The BBC is jeopardising its creative future by pressing on with plans to further embrace the private sector, according to research commissioned by the corporation.

The report from The Work Foundation, an independent consultancy, argues that creating competition for BBC funds could "eliminate inhouse production" at the broadcaster altogether.

The report's findings are due to be presented in London today by its co-author Will Hutton, the former editor of The Observer. He will say the BBC risks losing control of its content in the digital era if urgent reforms are not adopted.

The Tipping Point: How Much is Broadcast Creativity at Risk? says that a plan to open up the BBC’s budget, called the Window of Creative Competition (WoCC), risks "hollowing-out" the BBC as a creative organisation by stimulating "a newly empowered independent sector".

The BBC currently allocates 25 per cent of its production budget to independent producers. Under the WoCC scheme, a further 25 per cent of the BBC’s production budget will opened to competition between the private sector and inhouse BBC units. The BBC’s inhouse operations will be guaranteed a 50 per cent share.

According to the BBC, the total budget available under WoCC is £500 million.

The WoCC proposals have now been approved by the BBC governors. Some parts of the scheme will start this autumn before it comes into full effect in 2007.

Mark Thompson, the BBC's general director, has argued that increased input from independent producers is necessary to ensure the BBC gets the best value for money possible from its £2.8 billion licence fee income.

However, the announcement of around 3,800 job cuts at the BBC led to strikes earlier this year and there is resistance among staff to moves that could see more work being farmed out.

The Work Foundation argues that the WoCC will place the BBC at a disadvantage in the digital era, where consumers are becoming used to cherry picking television content over the internet when they want to watch it.

"For a broadcaster to be able to deliver in this new context, it must own the rights to the content," the report argues.

The report says that the international trade in rights has shifted the incentives for independent producers. They argue that shareholders in independent production companies will insist on business models that emphasize low-risk, re-sellable television programmes that give quick returns on investments.

It says that the 2003 Communications Act "has seen the balance tip in favour of the independent sector" as under the legislation the broadcaster has to pay additional money for rights.

"We do not foresee any changes to the proposed operation of the WoCC."

The BBC this morning said the Work House report would form part of a longer term debate as the independent sector continues to mature, but indicated it would continue to press on with the WoCC.

"We continue to believe that the work that we have done in arriving at the figures we did - work which led to the proposed 50:25:25 split - is correct and will see the best ideas on screen," it said.

In March the BBC won a ten-year extension to the licence fee from the Government in a deal that means the BBC will not have to share its £2.8 billion licence fee income with other broadcasters until 2017.

Recent in-house BBC productions have included Dr Who, Strictly Come Dancing and Dragon's Den; recent independent productions for the BBC have included Spooks and The Apprentice.

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