This is the text of a speech made by Sir Michael Lyons, Chairman of the BBC Trust, to the Royal Television Society, London on 19 May 2009:

Customer or shareholder? The BBC's relationship with licence fee payers.

I want to do two things this evening.
The first is to examine the relationship between the BBC and the public who own and pay for it. To look at the nature of that relationship, and to draw together all the work the Trust has been doing over the past two years to reshape the BBC, and turn that work into a set of commitments by the Trust to the public.
The second thing I want to do tonight is to put down some markers on behalf of the Trust in the current debates about the licence fee: how to set it, and how to spend it. As you may have noticed, lots of people are floating lots of ideas about the licence fee. And you won't be surprised to hear that the Trust, as the body that represents licence fee payers, has some ideas of its own.
The BBC and its public
Let's start with the relationship issue.
I suppose my thoughts on this were crystallized by the furore caused by the Ross/Brand affair. Here was a moment when the BBC managed to do something so spectacularly crass that it enraged a sizeable portion of its public.
And yet the reaction of the public – as opposed to the reaction of some in the commentariat – was not: "Let's do away with the BBC". It was something more complex. And it's worth spending a few moments trying to understand what that was all about.
The original radio broadcast was heard by some 400,000 people and a further 150,000 caught up with it in the following week. As a result the BBC received just 5 complaints.
Now a single complaint can be enough to trigger the BBC's investigatory mechanisms. And that's how it should be.
But, that said, keep in mind those figures: more than half a million listeners; five complaints.
The figure for complaints rose to 42,000 once the story had been picked up by the press, and people who hadn't heard the original broadcast were able to read transcripts of the most offensive passages or hear them on the internet.
Now, I don't intend to go over the subsequent events in detail. The broadcast was one of those occasions – one of those thankfully rare occasions - when the BBC made a very serious mistake and a number of people paid a high personal price for their errors.
What I'd like to consider this evening is not the offence itself or its aftermath, but an aspect of the controversy that throws a revealing light on the BBC's relationship with its public.
The right to complain – even about programmes not experienced first hand
During the controversy there was a strain of commentary suggesting that the BBC was wrong to give a hearing to complainants who had not heard the original broadcast, particularly as they weren't the target audience.
It was – so this line of argument went - like a customer going into a music store and complaining because its stock included music the customer had no intention of buying, just happened to dislike: 'How dare you sell Sibelius! Don't you know Sibelius sets my teeth on edge!'
It's an appealing analogy. But false. False because it doesn't take into account the true nature of the relationship between the BBC and its public.
This relationship is not that of a customer choosing between different options on a menu.
The more accurate analogy is not with a customer of a shop, but with a shareholder of the enterprise.
Customers and shareholders come with different expectations.
The customer expects the right to pick and choose from what's on offer. The shareholder, on the other hand, expects the right to influence the offer itself. The shareholder has a bigger commitment to the business itself and a much broader view of the value they expect in return for their investment.
And that's much like the relationship between the BBC and the public who own it and pay for it.
Now the licence-fee-payer-as-shareholder is not a perfect analogy. But it's a near enough match to explain why it was entirely legitimate for those who had not heard the Ross/Brand broadcast to feel outraged at what had happened.
And it also explains why it was entirely legitimate for the BBC to take the complaints of those who had not heard the broadcast just as seriously as the complaints of those who had.
And we in the BBC Trust – your representatives – must give all views due consideration.
The understanding between the BBC and its public
So, what should we take away from this?
What I take away from it is that the idea of the British public as shareholders-not-customers of the BBC implies an understanding – an unspoken one, but an understanding nonetheless – between the BBC and its public. This unspoken understanding is a powerful force shaping public expectations about the BBC.
In the case of Ross/Brand, these expectations were not met. And I think the anger we saw was not an expression of hostility to the BBC as an institution, but an expression of deep disappointment that the BBC had so thoughtlessly broken that unspoken understanding.
It was, in short, a reaction founded on a history of trust - even of affection. And that, to me, speaks of a relationship rooted in high public esteem: people value the BBC.
Indeed there is evidence that the value the public place on the BBC is actually rising. The Trust takes regular soundings of what people think about the BBC. One of the questions we ask is: "Would you miss the BBC is it wasn't there?"
Two years ago, 70 percent said they would. Not a bad figure. But we've just repeated that survey and though the full results won't be out until July I can tell you tonight that that figure of 70 percent who would miss the BBC has gone up to 85 percent.
That degree of public esteem is not something to be taken for granted. We need to consolidate it and to build on it for the future.
So, what I'm going to do tonight is spell out six commitments - half a dozen areas where the BBC Trust believes it should make a public and accountable commitment to those who own and pay for the BBC.
I don't think these half dozen commitments sum up the whole of the understanding between the BBC and its public - far from it.
But I think together they come close to defining the expectations the public has of the BBC. And the corollary, of course, is that they begin to shape a set of explicit principles underlying all the BBC does.
So here goes.
Commitment 1: Standards
Our first commitment is about standards – in particular about editorial standards.
The Trust's commitment here is that we will ensure that the BBC maintains the very highest editorial standards, which accurately reflect the current broad views of BBC audiences throughout the United Kingdom, and that these standards are rigorously adhered to.
That phrase about "the highest editorial standards" means what it says – it means higher than other broadcasters. To give that commitment real bite the Trust is currently examining the BBC's editorial standards policy.
Editorial standards is a big and complex area. It covers not just what used to be called 'taste and decency' (now expressed as 'harm and offence'), but also key issues including impartiality, accuracy, fairness, privacy and so on. Any one of these poses large and difficult questions. And we also need to ensure we don't lose sight of the fact that producing creative and challenging content is part of what the BBC does and we should support its staff in delivering this.
The problem underlying all of this, of course, is that audience expectations change over time,– but not in all parts of the audience at the same speed. There will inevitably be conflicts between different sections of the audience about where the boundaries should be drawn at any one time.
Finding the right resolution to those conflicts takes firm leadership and good judgement, informed by wide consultation. The BBC has been carrying out a very large scale public consultation exercise to help us in our work of judging where generally accepted standards stand now, in the United Kingdom, in the early part of the 21st century.
I expect the findings to be published imminently and I hope they will give us a new baseline – after proper consultation and debate - an accurate reflection of the current broad views of audiences throughout the United Kingdom, providing a clear lead to those who make programmes for BBC audiences, and setting clear standards against which BBC programme makers and those who commission and schedule them can be held to account.
I don't intend to preempt the findings tonight. But I will say this. If it becomes clear that there are issues on which we need to move in order to make sure BBC editorial standards are properly attuned to generally accepted standards, then that will be the direction in which we shall lead.
So, this is our first commitment – on editorial standards.
Commitment 2: Serving all audiences
Our second commitment relates to our determination that the BBC should serve ALL its UK audiences. Our commitment here is this: the BBC will strive to offer value to everyone in the UK, wherever they live, and whoever they are.
This is partly an issue of geography. I've spoken many times about our research showing that affection for the BBC diminishes the farther away people live from London and the South East. There are too many people who don't feel the BBC fully reflects their lives and their aspirations.
That's a fundamental problem for the BBC, and we are taking radical action to deal with it. This includes building important new production centres in Salford and Glasgow, and moving production of key strands out of London to help create sustainable centres of production excellence in many different parts of the UK. There are short-term costs in this – but it's money well spent.
Other action includes the editorial changes under way in the BBC's network news and current affairs coverage of events in the nations and regions following Trust-commissioned research that identified failings in range, clarity and precision.
This will all have an effect. But this is a big tanker to turn around and it will take time before we can expect to see decisive changes in the direction we want. But this is something the Trust will not back off from. Of course we have to ensure that the BBC does not lose the affection of its existing loyal audiences in doing this, and that's a tricky – but not impossible - balance to achieve.
And serving all audiences is not just a matter of geography. The BBC must constantly find new ways to reflect the endlessly shifting demographics of the UK, so that it offers something of real value for everyone, however young or however old; whatever social group they spring from; and whatever faith group they belong to – and those of no faith as well.
Nor does this aspiration to reach all audiences mean that the BBC should ever dilute its values. The ambition to serve all audiences does not mean we compromise on quality.
The BBC should never underestimate the public, it mustn't patronise them. It should produce content that stretches and challenges all its audiences. This content can be offered in many different formats, style and tones of voice. But that golden vein of standard-setting should run through it all.
Commitment 3: Content
Which bring me to our third commitment - on content. The commitment here is that the BBC will always strive to be a leader, not a follower, bringing to the public content of the highest quality and of a kind that no-one else is doing.
This is a bold commitment. But it is central to the BBC's purpose. The BBC doesn't exist just to provide content, but to provide genuinely "distinctive" content.
But what does distinctive mean? It means "different". Different in quality and in kind. In the world of almost limitless " digital technology has opened up, audiences have made it clear that the BBC has work to do to show that the licence fee is not being used just to replicate something they can find elsewhere.
There are plenty of examples of the BBC getting this right. Just take one genre – television drama – across BBC One, Two, Three and Four, and look at recent outstanding shows:
A Short Stay in Switzerland
Criminal Justice
The Diary of Anne Frank
Five Minutes of Heaven
Einstein and Eddington
Being Human
And, Margaret Thatcher: the Long Walk to Finchley
These are the kind of BBC dramas that audiences tell us not only represent exceptional quality, but are also original and different. They epitomise distinctiveness.
But the public want more.
This is particularly an issue with television – and television is still the great driver of approval of the BBC.
We know that the public think the BBC is doing well in relation to other broadcasters – as it should – but the public are also telling us that the quality and originality of BBC television programmes is still not meeting their expectations.
Of all the Trust's priorities this commitment to making sure that the BBC delivers great programmes and content that audiences love, and that meets their high expectations is paramount.
It is the key yardstick by which the effectiveness of both BBC management and the Trust will eventually be measured over this Charter period.
And, of course, leadership in content also includes new ways of delivering that content. Bringing the benefits of new technology to BBC audiences has always been part of the BBC's remit – whether it was colour television in the 1960s or High Definition now. The iPlayer is another great example of the BBC leading the way in delivering to the public more value from the content they have paid for by making BBC programmes available for consumption at more convenient times.
And there is more to come here as the BBC finds new ways to open up the incredible riches of the whole BBC programme archive stretching back more than three quarters of a century.
Commitment 4: Supporting PSB content beyond the BBC
Our fourth commitment is that the BBC will do all it can, consistent with its obligations to licence fee payers, to support the provision of public service content by others and to sustain its contribution to the wider UK creative sector.
The Trust has no wish for the BBC to end up where it began, as the monopoly supplier of public service content. It would be bad for the public – and bad for the BBC. We recognise that the great privilege of licence fee funding places on the BBC a duty to help support other public service broadcasters, whose funding from advertising is coming under particular strain right now.
Our starting point, of course, has to be that nothing we do should put at risk the BBC's own offer to licence fee payers.
But, that said, there is much we can do.
The BBC is currently engaged in a very wide range of partnership talks with the other UK PSBs, developing imaginative ways, through joint ventures and sharing of resources and knowledge, to help them increase their income or reduce their costs.
Intensive discussions between BBC Worldwide and Channel 4 have identified significant value-creating opportunities for both sides and the Trust will be looking in detail at the proposals as they come forward.
The BBC has already signed an agreement with ITV proposing sharing facilities for regional news in England and Wales. The potential is there for ITV to cut its costs significantly – and, more to the point as far as audiences are concerned, the proposals could keep ITV's endangered regional news services on the air. This sharing of facilities could in principle extend to other providers, including independently funded regional news consortia.
The BBC is also developing new partnerships with commercial radio; exploring the possibility of sharing BBC content with the newspaper industry; and there's an archive partnership under way with the British Film Institute.
That's in addition to the BBC proposals to share with other broadcasters its digital production expertise; to open up the iPlayer to other broadcasters; and ongoing work with BT and the major UK ISPs on Project Canvas – a simple way of bringing the internet to domestic television sets, so that audiences can access the iPlayer and all the other riches of the web on their main TV set and not just through their laptop or PC.
But it's important to underline that the distinguishing factor here is that these initiatives enhance value for audiences and enjoy public support.
So, looking beyond the BBC, and doing what we can to help secure the wider PSB ecology and to help maintain public service choice for licence fee payers is our fourth commitment.
Commitment 5: Value
Our fifth commitment is about value for money.
On behalf of the BBC the Trust commitment here is that that the BBC will spend only as much money as it needs to in delivering the public mission set out in the Charter.
The Charter gives the Trust the duty of exercising "rigorous stewardship of public money". In practice that means keeping a tight grip on BBC spending, and making sure the BBC is run as efficiently as possible.
That's why we've insisted that the BBC should commit to delivering 15% efficiencies over the current licence fee period – getting on for £2billion in all. That money is being ploughed back into better, richer, output across television, radio and online. And the Trust wants to make sure these are real efficiencies, not just cuts.
It means some painful decisions. Thousands of jobs have gone or will go. We are insisting that the BBC learns how to do more with less – for example through new ways of working and smart use of technology.
All this is already in the works and on the record. But I think there is more the BBC could and should do to show it is delivering value, particularly at a time of recession when many licence fee payers are feeling real economic pain. This will mean continuing strong downward pressure on our costs. And that, of course, includes top management salaries and fees paid to top talent.
Commitment 6: Independence
Our final commitment is about the independence of the BBC. Our promise here is this: the Trust will never allow any external interest, whether political, commercial, or from any other quarter, to exercise undue influence on the BBC's editorial or operational independence.
The independence of the BBC is not a nice-to-have. It is absolutely central to everything the BBC stands for - it is part of that bond of affection I mentioned at the beginning of this speech.
Impartiality, for example, walks hand in hand with independence.
You cannot have one without the other. So the Trust will always be a jealous guardian of the BBC's editorial independence.
This doesn't mean that the BBC has a right to be arrogant, a right to ignore criticism, from whatever quarter.
Far from it. The rigour of the BBC's complaints processes is an answer to those who sometimes charge the BBC with ignoring external criticism – and the system has been made significantly more rigorous since the Trust came into being. It has teeth, and we are not afraid to use them.
But the Trust has been concerned that some recent suggestions about the licence fee carry potentially serious implications for the independence of the BBC – and we have said so publicly.
Tomorrow, for example, Parliament debates a proposal to break the current six-year licence fee settlement and to freeze the licence fee for the current year, and perhaps even move to much more frequent reviews of the licence fee formula in future.
That is a recipe for curbing the editorial independence of the BBC.
The traditional system of multi-year funding agreements – the current one runs for six years –underpins the BBC's editorial independence. It means that BBC journalists, for example, never have to trim to the short-term prevailing political wind in order to avoid upsetting the latest licence fee negotiation.
It is vital that the BBC's horizons do not become too closely entwined with the political cycle.
I would ask those who argue for shorter licence fee settlements to consider the shift in the balance of power that would inevitably follow: away from an editorially independent BBC and towards the inevitably political agendas of those who would have the final say in these more frequent funding decisions.
The question I would ask them is this: how would such a shift serve the public interest?
So those are the six commitments the Trust is making - on standards, on delivering value to all UK audiences, on content, on supporting public service broadcasting beyond the BBC, on value for money, and on guarding the independence of the BBC.
These commitments are not the whole of the understanding between the BBC and its audiences, but I think they form the key supporting structures of that understanding. That's what we've been responding to in all the work we've been doing over the past two years, shaping the BBC for the future.
How to deal with the projected digital switchover surplus
Before I finish, let me say a few words about the issue of top-slicing and make it absolutely clear where the Trust stands on this.
As you know, we have agreed to discuss with the Government the potential to use any digital switchover surplus to fund universal broadband rollout and take-up.
We've agreed to do this because ensuring universal access is already one of our responsibilities.
But agreeing to these discussions does not mean we are signing a blank cheque, or agreeing to any more general use of the licence fee to pay for things that don't fall within the BBC's public purposes as set out in the Charter.
The Trust is the guardian of the licence fee. Those are the words of the Charter – "the guardian of the licence fee". And that's not a duty we'll shirk.
This is not a matter of the BBC defending its own narrow interests. It's about fulfilling the Trust's duty to be guardians of the public interest in the BBC. That's another quote from the Charter.
In my book, "guardianship of the public interest in the BBC", includes seeing off opportunistic attempts to spend the licence fee on things that have nothing to do with the BBC's public purposes.
Any proposal to spend any of the licence fee has to be judged against the public value it delivers. That's the acid test.
Let's not forget whose money we are talking about here. Not the Government's, not political parties', not other regulators' and ultimately not the BBC's. It's the public's money. It's licence fee payers' money.
People would do well to remember that licence fee payers give us their money in good faith, believing it will be spent on BBC services and content.
To suddenly tell them mid-way through the settlement that their money is being siphoned off, as some have suggested it should be, would be more than an act of bad faith, it would be tantamount to breaking a contract.
We know what the public would like to happen to any surplus. Ofcom's own research shows this clearly. They'd like their money back. As far as the Trust is concerned, returning any surplus to licence fee payers is the benchmark against which any other proposal should be judged.
Some commentators have gone even further, speculating about monies beyond 2012 and the next licence fee settlement. My view on this is clear. That's a discussion for the future and a decision for the government of the day.
When the process of agreeing the next settlement does begin it will require a sober, measured look at the needs of the BBC, guided by the demands of the public. If we start off with questionable assumptions about where money can be apportioned based on an economic picture that will be three years out of date by the time the next settlement begins we risk doing licence fee payers a serious disservice.
The licence fee should only be used to enable the BBC to deliver its public purposes. The digital switchover help scheme is consistent with that. The roll out and take up of universal broadband may be consistent with that. We'll see.
But taking licence fee payers' money and giving it to other causes and commercial players clearly isn't. It's wrong in principle, it undermines the BBC's accountability to licence fee payers, and it risks compromising the BBC's independence.
And where the BBC's independence is concerned the Trust, as I hope I've made clear, will be ever-vigilant.
Conclusion
Our job as BBC Trustees is to challenge the BBC to do better – but also to support it, when support is needed. Some commentators find a contradiction in that.
I don't.
The Trust will always be pushing the BBC to do better on a whole range of fronts, whether it's the quality of the content or the efficiency of the operation or the standards to which it aspires. And we'll continue to push for improvement because the public tell us that's what they want to see from the BBC they own and pay for.
But don't mistake our constant drive for improvement for lack of faith in the BBC. Don't ever doubt our determination to defend its strength and independence. I'm proud to lead the BBC, proud to be part of this great British institution.
The BBC has built a unique and distinctive place at the heart of British life through its commitment to the great Reithian trilogy of information, education, and entertainment. And it's been doing that now for more than three quarters of a century.
That's a colossal achievement. But the sheer longevity of the BBC brings with it all the dangers of familiarity. Not many people alive in Britain today can remember a time when the BBC didn't exist. It's fatally easy to take its existence for granted. To think: oh, take a little chip off here, a little slice off there, it doesn't really matter, the BBC will just carry on as it's always done.
Well, let me tell you, there's a real danger here.
The danger is that a succession of apparently small measures will step by step damage the BBC's ability to deliver its mission and risk its independence.
These are not dangers to be taken lightly. We know we may have a battle on our hands. But the Trust is prepared to fight it.
Thank you for listening.