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12.32 pm

The Secretary of State for Culture, Media and Sport (Tessa Jowell): With permission, Mr. Speaker, I would like to make a statement about the future of the BBC. I will set out for the House the background to the current review of the BBC's royal charter and our proposals on its funding, governance and purposes. Those proposals are set out in a Green Paper, "A strong BBC, independent of government", which is published today.

Alongside the NHS, the BBC is one of the two great institutions of British national life. For more than 80 years, it has sought to represent the highest standards in broadcasting. Its archives are a record of our national collective memory, from broadcasts of the coronation and the 1966 World cup to "Dixon of Dock Green" and "The Office".

Since the corporation's foundation, its royal charter has been reviewed by the Government roughly every 10 years, the last occasion being in 1996. Like its predecessors, this review examines the corporation's scale and scope, and its funding and governance. It is, however, unique in the level of public consultation, and in tackling perhaps the greatest challenge the BBC has ever faced—the changes in TV technology that will soon result in a wholly digital Britain.

Like any public institution, the BBC must adapt if is to serve its audiences and keep pace with change, but its values, its global reach, its standards and its editorial independence must be preserved and strengthened, for that is what the British people want.

The results of our public consultation and research are very clear. Overwhelmingly, people like and trust the BBC: they understand and support the principles of public service broadcasting; they want the BBC to have scale; they want the BBC to set the highest standards; they want the BBC to be independent of Government, Parliament and any commercial influence; and they want the BBC to listen.

But they also have significant criticisms—for example, that the BBC is not responsive enough to their interests, and that there has been a decline in quality, particularly in television, with a tendency towards copycat programming at the expense of real innovation. Some people worry about the value for money of the licence fee—particularly those who want but cannot get Freeview—and some of the BBC's commercial competitors believe that it has too much freedom to expand into new markets and stifle competition.

We have to find a balance between meeting those concerns while ensuring that public service broadcasting leaves a footprint in every medium—a guarantee of quality, impartiality and innovation. That balance is harder to strike as the media change. In 1988 Britain had four TV channels; today there are more than 400. In a few years' time, we will become a fully digital nation when the switchover from analogue to digital TV is made. As technology changes, so do the public's expectations. The challenges facing the BBC are enormous, and it plays a leading role in guiding the nation through this period of change. To do so, it needs certainty about its future. Therefore, after closely considering the alternative recommendations of the
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Select Committee on Culture, Media and Sport, we have decided that the BBC's charter should be renewed for a further 10 years.

I now turn to the question of funding. The review looked at the different options for funding the BBC and consulted the public. Perhaps surprisingly, the licence fee retains a high degree of public support. Although it is not perfect, we believe that it remains the fairest way to fund the BBC, so it will continue throughout the next charter. In the coming months, we will decide on the right level for the fee after 2007, but beyond that we have to take account of the rapid advance in technology and media consumption. During the life of the next charter we will review the case for alternative funding models, particularly subscription, making a contribution after 2016. We will also review the risk to plurality in public service broadcasting, encompassing Channel 4's longer-term position, and whether any public funding, including licence fee income, should be distributed more widely beyond the BBC in order to sustain plurality—and if so, how any such distribution might take place.

The old definition of the BBC's purposes as to educate, inform and entertain still holds true, but is no longer enough, by itself, in a world of increasing choice. We have therefore identified five new purposes for the BBC, which I set out in the Green Paper. In addition, the BBC will play a leading role in the process of switching Britain from analogue to digital television. It will be at the forefront of public information campaigns; it will help to manage "Switchco", the organisation that will co-ordinate the technical process, and it will help to establish and fund schemes that will help the most vulnerable consumers. Hon. Members will know from their own postbags that there is disquiet in many households that are expected to pay the fee when they cannot at the moment receive the full range of BBC services. That is why we think it important that the BBC should help to drive the switchover process.

I should now like to move on to governance, where we will introduce radical change—a BBC-specific model of governance that gives expression to the values on which the BBC is built. There is widespread consensus that the current model of governance is unsustainable. The governors' dual role as cheerleader and regulator does not sit easily in a public organisation of the size and complexity of the BBC; it lacks clarity and accountability. In the Green Paper we set out a new model that reflects the public value approach of the current BBC model but also draws significantly on Lord Burns' work. The BBC governors, with their dual role of managing the BBC but also holding it to account, will be replaced by two bodies, each with a clearly defined role.

A BBC trust will be the custodian of the BBC's purposes, the licence fee and the public interest. An executive board will be accountable to the trust for the delivery of the BBC's services. The functions of the two bodies will be clearly defined, enabling the trust to judge the management's performance clearly and authoritatively. The trust will have high-level powers of approval over BBC budgets and strategy. It will have the tools to hold the BBC to account, issuing new service licences for each BBC service and applying a public value test to proposals for new services. Michael Grade, whose current appointment as chairman of the BBC continues until 2008, will be the first chairman of the trust.
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The trust will represent the licence fee payer. Ways of doing that will be developed further between the Green Paper and the White Paper, but they might include webcasting trust meetings, publishing audience research or electing local representative councils. Day-to-day management will be carried out by the executive board, which will be strengthened by a significant minority of non-executive members, and whose chair will be appointed by the trust.

In the past months, we have examined closely the changes that Michael Grade has made. We have also studied the model proposed by Lord Burns for an external public service broadcasting commission. Our trust model builds in the strongest elements of the BBC's proposals, which include the establishment of a separate governance unit, the introduction of service licences and the application of public value tests to both new services and any major changes to existing ones.

The BBC's proposals are undoubtedly a step in the right direction, but as they stand, they fall short of the accountability test because they do not resolve the confusion of the governors' dual role and depend too much on behavioural rather than structural change. The setting up of a BBC trust also incorporates the key recommendation from Lord Burns that there should be clear separation of different responsibilities, to avoid confusion or capture.

However, we believe that the Burns proposals for a unitary BBC board with a Government-appointed chair, and an external PSB commission also with a Government-appointed chair, would fail to provide sufficient authority, clarity or distance from Government. Our proposal ensures that there will be only one clear sovereign body and only one Government-appointed chair. That will make the trust a powerful advocate for the public interest, able to safeguard the BBC's independence.

Strong does not mean over-mighty, and we must ensure that the BBC deals fairly with the wider market. The BBC's competitors have become increasingly concerned about the impact of a publicly funded BBC on their services. Successive Governments have allowed the BBC to be, in effect, a desirable market intervention. However, we also need it to be constrained when its interests collide with the commercial sector and threaten the choice and quality of programming from other broadcasters. It should not play copycat or chase ratings for ratings' sake.

We want the corporation to maximise its income from commercial services, but we also want to see a clear link between those services and its public purposes. To achieve that, the BBC will be subject to tough new internal and external processes. Ofcom will be given powers to conduct market impact assessments for proposed new services. It will retain full Competition Act 1998 powers in relation to the BBC and, in addition, we will consider giving it a new power of approval over the BBC's internal code on fair trading.

Another subject of debate is the BBC's use of independent productions and the balance between in-house and externally commissioned programmes. I want to ensure that the licence fee truly becomes venture capital for creativity. Twenty-five per cent. of the BBC's television productions already have to be commissioned from the independent sector.
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I believe that there is scope to go further, and we will consider a range of options for reform in that area, including the BBC's proposal for a new "window of creative competition" and, alternatively, increases in the existing quotas. Either way, I expect substantial progress in that area. The BBC has exclusive access to the licence fee, and in return we want that used to encourage independent production as well as in-house production.

For radio, the BBC has adopted a voluntary 10 per cent. quota, and we will consult on whether that is sufficient.

To reflect the whole United Kingdom and its different and diverse communities, the BBC also needs to make sure that a significant slice of production takes place outside London. It needs to provide a specific range of services for the UK's nations and regions. People should see the full diversity of the UK and their local communities reflected in mainstream as well as regional programming.

I am immensely grateful to Terry Burns and his panel, to Michael Grade and the BBC and to Ofcom. Most of all, though, I am grateful to the members of the public who, in their thousands, made their voices heard. We have endeavoured to take the best of what they told us.

In a changing world, values still endure. In a changing world, trust becomes ever more important in people's lives. In our changing world, the Government will secure a BBC that belongs to its licence fee payers and embodies the values that the British people want. That means a BBC that promotes citizenship and builds our civil society; that promotes education and learning; that   is dedicated to creativity and cultural excellence; that celebrates our nations, regions and communities; that brings the world to the UK and the UK to the world; and that is strong, independent and securely at the heart of British broadcasting for 10 more years.

On that basis, I commend the statement and the Green Paper to the House.

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