same
as regulation.
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Regulation is about post facto policing of rules –
quotas, guidelines, codes and so on.
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Governance is not about regulation - although ensuring
regulatory compliance is part of the job.
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Governance at the Â鶹ԼÅÄ is about stewardship. Stewardship
of the public interest. And stewardship of the money.
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External regulators carry many heavy responsibilities.
But they carry no responsibility at all for anybody's money.
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The Governors, by contrast, have the stewardship of
those three billion pounds. That gives us real muscle.
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If, guided by the public interest, we choose to change
the output, or the personnel, or the budgets, we can do so – immediately.
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External regulators can act – but only ever after
the event.
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The Â鶹ԼÅÄ Governors, guided by the public interest, can
act in advance.
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We can prevent where regulators can only punish.
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We can improve where regulators can only watch and
hope.
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The Governors are just completing one independent review
of the Â鶹ԼÅÄ's system of financial controls to ensure they are fit for
purpose.
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There'll be more such reviews, independent of management,
in the future.
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Another strength of the current system is that the Governors
never have to perform the delicate balancing act that external regulators
sometimes have to manage, weighing the public interest against the commercial
and political interests that compete for their attention.
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Only the public interest ever counts with us, it is
not shared or balanced with any competing interest, be it advertisers,
shareholders or the need to compete for revenues.
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It's the Â鶹ԼÅÄ's governance system, in other words, that
guarantees the Â鶹ԼÅÄ's independence from commercial and political pressure.
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And it's the Â鶹ԼÅÄ's independence that underpins the
public value of the Â鶹ԼÅÄ.
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The governance system of the Â鶹ԼÅÄ may not be the perfect
theoretical construct.
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But, with the changes we're now making, it's appropriate
and it works in practice.
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Of course there are areas where the Â鶹ԼÅÄ Governors need
to do much more.
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We urgently need to develop new ways to get much closer
to our licence payers so that we develop a fingertip feel for their
concerns.
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Tessa Jowell said the other day the Â鶹ԼÅÄ needs to have
what she called a "continuing conversation" with the people
who pay for it. Absolutely right!
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I think the internet and the new digital technologies
should contribute to a solution.
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In the New Year, we will announce our programme of
action to connect with the licence fee payers who are our customers
and our owners.
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They deserve better than a passive role.
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I spoke earlier about our stewardship of the money.
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I'd like to close by briefly telling you about the action
we are taking to ensure that the Â鶹ԼÅÄ is run as efficiently and effectively
as possible.
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The new DG has publicly committed himself to a Â鶹ԼÅÄ,
as he puts it, "as small as its mission allows".
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Mark Thompson is now coming to the end of a series of
searching reviews of the way the Â鶹ԼÅÄ conducts its business. They will
start to report in a few weeks' time.
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They're looking at how the Â鶹ԼÅÄ makes its programmes,
and where it makes them.
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The Â鶹ԼÅÄ spends £140 a head in London and £3
a head in Manchester. That's not right.
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The Â鶹ԼÅÄ is paid for by licence payers across the UK.
The geographical spread of our operations should better reflect the
nations and regions we serve.
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And it will.
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Mark has also launched a commercial review looking at
how to generate the most revenue from Â鶹ԼÅÄ assets; and, most importantly,
perhaps, there's a value for money review.
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I don't propose to pre-empt the reports –they are
still work in progress.
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But let me give you some insight into the value for
money review.
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There are a number of objectives.
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First and foremost, the Â鶹ԼÅÄ always has to justify the
colossal privilege of secure public funding by demonstrating that it
is as lean and agile as it possibly can be.
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That's just a given.
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Second, the Â鶹ԼÅÄ is facing some very big calls on its
bank balance over the coming period. For example, the switch from analogue
to digital distribution carries a serious price-tag.
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Before the Â鶹ԼÅÄ starts looking for help with that cost,
it knows it must be able to demonstrate that it has taken a very hard
look at its own costs.
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Mark Thompson is committed to self-help - to finding
big savings from existing spending to recycle into new investment.
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The results of the value for money review are likely
to require the Â鶹ԼÅÄ to do some difficult things. This will not be comfortable.
But it will be done.
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Ladies and Gentlemen, as you know, the Â鶹ԼÅÄ is now launched
on the process of Charter renewal.
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Next year there will be a Green Paper from the government.
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And some time after that – we hope – a new
Charter taking the Â鶹ԼÅÄ forward for another ten years.
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We are encouraged by some of the early signs.
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In particular by the recognition from Ofcom, that –
in Ofcom's own words: "an effective, strong, and independent Â鶹ԼÅÄ
is essential to the health of public service broadcasting in the UK.
It should continue to be properly funded by a TV licence fee model.
[and] the next Royal Charter should run for ten years."
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Well, I'll buy that.
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But we also know that the debate is not over.
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Every aspect of the Â鶹ԼÅÄ is being picked over –
and rightly so.
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In a world of change the Â鶹ԼÅÄ cannot stand still.
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I've set out some of the areas where large-scale change
is already under way in the Â鶹ԼÅÄ.
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We ask to be judged not on fine words but by our actions.
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But among all this change, certain Â鶹ԼÅÄ values remain
timeless.
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They are:
Universality: the Â鶹ԼÅÄ is for everyone;
Fairness and Equity: the Â鶹ԼÅÄ reflects the needs and interests
of all its users;
And Accountability: the public that owns the Â鶹ԼÅÄ has
the right to hold it to account.
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Add to these the core principle of editorial independence
– a Â鶹ԼÅÄ free from all commercial or political influence –
and you have an institution that has served Britain well for more than
three quarters of a century.
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An institution that has brought credit to Britain and
contributed significantly to the quality of life in the UK.
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If we want that contribution to continue into the 21st
Century then it's clear the Â鶹ԼÅÄ has to change and change radically.
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The leadership of the Â鶹ԼÅÄ is committed to making those
changes happen, so that a strengthened Â鶹ԼÅÄ can continue to meet public
expectations and public aspirations.
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Those expectations and aspirations are embodied in our
programmes – programmes that inform and educate and entertain.
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The great TV playwright Dennis Potter crystallised
my own feelings about what the Â鶹ԼÅÄ must offer.
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He was talking about television, but his message applies
just as much to radio:
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"I first saw television when
I was in my late teens. It made my heart pound. Here was a medium of
great power, of potentially wondrous delights that could slice through
all the tedious hierarchies of the printed word, and help to emancipate
us from many of the stifling tyrannies of class and status and gutter-press
ignorance.
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"We are privileged if we can work in this, the
most entrancing of all the many palaces of variety. Switch on, tune
in, and grow."
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Ladies and Gentlemen, thank you for giving me this opportunity
to explain why I believe the Â鶹ԼÅÄ matters.
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