麻豆社

The future for governance, regulation and funding of the 麻豆社

Date: 05.11.2015     Last updated: 05.11.2015 at 15.42

Speech by Alex Towers, Director, 麻豆社 Trust, to the Westminster Media Forum on 5 November 2015.

The title of this session is the future for governance, regulation and funding of the 麻豆社.  Quite a lot to go on there, but I’ll have my best shot at a fifteen-minute version.

I’ll come to funding at the end.  But I’ll spend most of my time talking about governance and regulation, since that’s what I spend most of my days focused on as the Director of the Trust.

It’s always a bit of a surprise just how much of an interest people outside the 麻豆社 take in its governance structure – it’s become a minor branch of theology for the media industry.  That may be partly because it’s easier to question the corporate bit of the 麻豆社 than it is to second-guess the creative decisions.  But the corporate stuff does matter and, in our view, it does also need to be reformed.

Why does it matter? 

Let’s start with what the public expect from the 麻豆社.  In response to the Government’s Green Paper, we’ve undertaken a huge raft of public research and consultation to try to put licence fee payers at the centre of the Charter debate.  We’re publishing it piece by piece.  A further three documents – on governance, complaints and efficiency – are out today. 

If I had to summarise all the findings in a single sentence, I’d say that the public don’t want anyone mucking about with the 麻豆社.  They are protective of it.  They want a strong, broad, independent and universal service.  Here are a few headline research stats to underline those points.

Source: ICM Quantitative research, 28 August - 13 September 2015

The Trust is committed to the concept of a universal 麻豆社 – where everyone has the same access, free at the point of use, to the full range of distinctive public services.  We also want to ensure its independence is better protected.  The 麻豆社 is a National broadcaster not a State broadcaster.  If it becomes a State broadcaster then it loses its reason for being. So it needs a more profound form of independence from Government than exists for other public sector organisations – because it needs to be completely fearless about holding that Government to account.

But a strong, independent 麻豆社 also needs strong checks and balances and independent regulation. 

If the 麻豆社 is spending nearly £4 billion of public money, it must feel that it’s properly accountable for that, and it must be properly scrutinised. 

A mission to be universal should not be translated into a licence for the 麻豆社 to try to do everything.  A freedom to develop new online services should not become a freedom to trample on other new online businesses. 

The 麻豆社 needs to keep earning the public’s trust and support.  Effective governance and regulation should help it do that.

Having said all that, we think current system needs reform. 

Not because it is failing altogether.  The public debate tends to focus on what’s gone wrong.  But a lot has gone right since 2007.  The phenomenal success of the 麻豆社 in that period is not divorced from its system of governance. 

The Trust has pushed the 麻豆社 to become more distinctive, more efficient, more attentive in the way it covers a whole range of subjects, from the politics of the devolved Nations to the issues facing rural England. 

It has put in place an effective system of independent editorial regulation. 

It has been willing to halt 麻豆社 plans for over-expansion where there was a potential for damaging market impact – for example around proposed local news video websites, expansion of the sports extra radio service, and through its provisional decision on a 麻豆社 One+1 channel.  

It has also halted plans for over-contraction in some of the most distinctive areas – blocking the closure of Radio 6Music and curbing cuts to local radio budgets.  It has put in place clearer rules of engagement between the 麻豆社 and the industry in a number of places – whether that’s the fair trading rules, the on-demand syndication policy or the operation of the WoCC. 

And it has done all its work publicly, transparently, and with unprecedented levels of public engagement, consultation and research.

I’ve never been convinced that the Trust’s problem is that it is both a cheerleader for and regulator of the 麻豆社.  I’m sure 麻豆社 executives could find a wide range of words to describe the Trust, but I’d be surprised if ‘cheerleader’ was one of them.  It’s not really my style, or part of the Trust’s DNA. 

In practice I think the Trust has tried to act more as the conscience of the organisation.  That works well enough for a lot of the Trust’s day-to-day work and many of its current functions.  But it works less well in any sort of crisis situation, when responsibilities need to be clear and decisions need to be taken quickly.  In those situations, it can be a real problem that the Charter tangles up some of the functions of running the 麻豆社 with those of regulating it, and requires the Trust to try its hand at both simultaneously.

To be clear – I don’t blame the system itself for any of the specific things that have gone wrong.  But by the time something has gone wrong, it’s not always been clear who should be stepping in to sort it out.   And if that hasn’t been clear inside the 麻豆社, the sense of confusion has been amplified when those outside have tried to evaluate, after the fact, where the mistakes were made and who should be held accountable.

So the key to future reform is to get the right sort of separation between those people running the 麻豆社 and those people regulating its activities.  There is a bit of devil in the detail here, so we’re very pleased that the Government have asked David Clementi to conduct an independent analysis of the options.  

Our suggestion to him has been to start with the corporate governance part of this equation: give the 麻豆社 a single Board with a clear mandate to run the organisation, responsibility for all the financial controls and sufficient space to develop and deliver its own strategy.  Once that is in place, it’s clear that there are a range of regulatory functions that the 麻豆社 itself cannot reasonably fulfil.  As ever, we’ve done some research on this.  It shows that the public have a very clear sense of the functions that require some form of independent oversight or regulation, and that neither the 麻豆社 itself nor the Government should be responsible for. Here are a smattering of findings:

Source: Research conducted by ICM between 25 November - 4 December 2014

There are a couple of obvious tasks to add to this list, that are of less interest to the public but highly relevant to the industry – like setting licences for the 麻豆社’s services and making decisions about whether or not to approve new services that have been proposed by the 麻豆社 Board. 

  • Added together they represent a broad set of functions for an independent regulator to pursue:
  • setting licences and standards
  • policing boundaries and market impact
  • hearing complaints and appeals
  • assessing whether the 麻豆社 is fulfilling its public duties and purposes.

It will make sense for any future regulator to build on the work and expertise that the Trust has developed – including the systems we have created of service licences and public value tests, and the existing 麻豆社 editorial guidelines.  All of these can and should evolve and improve.  But they provide a strong base from which to start – and a huge step forward from ten years ago, when all the big decisions were made either by the 麻豆社 itself or by the Government.

I have two final thoughts to offer about the design of any future regulatory system.

First, although I am agnostic on exactly who the regulator should be – whether that’s something called the 麻豆社 Trust, Ofcom, ‘OfBeeb’ or some sort of hybrid – I think it’s very important that the regulation itself should be bespoke to the 麻豆社. 

The regulator will need to assess whether the 麻豆社 has fulfilled its specific public purposes.  It will need to assess whether very particular fair trading requirements have been met.  It will need to make judgements about changes to 麻豆社 services that balance market impact concerns against the wider interests of licence fee payers.  These are not functions that apply in quite the same way to other broadcasters.

Even where there is currently parallel regulation between Ofcom and the Trust – around editorial standards – there is no easy assumption that functions can simply be transferred from one to the other.  Things are slightly more complicated. 

For a start, Trust’s editorial standards have a different scope.  So its regulation of accuracy, for example, applies to all programming, where Ofcom only looks at news.  The Trust regulates all 麻豆社 content – broadcast and online - to exactly the same standards, whereas Ofcom does not regulate broadcasters online content in the same way that they regulate broadcast output. Our figures show that over 130 of the 286 editorial standards cases that the Trust dealt with in 2014 – nearly half of them – would never have been considered by Ofcom under its current remit.

On top of that, when you look at an analysis of the number of breaches in the 麻豆社 system as opposed to the Ofcom system, you can see that something different is going on.

Source: Analysis by Chris Banatvala/Bear Consultancy between 1 January 2007 and 30 June 2015

Even accounting for the greater scope of 麻豆社 regulation and the larger range of 麻豆社 services and programmes involved, it’s pretty clear from these numbers that a different standard of accuracy and impartiality is being applied - unless you believe the 麻豆社 to be woefully inaccurate or biased in comparison to ITV or Channel 4.

This issue needs grappling with, whatever structure is put in place.  It would seem perverse if independent regulation led to a diminution of the standards that are applied to the 麻豆社.

My final thought is about funding and independence. 

Our experience in the summer of another rushed funding settlement, behind closed doors, was a bad one. We are determined to secure, through this Charter Review, firmer protections for the 麻豆社 in any future negotiations.  If the Government gives the 麻豆社 an independent regulator, there is also an opportunity to de-politicise 麻豆社 funding settlements in future, and to make the process fairer and more rigorous, by giving that regulator a formal role to advise Ministers on the right level of funding. 

One piece of analysis included in the material we’re publishing today is a report by PwC on the 麻豆社’s past efficiency record and the scope for future savings. 

It shows that the 麻豆社 has achieved significant sustained efficiencies in recent years and that the 麻豆社’s overheads now compare favourably with regulated industry and public sector bodies. It sets a baseline for future savings targets.  It should help reassure anyone in Government who was still worrying about whether the 麻豆社 was doing enough to make itself more efficient – and of course we will be trooping into Whitehall to talk them through the underlying detail. 

But I’d argue that this is all happening the wrong way around. The Budget decisions have already set the financial framework.  We are presenting this work in order to stop anyone trying to unpick it.

In future, we’d like to see a different model.  In a different walk of life, a regulator like Ofwat does some work every five years to evaluate efficiency levels, investment plans and customer needs in order to determine where to set price caps. 

Why couldn’t a 麻豆社 regulator could conduct its own analysis of the 麻豆社’s efficiency, inflationary pressures, commercial income, affordability and the public’s willingness to pay, in order to provide the Government with some independent advice on what the level of the licence fee should be?  In the same way that the low pay commission make a recommendation about the minimum wage.

I raise this because I think we need to look for ways to take some of the politics and some of the existential angst out of future Charter and funding reviews.  In the current set-up, everything comes to an end pretty much simultaneously – the Charter, the funding deal and the 麻豆社 itself – and the process of review and renewal is left vague and entirely at the Government’s discretion. 

This is only one idea.  A marginally longer Charter just to break the link between future Charter negotiations and fixed term Parliaments is another.  But the Trust’s view is that some form of greater certainty and protection is needed in future, in the interests of those 81% of people who want the 麻豆社 to stay independent of Government and politicians.