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In January 2011 the Â鶹Éç Executive launched a consultation with staff to determine how the Â鶹Éç could deliver against the Trust's strategy within the terms of the new licence fee settlement. The Executive delivered a set of proposals to the Trust, entitled Delivering Quality First, at the end of September 2011. These set out a planned programme of efficiencies together with proposed changes to the scope of the services that the Â鶹Éç provides to audiences.

The Trust's public consultation on these proposals closed on 21 December 2011. The Trust will reach its conclusions early in 2012.

Over almost 90 years since its creation, the Â鶹Éç has earned respect abroad and trust and pride at home. It is far from perfect but is a great institution and at its best a great broadcaster. It should constantly strive to do better, providing high quality programmes and services to as many people as possible.

The major news stories of the past year have highlighted again the importance of the Â鶹Éç providing an independent source of information and a public space for arguing and debating the future. It serves our Nation, not the State.

Yet like every other part of the public sector the Â鶹Éç must live within our collective means. It is a privilege to be funded by the public through the licence fee. This privilege should be neither abused nor taken for granted. With people and organisations everywhere in Britain obliged to pull in their belts, we cannot absolve ourselves at the Â鶹Éç from the responsibility of responding to current economic realities. No-one is demonstrating for a higher licence fee, and with one that is frozen for the next five years we have to make savings of at least 16 per cent to our annual budget. If inflation runs above present projections, these savings will need to be even bigger.

It is a new experience for the Â鶹Éç to see its income fall significantly in real terms. But it should not be impossible to adapt to this reality. We should be able to run an outstanding public service broadcaster on a budget of £3.5 billion. The Â鶹Éç Trust has to guide the Â鶹Éç to implement a strategy that does this. We cannot do everything we want. Some things we would like to do are luxuries we cannot afford. We have to focus on our core services and deliver them as efficiently as possible.

The public will naturally expect the Â鶹Éç to use its money wisely and well. It has made great progress in recent years towards the £2bn efficiency target that was set after the previous Government funding review. But the search for further efficiencies must continue. And the Trust, with its own independent advisers, has set a stretching target to save as much as possible of the money that has to be saved through better management and reduced back office costs. We are confident that the Â鶹Éç can deliver over half the necessary savings that way. But not everything can be found through efficiency gains. We will also have to find ways to save a minimum of £205 million from the annual content budgets for Â鶹Éç services by 2016/17.

It's not easy to decide how to allocate those savings across the Â鶹Éç. Every service is currently performing well. Every service has a loyal following. Every individual will have their own view of the right or fair way of making savings. If we were to make our decisions by focus group, we would probably end up with no savings at all, or squeezing every budget by the same amount on the erroneous grounds that this would produce a solution that would be defensible because it was manifestly more equal.

This is not the way forward. We want instead to take some clear decisions about the shape of the Â鶹Éç's services so that it meets the strategy that we have already agreed and published for increasing the distinctiveness of Â鶹Éç programmes and serving all sections of our audience.

The Trust's approach can be summarised as follows:

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• We want to protect the five editorial priorities that the Director-General has identified: the news; children's programming; UK drama and comedy; knowledge programming; and the coverage of events of national importance. These are the heart of the Â鶹Éç, where it most clearly distinguishes itself from other programme makers.
• That has to mean a reduction in the amount available to spend on some other areas, for example sport and entertainment; the decision to share the coverage of Formula 1 motor racing is early evidence of this.
• We also want to maintain investment in those parts of the Â鶹Éç that bring the greatest value to the greatest number of people: distinctive and high quality programmes in the peak schedules of the flagship network television and radio services.
• We believe we can do this by reducing programme budgets elsewhere: partly by removing or re-casting less-valued parts of the schedule in daytime and overnight; and partly by taking some money out of the Â鶹Éç's smaller channels and identifying them more clearly as extensions of their larger siblings. In television, the final act of digital switchover in any case provides a natural moment at which to re-balance a channel line-up that was originally conceived mainly to attract people to digital viewing over a decade ago.
• We will stick to the plan that has reduced Â鶹Éç Online's budget by 25 per cent in the past year. We will continue, however, to look to the Â鶹Éç to invest in new technology where it can add to the audience experience – whether through the development of HD, through access to the back catalogue or through internet-connected television in all its forms.
• In making any changes, we want to ensure that the Â鶹Éç continues to improve the extent to which its services resonate with all the UK's nations, regions and communities and reflect the devolved nature of the UK and the distinctive characters of its constituent parts.

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The Trust has encouraged Â鶹Éç management to develop detailed proposals that fit with this general approach. Those proposals are set out below. None of the proposals extend so far as to suggest the complete closure of a Â鶹Éç service. Given the loyal following that every service carries, the Trust has agreed that it is desirable to avoid such closures if possible.

Before the Trust agrees or implements any changes, however, we want to test them with the public and the industry. Let us know whether you think the detail matches the ambition we have set to have a Â鶹Éç that is clear and confident about its purpose and holds tight to its public service mission – educating, informing and entertaining. But please remember that to do nothing is not an option.

Lord Patten of Barnes

Chairman, Â鶹Éç Trust