BBC HomeExplore the BBC
This page has been archived and is no longer updated. Find out more about page archiving.

29 October 2014
Press Office
Search the BBC and Web
Search BBC Press Office

BBC Homepage

Contact Us

BBC Chairman Michael Grade


Michael Grade

BBC Chairman

Chairman's speech at the Annual Report 2004/2005 launch

New governance and clarity of purpose delivers a year of change

Tuesday 12 July 2005
Printable version

Check against delivery


Ladies and Gentlemen, we're here today to launch this year's BBC Annual Report.


I'm going to say a few words to outline some of the major themes from the report. The Director-General, Mark Thompson, will then join me, and we'll be happy to take your questions.


I shall split my remarks into two areas:


First, the governance and organisational changes of the last year;


And second, the performance of programmes and services provided by the BBC in return for the licence fee during the year under review.


May I remind you of the key commitments we made when we launched our agenda for change - Building public value - 12 months ago.


I said then that the BBC's task over the next year was to explain to the British public why the BBC's role in the new digital age of plenty is both justified and necessary.


But I also said that the BBC had to become more operationally efficient to maximise its investment in programmes and services, and thus deliver greater public value.


And I stressed that the licence fee places a duty on the BBC to provide distinctiveness. Now, more than ever, the BBC must be the standard bearer of quality in everything it does.


This year's Annual Report and Accounts demonstrates how the BBC is beginning to deliver on those promises.


I also made clear a year ago that the BBC's system of governance had to change. Since then, it has undergone the most radical reshaping in the Corporation's 80-year history.


I would, of course, have preferred time for our changes to bed down and to demonstrate their worth. But the timetable of the Charter review process did not allow for this. Policy decisions had to be made before our reforms had been completed.


In February this year the Government set out its decision to replace the Board of Governors with a new BBC Trust. It creates a new twin-board structure, with clear, newly-defined responsibilities, that builds on the behavioural change we had begun to implement. The Board of Governors is satisfied that this new Trust model meets all the objectives and principles that we had identified at the outset of the public debate, especially in maintaining the independence of the BBC.


Governance of the BBC is more than simple regulation, setting minimum standards and quotas, and checking compliance after the event. Most of the strictly regulatory functions in fact now rest with Ofcom. The Trust will carry the much wider responsibility of ensuring best value for licence fee payers, both in the range and quality of the BBC's services, and the efficiency with which they are produced. The new model is appropriate for these purposes.


The Government's decision offers clarity and certainty so we can move ahead. These changes are also future-proofed. They will not evaporate 12 months after the start of the new Charter and no future board appointees can undo them. They will be enshrined in protocols that ensure the Trustees of the future remain focussed on representing the public interest and that the BBC delivers its public service remit.


So what has been the impact of the changes we've already implemented?


The independence of Governors from management is key and the new Governance Unit has transformed the relationship between the two, ensuring better scrutiny and better outcomes.


The Governance Unit provides the Board with independent advice and analysis, and calls upon independent outside expertise when necessary. It is entirely outside the management chain so Governors are no longer dependent on information from management to judge the performance of management.


This Annual Report is evidence of that. Let me give you some examples from the last year.


The Governors commissioned an independent report on impartiality in BBC coverage of the European Union. The report did not make easy reading for BBC journalists. Nevertheless it was published, and in full. It has led to changes in the way BBC journalists are trained and organised, resulting, we expect, in better informed coverage of European affairs.


The Governance Unit also supported the Governors in scrutinising the Director-General's internal reviews. Our advisers, together with external experts - PA Consulting - provided the independent detailed analysis we needed to reach an informed and objective decision about the value-for-money recommendations. We recognised that the impact of our decision inside the BBC would be profound and result in some tough choices for managers and staff. We ultimately approved the plans because we concluded they are in licence fee payers' interests.


This has also been a year of unprecedented external scrutiny of the BBC. In addition to Charter Review we have had Graf on online; Gardam on digital radio services; Barwise on digital television channels; the National Audit Office; and Ofcom's public service broadcasting review. There is no corner of the BBC into which powerful searchlights have not been shone.


Responding to the resulting blizzard of reports has sometimes seemed like the main business of the BBC rather than ensuring the provision of good programmes for the public.


But accountability is crucial to maintaining public support. And there is no escaping the fact that there is a cost attached to the fulfilment of these responsibilities.


We have this year, for the first time, included an estimated annual cost of complying with the many regulatory, statutory and legal requirements that - for the most part - apply uniquely to the BBC. In 2004/05 this amounted to £17 million, including a subscription of £4.7m to Ofcom.


One benefit of the new system of governance once it is fully in place will be a reduction in the number of external reviews of the BBC and less bureaucracy.


Our new tools will include service licences; the public value test; and the new measurement framework of reach, quality, impact and value, which has today been endorsed by the NAO in a separate report we are publishing.


In next year's Annual Report, we will include a breakdown of costs for the Governance Unit's first full year in operation. The total cost of the Unit and that of its predecessor department in the year 2004/05 was £8.4 million.


And so to the finance report. I don't intend to go through it in detail - but note that the BBC's net borrowings were down to £89m from £106m last year and the actual positive cash balance at the year end was £12m as against £3m last year.


The BBC remains on plan to reach a broadly zero debt position by the end of this current Charter.


The commercial subsidiaries increased their contribution by £16m to £151m and that of course does not include the receipts of £150m from the sale of BBC Technology during the year.


Jeremy Peat, the Scottish National Governor and Chairman of the Governors' Audit Committee, and Zarin Patel, the Group Finance Director, are here to answer any questions on the accounts.


The Board has also overseen important changes to the BBC's accountability mechanisms, with changes to complaints procedures to make them quicker, more effective, and fairer.


The Governors are considering proposals for further changes to the BBC's complaints handling processes, to make the appeal process even more open and transparent. We will be consulting the public on these proposals soon.


Connection with licence-fee payers is now a key objective for the Governors. Initiatives include a Governors' website, and next week, an annual general meeting where we, the Governors, will be quizzed - rigorously I'm sure - by members of the public. This openness to direct scrutiny is an important and necessary feature of how the BBC is changing for the better.


Finally - before I move on to programmes - the remuneration report. We are announcing today a package of reforms that represent a significant change to the remuneration policy for executive directors at the BBC: most notably, a reduction in executive bonus awards.


The BBC is different from commercial broadcasters. We do not and cannot offer share options and long term incentives and other financial rewards which are available to our private sector competitors.


The BBC is a public sector organisation with a guaranteed income, so this is how it should be. The BBC's policy for all staff is to pay basic salaries based on the market median of relevant private and public sector organisations, including broadcasters, to ensure we attract and retain the most talented people. The median, that is not the top of the market range, nor the bottom.


The Governors have reviewed the policy for executive bonus awards. We decided that the bonus opportunity will be reduced from 30 per cent of base salary to ten per cent.


We concluded that it was important to retain some element of performance-related bonus, but that 30 per cent was too high for a public sector organisation.


Some consolidation on base salary will take place but this will be capped at ten per cent.


Our policy of offering salaries based on the market median will be maintained. Adjustments will be made to accrued pension entitlements to ensure the effect of consolidation is neutral.


The Governors' Remuneration Committee received independent professional advice, from the specialist Hay Group in July last year, that there had been a marked erosion of some executive base salaries below market median and some adjustment was necessary to bring them in line with policy.


We agreed a two-stage approach, the first of which is reflected in the salaries disclosed in this annual report. The bonus awards for 2004/05 are in recognition of performance against set criteria. The Governors accepted Mark Thompson's decision to waive his own bonus entitlement this year.


So, as you can see, this has been twelve months of fundamental change in the way the BBC operates.


All of these changes are driven by a single aim: to make the BBC more responsive to the expectations of licence fee payers. This clear purpose is driving our commitment to change.


So let me turn now to the BBC's programmes and services, with a quick overview of the past year.


Let me start with BBC ONE - still for many people "The BBC." BBC ONE has had a very good year. I'll repeat that to avoid any misunderstanding - "BBC ONE has had a very good year"!


A lot of work has been done to understand its viewers' needs better. The Governors have noted quality output of distinction across a wide range of genres and a successful balance between high level public service commitment and the appeal for large audiences. These are encouraging signs.


But there are still areas where we - on behalf of licence fee payers - want to see improvement: fewer repeats in peaktime, more quality comedy and drama, and more innovation and risk taking.


None of this is new - you've heard Mark Thompson himself commit to delivering these changes and explaining how the efficiency savings he is implementing are designed to achieve them.


Management must be equally alert to licence fee payers' needs. The Governors - and in future the Trustees - have a unique position of influence inside the BBC and their responsibility must be to ensure management delivers the outcomes that audiences will value.


Over on BBC TWO, last year saw some creative success and critical acclaim for quality and originality of its programming. The role of BBC TWO is to offer a more challenging mix than BBC ONE and, in particular, offer a strong and distinctive factual core. This year it has made some progress.


But there has been some cost in audience terms. The challenge now is to improve reach, particularly to younger audiences and in multichannel homes, without endangering BBC TWO's distinctiveness.


That challenge is not an easy one, but we know Roly Keating, the new Controller of BBC TWO, is committed to meeting the task.


The digital television channels are making good progress, although we need to keep working hard to ensure they deliver value for money to the licence fee payer.


BBC Radio has had a strong year overall. But, there is no room for complacency and we recognise our responsibility as Governors in ensuring that BBC Radio continues to meet its public service remit.


As we make clear in the Annual Report, the Governors are aware of concerns expressed by commercial networks, in particular about Radios 1 and 2.


The Governors are confident both are currently offering a service that is distinctive from their commercial rivals.


Our new system of service licences will provide greater clarity on what audiences - and the BBC's competitors - can expect from all the BBC's services. It will enable our successors, the Trustees, to judge performance transparently using consistent measures. is a clear example of the BBC responding speedily to valid concerns. In response to the Graf Report, the Governors changed the remit so it properly reflects the BBC's public purposes; stronger direction and tighter boundaries for the service are now in place; and some sites have been closed as a result.


We have also required that future investment decisions must balance the potential to create public value against the risk of negative impact on the market.


Elsewhere in New Media there have been lots of new developments: the re-launched Radio Player; the birth of podcasting; trials of iMP -the interactive media player that holds the potential of allowing downloads of television programmes; there has been good work in developing the potential of interactivity - most particularly during the Athens Olympics.


News. It was a year of big and challenging stories and News responded confidently. News has also responded positively to the Neil Report and, as I've already mentioned, the Wilson report on BBC coverage of Europe. Note that 80 per cent of the public trust BBC News. There were some slips-ups too, but the BBC responded frankly and honestly and made sure the lessons were learned.


I am happy to report that the Nations and Regions are enjoying growing viewer and listener satisfaction. And the World Service is growing its global reach. These areas are well covered in the annual report.


The combined weekly reach of all BBC television and radio was 92.9%. This is unchanged from last year. There were variations - some services up, some down - but in a rapidly changing media landscape, stable reach overall is reassuring.

And online, continues to grow.


I have only given you a flavour of the BBC's performance over the last year. Lots of good things. Not, by any means, perfect.


Over much of its history the BBC's Governors have acted primarily as defenders of the Corporation as an institution. Yes, the public rightly expects us to defend the independence of the BBC. But the Governors, and in future the Trustees, cannot act as cheerleaders for the organisation, right or wrong.


It is now crystal clear that our fiduciary responsibility is to represent the interests of licence fee payers. Last year they each paid £121. Our duty is to ensure that they are getting services they value, delivered where and when they want them, and produced as efficiently as possible in return for their annual investment.


V W X Y Z    


Printable version top^

The BBC is not responsible for the content of external internet sites

About the BBC | Help | Terms of Use | Privacy & Cookies Policy