This is the text of a speech given by BBC Chairman, Michael Grade, to the Westminster Media Forum on Thursday 30 March 2006:

New Charter - New BBC

It seems a very long time ago that we began this journey to the new BBC Charter.

This has been a lengthy and intense scrutiny - as it should be.

The verdict has been a great vote of confidence in the continuance of the BBC. This vote of confidence is endorsed by all the main political parties and by the general public.

It is a verdict that recognises the continuing need for a mixed economy in broadcasting in the digital era, with a public sector provider as the keystone of a system that transcends the limitations of a purely market-based model.

And yet it was clear that while everyone - a few ideologues apart - wants the BBC to carry on in this role, everyone also recognises it's time for radical change – and that includes me.

The consensus has been quite clear: the BBC must become more transparent, more responsive to criticism, more sensitive to the market and, above all, more accountable to those who pay for it – the licence fee payers.

These are demands I am determined to meet.

But the BBC has often made promises that change will come – "jam tomorrow".

Where is the guarantee that these latest promises will not just evaporate before the ink on the document is dry? Where is the guarantee that all this will not be forgotten once the process of Charter renewal is over?

My answer is: Just read the draft Charter and Agreement.

No BBC Charter is ever going to figure in Melvyn Bragg's list of 12 books that changed the world. But this new Charter does spell out the biggest change in the BBC's history.

There are those who say the changes are merely cosmetic. That the Trust is just the Governors re-badged. That separation from management is just window dressing. That the Corporation has got away with it again, licence fee intact, free to go on squandering other people's money with never a thought for other media providers.

But please, read the new Charter and see if you still think that.

The draft Charter and Agreement are very different from those of 1996. They're much more detailed and much more prescriptive about the new governance regime. 175 clauses against just 44 last time.

They lay down a very clear route map that those in charge of the BBC must follow - clear prescription for real and sustained change in the governance of the BBC.

I can almost feel the odd eyebrow being lifted round the room. "Real change?" I hear you murmur, "Real change at the BBC? Shome mishtake, shurely?"

Well, speaking as Chairman-designate of the new BBC Trust, I can assure everyone that for the BBC, the times they are a-changing.

I took on the job of BBC Chairman with an agenda for change based on three equal and essential priorities: delivering efficiency, sustaining creativity, and defending the independence of the BBC.

I regard all three as vital elements in keeping faith with the interests of licence fee payers.

To be honest, I didn't expect the outcome to be quite as radical as it has turned out to be. The new Charter has taken on board the behavioural changes the Governors have been pursuing for the last couple of years.

But it has taken them much further, and on top of that it has crystallised them into structural and lasting change. These include a whole new range of mechanisms with purpose remits at their apex. In effect this structural change has future-proofed the BBC against any black-sliding.

The old imperial BBC can be no more. The days when the BBC could put its narrow institutional interests ahead of those of the people who pay for it are gone.

To underline the potency of the changes, let me take head-on the most frequent criticisms made of the BBC under the old system and show how the new Charter meets them.

I've counted four major criticisms currently in circulation. Auntie's four Deadly Sins. Not quite the usual seven – although doubtless there will be a few in this audience eager to suggest some I may have overlooked.

The first deadly sin is elephant-itis.

This charge has been very wittily framed by Tim Gardam.

This is what he wrote: "I see the BBC like the well-meaning elephants, stomping through the jungle, trumpeting their achievements, each executive holding on to the tail of the one in front."

"They are undoubtedly a force for good, but unfortunately they can be oblivious as to what might get crushed under their enormous feet."

So there's the charge: the BBC is too big, too fat, and above all too careless of all the other creatures, especially the entrepreneurial species fighting for their bit of the jungle.

I think that's a fair cop, Tim.

There have been too many times when the BBC's definition of its core purpose has been: "Cor! Why don't we do that?"

Not any more.

The new Charter sets out for the first time and in considerable detail the services the BBC currently provides. It then spells out, and I quote: "any significant proposal for change must be subject to full and public scrutiny."

Note the word: proposal. Note the word: scrutiny. The word: full. The word: public.

No more cosy deals behind closed doors to set up new services or change existing ones. No more instances when the interests of other providers are considered only after a new service has launched. Under the new Charter this just cannot happen.

The instrument that prevents it is the Public Value Test. It requires that the potential public value created by any proposed new service (or any significant change) must be weighed against the potential negative impact on the market.

And the test itself will not be carried out in secret, but in an open and transparent way. The market impact assessment will be carried out by Ofcom and of course all the key stakeholders given a voice by right.

Some critics have asked whether it's possible for the Trust, however well-meaning, to act impartially when judging proposals made by the BBC's Executive Board.

But that is to misunderstand the nature of the Trust. The new Charter requires that the Trust is independent of management and represents only the interests of licence fee payers.

And that does not mean the interests of licence fee payers narrowly defined as consumers of BBC services.

Every licence fee payer also has an interest in the wider choice offered across the broadcasting market. The Trust must therefore have a pre-disposition to take account of that interest in choice and plurality and do nothing to reduce it.

There can be no doubt that the way the Trust's responsibilities are now set out, and the transparency of the procedures laid down to fulfil them, will deliver to the private sector the clarity and comfort they have long demanded.

The BBC can no longer be perceived as "a law unto itself".

This does not, however, mean the BBC is about to be reduced to a mechanism for sorting out market failure, a backstop provider of the unprofitable unpopular output no-one else wants to make.

The BBC is not going to wither away. It is not about to shed any of its current services. In the words of the White Paper, it is going to remain a broadcaster of "real scale and scope".

So, the new Charter does place real constraints on future expansion.

This will all be backed up by a new and much tougher fair trading regime and new conditions on the BBC's commercial activities.

The second deadly sin laid at the BBC’s door is inefficiency, a symptom of what's sometimes known as "Jacuzzi-itis".

With any public sector organisation without a bottom line it's always harder than in commercial companies to maintain financial discipline and the efficient use of resources – and to show that you're doing it.

That's why, ever since I became Chairman, I've made the rigorous stewardship of the licence fee one of my three top priorities. As I've said before, it's what keeps me awake at night.

There is a direct connection between efficiency and the second of my priorities: sustaining creativity. Efficiency maximises the funds that enable creativity to flourish.

The need for sustained efficiency is now greater than ever. Over the next ten years the BBC has undertaken – as part of its licence fee bid - to fund 70 per cent of its new investment from self-help.

Mark Thompson's efforts in this area are already producing significant returns. He's on course to secure £355m of savings by the end of March 2008.

And as you have already seen, this isn't a pain free process. The headcount he inherited was over 27,000 – up from 23,500 in 2000. It will be reduced back to 23,5000 by the end of March 2008.

The new Charter formalises the priority of efficiency. "The Trust," it says, "is the guardian of the licence fee revenue and the public interest in the BBC."

And it goes on to say that one of the Trust's key duties is, and I quote: "rigorous stewardship of public money." Nothing like that has ever appeared in any previous Charter.

Incidentally, the forthcoming licence fee negotiation is emphatically NOT about the BBC getting the most generous settlement it can. That would be to cast the argument solely in the narrow institutional interests of the BBC.

Instead there is a balance to be struck between delivering the expectations of licence fee payers, while doing so at the lowest possible cost. The Board will play its part in delivering that outcome.

The next deadly sin is management capture: the sin of intimacy.

The charge here is that those tasked with the governance of the BBC can never be trusted to put up more than token resistance to the blandishments of management.

Well, management capture was definitely a problem – but note the tense, WAS.

The present Governors began a process of separation from management a couple of years ago and the new Charter pushes this process much further and enshrines it in the new constitution.

Under the old system the Governors were entirely dependent on information FROM management to judge the performance OF management. That has been put right.

The Governors now have their own Governance Unit – completely separate from the executive – from which we commission independent research and analysis. The existence of this unit is mandated in the new Charter – another first.

The introduction of service licences is another significant and visible tool underlining the clarity of the Trust's role and its distance from management.

The existence of these licences - setting out the budget and remit of every service - will make it impossible for management to alter course without an open and transparent public process.

In the context of separation, there are also constitutional changes proposed to the structures of management which are as important as those for the Governors.

In addition to the Trust there will be a new, formally-constituted Executive Board with outside, independent non-executives forming at least a third of its membership.

The new Charter makes the difference between the two bodies abundantly clear.

Of course there are those who find it hard to believe that the BBC management will accept the new arrangements.

One arch-sceptic, Simon Jenkins, suggested recently that separation was a sham: "The BBC," he wrote, "will eat the Trust for lunch as it eats its Governors for breakfast."

Well, nice quote Simon. But, please, read the new Charter, especially Clauses nine and ten which specify, and I quote: "The members of the Trust and the members of the Board shall never act together as a single corporate body... The Trust must maintain its independence of the Executive Body."

That sounds like separate canteens to me.

The separation set out by the legislation is inescapable. There can be NO collusion, and NO capture.

But it will also leave the Trust sufficiently informed to look after the licence fee payers' money and ensure delivery of real benefits.

And this, of course is something that could never be done effectively, or in a timely manner, by any form of post-facto external regulation.

And so to the fourth deadly sin: lack of accountability - the sin of Auntie-knows-best-ism.

The BBC does have form here. According to Asa Briggs, in his history of the BBC, Lord Reith never had much time for audience research. He took the view that the Almighty had put him on earth to lead licence fee payers to a higher plane, not to ask their opinions.

And it is just possible that his example infected some of his heirs and successors at the BBC.

Well, not any more.

The Trust must listen to licence fee payers and it must be their voice.

The new Charter makes clear that the Trust exists, and I quote: to "represent the interests of licence fee payers" and places on the Trustees the duty of, as it puts it: "actively seeking the views of, and engaging with, licence fee payers."

That is a duty that I and my fellow Trustees - when they are appointed – cannot shirk.

We've already laid some groundwork here: the Governors' website, the first ever BBC AGM, the new complaints processes.

In future the new Audience Councils that replace the Broadcasting Councils will continue to represent licence fee payers in England, Scotland, Wales and Northern Ireland.

We will regularly commission major surveys using samples of up to 10,000 people to keep us in touch with the licence fee payers. And we must consult the public when new services or significant changes are proposed by management.

So for each of the BBC's four alleged deadly sins, I hope I have shown how the new arrangements offer effective and lasting remedies under the new Charter.

A BBC that is clear and transparent about its own direction, but also a good corporate neighbour, sensitive to its effect on the market.

A BBC not wasteful and spendthrift, but delivering value back to licence fee payers.

A BBC not driven by its own institutional interests, but a BBC held to account by an effective and independent governance system, properly equipped to judge performance and delivery.

A BBC no longer arrogant, but listening to audiences and responding to their expectations.

By putting the licence fee payers' interests first the new Charter also strengthens the third of my key priorities: independence.

Doing so will give the BBC Trust the strength and legitimacy – a mandate if you like - to resist anyone who might try to capture the BBC and use it for their own narrow interests, be they commercial or political.

Ensuring efficiency, sustaining creativity and defending the independence of the BBC.

As Chairman of the BBC Trust, operating within the terms of the new Charter, these will remain my priorities.

I want to see a BBC that is fit to meet the challenges of the new digital world. A BBC that plays a key role in delivering the benefits of digital to the public. A BBC that continues to be highly valued by those who pay for it.

In the end the BBC will be judged on its output. The whole purpose of the BBC is to expand the horizons of its audiences.

As Dennis Potter so memorably said of the BBC: "Switch on, tune in and grow".

We forget that at our peril.