I knew I was right

The BBC must face competition to justify its future public funding, says David Elstein

It has been an interesting year. Twelve months ago, I and my colleagues on the Broadcasting Policy Group published a far-reaching report, Beyond The Charter, on the future of the BBC. It created something of an outcry and was widely attacked as being impossibly radical. Yet already many of our ideas have become common currency.

It has been an interesting year. Twelve months ago, I and my colleagues on the Broadcasting Policy Group published a far-reaching report, Beyond The Charter, on the future of the BBC. It created something of an outcry and was widely attacked as being impossibly radical. Yet already many of our ideas have become common currency.

Central to our argument was that it was public service programming, not the BBC, that needed attention. Our key objectives were plurality of supply and contestability of funding. The increasing dominance of the BBC in public service programming was unhealthy, and only competition offered transparency, comparability and accountability in the way public money was spent.

Ofcom went some of the way down this road, proposing a new publicly-funded body, the Public Service Publisher. But it failed to address the issue of accountability. Happily, the Burns Committee, set up by the Culture Secretary Tessa Jowell, grasped this nettle, with a proposal very similar to the Public Broadcasting Authority, which we on the BPG had suggested. They came up with the Public Service Broadcasting Commission, which would receive the licence fee and allocate it on contestable principles between the BBC and other applicants.

Burns followed the same logical path as the BPG, in recommending that this would be the body to which the BBC would be accountable for its public service offerings, with Ofcom regulating all other issues. Burns (like Ofcom and now last week's Green Paper) followed the BPG's proposal that the BBC Governors should become a mix of executives and non-executives, like Channel 4.

However, the Green Paper chose one of the options rejected by Burns as a mechanism for BBC regulation - the BBC Trust. Burns had preferred a broad external body to avoid an inward-looking entity that might be neither equipped nor inclined to take full account of the wider creative economy or the concerns of commercial competitors. The BPG's logic was very similar.

The Green Paper also chose to guarantee the BBC its licence fee for 10 years, whereas Ofcom and Burns proposed a five-year review to coincide with the presumed switchover to digital in 2011/2. But before the BBC celebrates too loudly, it should reflect that governments cannot bind their successors. Labour unravelled the last BBC licence fee settlement.

Michael Grade tried to find a version of the Governors that solved the regulator/cheerleader conundrum, but the Green Paper reflects the consensus that no single body can fulfil both functions. His role as chairman of the new trust will be small compensation.

Grade also urged the Government to "follow the money", implying that guaranteed finance underpinned independence. For the moment he has won that battle. But this risks "fetishising" BBC independence, elevating it to an absolute and primary requirement, irrespective of all other considerations.

We all know that the BBC is capable of abusing its independence. It has announced reform of its unconvincing internal complaints procedures twice in 12 months. And it cynically failed to meet its independent production quota three years in a row, knowing it could suffer no meaningful external sanction.

The reason why the BPG rejected this "follow the money" mantra was that we saw how illogical it was to have a compulsory tax on all households to fund both entertainment and public service output, with no way to monitor the BBC's switching between the two.

Our solution was simple: pay for all public service content (including the BBC's) from public funds, but let the consumer pay for entertainment voluntarily. The only task was to distinguish between BBC content readily fundable in the marketplace (from EastEnders to The Blue Planet) and programming that the market could not or would not support ( Newsnight, File On Four). For far too long the BBC has got away with the syllogism that, because the market could not fund some of its content, all of it (however market-mimicking) needed to be paid for by exclusive access to a compulsory fee. Ofcom and the Green Paper have, trivially, acknowledged this issue, by calling for the BBC to withdraw from derivative formats and high-priced Hollywood products. Yet most programmes owe something to their predecessors. "Derivative" is a relative notion.

As for imported content, why should it be permissible for one publicly-owned broadcaster (Channel 4) to pay a fortune for The Simpsons, but not for another? And should the BBC now withdraw from all premium sport such as the FA Cup and the Olympics? How about top-priced presenters?

These simple-minded propositions flow from a failure to understand the importance of the distinction between market products and non-market ones, and the difference in their funding basis. As long as viewers choose to pay for BBC entertainment, it is no business of the Government or Ofcom what that entertainment might be or what it costs. Consumers decide such matters.

The Green Paper advocated its reform of the BBC Governors on the basis that it would increase accountability to licence payers. But, by definition, the BBC can never be "accountable" to licence payers as long as they have no choice whether to pay.

The BPG report saw the gradual replacement of the licence fee by voluntary subscription as a welcome delivery of choice through technological advance.

That is why we also recommended aligning the BBC's objectives with those of digital switchover by reviving Gavyn Davies' 1999 proposal that the BBC's digital channels be funded by subscription, not the licence fee. That way, we believed, the BBC would have to greatly reinforce its digital offerings, thereby driving digital take-up and enabling a swifter switchover.

Burns, Ofcom and the Green Paper all failed to embrace this logic. Thus, one could argue, if Burns has adopted 75 per cent of the BPG argument, and Ofcom 50 per cent, the Green Paper is still only 25 per cent of the way there. Even so, given the media hostility that greeted the BPG report, these percentages are grounds for quiet satisfaction. And with two elections (plus a White Paper this autumn) between now and switchover, the final word on the BBC's future is far from certain.

The writer is head of the Hallmark Channel, former chief executive of Five and author of last year's 'Beyond The Charter' report