The BBC is the cornerstone of broadcasting in the United Kingdom and is respected across the world. BBC news and current affairs, on television, radio and online are known for their accuracy and impartiality. When the British public were asked to name a trustworthy news source, they chose the BBC five times more often than any of its rivals. Abroad the BBC World Service is seen as the most objective international radio broadcaster in almost every country surveyed. Our aim is to strengthen the BBC while meeting the legitimate claims of the licence fee payer.

The current review of the BBC's Royal Charter, to which our report contributes, provides an opportunity to ensure that the BBC can respond to three contemporary challenges in a way that effectively serves licence fee payers and maintains the Corporation's global reputation. The first of these challenges is to the basis of the BBC's reputation—the accuracy of its reporting and its journalistic and editorial independence. The events leading up to Lord Hutton's inquiry epitomise this challenge. The second challenge is the development of new technologies and the so called "digital revolution". And the third challenge is the increasing emphasis on more rigorous systems of corporate governance and regulation in both the public and private sectors.

In March 2005 the Government published a Green Paper which they entitled "A strong BBC, independent of government". We do not believe that the Government have seized this opportunity to secure a strong BBC which is truly independent of Government. The Government intend to continue to establish the BBC by Royal Charter through the Privy Council. The Government support this method because they control it. It is entirely up to the Government of the day to decide what goes into the Royal Charter and the associated Agreement between the BBC and the Secretary of State. We believe that the BBC's mandate and structure should be defined in statute rather than by Royal Charter. The passage of an Act through Parliament is more democratic, more independent and more transparent. It provides for all-party involvement and thus protects the BBC from the pressures exerted by any one political party.

The licence fee is the best way to fund the BBC over the next decade. However, we believe that the system for agreeing the cost of the licence fee should be more transparent and the BBC's bid should be subject to independent investigation. Negotiations on the level of the licence fee should no longer take place behind closed doors with Parliament expected to approve the Government's proposal without knowing its basis. Instead the National Audit Office should provide an independent assessment of the bid. This will insulate the BBC from potential political interference in its finances by providing an objective and non-political assessment.

We do not believe that the BBC should expect automatic licence fee settlements above the rate of inflation. The BBC needs to demonstrate to the licence fee payer that it has taken every sensible action to contain costs and secure maximum value for money. The BBC's current bid is particularly high because the Government expect the BBC to fund a significant proportion of the costs of analogue switch-off. We see no reason why the licence fee payer should fund analogue switch-off. Licence fee payers already face covering the costs of replacing their analogue television sets and recorders and possibly updating their aerials. In addition the Government are set to benefit financially from analogue switch-off. It is estimated that the benefit to the UK economy will be between £1.1 and £2.2 billion[1]. The Government will be in direct receipt of substantial proceeds from any sale of the analogue spectrum. In these circumstances it should be Government and not the licence fee payer who fund switchover.

The Government's Green Paper proposals for reforming the governance and regulation of the BBC are confusing, misguided and unworkable. The proposal that the BBC might have two Chairmen could result in warfare within the Corporation. The proposal to have non-executive members on the Executive Board is ill conceived and will place an unrealistic burden on the non-executives. The Government's failure to commit to a new politically independent system for appointing the Chairman of the BBC yet again highlights the Government's failure to make the BBC truly independent. The Chairman of the BBC should no longer be selected by a panel led by Government officials, according to a job description set by Ministers. There should be a truly independent appointment panel, with a majority of its members drawn from outside politics and the civil service.

What concerns us most about the Government's proposals for the governance and regulation of the BBC is that they do not clearly separate the two functions. In many respects the BBC will remain judge and jury in its own case. We believe a new system of BBC governance and regulation is necessary. The BBC's listeners and viewers, as well as the BBC's competitors, must be able to understand and have confidence in it. It should be designed to serve the licence fee payer. It should secure accuracy in reporting and safeguard the BBC's reputation for quality and independence.

We propose reforms that clarify the three distinct roles of management, governance and regulation and vest them in three separate bodies. For the governance of the BBC we propose a unitary board with a majority of non-executive members and a non-executive Chairman who together are responsible for a wide range of governance functions. The BBC's management should be clearly separated from the governing board. The management committee should be chaired by the Director-General. We recommend that Ofcom should take final responsibility for adjudicating on appeals arising from complaints about all types of BBC content. This would secure clearly independent regulation and clarity for complainants and mean that the Ofcom Content Board would have the same regulatory responsibilities for BBC content as for other terrestrial public service broadcasters. In order to make this possible we suggest that Ofcom's Content Board should be considerably strengthened.

The BBC and the Government have proposed that in future the BBC should not be able to launch new services until their value to the individual and the citizen, as well as their impact of the wider market, have been assessed. We support the introduction of this so called "Public Value Test". However, we believe that it will only be an effective tool if it is applied equally to new services and proposals for significant extensions to existing services. We also believe that it should be possible to appeal the results of the Public Value Test. We recommend reform of the BBC's fair trading commitment to ensure that it is clear and transparent and has the confidence of the wider industry.

The BBC has an important role to play abroad in providing impartial journalism where it is most needed. However, if the BBC is to continue to act as an international opinion former then the World Service should keep up with changing habits of media consumption and provide a television service. We believe an Arabic language television service is of particular importance.

The BBC has always offered a wide selection of programming and not simply public service programming. The Government propose this should continue and we agree. The BBC should continue to provide a full range of programmes and not be confined to programmes not provided by other broadcasters. In short the BBC should strive to serve all licence fee payers across the whole of the United Kingdom and provide them with high quality programmes and services.