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Michael Grade


Building Public Value

Tuesday 29 June 2004
Printable version

Ladies and gentlemen we live in a somewhat cynical world. Someone once said that every ten years, come Charter Renewal, the BBC gets the old time religion. Can't think who it was, no doubt some clever clogs from Channel 4.


That film you've just watched tells another story.


One of the many surprising things I've discovered since I became Chairman is the amount of truly public service work that goes on in the BBC, year-in, year-out, charter renewal or no charter renewal. Using our programmes and reputation to reach out to communities beyond our core broadcasting remit.


I've been Chairman now for six weeks and this is the moment to offer some thoughts from the boardroom.


We're here to launch the BBC contribution to the debate over charter renewal and I would like to put the document we're publishing today into a personal context.


A good deal of the thinking had been done by the Governors before I became Chairman. I've added my thoughts. Mark Thompson, the new Director-General, has added his.


It represents a consensus across the BBC, although part two, which deals with governance, is of course exclusively the responsibility of the board of Governors.


Our document is called Building Public Value. The founders of the BBC knew all about public value. They believed that broadcasting could make the world a better place.


More than 75 years ago, when the British Broadcasting Company stood on the verge of becoming the British Broadcasting Corporation, the first Director-General John Reith told his staff: "We have tried to found a tradition of public service and to dedicate the service of broadcasting to the service of humanity in its fullest sense."


In America, by contrast, they chose to use the new emerging mass media largely as a new opportunity for advertisers.


Britain took a different path. It set out to build, through public intervention, a new broadcasting infrastructure to reach every household in the land.


Not just to give people wonderful entertainment. But also, unashamedly, to build an instrument of public value.


That was then. It was an age of spectrum scarcity.


Today, with the possibility of unlimited spectrum, there are those who look to a different model. A model not of public, but private value. A digital world of limitless individual consumer choice delivered by the market.


I have never believed this Utopia is anything but a digital pipe dream.


Our task over the next year is to convince the British public that the BBC's role in the new digital age of plenty is both justified and necessary.


I want a BBC that delivers wonderful programmes that offer something of value to everyone. And more than that, a BBC that builds public value.


How can the BBC do that?


by underpinning civic life with trusted and impartial news and information


by bringing British talent and audiences together to enrich our culture


by offering learning opportunities for every age across every medium


by supporting Britain's global position by being and remaining the world's most trusted provider of international news


by enabling communities of place and interest to take root and flourish


and by fostering the understanding that opens the way to tolerance.


I hope and believe that we can all agree these are not outcomes we can confidently expect the market to provide.


To achieve this, the BBC has to change. The status quo is not an option.


In the new world of spectrum plenty it is supposed to be harder to make the case for a publicly funded BBC.


I believe the opposite to be true.


The bigger and more intensely competitive market-led broadcasting becomes - the tougher the ratings wars, the tighter the budgets - the more necessary it becomes to have the BBC.


Television as provided by the market is changing out of all recognition.

I cut my broadcasting teeth in the age of the old television duopoly when ITV, believe it or not, ran Glyndebourne live on Sunday nights. In peak time.


When there were South Bank Show specials. In peak time.


When there was World In Action and This Week. In peak time.


When there was Brideshead, News at Ten and yards and yards of wonderful factual programming and single plays – all in peak.


In public service terms it was hard to distinguish the BBC from its private sector competition. How the landscape has changed!


In the new world of market-led multi-channel television, programmes have become commodities.


Investment in high quality home-produced programmes is being squeezed.


Audiences have morphed into consumers – to be delivered in bulk to advertisers or targeted for higher and higher subscriptions.


How long before a British television executive is asked the question I was asked when I pitched a script to a network executive in Hollywood: "Mr Grade, how many eyeballs will it deliver to the vehicle?"


But the BBC doesn't compete for commercial revenue. That's the key difference between the BBC and commercial broadcasting.


The BBC has the privilege and the responsibility of treating all licence payers as equals. Not as sub-demographic groups, some of whom attract juicier rates from advertisers than others.


As commercial competition continues to intensify, and commoditisation continues apace, there is an overwhelming case for an independent and adequately funded sector of British broadcasting with a lot more on its mind than simply winning every time period and maximising returns to shareholders.


Ed Murrow, the most distinguished figure in American broadcast journalism, said of television: "This instrument can teach. It can illuminate. Yes, it can even inspire. But it can do so only to the extent that humans are determined to use it to those ends. Otherwise it is merely lights and wires in a box."


There is nothing wrong with the market, morally or economically. The BBC still has a lot to learn from the private sector, particularly about operating efficiency. And it will!


But there are different kinds of efficiency in broadcasting.


At one level, we all need to be efficient. To make sure that resources are used to best effect. That applies to the BBC just as much as to Sky, five, ITV and the rest.


But in the private sector, there is the unavoidable extra dynamic of shareholder efficiency - the need to maximise profits by generating the highest revenues at the lowest cost.


This efficiently delivers shareholders their rightful return. But in the process, large areas of viewers' interests are ignored. And risky investments in original programmes are shunned.


How can it be efficient in shareholder terms to put money into unproven output when you can re-cycle existing formats so profitably?


But for public service broadcasting, there is another form of efficiency.


This puts the viewers' and listeners' interests first. It serves the citizen as much as the consumer. It adds home-grown quality and value to all genres, across the board.


Some economic theorists believe the BBC stands in the way of a free market in broadcasting. A market that, left to itself, would offer viewers and listeners pretty much everything they could possibly want.


Those who run this argument should get out more.


Go to the USA, the biggest, richest, most developed free media market in the world.


Ask yourselves, is this what we want to swap the BBC for?


Is there a more depressing spectacle in broadcasting anywhere in the world than American PBS on radio and television passing round the begging bowl during pledge weeks? Is this a risk we're prepared to take?


Be sure of one thing, once dismantled, all the queen's horses and all the queen's men couldn't put 'auntie' together again.


When I was at Channel 4 I was fond of saying: "It's the BBC that keeps us honest." I stand by that still.


Now more than ever the BBC should be the standard bearer of quality and culture in broadcasting. But culture in its widest sense.


Public service broadcasting is about more than live relays from Glyndebourne, enjoyable though they are. All the recent research, including Ofcom's, shows that licence payers have a very broad definition of public service broadcasting.


It includes British comedy, sport, drama, natural history, soaps – as well as the arts, religion and high quality impartial and independent journalism.


Licence payers expect range as well as home-produced quality.


They do want an alternative to commodity broadcasting. And they want it across the piece.


And let's not forget that the BBC serves a global audience too. Its news services alone reach 185 million around the globe across radio, television and the internet.


In a world of intolerance and instability, the BBC plays a significant role in enabling informed global debate, and supporting it with impartial and trusted news and information.


With the right funding settlement the World Service will continue to build on that, and in doing so return a dividend to Britain of enhanced reputation for the British way of doing things.


It's beguilingly easy to make sweeping statements about the public value of the BBC. But how do we test them?


It really is the toughest question for the BBC. The marketplace has the bottom line to measure success. What's the BBC's bottom line?


Is it ratings? Well, ratings do have a part to play. But ratings will always be a two-edged sword for the BBC.


If they go up, you're accused of dumbing down. If you strive for quality, win lots of awards and critical acclaim but ratings slip, then you're pandering to the metropolitan elite.


And for a channel such as BBC ONE – offering broad popular entertainment as its remit - ratings are part of the mix.


If BBC ONE's ratings fell below BBC TWO's, then BBC ONE would be failing its viewers, who expect BBC ONE to offer popular entertainment.


But the real issue is not ratings per se, but how they are achieved.


The essence of successful public service broadcasting is that it never patronises its audience, never offers them cynical, derivative, exploitative programming.


At its best BBC ONE achieves its audiences with home-grown, home-produced, innovative programmes that engage everyone from the reader of the Times Literary Supplement to the reader of the Star. And does it all in the same programme.


Spooks. EastEnders. D-Day. Only Fools and Horses. Walking with Dinosaurs. The Canterbury Tales. And there are many more.


But it would not be acceptable for BBC ONE to set out to buy ratings with commodity programmes and million-pound giveaway quiz shows.


Nor would it be acceptable to do it by turning successful programmes into commodities: EastEnders twice a day seven days a week, for example.


That's not what BBC ONE should do – nor does it.


In judging the success of other services, ratings may simply be misleading. If Radio 3's ratings suddenly shot up then something would clearly very seriously have gone wrong.


In any case, the benchmark for the BBC as a whole will never be ratings on a single day or a single week. It's the trend over time that matters. And, crucially, it's reach.


Reach is the measure of the universality of BBC services. And universality is one of the bedrock principles of the BBC together with equitable treatment of all licence fee payers.


In practical terms universality and equity mean that since everyone pays the licence fee, everyone must get back from the BBC something they value – and regularly.


Of course there will always be some things of value that can't be measured. Not even by Ofcom. But that doesn't mean we shouldn't try.


It's no longer acceptable for the BBC to define public service broadcasting as whatever the BBC chooses to broadcast.


So in the future we will use a new set of measures against which the Governors will assess the public value of everything the BBC does. The details are in our document.


Some of these measures are quantitative. But some are unashamedly qualitative.


At some point, assessing public service broadcasting does have to be an outside informed judgement call.


But it won't just be the Governors' call. Licence payers will be part of the jury too.


We will consult them regularly. And every few years we will commission a significant piece of independent research, involving up to 10,000 respondents, to assess how we're doing and to assess the public value of the BBC.


And here's a twist - we will publish the results.


We have also developed a new tool to ensure the BBC is single-mindedly focused on serving the public interest. We've called it the Service Licence.


The Governors will issue a Service Licence for each and every BBC network and channel - across radio, television and online.


The Service Licences will set out in some detail: remit, objectives, and budgets.


And I want to make clear today one particular element they will definitely specify.


The Governors will require serious current affairs to be restored to its proper place and prominence across the BBC, including BBC ONE.


How that's achieved is not for the Governors to determine. Our job is to set the remit, management's job is to fulfil it.


The Governors will hold management to account against these licences. And if the conditions aren't met, it will not be a case of "assistant heads must roll". Top jobs will be on the line.


One virtue of this new system will be that the BBC will finally be able to analyse sweeping accusations of dumbing down.


If there is a problem with the output we will be able to drill down precisely to where it lies.


The BBC is a great institution. But, as you may have noticed, it does have the ability to shoot itself in the foot from time to time.


One self-inflicted wound has been has been its failure to meet the 25% independent quota.


It made it look as though the quota wasn't taken seriously. It gave comfort to those who accuse the BBC of arrogance.


But worse, much worse, it denied licence payers access to some of the best programme-making talent – much of it trained within the BBC. We will not let this happen again.


As Governors, our job is to represent the public interest. In this case, it's to ensure licence payers get the best programmes regardless of who makes them.


The BBC needs both in-house and independent producers. But we must ensure that independents are not disadvantaged in the process.


We have therefore asked management to review the BBC's commissioning needs and production base across all media and report their findings to us.

Some say this is not enough. Why does the BBC need to make any programmes? Why not turn the BBC into a publisher/broadcaster on the lines of Channel 4?


Well I've worked in both and I don't think it would serve the public interest.


I've already highlighted the market dynamic towards commodity programming. But there's another dynamic – and it's pushing broadcasting in the same direction.


This is the casualisation of employment in broadcasting.

Casualisation is leading to derivative ideas. You give the commissioners what you think they want, not what you are passionately dying to make and believe in. Because you're desperate for the work.


Somewhere in British broadcasting there has to be a bedrock of sustainable talent with time to think, to observe, to absorb what's going on in the world outside broadcasting and to turn that experience into programmes of challenge, ambition, quality and innovation. Innovation does not come from watching other channels.


But in return for the huge privilege of secure funding that this implies, the BBC has to be able to demonstrate it is spending the licence fee prudently in the public interest.


And it has to be able to do that openly and transparently.


In this, as in other areas, it's no longer acceptable for the BBC to give any appearance of being sole judge and jury of its own performance.


We have asked management to carry out a series of urgent reviews.


Now BBC reviews have sometimes been about confessing failings in order to avoid action but mostly to bamboozle the Governors.


Not this time.


Independent outsiders with relevant expertise are being drafted onto these reviews. The Governors will publish the findings and ensure management acts on them.


We have also asked management to review the BBC's commercial activities.


Where does the public interest really lie? What businesses does the BBC really need to own? Are there better ways to earn a proper return for licence payers' investment?

Then there is the question of value for money across every BBC activity.


How can more be achieved here? How we can reassure licence payers that the BBC is as lean and mean as it can be? This too, is an issue the Governors have asked management to review urgently.


We have also asked management to look hard at where the BBC is based.


The BBC is paid for by licence payers across the UK and the geographical spread of its operations should better reflect the country it serves.


The BBC remains too London-centred. That must change.

One of the biggest questions we're considering is the size and scale of the BBC.


Should it expand further? Or should it now consolidate? The Governors' view is that imperial ambitions are a thing of the past.


The most urgent priority is not further expansion, but completing the challenge of creating a fully digital Britain.


That is what will enable the BBC to deliver its version and vision of universality.


This is not to say the BBC will remain set in aspic.


Technological change is offering us new means of delivering our content in ways that work better for our audiences. The public interest demands we explore them.


But the BBC must also take account of the legitimate interests and concerns of the rest of the industry.


Where new avenues are contemplated then the Governors will insist that a public value test is applied before we will give any approval.


That test will include an independent assessment of the potential impact on other players in the market.


Turn now to the other big question. How should the BBC be paid for?


It has to be the licence fee.


Woody Allen said he wasn't keen on the idea of growing old – until he considered the alternative.


Advertising means commercial pressure and the narrow-market - the narrow market view of efficiency. And in any case it would impoverish the whole sector.


Direct taxation means political pressure and intervention.


Subscription would force the BBC to concentrate on those programmes that bring in the biggest subscription revenue with the least commercial risk.


Range would narrow. And slowly but surely a subscription-funded BBC would adopt the characteristics and limitations of the market.


However you cut it, anything other than the licence fee changes the nature of the BBC and dilutes the interests of our audiences.

But I do believe there is one change to the licence fee we need to think about. That is the way the level of the licence fee is set.


Is it right that this lies solely in the hands of the Government of the day? How does that fit with a truly independent BBC? Is it a responsibility that Government necessarily wants?


Imagine what would have happened if the licence fee decision had fallen in the middle of the Hutton Inquiry?


The present arrangement would have put the Secretary of State in an impossible position.


The first significant action the Labour Government took was to hand over control of setting interest rates to the Bank of England's monetary policy committee. By doing so, they took the politics out of interest rates.


While we are taking a root and branch look at the BBC, my personal view is that we should have the debate about whether control over the level of the licence fee could be devolved to a specially convened independent body appointed by, but independent of, Government.


De-politicising the licence fee settlements could be the final underpinning of the BBC's long term independence.

There are calls for the licence fee to be top-sliced. To be shared with those commercial broadcasters who still carry some public service obligations.


Or for a portion to be put into a separate fund for which all broadcasters could bid – contestable funding as it's called.

My view on this is clear.


If the Government want to hand a public subsidy to Channel 4, ITV and others, then I'm delighted that shareholders should have such a pleasant windfall.


But it's got nothing to do with the licence fee.


The licence fee is there to pay for a BBC that operates only in the public interest.


Licence payers understand this.


Top-slicing would mean licence payers would no longer know exactly what they were paying for. It would work against our aim of building a transparent and accountable relationship with licence payers.


It is a very bad idea.


On the day I was appointed Chairman I made it clear that the BBC's system of governance needed radical reform. May I explain now what I meant.


Let me begin by clarifying what I mean by governance.


Governance is not the same as regulation.


Regulation is about rules – about quotas, guidelines, producer codes, and so on.


As Governors we are responsible for some of the BBC's regulation too. But governance is not about regulation.


It's about stewardship. Stewardship of the money. And stewardship of the public interest.


This is the great difference between the BBC Governors and Ofcom.


Ofcom has no responsibility for anybody's money. The Governors by contrast have the stewardship of more than three billion pounds a year.


As trustees of the public interest we have to put the public first in everything that we do.


That means that we as BBC Governors have to establish a clear separation from BBC management.


That has not always been achieved.


I have no problem with the Governors being champions of the BBC. But that is a very different thing from the Governors being champions of BBC management.


We can't allow that distinction ever to become blurred.


Some of the changes I have already mentioned demonstrate our determination here: the service licences; the rigorous application of the public value test; the regular large-scale public survey; and the new approach to performance-measurement.

In addition, we will create a distinct and properly resourced governance unit.


In the past, Governors have sometimes had to assess the performance of management largely on the basis of information supplied by management.


The new unit will be a resource of wholly independent advice and expertise.


The annual report will change too: no longer part-owned by management, but wholly-owned by the Governors.


The vehicle through which we publicly hold management to account on behalf of the licence payers.


The annual report we will publish in a few weeks' time shows the direction in which we are moving and there is more to come.


Once these reforms are in place, with the Governors properly resourced and their separation from management crystal clear, then I very much hope it will no longer be necessary for the Government to have to launch review after review of what the BBC does.


It must be the Governors' job to scrutinise the BBC.


If we don't do it properly and independently of management then that's the time for the Government to step in.


Of course some will say the BBC governance system is simply beyond reform.


It should be done away with, handed over to Ofcom, or given to some new public service broadcasting regulator.


I disagree.


The manifest independence of the BBC is a key element in the value the public derive from the licence fee.


While the Royal Charter may not be the only constitutional form that can guarantee that independence, we tinker with it at our collective peril.


It is no accident that for more than three quarters of a century the BBC's independence has survived sometimes ferocious political pressure.


Our governance system has given us that strength and that independence.


And our resulting independence is a key part of the benefit licence payers expect in return for their licence fee.


The BBC's current Royal Charter ends in 2006. We would welcome a debate about the nature of the constitutional arrangement that replaces it.


Mutualisation, trust status, establishing the BBC as a public interest company, another Royal Charter – let's talk about it, let's examine all of these ideas.


But any new constitutional arrangement must guarantee the same degree of independence as the current Royal Charter.


One aspect of the new arrangement in particular it's crucial to get right. That's the term of the new charter, or whatever might replace it.


The present charter runs for ten years. I don't think there's any case for the next term to be any shorter.


No doubt some will say ten years is too long when technology and the marketplace are changing so rapidly.


But that's exactly why 10 years is not too long.


Ahead of us we have digital switchover. A transformation of Britain's broadcasting landscape.


It is right that the BBC should be expected to lead this change.


We need stability to plan the transition in an orderly manner.


Moreover, in doing so we will invest very large amounts of licence payers' money in a new digital transmission network.


The licence payers are entitled to a proper return, which will take time.


Any shorter renewal term brings other problems too – in planning investment, in attracting and retaining the best staff, in maintaining continuity.


The effect would be to weaken our ability to put the public interest first.


I spoke earlier about the core values of universality and equity that underpin the BBC.


There is a third core value: accountability.


The BBC record here is patchy.


The BBC has always been rather closed as an institution. Its record in listening to external criticism and responding candidly has been uneven.


Sam Chisholm when he was at Sky used to say to me: "Michael, dealing with the BBC is like dealing with the laundry. Nothing ever comes back."


That is changing.


You will have noticed that last week the BBC published the whole of the Neil report on the editorial lessons of Hutton.


When we say open and transparent, we mean open and transparent.


It's a widely accepted principle that the real litmus-test of any organisation is how it deals with complaints from the public.


We will shortly publish details of a new system for dealing with complaints from our licence payers.

It will put in place much tougher controls to ensure objectivity, fairness and transparency.

Ladies and gentlemen, in building public value we are setting out a programme of very significant change right across the BBC.


We're already starting to make many of those changes.


And if you ask what the most important change is, it is this: that any perception that the BBC is sole judge and jury of its own performance will be a thing of the past.


As a publicly owned and publicly accountable institution there must be no room for doubt that the BBC's agenda is seen to be dictated by the public interest.


The principles that must underpin the BBC are: universality; equity; and - in some ways most important of all - accountability.


A BBC available to everyone, delivering value to everyone, and open to everyone.


I said at the start this was our contribution to the Charter Renewal debate. It is just that: a contribution.


Not the last word. The BBC does not lay claim to a monopoly of wisdom on its own future.


But let me say this.


All our reforms are worthless if the BBC doesn't continue to attract and train the best and brightest British talent and make the BBC the place where the best talent wants to work.


Because without that talent creating wonderful output across television radio and online there is not a hope that the BBC will command public support for an extension of its public funding and its lifespan.


We can think up all kinds of effective ways of improving governance, and sharpening up regulation, and driving efficiency, and bearing down on costs – and we have.


But when it comes down to it: it is all about the content, isn't it? And it always will be, whatever technology delivers.


It's not my business as Chairman to choose or to schedule programmes.


My days of commissioning The Singing Detective from the Head of Drama - Jonathan Powell - in the loo at TV Centre are over.


But rest assured, I will use whatever experience I have to make sure that everyone who works for the BBC, in-house or independent, understands this:


The programmes the BBC makes and commissions, in whatever genre and for whatever service, and for whatever audience, must be clearly labelled 'only from the BBC'.


No clones, no exploitation, no patronising tones or formats, nothing, that dreaded word in creativity, 'safe'.


Everything we present to the licence payers must aspire to be original, inventive, risky, imaginative, relevant – and must be made with a conviction that stamps a BBC public service ethic indelibly across it.


There is even room for some mindless entertainment – provided it is as original as I'm Sorry I Haven't a Clue.


To keep the rest of broadcasting honest, we must be honest with ourselves, and about ourselves.


I commend this document to you.


Thank you for listening. I now hand over to Mark Thompson.


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