Rona Fairhead, Chairman of the BBC Trust, has said its responsibilities for regulation and accountability be should be transferred to an external regulator, with strategy and oversight remaining with the Corporation’s Executive Board.

Delivering a speech on ‘BBC Governance – The Case For Intelligent Reform’ at the Oxford Media Convention, Fairhead said she was committed to making the current system work through to the end of the current Charter, but was making the case for what she described as “intelligent reform” in particular structural change that would provide greater clarity in one particular area – the oversight of the BBC’s strategy and its operational decision-making.

According to Fairhead, any governance structure needs to fulfil three roles:

• Regulation to apply the appropriate checks and balances as it is a major market intervention

• Licence fee payer representation to ensure that the public voice is heard, that the BBC provides value for money and that quality and editorial standards are met, and

• Oversight of its strategy, operations and management.

“These roles cannot be left to Government or Parliament if the BBC itself is to remain independent as the public wish it to be. And it needs to be recognised that there is no ‘perfect’ governance system – ultimately it’s about clarity of accountability and key relationships based on trust and respect,” she suggested.

Fairhead said that some of the big Charter Review debates would be about the impact of changes in technology, the market and audience behaviour, which would also influence the way in which the BBC is regulated. She said the Trust would want to propose some changes to those regulatory processes so that they can keep adapting to the world outside the BBC. For example:

• Rather than reviewing every service every five years, it will make more sense to conduct performance reviews where and when they are most needed – and to allow for reviews of genres as well as channels.

• The system of Public Value Tests, which take at least six months each, was designed for a different world – and needs revisiting.

• The regulator needs a greater range of tools – including some clearer, simpler, more transparent ways to assess smaller changes, including closures. But that must include adequate opportunities for industry and public consultation.

Fairhead suggested that the most complicated area of governance is the oversight of financial and operational management and strategy, noting that in the existing structure, the Trust shares responsibilities in these areas with the Executive Board.

“The Executive Board develops strategy and oversees day-to-day finance, performance and operations. The Trust approves some significant financial decisions, reviews and finally endorses the overarching BBC strategy. It also approves and monitors – at high level – operational performance, in particular against the annual objectives and budget,” she explained, suggesting that the Trust had worked with the Executive Board to clarify the boundaries between the pair and to provide for meaningful oversight from the Trust that doesn’t confuse or interfere with the management’s ability to do their job.

“It’s a set-up that I am confident can be made to work through to the end of the Charter. And it needs to work, because the role of the Trust in overseeing long-term strategy and direction will be of fundamental importance in the Charter Review,” she advised.

According to Fairhead, the strongest case for more significant change was in this area of oversight, where a ‘fault line’ continued to lie in the blurred accountabilities between the Trust and the Executive board.“And that’s why we want to propose reform,” she declared. “Responsibilities for strategy, financial and operational management need to sit with the BBC Executive – to allow them to respond to a rapidly changing environment. Responsibilities for regulation and broader accountability need to sit at one remove. That way, there should be no possibility of vagueness or uncertainty about who will be held responsible for what, when the chips are down. At a minimum, we would want to propose some reform of the current model. To keep the Trust as part of the BBC but to be much more specific, in any future Charter, that its responsibilities were focused more clearly on regulation and accountability, with strategy and oversight left to the Executive Board,” she advised.

Fairhead said the cleanest form of separation would be to transfer the Trust’s responsibilities for regulation and accountability to an external regulator. “And that’s an approach we want to explore further. I think it’s the front-runner. In this model, the BBC would need to establish a stronger unitary Board, with an independent chairman and a majority of non-Executive Directors. They would take sole responsibility for running the BBC and its corporate governance. They would have their own responsibilities to listen and respond to their most important stakeholder – the British public. And the Non-Executives would need to have access to independent research and advice,” she noted. The external regulator would have responsibility for all matters of regulation and those matters of Licence Fee Payer representation which require a broader, more regulatory perspective.

“This model needs to be tested thoroughly. It does provide maximum clarity about who is accountable. But for it to work, the regulator would need to have fairly strong powers and levers – to hold the BBC to its public purposes and to the standards that audiences expect; and to prevent undue damage to the commercial market. The BBC Board and its regulator would need to be able to act as a protective buffer between Government and management, to ensure the organisation’s independence. There would need to be some structure for ensuring the BBC served audiences in all the UK’s Nations and regions,” she noted.

“The Trust is convinced that, in this or any model, there needs to be a bespoke regulator for the BBC, given the higher expectations that audiences have for its editorial and creative standards and the particular concerns that exist about its market impact and fair trading. There should be a single body responsible for setting those standards for the BBC, licensing and regulating its activities, and holding it to account for the way it spends public money,” she stated.

According to Fairhead, this was why the Trust had some concerns about the Select Committee’s proposal for a Public Service Broadcasting Commission. “We question its ability to exert real authority if it were unable to set BBC service licences and editorial standards. And carving up the licence fee may weaken the direct line of ownership and accountability that runs between the public and the BBC,” she warned.

Fairhead has been under pressure in recent days to relinquish either her Trust role or her job with HSBC – paying €15,000 a day – as the bank has been embroiled in a UK tax evasion controversy.

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