Credit: EastEnders. BBC/Jay Brooks

 War and Peace is a great example of why I am so proud of the BBC - a magnet for the country’s best creative ideas and talent; taking risks for audiences at home to make high-quality, British programmes that might not otherwise be made; then exporting them to the world, with the value returning to Britain, to reinvest in more creativity for British audiences and for our creative industries. I’m thinking of what Andrew Davies said about War and Peace, which echoes what I hear so often from this country’s finest creative talent… “It couldn’t have been done without the BBC… Who else would have done it?”

 Last year, I made the case for a strong BBC as the cornerstone of Britain’s creative economy. I said that those who believe in the importance of Britain’s creative industries should fear a diminished BBC. I warned that those prepared to accept a diminished BBC must be prepared to accept a diminished UK media industry, and a diminished status for this country as a cultural superpower. Since then the case has only got stronger. Today I want to highlight two important developments that make a strong, sustainable BBC more important than ever. I want to talk about how we are responding to the challenge by simplifying and modernising the BBC. And I want to pick out three essential criteria for our future, simple tests by which the Department of Culture, Media and Sport’s White Paper will stand or fall.

A new consensus has emerged

The first development is this: a new consensus has emerged. You might not read or hear about it, but it has. There has never been such collective support for the kind of BBC the country wants and needs: 

• A distinctive, universal BBC, informing, educating and entertaining, bringing the best to everyone;
• A trusted voice in a crowded arena, accountable to the public and focused on their interests, independent of both government and market;
• Bringing the country together in a national conversation and representing it to the world;
• An engine of growth for our creative industries and one of the UK’s most valuable, global brands. 

I believe in this version of the BBC. The leaders of all our major political parties do, and the industry does too – well, most of the time. Sky called us a “vital institution” … ITV said that the BBC is “incredibly important” and should “remain strong, successful and popular”. Last month, the Lords Select Committee lent its support to a universal BBC, and found “no compelling evidence for a reduction in scale or scope”. Then, there was the report from the Commons Culture, Media and Sport Committee. It starts by saying: “The BBC is an extraordinary national and global institution” and then goes on to say “But the BBC also has a role as a beacon of enlightened values of openness, freedom of thought, toleration and diversity…”

And then there’s the public, who certainly believe in a strong BBC. With nearly 200,000 responses, their reaction to the DCMS consultation was second only to the record-breaking response on gay marriage. The DCMS described it as “unprecedented” because – as they pointed out – there were very few identikit responses. The responses were no cut and paste job. They were individually written. Their message was clear. The public want more BBC, not less. Over 80 per cent said the BBC is serving audiences well – around three-quarters said our services are high-quality and distinctive. Three-quarters support the licence fee, and three-quarters think we deliver value for money. Overwhelmingly, they want us to remain independent from government and politicians. Overwhelmingly, they want us to be universal.

And they are not just voting for 'something for everyone' with their heads, but also with their hearts. The most 'loved' programmes on iPlayer in the last year really demonstrate the remarkable range that our audiences enjoy. Doctor Who and Strictly, Sherlock and Bake Off, Match of The Day and War and Peace… And who would have predicted that our children’s dance drama The Next Step would rank second only to EastEnders? It adds up to an extraordinary degree of public and industry support for a BBC that remains independent and universal - that continues to play a vital role in society, in the media sector, and for the UK around the world.

The stakes are higher than ever

The second development is this: the stakes are now higher than ever. Last year, Netflix was available in around 60 countries. Now it is in close to 200. Yet, as global competition rapidly grows, overall investment in original British content is in long-term decline. Over the past few years – as the BBC’s spending has fallen – it has gone down by nearly £250 million, reducing the volume of new UK content broadcast each year by around 2,000 hours. Sometimes new British content is being bought up to go behind a paywall – like Black Mirror. Or it is being produced for a global audience first – like The Queen (the first programme, by the way, Netflix has made about Britain, out of the vast sums they have spent on content so far).

So the choice we face is stark. Down one path is a strong BBC, helping bind the country together at home and championing it abroad. A BBC which belongs to everyone and where everyone belongs. A beacon of British creativity to the world. Down the other lies a BBC reduced in impact and reach in a world of global giants. Sleepwalking into decay, with the UK’s creative industries damaged, and Britain diminished as a result. Which means a UK dominated by global gatekeepers, partial news, and American taste-makers.

A BBC with its best days ahead

We shouldn’t accept that. I won’t. When I first returned to BBC, I said I believed that its best days were ahead. I am often asked if I still believe it. The truth is, I believe it more than ever. Last September, we set out an ambitious, long-term vision to create an open BBC, fit for the digital age. My vision for the BBC is Lord Reith’s: the trope ‘inform, educate and entertain’ cannot be bettered. To which I’ve sometimes added a fourth: ‘to inspire’. It is something that the BBC can uniquely do. And for everyone. And this is so important. Universality does not mean doing everything for everyone. It means reaching everyone with good things, things of real value, of public value to them, but of personal value to them as well. Whoever they are. However wealthy they are. Whatever age group they’re in. Whatever background they come from. Whatever part of the UK. So the BBC must be more creative than ever. More prepared than ever to take risks. More open than ever to partnerships and collaborations - open to working with the best ideas and talent wherever they come from. Everyone should have access to the best. I have great confidence in that vision, and in our ability to deliver it.

BBC Studios is central to this. At its core, the BBC is a programme-maker. We have been, right from the start and – look at the film – it’s the most important test for the health of the BBC. For our first hundred years, we have been one of the very best programme-makers in the world. And – as we prepare to embark on our second hundred – we intend to keep it that way. But the production market has changed dramatically. Securing access to the high-quality content that is vital for our public service mission has got tougher. BBC Studios – and the removal of quotas associated with it – will open us up to the widest and most competitive range of suppliers, and encourage independent producers to bring us their very best ideas. And it will put a unified creative powerhouse at the heart of our business.

As I keep saying, we are first and foremost a programme-maker. Without the rights associated with programming-making, our future is limited. Without intellectual property, you can’t invest in and grow the best British programmes for our audiences. I want a thriving creative culture in the BBC where we get the best from the independent sector as well as the best from in-house. I’m delighted with the industry consensus that has grown up around BBC Studios. And I’m particularly pleased with our agreement with PACT that will ensure we encourage competition while continuing to nurture independent companies. Of course we’re not there yet – we’ve got some hurdles to go through. Studios is not only the best answer if we are to meet audience expectations while providing them with value for money. It is also the only answer if we are to remain one of the top programme-makers in the world.

A leaner, simpler BBC

Studios is vital to our vision of a BBC that is stronger and more creative than ever before. But it’s also a guarantee of a strong supply of reinvestment back into the Corporation through BBC Worldwide. So it’s central to the financial health and sustainability of the BBC overall. And that’s even more crucial in the financial context we face. Because for the future BBC to be stronger, it must also be leaner and simpler. In the past three years, we have transformed our efficiency beyond recognition. We have ramped up a reform programme that represents the most far-reaching organisational overhaul in our history, and ranks at the very forefront of the public sector. By the end of this Charter, our savings will reach more than £1.6 billion each year. This is an efficiency record second to none. Our ‘Compete or Compare’ strategy has allowed us to ensure that everything we do is either challenged in the market or rated against it.

We have cut administration and people costs, reduced the property bill, and negotiated tougher deals with contractors who provide the goods and services needed to run the BBC. We have cut bureaucracy, reducing layers of management by up to a third, senior managers by a third, the numbers of boards by two-thirds. And changes in professional support areas like finance and HR mean we are getting rid of duplication, and reducing complexity and cost. Today more than 90 per cent of our controllable spend is focused on content and delivery, with just 8 per cent spent on running the BBC. We are planning to get this down to 6 per cent. That will take us into the top 25 per cent of regulated industries. But we have to continue to push for more.

All of this shows the strength of our commitment to building a simpler, leaner BBC - one that allows creativity to flourish without complexity or constraint, and that refocuses the Corporation and its organisation around our unique mission in the digital age.

A tough financial context

But reform is a process, not a destination. And there is much, much more we need to do – to make the savings we need in the current Charter, and the savings our financial settlement will demand in the next. We said last July that the licence fee agreement meant flat cash for the BBC through to 2022. Of course in real terms, that means a cut in our income of 10 per cent. But the true picture is much tougher, because the BBC cannot stand still.   We need to absorb the falls in TV penetration that create an annual loss in income of £150m. We need to cope with rapid inflation in areas such as drama and sport. And we need to reinvest to stay competitive. The overall result is that, by 2022, the BBC will need to make overall savings of £800 million a year. That’s 23 per cent – and in some parts of the BBC, it will be more.

Our principle, as always, will be to protect our services as far as possible, and minimise impact on audiences. So, of course, we will push even harder on efficiency. But – let’s be clear – it's inevitable that we’ll be searching for much bigger savings from the vast majority of our spending that is not overheads. Even if the BBC abolished all its managers tomorrow, and one or two people might quite like that, we would have found just 6 per cent of the savings we need. So there will be tough choices ahead.

In the next few weeks, James Harding’s team will begin reporting back on their three-month review of everything we do in News. They have already set out £5 million of savings, but now they are looking for around £80 million more. In the next few weeks too, we will announce a new structure to simplify the BBC, so we can remove duplication of management. Fewer divisions, with clearer missions, and clearer accountability. It’s a process that has already begun. Last year we announced the merger of Technology, Engineering and Digital into a single division. In January, we announced a single controller across BBC TV channels and iPlayer – meaning a more streamlined commissioning system, greater collaboration, and more open movement of ideas and talent across the portfolio. You will see more like this in the weeks ahead.

Financial agreement

What is at stake is a sustainable BBC – one that continues to be universal, relevant and to provide value to all audiences. So let me pick out the three most important things we need from others now to keep the BBC sustainable. The tests, if you like, for the DCMS’s White Paper. The first is this: the financial agreement we came to with the Government last July is the agreement. It gives us financial stability. In that agreement, the Government said that the licence fee would rise with inflation, and that’s for the first time in nearly a decade. They also ended top-slicing the licence fee to pay for broadband. And we welcome the news last week that the iPlayer loophole is being closed.

That settlement is a firm foundation on which to build a sustainable BBC. We all accepted the agreement on that basis, with the clear understanding that the level of funding was a floor, not a ceiling. And I’m very grateful for the additional funding the Chancellor has given us late last year specifically for the BBC World Service. So I shouldn’t now need to point out that we cannot live with any further cuts. Not a penny less, not a penny wasted.

New safeguards for the BBC’s independence

The second essential is this: new safeguards for the BBC’s independence. Until recently, the BBC’s independence was protected by a set of quiet customs and traditions that – though informal – were understood and respected on all sides. Shortly after Margaret Thatcher came to power, it was Willie Whitelaw who gave the BBC the security of a 15-year Charter. That was followed by a series of 10-year Charters.

Government’s role was to set regulation. They did not appoint anyone to our editorial board, but appointed our supervisory board of governors. The BBC had control of its budget and was independent in the management of its affairs. Then, the licence fee began to be spent on other projects: Digital switchover, broadband and local TV. The licence fee increasingly began to be treated as a tax. Fixed-term parliaments brought the BBC’s funding reviews firmly into the political cycle. Some have even suggested that Charter Review should follow the same rhythm – calling our future and funding into question at every election. Between elections, Select Committees now regularly ask the BBC to account for its editorial decisions.

We have to be independent to do the job our audiences expect us to do. And we need to have the safeguards in place that mean we are also seen to be independent. That is why so many have called for the White Paper to make the BBC more independent. And that is why I welcome last week’s review of governance from Sir David Clementi.

Now, I am the first Director-General to call for external regulation of the BBC. Sir David’s proposals would do just that – and bring about the most significant change in governance and regulation of the BBC in its lifetime. It would provide clarity – the new unitary board of the BBC would set strategy and execute it, and Ofcom would assess performance against its own framework and direct any changes necessary. It would streamline and simplify the responsibilities and processes for the BBC and Ofcom. As the Secretary of State put it last week, Sir David’s "ideas for the principles of simpler Governance structures and streamlined regulatory arrangements that have public interest and market sensitivity at their heart, are ones that it would be very difficult for this – or indeed any – Government to overlook".

Finally, though, in welcoming Sir David Clementi’s report, I do so with one important – in fact vital – caveat. Sir David suggests that, for the first time in history, the DCMS could take the power to appoint members of the BBC’s operational board – the proposed new unitary board. Under his proposals, the Chairman, the Vice Chairman and four of the non-Executive Directors – half the board and therefore the majority of the non-executives – could be appointed by the DCMS. I think we need to think very hard about this.

Because, unlike any previous governing body, this unitary board is the very board that will set the editorial direction of the whole BBC. It will make key decisions on programmes and services, and it will work with me - as editor in chief - on how we manage our impartial journalism. It doesn't feel to me that these tasks should be undertaken by Government-appointed board members. The BBC is one of the world's great public service broadcasters - not a state broadcaster.

A strong, sustainable BBC needs new safeguards for independence, not yet more erosion. The Secretary of State reminded us last week that the public want the BBC to remain independent, echoing the BBC Trust’s own consultation – an overwhelming majority shared that sentiment. And, as he put it, "on independence - the government agrees entirely." What that requires is an 11-year Charter to take us beyond the next electoral cycle. The BBC Trust and ourselves are united on this. And a system of governance that keeps us safe even from any accusation of political influence, interference or pressure.

And when it comes to appointing the members to the new unitary board - the BBC's editorial board - we will be arguing for a transparent and independent process, at arm's-length from the Government.

Proposals to increase the BBC’s creative freedom

The third and final essential is this: demonstrable proposals to increase the BBC’s creative freedom. Creativity is the life-blood of the BBC. People come to us to find a home for ideas they can’t find the freedom to develop elsewhere: to work with great creative teams and make programmes that might not otherwise get made. In other words, to do the best and most creative work of their lives.

As I said last year in a speech in Cardiff, that means a BBC that is aware of the market, but not led by it. Not having to navigate 'no-go' areas or define 'good' in advance. But allowing programme-makers to focus on making their programmes, and letting risk of failure be the price of success. That is even more important at a time of shrinking budgets. We will have to spend every penny of the licence fee as wisely as we can on the best and most creative programmes possible.

A better than ever BBC is one that has as few barriers as possible to creativity, allowing people, teams and ideas to come together to do their best work. It is not one which allows bureaucracy, layers and box-ticking to get in the way. It’s another reason why I welcome Sir David’s review. External regulation gives us the chance for more creative freedom. The external regulator should tell us what we’re required to do, but not how to do our job. And they should have strong powers to step in if we don’t meet those requirements. Today’s market demands flexibility and responsiveness more than ever. That’s why it’s so important to keep money and control in the hands of creative commissioners.

Conclusion

I want to finish by saying that, for all the talk of risk and challenge, I have never been more confident about the need for the BBC, and its ability to meet that need. Last year we set out a clear strategic vision for the future – more open, more distinctive, more creative than ever. Re-shaped for the digital age, renewed for our audiences, and playing its strongest possible role as the cornerstone of one of the most successful media industries in the world. Get it right now, and we could be looking at a golden age of British content. Strong at home, and strong abroad, with a strong BBC – British, Bold, Creative – at its heart.

This is a version of a speech by Tony Hall, Director-General of the BBC, to the Media & Telecoms Conference 2016 on Tuesday 8 March 2016.