BBC Governance - The Case For Intelligent Reform

Date: 04.03.2015     Last updated: 04.03.2015 at 15.32
Speech by Rona Fairhead, Chairman of the BBC Trust, to the Oxford Media Convention

I arrived as Chairman of the BBC Trust expecting to spend most of my time working through the shape and substance of the BBC. Were the programmes good enough? Were they impartial, distinctive? Did the licence fee represent good value for money? How could the BBC sustain and fund itself in a dramatically changing marketplace?

And although I haven’t been surprised by the focus on the future of the BBC’s governance structure, I have been struck by just how much of the external debate is taken up by governance rather than purpose.

There’s a famous psychology experiment called the Invisible Gorilla. Participants were asked to watch a video of some people playing basketball and to count the number of passes made. Half of them failed to notice when someone in a large gorilla suit walked across the screen, beating their chest.

It’s proof of the human capacity to focus on one particular detail to the exclusion of all else. And that’s the risk, I think, with the debate about BBC governance.

Good governance is vitally important. The audience needs to know that the BBC is in safe hands. But the fine detail of the structure is not something to get doctrinal about - particularly if it means other important issues are not addressed.

It’s clear to me from my first few months in the job that the Trust model has brought positive changes and has a lot of strengths. But it also has its challenges.

Lessons have been learnt from the past crises and actions taken. I am committed to making the current system work through to the end of this Charter. And I am clear that the Charter Review, when it begins, provides an opportunity to work all the issues through.

So when I gave my first speech as Chairman, last month, I didn’t speak about governance. Instead I talked about our research which confirmed the public's strong support for the enduring mission of the BBC – to inform, educate and entertain – as well as the challenges of substantial commercial and financial pressures and changing audience patterns. I talked about refining the public purposes of the organisation. I talked about the public’s resolve that the BBC should remain universal, impartial, independent and value for money. I talked about the need for a confident BBC, trusted by the public, innovating, taking creative risks and being brave in all its journalism. Most important of all, I talked about the need to hear the public’s voice in the debate about the future of the BBC. And I was pleased that the Select Committee’s report recommended that the Charter Review process should be – I quote - “as thorough, open and democratic as possible”.

I welcome their considered and timely contribution to this debate.

The report highlights a number of issues which clearly do need to be resolved – the scope and range of the BBC’s services, the long-term future of the funding model, and of course its governance.

And it also recognises the BBC’s valuable contribution to society, culture and people’s lives.

I’m keen to spend most of my time in this job focussing on what matters most to audiences. And I don’t want to spend the whole of the next two years talking about governance.

But today I will make the case for intelligent reform. Retaining the good but changing where necessary.

Because good governance does matter.

I’m going to talk about the principles that I think are important in this debate.

I’m going to highlight some of the things that the Trust does well and identify advances that the current governance structure has made. I will also identify areas which need to evolve.

Finally, I will also make a case for some structural change. To provide greater clarity in one particular area – the oversight of the BBC’s strategy and its operational decision-making.

Guiding principles

Principles first.

Just as the BBC’s core mission has not changed, nor have the requirements of effective governance.

The BBC has a privileged position. It receives over £3.7bn of licence fee funding – and as such, needs to be rigorously monitored and governed. Any governance structure needs to fulfil three roles:

  • Regulation to apply the appropriate checks and balances as it is a major market intervention
  • Licence fee payer representation to ensure that the public voice is heard, that the BBC provides value for money and that quality and editorial standards are met, and
  • Oversight of its strategy, operations and management.

These roles cannot be left to Government or Parliament if the BBC itself is to remain independent as the public wish it to be.

And it needs to be recognised that there is no "perfect" governance system – ultimately it’s about clarity of accountability and key relationships based on trust and respect.

There is no doubt that there are tensions in the existing model, and I will address these later, but the Trust has also had some notable and enduring successes:

  • It has established clearer remits for BBC services through the creation of service licences
  • It has introduced more robust assessment of how those services perform
  • It has applied tighter controls around the BBC’s market impact
  • It has given the public – and the industry - a major say in its big decisions
  • It has set the highest editorial standards and provides an independent route of appeal on editorial issues
  • It has made the BBC's processes much more transparent than in the days of the Board of Governors
  • It has driven a programme of efficiency savings

This is important work. I believe it’s work that must continue, regardless of any structural change.

So what exactly does the Trust do?

First, regulatory activity

Some current examples.

Last month we published a new commercial framework for the BBC - this is a way of defining the remit and boundary for the BBC’s commercial activities, to give the market greater certainty.

This framework sets some clear principles – about the relationship between commercial services and the rest of the BBC; about what sorts of business can be conducted and how performance will be assessed. Our work on the framework has also led us to undertake a review of transfer prices which will take place later this year.

Of course, we already conduct major performance assessments for the BBC’s publicly funded services.

So, later this month we expect to conclude our music radio review. In a market where the BBC takes over 50% of the audience, it is important to ask whether the BBC is spending its public money in a distinctive way.

So we have been asking whether the six BBC’s music stations between them adequately support home-grown talent, live and new music. How well equipped they are to respond to the evolution of radio and music as consumers’ habits change. How far their speech content complements and enhances the music and the delivery of the BBC’s public purposes.

And we will identify the areas for improvement and the actions we expect the management to take.

When we publish our work plan at the end of March, it will be full of this sort of important, day-to-day regulatory work.

Here are just a few. The Public Value Test on the BBC Three proposals. Our review of Content Supply. An assessment of how the BBC’s news and radio services in each Nation are performing. And a further impartiality review.

But we need to keep changing

Some of the big Charter Review debates will be about the impact of changes in technology, the market and audience behaviour.

These will also influence the way in which the BBC is regulated. So, we will want to propose some changes to those regulatory processes so that they can keep adapting to the world outside the BBC. For example:

  • Rather than reviewing every service every five years, it will make more sense to conduct performance reviews where and when they are most needed – and to allow for reviews of genres as well as channels.
  • The system of Public Value Tests, which take at least six months each, was designed for a different world – and needs revisiting.
  • The regulator needs a greater range of tools – including some clearer, simpler, more transparent ways to assess smaller changes, including closures. But that must include adequate opportunities for industry and public consultation.

Turning to the second key role of governance: representing the licence fee payer.

The Charter makes Trustees the guardians and stewards of the licence fee. This is a very broad responsibility, which requires us, for example, to scrutinise major capital investments and to set the BBC its overall efficiency targets.

It also allows us to conduct our own investigations into particularly contentious areas of BBC spending. And today, we are publishing a report on talent costs. This is an area the Trust first reviewed back in 2008, in response to significant public concern about what some presenters and performers were being paid. The follow-up work tested the impact of the BBC’s actions since, as well as assessing how the market has changed.

The Trust recognises that the outstanding people on-screen and on-air are at the heart of the BBC; at the same time we are clear that the BBC has a responsibility to spend public money wisely. Today's report shows that the BBC has made great strides in reducing talent costs, and it's clear this has been achieved without affecting quality.

The report also points to increasing competitive and inflationary pressures in the market.

To counter that pressure, the BBC needs to build on its progress – so that it does more to develop new talent, can demonstrate optimum value in its deals and knows exactly when to walk away.

One of the Trust’s most important functions is to give the public a voice

Whenever the BBC makes a big decision, people care. They have strong opinions about the programmes. And they want to be heard.

That was what prompted more than 90,000 people to write to the Trust about the proposal to close Radio 6Music. And that’s what’s behind the 23,000 responses we’ve had to our consultation about the future of BBC Three.

Since 2007, the Trust has completed 16 separate reviews of BBC services, with direct input from more than 100,000 licence fee payers. And we have been transparent. Making all our findings and all the evidence public.

I have been impressed with the way the Trust uses the Audience Councils and audience insight from external research to drive improvements.

For example, the focus the Trust has put on the accuracy of reporting on devolved issues in network news. Or the longstanding challenge to take more creative risks with some of its TV output. And just look at some of the recent examples of outstanding creativity: from The Honourable Woman to The Fall to Wolf Hall.

When the Charter Review begins, we need to step up our efforts and our engagement to a different level. You can expect to see a dedicated space on our website for Charter Review. Public debates and seminars that are available for everyone to watch on the internet. And the most comprehensive research programme possible, from focus groups and online surveys, to more sophisticated studies of public attitudes towards the BBC’s services and its funding.

Oversight and reform

The most complicated area of governance is the oversight of financial and operational management and strategy. In the existing structure the Trust shares responsibilities in these areas with the Executive Board.

The Executive Board develops strategy and oversees day-to-day finance, performance and operations. The Trust approves some significant financial decisions, reviews and finally endorses the overarching BBC strategy. It also approves and monitors - at high level - operational performance, in particular against the annual objectives and budget.

The Trust’s oversight can be gritty. For example it has worked hard to ensure that the BBC achieves operational efficiencies.

And these have been realised – in fact the efficiency programmes overseen by the Trust have already saved the BBC £800m per year, with more to come.

It’s clear the BBC’s reputation has been damaged by a spate of issues in recent years, though somewhat heartening that public faith is returning. The Trust has worked with the Executive Board to clarify the boundaries between us and to provide for meaningful oversight from the Trust that doesn’t confuse or interfere with the management’s ability to do their job.

It’s a set-up that I am confident can be made to work through to the end of the Charter.

And it needs to work, because the role of the Trust in overseeing long-term strategy and direction will be of fundamental importance in the Charter Review.

However, the strongest case for more significant change is in this area of oversight, where a fault line continues to lie in the blurred accountabilities between the Trust and the Executive board.

And that’s why we want to propose reform.

Responsibilities for strategy, financial and operational management need to sit with the BBC Executive – to allow them to respond to a rapidly changing environment. Responsibilities for regulation and broader accountability need to sit at one remove.

That way, there should be no possibility of vagueness or uncertainty about who will be held responsible for what, when the chips are down.

At a minimum, we would want to propose some reform of the current model. To keep the Trust as part of the BBC but to be much more specific, in any future Charter, that its responsibilities were focused more clearly on regulation and accountability, with strategy and oversight left to the Executive Board.

But the cleanest form of separation would be to transfer the Trust’s responsibilities for regulation and accountability to an external regulator. And that’s an approach we want to explore further. I think it’s the front-runner.

In this model, the BBC would need to establish a stronger unitary Board, with an independent chairman and a majority of non-Executive Directors. They would take sole responsibility for running the BBC and its corporate governance. They would have their own responsibilities to listen and respond to their most important stakeholder – the British public. And the Non-Executives would need to have access to independent research and advice.

The external regulator would have responsibility for all matters of regulation and those matters of Licence Fee Payer representation which require a broader, more regulatory perspective.

This model needs to be tested thoroughly. It does provide maximum clarity about who is accountable. But for it to work, the regulator would need to have fairly strong powers and levers - to hold the BBC to its public purposes and to the standards that audiences expect; and to prevent undue damage to the commercial market. The BBC Board and its regulator would need to be able to act as a protective buffer between Government and management, to ensure the organisation’s independence. There would need to be some structure for ensuring the BBC served audiences in all the UK’s Nations and regions.

The Trust is convinced that, in this or any model, there needs to be a bespoke regulator for the BBC, given the higher expectations that audiences have for its editorial and creative standards and the particular concerns that exist about its market impact and fair trading.

There should be a single body responsible for setting those standards for the BBC, licensing and regulating its activities, and holding it to account for the way it spends public money.

That’s where we have some concerns about the Select Committee’s proposal for a Public Service Broadcasting Commission. We question its ability to exert real authority if it were unable to set BBC service licences and editorial standards. And carving up the licence fee may weaken the direct line of ownership and accountability that runs between the public and the BBC.

These are all questions that need working through as part of the Charter Review. I don’t want to set out a blueprint today. We want to keep an open mind and work towards the best solution.

And in the midst of what might be quite a technocratic debate, we need to remember that the BBC is not just another broadcaster.

We’d be foolish not to cherish and protect it. It's special. Because of its public funding, of course. But also because of the credit it brings to Britain all around the world. For its place in people's affections and the trust they put in it - which is why they are so ready to complain when they feel it lets them down.

That's why the Trust sets standards for the BBC which set it apart from all others. The BBC is special. And the way it is governed and regulated needs to reflect that.

None of this is easy. There is no perfect or obvious answer.

And any proposals need to be tested to see how well they protect the BBC’s independence: something our research shows the public really care about; and something that I am determined to defend.


Ultimately these will all be decisions for Government at the end of the Charter Review. And governance will be just one issue for any public consultation process.

I do believe that the successes of the Trust are significant and that these should not be lightly cast aside by any future structure. But I also recognise that reform is needed.

There is plenty of detail to talk through with the Government in the course of the next year or so. But it’s not the primary concern for those 96% of the population who turn to the BBC each week.

We want to avoid turning the Charter process into any form of self-obsession on the Trust’s part.

As Woodrow Wilson said, “If you think too much about being re-elected, it is very difficult to be worth re-electing.”

In the next two years we have a much more important job to do than worry about our own future. We are committed to defending robustly the BBC’s independence. We are committed to making the current structure work – to ensuring effective regulation, proper representation and rigorous oversight. We will be arguing for intelligent governance reform: retaining the good but changing where necessary.

As the Select Committee report stressed, there needs to be a proper and lengthy debate involving all stakeholders in the debate about the shape, funding and constitution of the BBC. Our job is to ensure that the British public has the strongest possible voice in that debate. And when the Charter Review begins, we intend to do just that.