It will be its sixth national radio network.
Sir Michael told the annual Radio Academy Festival in Birmingham yesterday that the pounds 9m-a- year service would be funded from efficiencies and economy measures being pushed through by the policies of producer choice and a stringent review of its overheads.
It will be run from a pounds 30m news and current affairs complex being built at BBC Television Centre in west London.
Tony Hall, director of news and current affairs, and Jenny Abramsky, head of radio news and current affairs, said after the announcement that the service would be live, offer a breadth of coverage and richness of news and topics currently unable to find a place. It would increase news and current affairs by BBC Radio from 2,500 hours a year to 8,000. It would not use phone-ins to fill airtime but would be looking, for example, for items such as John Cole's Letter from Westminster. The BBC is also discussing a 24- hour television news service by amalgamating with Sky News.
The changes mean radio news and current affairs will leave Broadcasting House.
The BBC is compressing its policy of building new FM transmitters from five years into two years. It is also considering using satellite distribution for Radio 4.
Sir Michael said that 'partial exposure to Sky News and CNN on television and the BBC's initiative of splitting the Radio 4 service during the Gulf war, the release of the Beirut hostages and the general election have made viewers and listeners aware of the attractiveness of a continuous news service. There is an increasing demand for live, on-the-spot coverage of unfolding events . . . If the BBC is to retain its place as the leading provider of news and information, then it must become involved in continuous news services on both TV and radio'.
Sir Michael also announced a greater emphasis on the BBC's educational services for schools and adults by setting up a new educational directorate to co-ordinate radio and television output. He also committed BBC Radio to covering live sports events, especially since these may be lost to subscription television.
A third weekly episode of The Bill will be run on ITV from next January as part of a pounds 29m programme deal reached by Thames Television with the ITV network.
The Bill, which is one of ITV's top-rated dramas, will be run on Fridays at 8pm as well as the current screenings on Tuesday and Thursday.
The deal includes 104 episodes of The Bill, 13 episodes of Minder, two of Mr Bean, 12 of Wish you Were Here, 16 of This is Your Life, six Tommy Cooper compilations and a series of the children's programme Count Duckula.