Βι¶ΉΤΌΕΔ

Thursday 20 January 2005
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Ladies and Gentlemen, we meet at an extremely interesting time. The latest in a very long line of inquiries into the Βι¶ΉΤΌΕΔ is reaching a critical moment.

My former colleague Sir Bill Cotton used to say: "The Βι¶ΉΤΌΕΔ has inquiries like other people have mice!" And 25 years ago, one of my predecessors as Chairman, Sir Michael Swann, made a plea for an end to what he called "the continuous tinkering" with the Βι¶ΉΤΌΕΔ by committees of inquiry.

"The plant," he said, "will one day die from having had its roots dug up so often to see how they are getting on, and then left to dry out in chilly winds for so long before being replanted."

I know how he felt. Although, as it happens, I think our roots have been due - perhaps overdue - for some serious pruning and re-potting for some time now.

Lord Burns' committee have finished their deliberations - deliberations, I think we would all agree, carried out with a wholly admirable intelligence and rigour.

The DCMS green paper will be with us in due course. So it's a good moment to take stock of where we are in the debate over Charter renewal, because the debate has moved on a good deal over the last few months.

And it's a good moment to try to answer two questions: first, what is the Βι¶ΉΤΌΕΔ for? What outcomes do we want it to produce for licence fee payers in the 21st century? And second: what change is needed at the Βι¶ΉΤΌΕΔ to ensure the best delivery of those outcomes? In particular, are further changes needed to the Βι¶ΉΤΌΕΔ's system of governance to ensure licence fee payers' interests are best protected?

So, first, what is the Βι¶ΉΤΌΕΔ for? There are lots of ways of answering this question. But if you ask the most important people - Βι¶ΉΤΌΕΔ licence fee payers - they have a very simple answer: the Βι¶ΉΤΌΕΔ is there to broadcast great programmes.

What does "great" mean? Let me spell it out. It means to inform, educate and entertain - and do it in a way that's original, distinctive, ambitious, ground-breaking, risk-taking, memorable, innovative, informative, stretching, inspirational.

It means programmes that challenge, that open our eyes, and that bring delight.

It means setting the gold standard for every genre of content from news and current affairs to drama, comedy and yes, quiz games and everything in between. And doing it across television, radio, and online.

What is does not mean is patronising, derivative, formulaic commodity programming that may deliver value to shareholders or advertisers but can leave audiences short-changed. The sort of programming that is becoming more common as we move into the multi-channel, fully digital universe, where dramatically increased competition translates too often into risk-averse scheduling.

I've seen this at first hand in the States. There the commercial sector does produce some gems - some wonderful top-end drama series for example, and some brilliant and ground-breaking animation.

But where is the range? Do you find world-class quality right across a broad range of genres? The answer is no, you don't.

Yet we know from consultations with licence fee payers and research undertaken by Ofcom as part of its PSB review that audiences expect the quality they associate with public service broadcasting to be delivered across many different genres.

This is about much more than simply dealing with market failure. The Βι¶ΉΤΌΕΔ's assured income means it does not have to compete - nor should it - in the business of replicating commodity programming that is available elsewhere.

It also means that when the Βι¶ΉΤΌΕΔ comes up with a really original new format, it should not attempt to wring every last drop from it.

At some point, that hugely original new format will start to feel a bit tired, a bit repetitive, a bit formulaic. When that happens the Βι¶ΉΤΌΕΔ needs to be brave: move out, move on, move up. Make room for something new.

So the Βι¶ΉΤΌΕΔ is about great output across a wide range of genres on television radio and the internet, output driven by an editorial interest shared with no-one but the licence fee payers.

There are no commercial interests to be weighed, no advertiser interests to be met, no revenue implications for each and every editorial choice.

What a responsibility, but what perfect conditions to pursue excellence and innovation!

But it's not just about output. We expect the Βι¶ΉΤΌΕΔ to fulfil other key roles too. The assured income that lays upon the Βι¶ΉΤΌΕΔ that duty constantly to break new ground in its output, also lays upon the Βι¶ΉΤΌΕΔ wider civic responsibilities.

Central to these is the idea of building public value, of generating social capital, of serving its audiences not just as consumers but as members of a wider society, of contributing significantly to the quality of life in the UK.

As you know from our Building Public Value document, the Βι¶ΉΤΌΕΔ sets out to achieve this in many different ways, among them:

underpinning informed democracy through the provision of trusted and impartial news and information;

building a society strong in knowledge and skills through output that offers formal and informal education for all ages;

and enriching the nation's cultural life by bringing talent and audiences together to break new ground.

So if you ask our first question - "What is the Βι¶ΉΤΌΕΔ for?" - then the answer is clear. It's for high quality output across all genres, that underpins these wider public purposes. And that definition remains sound whether we are talking about an analogue world or a digital world.

What about the second question - "What further changes are needed to the Βι¶ΉΤΌΕΔ's system of governance to ensure licence fee payers' interests are best protected?"

I say "further changes" because we've already made very considerable ground here over the past eight months.

It's an unfortunate accident of timing that the very radical reforms we've introduced have coincided with the Charter review process.

I'm well aware of sceptical voices saying: "The Βι¶ΉΤΌΕΔ always sounds radical when the Charter's up for renewal, but somehow it never seems to deliver once it's in the bag."

Let me assure you that this time change is for real and delivery will be there for all to see.

I did not accept this job just to defend the status quo. In an ideal world I would have liked the changes to be fully in place well before the debate began so that their benefits for the licence payer would be clear for all to see.

But I had to begin where I found myself when I became Chairman.

The changes we've made are based on a set of fundamental principles. I believe passionately that any system of governance for the Βι¶ΉΤΌΕΔ has to be capable of meeting these clear principles. There are five of them:

Independence;

Rigorous stewardship of public money;

Accountability to licence fee payers;

Clarity of roles;

And last but certainly not least - practicality.

Well before I became Chairman eight months ago it was obvious to me that the Βι¶ΉΤΌΕΔ's governance structures had hardly changed from the patrician days of the old Βι¶ΉΤΌΕΔ monopoly.

It was clear to me on applying for this job that an urgent programme of reform was needed to give everyone new confidence that the Governors could represent the public interest and become sensitive to the complex, multi-media world it now shares with so many private sector players.

I made this absolutely clear in all the conversations I had with Whitehall before I accepted the job.

I spelled out that what I wanted to do as Chairman would involve significant structural change to the Βι¶ΉΤΌΕΔ's governance structures and behaviour.

I underlined that I had to get on with it from day one, not wait until the outcome of Charter review.

I left no-one in any doubt that this was not a moment for business as usual.

On arrival I was heartened to discover that my fellow Governors, under the chairmanship of Gavyn Davies, had also recognised the need for radical change and had begun a process of modernisation.

Together, we were able get that much needed change under way.

Now, eight months later, things are already radically different. Let me begin with clarity of roles. Under the old system a blurring had taken place between the roles of Βι¶ΉΤΌΕΔ Governors and Βι¶ΉΤΌΕΔ management and this had to be put right.

There was a real potential for management capture - and some evidence of it.

There had to be a much sharper separation between the Board and the Executive. We needed absolute clarity as to who was responsible for what.

We now have that clarity. The job of management is to manage. The job of the Governors is to interrogate management's proposals, approve, reject or amend them, regulate their execution and hold management to account for their delivery.

That wasn't altogether clear under the old system. It is now. It's clear that it's the Governors who represent the interests of the licence fee payers - the Βι¶ΉΤΌΕΔ's shareholders if you like - who want to be sure that they are getting the best output and the best value for their investment.

There was another problem we had to deal with. Under the old system the Governors simply didn't have the resources needed to do their job properly, by which I mean effectively, objectively, and transparently. Now they do.

Under the old system, Governors were almost entirely reliant on information from management when they came to judge the performance of management. The system had the potential for management capture built in.

Not any more. We've set up a Governance Unit. Its head we recruited from outside the Βι¶ΉΤΌΕΔ. His staff are not part of the Βι¶ΉΤΌΕΔ management chain. Their reporting line goes to us, the Governors, and we are now responsible for their pay and rations and performance appraisal.

The main function of the Governance Unit is research and analysis. They provide us with independent advice - from within their own numbers, and from outside experts as well, to reinforce our scrutiny of management decisions.

The unit is not yet fully staffed. But it's already made a crucial difference.

You'll be aware that the Director-General recently announced the preliminary results of the four big reviews he's been carrying out.

When Mark Thompson brought the first outlines of his four reviews to the Governors in the autumn, the new Governance Unit enabled us to do three months of really intensive and objective work.

Advised by independent external experts we challenged the management on their thinking and their assumptions. We made sure they thought through the implications of their proposed strategy.

As a result we are now content to support that strategy in its broad outlines - but nevertheless we have told management to bring us more detailed plans of the implementation risks and the costs. They too will be subject to independent external validation and audit.

Only after that process is completed to our full satisfaction will we feel able to sign off the DG's plans on behalf of the licence fee payers, who pay the bills.

Our most important concern during this whole exercise has been to ensure that the licence payers receive best value for their money.

That's now our prime focus as Governors - the interests of the licence payer, the public interest.

It's those interests that made me bring in Ernst and Young to run the rule over the Βι¶ΉΤΌΕΔ's financial systems over the summer.

I wanted to be as certain as humanly possible, on the licence fee payers' behalf, that management had the right systems in place.

It's those interests that are driving another key Governors' reform - the introduction of service licences.

A service licence is just that - a licence, issued by the Governors, for each and every Βι¶ΉΤΌΕΔ channel or service.

Each licence will set out budget, remit and performance targets.

These licences are a tool to enable us to hold management to account, to ensure that all Βι¶ΉΤΌΕΔ output delivers measurable public value and to exercise proper stewardship of the public's money.

For the first time in the Corporation's history, there will be a public document against which the licence fee payers can judge the Βι¶ΉΤΌΕΔ's output and delivery.

That guarantees more transparency and accountability than has ever been possible in the Βι¶ΉΤΌΕΔ until now.

We will introduce a Public Value Test. This is a radically new element in the process of approving new services or changes to existing ones.

The Public Value Test will involve an independent assessment of the potential impact on the wider broadcasting marketplace of any proposed new service.

We will not approve that new service unless the independent evidence clearly shows that the potential negative impact on other providers is outweighed by its public value.

And when we make a decision on the basis of this Public Value Test, we will publish the evidence for all to see. That is real accountability.

But it's already clear that, under our new system of service licences, there are things the Βι¶ΉΤΌΕΔ has undertaken in the past that wouldn't get under the wire now.

We've taken the initiative in the Βι¶ΉΤΌΕΔ's online services and closed down some websites following the Graf Report - which was commissioned by DCMS.

In future my aim is that the Governors should commission such inquiries, which will be both rigorous and objective - and before the event.

We're drafting these service licences now - but we won't sign them off until we've published the drafts and consulted widely and openly on their terms with all the stakeholders - with the public and with the industry.

Once the service licences are in place we will start a rolling series of reviews to make sure, in a structured and objective way, that management is delivering their requirements.

So we now have much greater clarity in the roles of Governors and management - and that works in the licence payers' interests.

But we want to go further. We intend to introduce a Governance Protocol. This will set out, publicly and transparently, the way in which the Governors are required to act independently of management.

For example, it would require us to reach properly objective conclusions on management proposals and to be able to demonstrate this by publishing the evidence and advice we have drawn on in reaching our decisions.

We are urging the Secretary of State to incorporate this protocol into the new Charter to ensure that the clear separation of power between Governors and management we are putting into place is enshrined in the future fabric and structure of the Βι¶ΉΤΌΕΔ and not dependent on the attitudes of the present board.

I want to see a robust and workable system of governance that is effectively 'people-proof'.

The Governors must work harder to inspire the confidence that we represent the interests of all our audiences, we need to find new ways to connect to them so that they genuinely feel part of the enterprise not just passive recipients of Βι¶ΉΤΌΕΔ output.

We are currently consulting groups of licence fee payers around the country to get their input into the next set of Βι¶ΉΤΌΕΔ objectives, to be published later in the year.

We are also working on plans for a virtual AGM enabling every licence payer who's interested to debate and interrogate the Βι¶ΉΤΌΕΔ's performance over the previous year.

And we are investigating ways of harnessing new media to encourage licence fee payers to engage with and inform the Governors' deliberations.

We think it's important, too, that our own performance should be open to independent scrutiny. So we are proposing that as part of the Governance Protocol there should be an annual external and independent appraisal of how the Governors measure up to best practice in the field.

This report will be published. It is both healthy and necessary for the Governors to open themselves to scrutiny in this way.

So the new system meets our core principles by greatly increasing accountability to licence fee payers.

One of licence fee payers' strongest concerns is that their money is being well spent. This is one of the Governors' key duties, rigorous stewardship of the public money - that is to say, the public's money.

The fact that the Βι¶ΉΤΌΕΔ is paid for by the public makes it essential that we have a structure of governance that ensures close supervision of how that money is spent.

You can't exercise proper and rigorous stewardship of that public money if you are so far removed from the spending decisions that you cannot monitor them properly.

It's no use wagging a finger after the money's been misspent. The money doesn't come from private shareholders - people who understand that any investment implies a degree of risk to their capital.

Licence payers don't view their annual fee in that way. They don't think of it as risk capital. They demand - and quite rightly - the reassurance that there is someone representing their interests keeping an extremely close eye on how their money is spent by the Βι¶ΉΤΌΕΔ.

That's why, when the Communications Bill setting up Ofcom was going through Parliament it was widely accepted that Ofcom's light-touch regulation, appropriate though it was for broadcasters dependent on private money, was entirely inappropriate for the Βι¶ΉΤΌΕΔ, funded as it is directly by the public through the licence fee.

Stewardship of the public's money is not something that you can do with a light-touch or backstop powers.

It calls for close engagement to allow informed judgement of how that money is being used. Exactly the kind of close engagement that the Governors have brought to the scrutiny of the DG's four reviews over the past few months.

Now there are those who say that this kind of close engagement is inappropriate for a body such as the Governors which also has a regulatory role. They say that this is just what leads to capture by management and to an unhealthy complicity in management decisions.

Until our current programme of reform, there was something in those criticisms. But in the light of the changes we have made, I profoundly disagree.

I believe it is both possible and necessary for the Board to discharge its stewardship role (which implies a degree of engagement with management), alongside its regulatory role (which implies a degree of separation).

Our structure - separate from management, but still part of the Βι¶ΉΤΌΕΔ - enables us to do that.

To engage in order to understand and monitor what is going on, yet still able to disengage in order to make objective, evidence-based judgements, and to impose sanctions when necessary.

Like all structures, our model is open to improvement and we welcome the current debate.

Our minds are certainly not closed to further discussion on this crucial issue.

But many of the alternatives proposed so far fail in two key respects. They fail to provide a proper balance between those crucial elements of engagement and disengagement.

And they create a degree of complexity that would bring them into conflict with another of our core principles: practicality.

In some ways this is the most important question of all. Will what is proposed deliver? Will it work?

Our new system is up and running. Although not complete in every detail yet, it is delivering. It's already clear that it does enable us to engage closely enough to scrutinise management activity, while at the same time giving us enough distance and formality of process to guarantee objectivity on behalf of licence fee payers.

I really do believe it answers the material criticisms levelled at the old system.

The new system we have put into place changes a great deal about the governance of the Βι¶ΉΤΌΕΔ, and the visibility of that governance.

But one thing does not change. That's the answer to the question: where does the buck stop? The answer is blindingly clear. It stops with me.

There is no division of responsibility for the guilty to exploit and hide behind - or for the Executive to play politics with, to divide and rule to get their way.

So, the radical changes we have implemented at the Βι¶ΉΤΌΕΔ demonstrably deliver four of our five core principles: effective stewardship of public money; greatly increased accountability to licence fee payers; much sharper clarity of roles; and it's workable.

But what about the fifth core principle: independence? On the day I became Chairman, I said that the Βι¶ΉΤΌΕΔ was not worth having if it was not editorially independent. The editorial independence of the Βι¶ΉΤΌΕΔ is non-negotiable. We're open to all kinds of suggestions in all kinds of areas. But not there.

I've been quite critical of the governance system I inherited. Not of the individuals, but of the system. In my view it did not allow a sufficient degree of professional focus.

But on this point of editorial independence I think you have to hand it to the system of Βι¶ΉΤΌΕΔ governance, and to the men and women who have made it work for the last 50 years.

They fended off some ferocious attacks from those trying to skew Βι¶ΉΤΌΕΔ news coverage for their own purposes: the Foreign Office during Suez; the Northern Ireland Office during the troubles; Number Ten during the Falklands. I could go on, but you know the history.

It would be nice to say that it will never happen again. But we all know it will. The Governors have been able to defend the Βι¶ΉΤΌΕΔ's independence because of the Βι¶ΉΤΌΕΔ's unique constitution.

That constitution needs modernising, to make the Βι¶ΉΤΌΕΔ fit for the crowded media world of the 21st century.

But at the core of a new Charter there must remain this clear and unambiguous role for the Governors as the ultimate protectors and guarantors of the Βι¶ΉΤΌΕΔ's editorial independence.

It's a fundamental part of what the licence fee payers expect when they hand over their money.

Any change to the Βι¶ΉΤΌΕΔ constitution that blurred this role, that caused confusion in the public mind as to where that responsibility lies, must be rejected.

Ladies and Gentlemen, we've always made it clear that in designing this new structure for the Βι¶ΉΤΌΕΔ in the 21st century we do not pretend to have a monopoly of wisdom.

We remain open to fresh ideas from any quarter if we have not met legitimate criticism of our behaviour. But when those ideas come, we will test them - and we would ask you to test them - against the five principles I have set out today.

Independence, stewardship, accountability, clarity and workability - these, we believe, are the touchstones against which to try all proposals for further restructuring of the Βι¶ΉΤΌΕΔ.

Ladies and Gentlemen, thank you for listening.