As Secretary of State for Culture, Media and Sport, John Whittingdale made a statement to the House of Commons on the future of the BBC under Charter Renewal:

The Government are today laying before Parliament and depositing in the Libraries of both Houses a White Paper on the BBC charter review. The royal charter is the constitutional basis for the BBC. It is the framework for how the BBC is governed and guarantees its independence. The current royal charter will expire at the end of 2016; today we lay out our plans for the next one.

The White Paper represents the culmination of 10 months’ work. I thank everyone who contributed to the Green Paper consultation process, not least 190,000 members of the public. I am also very grateful to Sir David Clementi and his team for their independent review of the governance and regulation of the BBC, to the Committees in both Houses that made recommendations and to all the stakeholders, BBC representatives and others who helped inform our deliberations.

The BBC is one of the country’s greatest institutions, and 80% of those who responded to our Green Paper said the BBC serves audiences very well or well. Every week the BBC reaches 97% of the UK population and 348 million people across the globe, informing, educating and entertaining them and promoting Britain around the world.

It is our overriding aim to ensure that the BBC continues to thrive in a media landscape that has changed beyond recognition since the last charter review 10 years ago and that it continues to delivers the best possible service for licence fee payers. So today we are setting out a framework for the BBC that allows it to focus on high-quality, distinctive content that informs, educates and entertains while also serving all audiences; enhances its independence while also making it much more effective and accountable in its governance and regulation; makes support for the UK’s creative industries central to the BBC’s operations while at the same time minimising any undue negative market impacts; increases the BBC’s efficiency and transparency; and supports the BBC with a modern, sustainable and fair system of funding.

The BBC’s special public service ethos and funding allow it to take creative risks, to be innovative, and to produce high-quality content. That means more choice for listeners and viewers. The BBC delivers a huge amount of outstanding programming, including in drama, news and current affairs, sport, science and the arts. Many programmes have received awards, not least at the BAFTAs on Sunday, and they demonstrate that, at its best, the BBC is still the finest broadcaster in the world. However, as the BBC Trust itself has recognised, in some areas the BBC needs to be more ambitious, particularly in its more mainstream television, radio and online services.

The BBC director-general has called for a BBC that is

“more distinctive than ever—and clearly distinguishable from the market”.

The Government are emphatically not saying that the BBC should not be popular. Indeed, some of its most distinctive programmes, such as “Life on Earth”, “Wonders of the Universe” and “Strictly Come Dancing” on TV, or the “Newsbeat” programme or Jeremy Vine show on Radio 1 and 2 respectively, have very wide audiences because they are so good.

With a 33% share in television, 53% share in radio and the third most popular UK website, and with only 27% of people believing that the BBC makes lots of programmes that are more daring and innovative than those of other broadcasters, commissioning editors should ask consistently of new programming, “Is this idea sufficiently innovative and high quality?” rather than simply, “How will it do in the ratings?” So we will place a requirement to provide distinctive content and services at the heart of the BBC’s overall core mission of informing, educating and entertaining in the public interest, and we will also affirm the need for impartiality in its news and current affairs broadcasts.

The BBC’s existing minimum content requirements will be replaced with a new licensing regime that will ensure its services are clearly differentiated from the rest of the market, enhancing choice for licence fee payers and backed up by robust incentive structures. The BBC will also be required to give greater focus to under-served audiences, in particular those from black, Asian and ethnic minority backgrounds and from the nations and regions, who are currently less well served. That will involve the BBC building on its new diversity strategy, maintaining out-of-London production quotas, and ensuring that it continues to provide for minority languages in its partnerships with S4C and MG Alba.

Over the next charter period, we want the BBC to be the leading broadcaster in addressing issues of diversity. For the first time, diversity will be enshrined in the new charter’s public purposes. This, along with a commitment to serve all audiences in the BBC’s mission, will help hold the BBC to account for delivering for everyone in the UK.

Looking beyond these shores, the BBC World Service is rightly considered across the globe to be a beacon of impartial and objective news. It is a vital corrective to the state-run propaganda of certain other countries. So we will protect its annual funding of £254 million for five years and also make available £289 million of additional Government funding over the spending review period, as announced by the Chancellor last year, so that the World Service can represent the UK and its values around the globe.

All organisations need a governance and regulatory structure that is fit for purpose. The BBC’s is not, and it is no longer supportable for the BBC to regulate itself. Governance failures, including excessive severance payments and the costly digital media initiative, have illustrated that the division of responsibilities between the BBC executive and the BBC Trust is confusing and ineffective. As the independent review led by Sir David Clementi made clear, there is widespread agreement that reform is vital. I can announce today that we are accepting the review’s recommendations.

The new charter will create a unitary board for the BBC that has a much clearer separation of governance and regulation. The board will be responsible for ensuring that the BBC’s strategy, activity and output are in the public interest and accord with the missions and purposes set out in the charter. Editorial decisions will remain the responsibility of the director-general and his editorial independence will be explicitly enshrined in the Charter, while the unitary board will consider any issues or complaints that arise post-transmission. For the first time, the BBC will have the ability to appoint a majority of its board independently of Government. This is a major change, as previously the BBC governors, and then the members of the BBC Trust, were all appointed by Government.

Ofcom has a proven track record as a regulator of media and telecoms. It is the right body to take on external regulation of the BBC. We will require Ofcom to establish new operating licences for the BBC, with powers to ensure that its findings are acted upon. Ofcom will also take charge of regulating the distribution framework and fair trading arrangements for the BBC. It will be a strong regulator to match a strong BBC.

The Government will introduce four further changes to make the BBC more accountable to those it serves. The charter review process will be separated from the political cycle by establishing an 11-year charter to 2027, with an opportunity to check that the reforms are working as we intend at the mid-term. This will be the third longest charter in the BBC’s history, and allows for an orderly transition to the new arrangements. The BBC will become more accountable to the devolved nations; the complaints system will undergo long overdue reform; and new expectations will be set for public engagement and responsiveness. These are major changes to the way that the BBC is governed. They will take time to effect and it is important that this process runs smoothly, so the current BBC chair, Rona Fairhead, will remain in post for the duration of her current term, which ends in October 2018.

The creative sector is one of this country’s great success stories, growing at twice the rate of the rest of the economy since 2008 and accounting for £84 billion of gross value added and nearly 9% of service exports. The BBC should be at the core of the creative sector, supporting everyone from established players to SMEs. It is already a major purchaser, spending more than £1 billion on the services of around 2,700 suppliers involved in making programmes for the BBC.

The BBC already allows up to 50% of its content to be competed for by the independent sector. The Government now intend that the remaining 50% in-house guarantee for television should be removed for all BBC content except news and related current affairs output. Unless there is clear evidence that it would not provide value for money, all productions will be tendered. There will be a phased introduction of this requirement, which will open up hundreds of millions of pounds of production expenditure to competition. Not only will this benefit the creative industries, but it is fundamentally a good thing for viewers and listeners, with BBC commissioning editors given greater freedom to pick the most creative ideas and broadcast the highest quality programmes.

The BBC plans to make its in-house production unit a commercial subsidiary. We support these plans in principle, provided they meet the necessary regulatory approvals. However, the BBC can, by virtue of its size and scale, potentially have a negative impact on the media market, crowding out investment and deterring new entrants, so Ofcom will be given the power to assess all aspects of BBC services to see how they impact on the market, with proportionate powers to sanction. Rather than seeing other players as rivals, the BBC should proactively seek to enhance, bolster and work in partnership with the wider broadcasting and creative industries. There will be a focus on that in the new charter. In particular, the BBC will support and invigorate local democracy across the UK, working with local news outlets.

The Government will also consult in the autumn on a new contestable public service content fund that will allow other broadcasters and producers to make more public service content in areas that are currently underserved, such as programmes for children and for black, Asian and minority ethnic audiences. It will be worth £20 million a year, and it will be paid for from unallocated funding from the 2010 licence fee agreement. There will be more transparency in the way the BBC promotes its own services, and a requirement to steer such activity towards areas of high public value. The BBC will be expected to share its content as widely as possible, and it will also be encouraged further to open up its archive so that other organisations and the public can enjoy its many treasures.

The BBC belongs to all of us. Making its archive more widely available is just one part of a broader opening up process. We want the BBC to be much more transparent, in particular about efficiency improvements. The BBC already plans to make £1.5 billion of savings by the end of this charter period, and the BBC Trust has driven some improvements in transparency, but the BBC needs to become more accountable to those it serves. Only 23% of the public believe that the BBC is efficient. Licence fee payers need the BBC to spend the nearly £4 billion they give it every year more wisely. The National Audit Office, which has an outstanding track record, will therefore become the financial auditor of the BBC and will have the power to conduct value for money investigations of the BBC’s activities, with appropriate safeguards for editorial matters. The BBC will also be required to ensure that it is transparent and efficient in its spending by reporting expenditure by genre.

The BBC already publishes data on the salaries of its staff by broad bands, and the names and detailed remuneration packages of those in management earning more than £150,000. The public have a right to know what the highest earners the BBC employs are paid out of their licence fee. The new charter will therefore require the BBC to go further regarding the transparency of what it pays its talent and publish the names of all its employees and freelancers who earn above £450,000—the current director-general’s salary—in broad bands. The Government also expect the new BBC board to consider other ways in which it can improve transparency of talent pay. The BBC will also be required to undertake a root-and-branch review of its research and development activity, laying out its objectives for the future.

Finally, the BBC needs a fair, accountable and sustainable funding system that is fit for the future. There is no perfect model for funding the BBC but, given the stability it provides and the lack of clear public support for any alternative model, the licence fee remains the most appropriate funding model for the next charter period. The licence fee has been frozen at £145.50 since 2010. We will end the freeze and increase the licence fee in line with inflation to 2021-22, at which point there will be a new settlement. In line with the other reforms to funding announced last July, this means that the BBC will have a flat cash settlement to 2021-22. This gives it the certainty and funding levels it needs to deliver its updated mission and purposes, and it will ensure that the BBC will remain one of the best-funded public service broadcasters in the world, receiving more than £18 billion from 2017-18 to 2021-22.

Future funding settlements will be made using a new regularised process every five years, giving the BBC greater independence from Government. The licence fee concession for the over-75s will be protected during this Parliament, although voluntary payments will be allowed. We will give the BBC more freedom to manage its budgets. Protected funding of £150 million a year for broadband and £5 million a year for local television will be phased out. The World Service will be an exception to this, given its enormously important role.

The current licence fee system needs to be fairer, so we will close the iPlayer loophole, meaning that those who watch BBC programmes on demand will now need a TV licence like everyone else. There will be pilots of a more flexible payment system to benefit those on lower incomes and make it fairer for everyone. At the moment, people have to pay for the first year in only six months, meaning six much higher monthly payments. We will take forward many of the recommendations from David Perry QC’s review to make the process of investigating and prosecuting licence fee evasion more effective and fair.

Although the licence fee remains the best way of funding the BBC for this charter period, it is likely to become less sustainable as the media landscape continues to evolve. The Government therefore welcome the BBC’s intention to explore whether additional revenue could be raised at home and abroad from additional subscription services sitting alongside the core universal fee.

The Government are clear that any new subscription offer would be for additional services beyond what the BBC already offers. It will be for the BBC to set the scope of these plans, but we expect it to review progress and success in order to feed into the next charter review process. We would also like to see BBC content become portable so that licence fee payers have access when travelling abroad.

The BBC is, and must always remain, at the very heart of British life. We want the BBC to thrive, to make fantastic programmes for audiences and to act as an engine for growth and creativity. Our reforms give the BBC much greater independence from Government—in editorial matters, in its governance, in setting budgets and through a longer charter period. They secure the funding of the BBC and will help the BBC to develop new funding models for the future.

 

At the same time, these reforms will assist the BBC to fulfil its own stated desire to become more distinctive and better to reflect the diverse nature of its audience. They place the BBC at the heart of the creative industries—as a partner of the local and commercial sectors, not a rival. The BBC will operate in a more robust and more clearly defined governance and regulatory framework. It will be more transparent and accountable to the public it serves, who rely on the BBC to be the very best it can possibly be so that it can inform, educate and entertain for many years to come. I commend this statement to the House.