THE BBC won a ten-year extension to the licence fee from the Government yesterday for the modest price of seeing its board of governors split in two.

From 2007 the corporation will be regulated by a BBC trust, to be headed by the current chairman, Michael Grade, and managed by an executive board led by Mark Thompson, the Director-General.

However, in a clear victory for Mr Grade, coming a year after the Hutton debacle, there will be no external regulation. Nor will the BBC have to share its £2.8 billion licence fee income with other broadcasters until 2017.

The governance proposals form the centrepiece of a Green Paper that covers the ten years of the BBC’s next royal charter and was published by Tessa Jowell, the Culture Secretary, yesterday.

In a statement to the House of Commons, Ms Jowell said that “alongside the NHS, the BBC is one of the two greatest institutions of British national life”, but that the governors’ “dual role as cheerleader and regulator does not sit easily in a public organisation of the size and complexity of the BBC”.

Ms Jowell presented the break-up of the governors as a middle way between Mr Grade’s approach of reforming the governors from within the existing framework, and the alternative of bringing in external oversight for the first time.

In January, Ms Jowell’s special adviser on BBC governance, Lord Burns, a former permanent secretary to the Treasury, advocated an external regulator for the corporation that would also take responsibility for collecting and allocating the licence fee. But that proposal was almost immediately rejected by the Culture Secretary. With the possibility of external regulation absent, the Green Paper was promptly accepted by Mr Grade and Mr Thompson, who found almost nothing in it to complain about.

Mr Grade said he was slightly regretful that he did not have a chance to complete his changes, which had been designed to create greater distance between governors and executives, but he added: “I don’t have a monopoly on wisdom.”

Mr Thompson said: “We face a decade of very profound change in the audio-visual sector. We have a ten-year charter and licence fee funding. The Green Paper provides a foundation for the BBC on which to build.”

The Government of the day will appoint the chairman of the BBC trust, which despite its name will be subject to ten-yearly charters, and its board members, matching the system used to appoint the current BBC governors. In turn, the trust will appoint the director-general, again in line with current arrangements. “There’s nothing in this new model that threatens the independence of the BBC,” Mr Grade said.

The BBC trust will be expected to be “open and transparent”, and “represent the licence-fee payer”. It will be responsible for ensuring that every BBC service meets standards set out in a “service licence”, for managing budgets and approving strategy.

Licence payers and pressure groups may be given the right to sack trust members. According to the Green Paper, licence-fee payers would be entitled to “submit their views of trust members’ performance” which could lead to “any member with a particularly poor appraisal . . . replaced”.

The trust is expected to consider meeting in public, publishing the voting records of each of its members and broadcasting its meetings over the internet.

The tradition of appointing specific governors to represent the regions and interest groups will end; instead people with experience of media, large organsations or “civil society” will be required for the new body.

BBC governors have frequently been criticised for being little more than a rubber stamp for the corporation’s management. During the course of the David Kelly affair, the governors backed Greg Dyke, the Director-General, throughout the Hutton inquiry that followed, until Lord Hutton found decisively against the BBC.

Ms Jowell described the licence fee as “not perfect”, but “it remains the fairest way to fund the BBC”. About halfway through the next charter, the Government “will review the case for alternative funding models, particularly subscription” for the next charter period after 2017.

CHANGES TO THE CHARTER

Licence fee based on television ownership alone could become redundant

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