Rona Fairhead, Chairman of the BBC Trust. Credit: Getty

Sir David Clementi has done us all an enormous favour in coming up with a coherent and convincing report on the future of BBC governance and regulation. He has put the BBC Trust out of its misery after a decade that has been an object lesson in how not to conduct public policy. His solution has been the favourite for some time: a unitary board with a majority of non-executives to run the BBC, and Ofcom to regulate it.

It may not be a perfect solution in every way – and although there is perhaps room for some further debate, it might be better for all concerned if we conclude, as the culture secretary John Whittingdale seemed to suggest at the Oxford Media Convention yesterday, that Sir David has come up with a pretty good set of answers to a complex problem. Given the tight timescale for Charter renewal – which must be completed before the end of the year – we all might be better off focusing, as the BBC chair Rona Fairhead told the same meeting, on how to make the proposals work in practical terms. 

A more powerful BBC? 

However, what happened in the last Charter renewal process, in 2005, should act as a cautionary tale. The Blair government was offered two ways of reforming the BBC. Lord Burns, the government’s independent adviser, called for the abolition of the governors and their replacement by a unitary board and an external regulator – the Public Service Broadcasting Commission. Michael Grade, the BBC chair, argued that the governors had reformed the existing system and they should be allowed to continue.

The reality is that either recommendation could have been made to work far better than the government’s own proposal – the trust. Within three years of creating the BBC Trust, the government had disowned its own idea and the trustees found their position undermined. The disasters of Savile, the Digital Media Initiative and executive pay-offs simply reinforced the sense that the system was not fit for purpose. The result has been pretty disastrous for the BBC’s independence, with the 2010 and 2015 licence fee settlements saddling the BBC with paying for more than £1billion of government expenditure.

So the first test for Sir David Clementi’s report is this: What does it do for the BBC’s independence? Overall, I think it achieves its aim to promote the independence of the BBC. The new unitary board will ensure clarity over who is responsible when things go wrong.  It will create a more powerful BBC, and one that should be better able to stand up for its independence.  It should be a board of people with relevant skills and experience prepared to make the very heavy time commitment needed to do the job.

Of course, creating a powerful board leaves the BBC vulnerable to the danger of the government of the day trying to pack it with its supporters – as happened to the governors in the 1980s with pretty dire consequences. Sir David recommends that the government should not appoint all the non-executive members of the new board. He thinks the chairman, deputy chairman and the four board members representing the nations should probably be appointed, as the trustees are and the governors before them were, by ministers after a public appointments process. However, he thinks that the board itself should appoint four or five of the new non-execs.

This is likely to be one of the key areas for debate. The Scottish government, for example, is likely to demand that it should appoint the board member for Scotland; the BBC would like to appoint more of it own board; the government may be reluctant to give up any power over BBC appointments.  Sir David’s compromise is a very fair one and crucial in extending the BBC’s independence – I just hope it survives into the White Paper.

The creation of such a strong BBC board also explains why he has gone for the strongest regulatory option – recommending that Ofcom should be the regulator and giving it hefty powers to set the framework within which the BBC should operate, to approve any new services and to be the final arbiter of complaints about its journalism. These represent three major changes for the BBC. How well they work in practice will depend on factors not entirely under the BBC’s control: above all, how Ofcom decides to interpret its task. 

Ofcom as super-regulator

First, the choice of Ofcom is a big decision with consequences far beyond the BBC. Those of us who argued that the regulation might be better handled by a bespoke ‘Ofbeeb’ regulator thought there were some benefits, particularly in terms of freedom of expression, in continuing the current patchwork of journalism regulation rather than have one single powerful agency. I have been in broadcasting long enough to know when an argument has been lost. Ofcom (which has recently added the regulation of video on demand to its remit) is going to be the first media ‘super-regulator’ in the history of British journalism even extending regulation for the first time into online written journalism when it takes over responsibility for complaints against all the BBC’s online output.

And becoming the final arbiter of complaints against the BBC’s journalism both ends 94 years of self-regulation and gives Ofcom a key role in the most sensitive editorial issues – in elections, for example, it will have the ability to ‘step-in’ to deal with fast turnaround complaints. Ofcom’s record on editorial complaints is a good one and there has never been much difference between its judgements and those of the trust. But it had better prepare itself for the scale of the lobbying and bullying which has up to now been aimed at the BBC over impartiality.

Second, Ofcom will set the operating framework within which the BBC is regulated and the Operating licences against which the BBC’s output is assessed. As well as annual reviews, Ofcom will have the powers to ‘step-in’ whenever it thinks the BBC might be failing to deliver or having an unjustified negative market impact.

Third, Ofcom will be the final arbiter of whether the BBC can launch a new service, using a modified version of the current Public Value Test (PVT) process. And if the BBC started a new service without going through the PVT process, but which Ofcom thought was having an undesirable market impact, Ofcom would have the powers to tell the BBC to suspend the service. 

These powers should satisfy all but the most obdurate commercial lobbyist that the BBC’s market impact will be effectively monitored and regulated. Sir David is right to identify competition issues, particularly around the BBC’s commercial activities, as likely to be increasingly important over the next Charter period. But given the 2015 licence fee settlement, launching new services is likely to be a lower priority than trying to preserve as much as possible of the existing portfolio. And if these powers are regularly used, rather than held in reserve for the rare occasions that they might really be needed, it would suggest the relationship between the BBC and Ofcom is not working as it should. 

The potential danger in any regulatory system is that the regulator is tempted to act as a ‘back seat driver’ – using its regulatory powers and sanctions to influence strategy. Ofcom’s role as the regulator of commercial public service broadcasting (PSB) companies, its overall responsibility for reviewing PSB as a whole, leaves it with a series of potential conflicts of interest in relation to the BBC. If Ofcom allows ITV to reduce, say, its regional programme spend, could the regulator then use its powers to make the BBC take up the slack by running more regional programmes in its schedule, even though the BBC board did not want to?

Ofcom is the clear winner in these changes. It is hard to believe that in 2009 David Cameron promised to cut back Ofcom “by a huge amount” when he became Prime Minister and that one of the key reasons the Prime Minister gave in 2012 for not involving Ofcom in any way in press regulation post-Leveson was that it was already a very powerful body, adding  “we should be trying to reduce concentrations of power rather than increase them”.  But with greater power should come greater scrutiny – of Ofcom’s approach, its appointments and its decisions.

Ofcom is a well-run organisation with a good track record in commercial and editorial regulation. But adding regulation of the BBC to its portfolio is a quantum leap. Sir David’s combination of a strong, professional and independent BBC Board and an equally strong, independent and professional regulator is the right structure – it will be down to the key people in both organisations to make it work. The flawed BBC structure of the last decade has partly masked the reality that most of the disasters that damaged the BBC were down to management or staff mistakes  – if the BBC and Ofcom cannot make their new relationship work it will be the fault of those in charge rather than the new system.

This is the third approach to BBC governance and regulation in a decade. What happens next matters to us all in Britain, as citizens and licence fee payers. The new system must be made to work, and to give the BBC the independence and stability that it so badly needs.