The BBC should not be left to self-regulate itself, according to a new independent report by David Clementi. The report, which forms part of the UK government’s review of the BBC charter, proposes doing away with the BBC Trust, which currently oversees the BBC’s internal machinations, and with it 94 years of self-regulation. Instead, communications regulator Ofcom should be responsible for all oversight at the public broadcaster, says Clementi, who has previously served as chairman of Virgin Money and Prudential, as well as deputy governor of the Bank of England.
There needed to be “fundamental reform of the system of governance and regulation,” said Clementi in the report, which criticized the BBC Trust for its role as “cheerleader and regulator” leading to confusion about where its ultimate responsibilities lay. “The BBC Trust model is flawed: it conflates governance and regulatory functions within the Trust, which leads to confusion about the Trust’s role,” stated the report.
The appointment of Ofcom, the report argued, would help the BBC to be more efficient.
“A clear distinction between the corporation (the BBC), which needs to comply with the regulatory obligations placed upon it, and the regulator itself, would provide greater transparency about roles and would be in the public interest,” the report said. “Regulatory oversight should pass wholly to Ofcom, which is already the public service regulator for the UK’s broadcasting industry and has the ability to look at the BBC in the context of the market as a whole. Ofcom would be a strong regulator to match a strong BBC.”
The BBC Trust was itself first introduced a decade ago to replace the then-board of governors as the main body responsible for the organisation’s responsible governance.
Clementi criticised the BBC’s dual board structure, where the BBC Trust oversaw regulatory matters, while a separate executive board responsible for operational issues. “It is inevitable that there will be overlaps, and gaps, between the operation of the two boards,” said Clementi.
Clementi was appointed last September by the Govt’s hawkish Secretary of State at the Department for Culture, Media & Sport, John Whittingdale, a vociferous critic of the BBC, who is in favor of the organization slimming down and also reviewing its license fee.
The BBC’s response to Clementi’s report was obsequent.
“Sir David Clementi has delivered a thorough and insightful report,” said a BBC rep. “We share his view that external regulation and a unitary board for the BBC will bring greater clarity to the corporation’s governance. If delivered, these proposals will bring about the most significant change in governance and regulation of the BBC in its lifetime. That is why it is important they are implemented in a way that strengthens the BBC’s editorial independence and ensures that future decisions about the corporation are made very clearly in the best interests of audiences, who own the BBC.
“A move to a single external regulator with strong powers will provide assurance to the market that the BBC is independently regulated. It will also provide an opportunity to look at the type of regulations in place for the BBC – with the opportunity to move from detailed, prescriptive rules to a greater and proportionate focus on audience outcomes and service quality.”
Even BBC Trust Chairman, Rona Fairhead, had been arguing in recent months against the Trust’s ability to provide proper governance for the BBC across its myriad activities. Fairhead has, however, recommended the appointment of a bespoke regulator rather than Ofcom, particularly as Ofcom is also partially responsible for some of the BBC’s commercial rivals.
It’s been a rough time of late for the BBC. A damning report last week by Dame Janet Smith criticized the organization for its handling of the serial pedophile and child abuser Jimmy Savile through his years as a presenter at the BBC. Last year, the corporation had to announce cuts of more than 1,000 jobs as part of a restructuring caused by a $234 million gap in license-fee income for 2016-2017 as well as face a bill in excess of $1 billion for new welfare charges. The public broadcaster was also asked to absorb the cost of the license fee for viewers over age 75 as the government shifted the cost, previously covered by the Department for Work and Pensions, off its books.
The pubcaster remains under pressure to find alternative ways to fund its operations. A report last year from the House of Commons Culture, Media and Sport Select Committee said the TV license is “becoming harder and harder to justify.”
It is a challenging time for public broadcasters in the UK in general. The government is believed to be looking at ways to fully or partly privatize Channel 4, which is publicly owned but part funded with advertising. Former Channel 4 chairman Lord Burns stepped down in January this year after ministers rejected his proposal to oversee the transformation of the broadcaster into a mutually owned not-for-profit channel. He has since been replaced by Easyjet’s deputy chairman Charles Gurassa, who has previously been chairman at phone operator Virgin Mobile, DVD rental service LoveFilm (now owned by and called Amazon) and TV distributor Parthenon. All three of those companies were sold during his tenure.
The move appeared to suggest that ministers could be in favor of privatizing Channel 4 completely — a move which would generate a much-needed financial windfall for the company but also sure to unleash a backlash. Channel 4 has long been a champion of diverse, edgy programming and any move to privatize would lead to fears of commercialization and homogenization.
Burns had been in favor of mutualization, by which Channel 4 would have been removed from public ownership without being sold to the highest bidder plans. Other options include privatizing Channel 4 fully or keeping the hybrid structure as is with the channel a state-owned broadcaster but funded almost entirely by advertising. Gurassa is believed to be more naturally open to the idea of a privatized Channel 4.
Channel 4 has been valued at potentially up to $1.5 billion if fully privatized. Channel 5, for example, which has a smaller viewership and infrastructure than Channel 4, was sold for £463 million ($663 million) to Viacom in 2014.
Mutualization is believed to be the favored option by Channel 4 execs, owned essentially by joint shareholders such as production companies and even members of the public, and keeping its public broadcaster remit. Such a structure would be unique in the UK landscape. Channel 4’s film arm, Film4, is one of the most vibrant and important sources of film investment, developing the likes of Slumdog Millionaire, Room and Carol.