The governance and regulation of the BBC - Communications Committee Contents

CHAPTER 4: Part 2—Issues outside Lord Patten's current review

Future public policy arising from developments in the wider broadcasting landscape

130.  Within the next few years important decisions about the BBC will have to be addressed in the context of other regulatory changes such as the Channel 3 (ITV, STV, UTV and Channel TV) and Channel 5 licence renewals in 2014—with important implications for the future of public service broadcasting outside the BBC—and what is likely to be a wide-ranging new communications bill which is due to be in place by the end of this Parliament.


Timeline of future regulatory changes

Source: DCMS, BBC Charter and Ofcom

131.  The role of the BBC has changed significantly since the early days of the Corporation when it was the monopoly UK broadcaster. With the growth of the internet and related media and the completion next year of digital switch over (DSO) the BBC's future looks to be set increasingly within a context of digital media. Indeed, one of the BBC's six public purposes is: "delivering to the public the benefit of emerging communications technology services."[206] Before the current Royal Charter comes expires in 2016 consideration will have to be given to what these developments actually mean for the services which the BBC should be providing.

132.  Two witnesses stressed the importance of considering that role within the wider picture. Lord Birt told us that although the governance of the BBC was an important matter there were other issues that matter too and "frankly ought to be much more on the agenda."[207] Referring to the need for a new communications bill, issues around online, and the "rapid decline" of public service broadcasting outside the BBC, Lord Birt said that "there are quite a lot of questions that we need to resolve before we then ask ourselves: what is the right architecture for regulating media more generally, for regulating public service more generally, if that is what we want to do." He believed that there was a need to have a "tailored focus on the BBC" but that this should come as the third question in order.[208]

133.  Dr Bowe, Ofcom Chairman, told us that "there are several interconnected things that have to happen, but also because they are happening against the background of enormous change in the sector. I think there is an extremely strong case for us—and when I say 'us' I mean collectively—to slightly stand back and say 'What does it mean for our traditional ways of looking at the BBC Charter, the ITV licences, etc … I do not honestly feel that we are exactly there yet in having that sort of national debate."[209] Dr Bowe continued "I think we have to have a very thorough understanding of all of those issues before we can start saying, 'Let's have some legislation'."[210]

134.  On 16 May 2011, in advance of the Green Paper which is expected at the end of this year, the Government launched a consultation about the future of communications regulation.[211] The consultation is focussing on three key themes:

  • Growth, innovation and deregulation;
  • A communications infrastructure that provides the foundations for growth; and
  • Creating the right environment for the content industry to thrive.

135.  We encourage the Government, as part of its policy thinking behind the new communications bill, also to consider what implications this might have on the BBC Charter renewal process which will be taking place at around the same time. It may be difficult to resolve new Channel 3 and Channel 5 licences when there is uncertainty concerning the extent to which forthcoming legislation might change the broadcasting landscape. We note that as has happened in the past, the Government might wish to consider a temporary roll-over of the Channel 3 and Channel 5 licences in order to align the process with the timings for the new communications bill.

136.  We welcome the Government's consultation as the 'first step' to the communications bill and support the wide-ranging review ahead of the Green Paper which is due to be published later this year. We see this as a useful start to discussions on the content of a future communications bill. We invite everyone in the industry and in particular the BBC Trust to respond to this review. We encourage the Government to conduct a comprehensive overview of the broadcasting industry to link the preparation of the next communications bill to the renewal of the Channel 3 and channel 5 licences in 2014 and the expiry of the current BBC Charter in 2016. Unless this is done the sector risks additional complexity and confusion.


137.  In our call for evidence (Appendix 3) we signalled our interest in the issue which underlies the governance and regulation of the BBC—the accountability of the BBC in general and the BBC Trust in particular. We have therefore examined and explored what are regarded as the basic tenets of the BBC: the significance of 'licence fee payers'; the supremacy of the Royal Charter; and the BBC's independence from Government. We have discovered that all three are more complex than commonly understood and we set out our findings in the hope that they will inform future debates on these important concepts.

(i)  Accountability to licence fee payers

138.  Throughout this inquiry many people with whom we have spoken have used the term 'licence fee payer' to describe those to whom the BBC Trust is accountable. Section 57 of the Charter states that: "a reference to a 'licence fee payer' is not to be taken literally but includes, not only a person to whom a TV licence is issued under section 364 of the Communications Act 2003, but also (so far as is sensible in the context) any other person in the UK who watches, listens to or uses any BBC service, or may do so or wish to do so in the future."

139.  A number of issues have arisen around the BBC's accountability and how the BBC Trust fulfils its duty as the guardian of the licence fee. Given the broad definition of licence fee payers in the Charter it is difficult to work out exactly how the Trust ensures that it is accountable to them. When we sought clarity from Sir Michael Lyons on how exactly the views of licence fee payers were represented he told us "That is a challenge is it not? Does the Trust have a way with engaging with the 25 million households who pay their licence fee? That is a difficult process, although no more difficult than it is for anyone else who seeks to engage and represent the public. There are no simple solutions to this."[212] Lord Patten explained that "there is an elaborate set of arrangements for audience councils, for opening ourselves up to the public."[213] However it is not very clear how the BBC can in any formal way be answerable to its audience. The Trust told us that licence fee payers' wishes are also determined through surveys and the collection of data on viewer's opinions and also by the Trust considering serious complaints about the BBC. Certainly the BBC will be given a message about the quality of its service if its audience evaporates or increases in size.

140.  In practical terms, the licence fee is a tax on television usage which is set by Government following a settlement negotiation with the BBC and is collected by an agent, TV Licensing, on behalf of the BBC. Licence fee revenue is then paid into the Treasury and the Government then pays an annual block grant back to the BBC to fund its services. Parliament does not vote money directly to the BBC. Instead Parliament votes an aggregate amount to DCMS and DCMS passes on to the BBC the grant in aid that equates to the licence fee collected and surrendered to the Consolidated Fund. It is the BBC that bears the risk around the collection of the licence fee if, for instance, collection rates are higher or lower than anticipated at the time of the settlement.

141.  The process by which the Government and the BBC reached the recent licence fee settlement in October 2010 raises issues about the role of the Trust as the guardian of the licence fee and the public interest. The negotiation of the settlement was conducted under a very tight time-frame in order to reach a settlement alongside the Government's Comprehensive Spending Review. Sir Michael Lyons told us that the Trustees had several discussions about the negotiation of the licence fee settlement as it evolved over several days.[214] However it is clear that such was the pace of the negotiations and the secrecy surrounding them that licence fee payers were not even aware of the options being considered until after they had been decided between the two parties. There was no opportunity for licence fee payers or anyone else for that matter to put their views to the Trust before the settlement was agreed. The House of Commons Culture, Media and Sport Committee has since concluded that: "it is vitally important that both licence fee payers and Parliament should have some involvement when far-reaching decisions about funding … are taken."[215] They recommended that this year's process "should not become a model for the next round of licence fee negotiations for the post 2016-2017 period."[216] We strongly support this view.

(ii)  Accountability to Government

142.  The Charter says that "The BBC shall be independent in all matters concerning the content of its output, the times and manner in which this is supplied, and in the management of its affairs." However, as the recent licence fee settlement process has demonstrated, the elected Government of the day is not without ways of influencing the course of events at the nation's largest broadcaster. In addition to setting the size of the licence fee it has now been demonstrated that the Government can determine the use of the licence fee revenue beyond BBC core services, sometimes funding activities such as the BBC World Service and S4C which were previously funded from the Foreign and Commonwealth Office and the Department for Culture, Media and Sport's grants. In advance of the licence fee settlement the BBC had committed a figure of up to £25 million pounds in capital costs in support of the Secretary of State's plans for Local TV. The House of Commons Culture, Media and Sport Committee has concluded that it remained "to be demonstrated that the admittedly modest funds the BBC has undertaken to commit represent good value for the licence fee payer."[217]

143.  Approximately every ten years the government of the day decides the Royal Charter. Each Charter contains a sunset clause and the government of the day decides the terms for the next Charter which is put into effect through the Privy Council after a debate in each House of Parliament. This in turn only comes into effect when the Trust agrees to a fresh agreement with the government. Thus the Agreement, which is also debated in Parliament with the Charter, sets the working relationship between the two of them and gives the Government real but circumscribed power and influence over the Corporation. This does not amount to control but equally it does not mean the BBC is entirely master in its own house. All Trustees, including the Chairman, are recruited through a process which is managed by DCMS, then appointed by the Privy Council. The BBC Trust is accountable to Government through its Annual Report and Accounts which it is required to submit to the Secretary of State, who then tables it before Parliament.[218] When the BBC Executive prepares its accounts it must comply with any directions which may, after consultation with the BBC, be given by the Secretary of State and the Foreign Secretary on the information to be given in the accounts. If the BBC wishes to close one of the World Service's language services it must have the written permission of the Foreign Secretary. The BBC's real journalistic and editorial independence from government is admired and envied by broadcasters around the world; many of them do not enjoy this privileged good fortune. What makes the British model, some might say the British compromise, so distinctive is the delicate balance between the BBC and government and the wide-ranging political and popular consensus supporting this independence. This, as much as the constitutional detail of how it is achieved, is the real basis for having an independent BBC set in the public sector as regards its general strategic modus operandi, but out with its journalistic output.

144.  As has been explained there is always the possibility of amending the Charter, and the Agreement between the BBC and the Government is regularly changed. This obviously exercises its own pressure on the relationship between the BBC and the Government. Furthermore, for as long as the concept of the BBC's independence is securely established in the public's mind this in turn exercises its own discipline on the Government of the day. Nevertheless, the amendability of the Charter combined with the changing tides of public attitudes means that the independence of the BBC may not be as secure or as entrenched as many people suppose. It is therefore very important that both the Government and the BBC commit themselves to follow not just the letter but the spirit of the constitutional arrangements which define and underpin the BBC's ongoing independence'

(iii)  Accountability to Parliament

145.  The complex nature of the relationship between the BBC and the government of the day gives additional importance to the relationship between the BBC and Parliament, where many voices are heard in addition to those of Government. The BBC Trust's written evidence states unequivocally that: "the BBC Trust is directly accountable to the licence-payers, not to Parliament."[219] The then Chairman of the Trust, Sir Michael Lyons, gave his own interpretation of whether parliamentary accountability exists when he told the House of Commons Culture, Media and Sport Committee in December 2010 that the BBC "is independent, but it is independent within a democratic system where everything is subject to the overview of Parliament."[220] When we sought further clarity on the issue of accountability to Parliament Mark Thompson told us that: "I think that it is very clear, which is that the Royal Charter delegates the task of holding the BBC to account to the BBC Trust, explicitly"[221] adding that: "this is not to say that there should not be interactions with Parliamentarians and Parliamentary Committees."[222] The Secretary of State pointed out that "Committees like yours are able to summon the Chairman of the BBC Trust and the Director-General of the BBC."[223]

146.  Sir Christopher Bland reflected that the BBC "should not be accountable for its output, but I think it has to give account to Parliament, which after all is master of all, as to how it is doing its job. It cannot effectively do that to the licence fee payer because the licence fee payer is not organised to put the Trust under scrutiny."[224] We are attracted to Sir Christopher's distinction between the BBC not "being accountable for its output" but "giving account to Parliament." There is also a distinction to be drawn here between institutional and editorial independence. It is certain that on the one hand the editorial independence of the BBC needs to be maintained however on the other there is a question over whether there should be some institutional accountability.

147.  We noted with interest UTV's evidence that: "Parliamentary Select Committees play a particularly important role in holding the BBC Trust to account. There is scope for Parliament to make greater use of these Committees in order to scrutinise the BBC's fulfilment of its Charter and remit."[225] The Secretary of State gave an example of a greater use of Parliamentary Committees when he reiterated to us his support for giving Parliament a formal say in who should chair the BBC Trust. He told us that Lord Patten's pre-appointment hearing with the House of Commons Culture, Media and Sport Select Committee was "... a very welcome innovation. The BBC Trust needs to take the lead on the links between the BBC and Parliament. I think that was a good thing to do."[226] We consider this process to be very important as it is one of a number of checks on the Government putting a place man in to run the BBC. We welcome the fact that Lord Patten's appointment was subject to this scrutiny as it assists and underpins his role as Chairman of the BBC Trust. We asked the Secretary of State whether it would also be possible for the House of Lords to have some say in any future appointment of the BBC Chairmanship and we welcome his comment that: "I would be very happy to consider that carefully, because I think both Houses being involved is a good thing and the more parliamentary scrutiny of these important appointments, the better."[227]

148.  Although the wishes of licence fee payers are sought through representative groups and determined by research it is clear that in reality the BBC Trust cannot be directly accountable to individual licence-fee payers. However given its statutory duty as the guardian of the licence fee and the public interest, the BBC Trust should continue to consider how it might provide further transparency and continue to consult with viewers, listeners and users of BBC services so that those who pay for and use the BBC have more of a voice on the sort of services which it provides and its strategy for the future. The two Houses of Parliament and especially their committees are important fora where the views of licence fee payers can be aired given the significant overlap between licence fee payers, who are represented by the BBC Trust, and tax payers, who are represented by Parliament. In this way the BBC can "give account" to Parliament without being "accountable for its output" which would destroy the long-treasured and rightly protected independence of the BBC from political influence.

206   Section 4, BBC Charter 2006 Back

207   Q 373 Back

208   Q 373 Back

209   Q 537 Back

210   Q 538 Back

211   A Communications Review for the Digital Age, an open letter from the Secretary of State to all those who work in fixed or mobile communications, television, radio, online publishing, video games, and other digital and creative content industries, 16 May 2011 Back

212   Q 133 Back

213   Q 577 Back

214   QQ 148-150 Back

215   House of Commons Culture, Media and Sport Committee, Fourth Report of Session 2010-12, BBC Licence Fee Settlement and Annual Report, HC 454 Back

216   Ibid. Back

217   Ibid. Back

218   Section 45 (10) of the Charter Back

219   BBCGR 3 Back

220   House of Commons Culture, Media and Sport Committee oral evidence session with Sir Michael Lyons, Chairman of the BBC Trust and Mark Thompson, BBC Director General on the BBC Licence Fee Settlement and Annual Report, 15 December 2010, Q 158 Back

221   Q 307 Back

222   Q 308 Back

223   Q 587 Back

224   Q 49 Back

225   BBCGR 15 Back

226   Q 588 Back

227   Q 589 Back

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