House of Commons Library

BBC governance and financial accountability

Published Friday, May 27, 2016

Arrangements for the governance, regulation and financial scrutiny of the BBC look set to change when a new Royal Charter is agreed. This paper examines what is currently in place and what is proposed.

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The BBC’s current Royal Charter comes to an end in December 2016. As part of the process of agreeing a new Charter to replace it, the Government issued a White Paper in May 2016. The White Paper includes significant proposals on the future governance and regulation of the BBC, and on scrutiny of the Corporation’s financial management.

At present, the BBC Trust is the Corporation’s governing body. It sets the BBC’s strategy, approves how and where the licence fee is spent, and reviews the performance of all of the BBC’s services, both public service and commercial. It is independent from the BBC’s Executive Board, which is led by the Director-General. The Executive Board is responsible for the operational management of the BBC and for delivering the BBC’s services in accordance with strategy agreed with the BBC Trust.

Under the current arrangements, governance and regulation of the BBC are somewhat blurred responsibilities. Both the BBC Executive and BBC Trust have a role in governance; both Ofcom and the Trust have a role in regulation. The Clementi Review of BBC governance and regulation, which reported in March 2016, recommended that regulatory oversight of the BBC should pass wholly to Ofcom and the BBC should have a unitary Board, with a majority of non-executive directors.

In the White Paper the Government proposes that the new Charter enshrine a clearer division of responsibilities:

  • On the new model, there would be a unitary board, responsible for governance, which would set strategy, deliver services, oversee operational delivery, measure performance and engage the public. The board would be made up of a majority of non-executive members with a non-executive chair and deputy chair. There is disagreement between Government and BBC about the composition of the board – how many members should be Government appointees and how many nominated by the BBC itself.
  • Meanwhile, Ofcom, which already has some powers in relation to the BBC, would become the Corporation’s regulator. Ofcom would issue licences, regulate editorial standards, arbitrate complaints, regulate commercial activity, regulate market impact, and monitor and review performance. The BBC has broadly welcomed this proposal.

In accordance with requirements in the current Charter, the BBC’s Annual Report and full financial statements are formally laid in Parliament, usually in July.

The National Audit Office (NAO) already carries out value-for-money studies on the BBC’s publicly funded operations. Since 2012 the NAO has had the power to decide which areas of BBC spending would form the focus of those studies. The White Paper proposes an extension of the NAO’s role, with the result that, under the next Charter, the Comptroller and Auditor General would become the BBC’s financial auditor. The BBC has responded that any expansion of the NAO’s role must include an explicit exclusion for editorial decision-making; the Corporation also thinks it inappropriate for the NAO to assess the value-for-money of the BBC’s commercial subsidiaries (another idea canvassed in the White Paper).

A separate Library paper, BBC Charter renewal, looks more widely at the process of agreeing a new Charter.

Commons Briefing papers SN05332

Author: Philip Ward

Topic: Broadcasting

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