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- Ministerial Foreword
- Executive summary
- Introduction
- Chapter 1: Governance
- Chapter 2: Editorial standards and impartiality
- Chapter 3: Complaints
- Chapter 4: Competition and market impact
- Chapter 5: Commercial governance and regulation
- Chapter 6: Diversity
The BBC matters deeply to this country – as it does to people right across the world. At its best it is a peerless media institution that reflects our values, culture and identity. We saw with its coverage of the Coronation, its reporting on the conflict in Ukraine and the hosting of Eurovision, its incomparable capacity to inform, educate and entertain.
The role of public service broadcasting and a free press has never been more significant than it is today. We are all living in an era of fake news, where social media creates echo chambers of opinion, presents individual experience as established fact and mis and disinformation go unchallenged. The public expects, rightly, the BBC to be an exemplar of impartiality, accuracy and diversity of opinion. An organisation that trusts, respects and serves the entire nation. One that is held to the highest possible standards.
The unique place the BBC holds in our national life is crystalised in the Royal Charter. That Charter forms the constitutional basis for the BBC and is not only the framework for how the corporation is governed, it guarantees and safeguards its independence.
This Mid-Term Review is an unmissable opportunity to pause and examine the scale of the changes introduced at the last Charter Review in 2016. To take stock, at the Charter’s half-way point, and evaluate the effectiveness of the BBC’s governance and regulation. In answering that question, this review considers a range of issues from the performance of the BBC Board and the effectiveness of the regulation by Ofcom to whether the current system of governance and oversight is fit for the future.
The Review unpacks, in detail, the myriad challenges facing the corporation and the opportunities the BBC now has to grow and sustain public trust in decision-making, impartiality and its complaints handling processes. Our recommendations are unambiguous that there is scope for material improvements across a variety of areas.
A major challenge for the BBC continues to be impartiality. It strikes at the very core of the BBC’s remit and the public expects the organisation to embody this value. But, as this review makes clear, audience perception that the BBC is not sufficiently impartial is an ongoing issue and, within a culture of continuous improvement, more can be done.
1. The BBC is a unique cultural institution that has provided the model for public service broadcasting across the world and continues to sit at the heart of the UK’s thriving media sector. It has been informing, educating and entertaining millions everyday, both in the UK and globally, for over one hundred years. Over that hundred years the BBC has consistently adapted to the changing world around it, and in several areas has actively driven change. But the rate of change across the media sector is posing new, and stretching, challenges for the BBC by fundamentally changing the context in which it has to operate, with evolving audience habits, changing technology and an increasingly globalised and competitive market.
2. Following the 2015/16 Charter Review, new BBC governance and regulatory arrangements were established: the governance of the BBC would be conducted by a new unitary Board, and regulation would pass to Ofcom, the BBC’s first independent, external regulator. Given the extent of these changes, the Charter provided for the government to conduct a Mid-Term Review (MTR). The MTR has therefore been an opportunity to examine the effectiveness of the governance of the BBC, and the regulatory framework designed to ensure the BBC delivers on its responsibilities, focusing on the issues which matter most to audiences and stakeholders. It has identified ways in which both the BBC and Ofcom need to make meaningful and effective change to the BBC’s governance and regulation to ensure the organisation is delivering for licence fee payers: for example, strengthening the BBC’s oversight of its complaints process to ensure audiences have trust that their complaints will be dealt with in a sufficiently independent way, and giving Ofcom new powers to regulate elements of the BBC’s online public service content.
3. In the period since the current Charter was adopted, there have also been challenging moments for the BBC, such as Ofcom independently finding the BBC made significant editorial failings over its reporting of the anti-semitic attack on Jewish students travelling on a bus in London and a finding of a “culture of defensiveness” at the BBC by Sir Nicholas Serota. Strong governance and regulatory arrangements are crucial to the BBC’s success in retaining trust, maximising future opportunities, and dealing with future challenges. Over the remainder of this Charter period the BBC and Ofcom should also both consider how governance and regulation can continue to be enhanced in order to ensure the best outcomes are delivered for audiences.
4. The Terms of Reference for the MTR were published in May 2022 (included at Annex A), and set out the 6 themes of the MTR:
•editorial standards and impartiality
•complaints
25. The BBC is a unique cultural institution that has provided the model for public service broadcasting across the world. Above even British sports and universities, the BBC remains the UK’s best-known cultural export. Closer to home, its services are widely used, with 4 in 5 adults using the BBC weekly. The BBC’s content serves to inform, educate and entertain millions everyday. As a nation, we share a lot of our time with the BBC, with UK adults spending an average of 16.68 hours a week with its services.
26. Beyond these rhythms of our own personal daily lives, the BBC holds a central place in our shared national life. It continues to bring the UK together - both in celebration and in loss - through its first-rate broadcasting of moments of national significance: from the Commonwealth Games and the Coronation of His Majesty King Charles III, to Covid-19 updates and the State Funeral of Her Majesty Queen Elizabeth II. The BBC also united record audiences across the world this year by hosting the Eurovision Song Contest in Liverpool on behalf of Ukraine.
27. As Ofcom noted in its 2021 report ‘Small Screen: Big Debate: Recommendations to government on the Future of Public Service Media’, the last decade has seen rapid change in the broadcast industry. This has been driven by wider global trends that are fundamentally changing the context in which the BBC has to operate. Audience habits and technologies have evolved, and competition has increased as global streamers have made their presence felt in UK markets. In 2022, less than half of audio-visual viewing went to live TV services. The main beneficiaries of this change have been Video-on-Demand (VoD) services, with over two-thirds of UK households now using a VoD service such as Netflix, Amazon Prime Video or Disney Plus (although household take-up of subscription VoD services appears to have reached a plateau). This means our PSBs, including the BBC, are now competing directly with streamers who are able to leverage significant financial resources arising from their global scale. However, given the proliferation of choice, this is an intensely competitive market for all players and there is increasing evidence of viewers shopping around to find the services that best meet their needs.
28. The cumulative effect of these trends presents difficult questions about how our PSBs can continue to best deliver for UK audiences long into the future. The government set out its vision for the broadcasting sector, and the steps it will take to support our system of public service broadcasting in our ‘Up Next’ White Paper. This includes a commitment to legislate for reforms through a Media Bill which was published in draft in March 2023. Public service broadcasting is of course a bigger concept than the BBC alone, but we want the BBC to continue to be at the centre of public service broadcasting’s evolution for our digital and globalised age.
Background
42. In his independent review ‘A Review of the Governance and Regulation of the BBC’, published in 2016 to inform the development of the current Charter, Sir David Clementi defined governance as being “about how an entity organises itself in its boards, committees and other decision-making bodies, setting strategic objectives and budgets for the organisation, seeking to be effective and efficient, as well as accountable to those it serves and those to whom it is responsible.” A strong governance framework is crucial for the success of any organisation. Sir David Clementi’s review looked at different models of governance and recommended how the BBC’s then governance framework could be changed. Governance is “how an entity organises itself in its boards, committees and other decision-making bodies, setting strategic objectives and budgets for the organisation, seeking to be effective and efficient, as well as accountable to those it serves and those to whom it is responsible.” 43. Before that point, the BBC’s governance was based on a Trust model with a two-tier Board. Sir David Clementi concluded that this model prevented clear responsibilities and lines of accountability, led to duplication of effort, and having both governance responsibilities for the BBC and regulatory responsibilities was not considered to be best practice. He noted that, “it is for this reason that some argue that the Trust is “both cheerleader and regulator””. 44. On the basis of his recommendations, the current Charter put into place a single unitary board, with collective responsibility for the BBC. The Board is responsible for ensuring the BBC fulfils its Mission and those Public Purposes, and must uphold and protect the independence of the BBC including by acting in the public interest. The Board consists of a majority of non-executive members. The government appoints 5 of the 10 non-executive members: the Chair and one NEM for each of the nations of the UK. 45. The Charter also requires the BBC to implement generally accepted principles of good corporate governance where appropriate. Ofcom has taken on the role of sole independent regulator. 46. Given the scale of these changes, we have looked at whether the unitary board has solved Sir David Clementi’s concerns and whether any further changes are required to ensure maximum ongoing effectiveness. We received the vast majority of feedback from those close to the day to day governance of the BBC under both the current and previous models. Whilst they were given the opportunity to comment on specific elements of the BBC’s governance, other stakeholders have more interest in audience needs and the BBC’s impact on the wider market rather than the BBC’s governance structure. We note that the review was conducted during the tenure of 2 different chairs.
The implementation and impact of the new unitary board structure
What we learnt 47. During the evidence gathering phase of this review, we received considerable feedback that the unitary board structure has addressed the key concerns identified by Sir David Clementi’s review. It has created clear roles and responsibilities, lines of accountability and a culture of constructive challenge. It is widely understood that the Board is responsible for holding the BBC executive to account without involvement in day to day operational delivery, whilst Ofcom is responsible for regulation rather than the BBC Trust causing confusion by having some of its own regulatory responsibilities. 48. Feedback suggested that the BBC’s sub-committee structure works effectively, in particular that the Audit and Risk Committee performs well. The Board has set up a delegation process – setting out what issues are matters that are reserved for the Board and where decisions can be made at other levels within the organisation. 49. We also heard that the Board receives a significant amount of information, for example a range of audience, financial, operational and editorial metrics and objectives, and that it receives the right information in order to help it make suitably informed decisions. We heard no concerns about the information flow between the wider Corporation and the Board, nor the quality of the information provided. 50. Sir David Clementi’s review set out a number of expectations for the new unitary board’s reporting responsibilities, to ensure the BBC can be adequately held to account. These include a report from key sub-committees in each year’s Annual Report and Accounts, as well as reports about specific activities and issues. The BBC’s Annual Report and Accounts for each year since 2017/18 include reporting on all of these issues, detailing their particular areas of focus, key decisions and reflections on the reporting year. Also included is the BBC’s performance against the Operating Framework and Operating Licence, editorial and complaints issues, and competition and fair trading issues, again in line with Sir David Clementi’s proposals and the requirements of the Charter. The government’s response 51. The evidence shows that the unitary board model has been implemented effectively, and is delivering the leadership required of a large and complex organisation. Moreover, the model overcomes the challenges presented by the previous model. In particular, it is now clear what members of the Board are responsible for, and what they are not. 1.1 We conclude that the unitary board model has been effectively implemented and is working well. Issues raised during the course of the MTR can be addressed within the current governance framework. 52. While we heard that the BBC Board receives the right information, given how critical that is in order to make effective and timely decisions, it is important that the Board continues to keep this under regular review, as part of its usual business activity, to ensure the current arrangements continue to work well. 1.2 We recommend that the Board keeps the information it receives under regular review so that it continues to maximise its ability to make decisions on the right balance of information. 53. It is important that the Board’s sub-committees have the specific responsibilities and expertise to enable a detailed oversight of particular areas of the BBC’s performance, and can identify, resolve or escalate problems to the Board as necessary. However, we discuss the effectiveness of the EGSC, the sub-committee responsible for developing, and ensuring compliance with, the BBC’s editorial guidelines, in later chapters of this report, as we have identified some specific recommendations for improvement in how this committee functions. 54. Overall, we conclude that the Board is effectively fulfilling the reporting responsibilities set out in article 37 of the Charter, which reflect recommendations made by Sir David Clementi’s review. Questions about the BBC’s transparency in specific areas, including the BBC’s transparency about service changes for licence fee payers and relating to the complaints process, are addressed elsewhere in this review. 1.3 We conclude that the sub-committee structure adds value, with clear delegated powers from the Board, and the vast majority of the committees are delivering effectively. 1.4 We conclude that the Board is fulfilling its reporting responsibilities effectively.
Compliance with best practice
What we learnt 55. Although the BBC is not a listed company, it has opted to fulfil its Charter responsibilities to implement generally accepted principles of good corporate governance where appropriate by following the appropriate provisions of the Financial Reporting Council’sUK Corporate Governance Code (“the Code”). We have seen a detailed explanation of how the BBC complies with the Code. It is also clear from the BBC’s Annual Report and Accounts each year why non-compliance is appropriate in specific areas, including those relating to shareholder relationships or where the Code is overridden by the Charter in areas such as the appointment and composition of the Board, and we have not identified any concerns about the BBC’s reasoning when explaining instances of non-compliance. Feedback during the evidence gathering phase of the review provided strong evidence of compliance in a number of specific areas: regular Board effectiveness reviews (discussed in more detail below). performance reviews of the Non-Executive Members (NEMs) conducted by the Chair, including to discuss their roles as Board sub-committee Chairs. a culture of frankness, debate and constructive challenge. an effective Audit and Risk Committee, as reflected above. Feedback during the evidence gathering phase of the review provided strong evidence of compliance in a number of specific areas: regular Board effectiveness reviews (discussed in more detail below) performance reviews of the Non-Executive Members (NEMs) conducted by the Chair, including to discuss their roles as Board sub-committee Chairs a culture of frankness, debate and constructive challenge an effective Audit and Risk Committee, as reflected above The government’s response 56. It is important to see evidence of compliance with the Code, and a clear explanation on an annual basis of where and why the Board does not see compliance as appropriate. This approach to compliance should form a strong foundation for ongoing governance effectiveness, which is crucial for such a complex organisation supported by significant amounts of public funding.
Background
75. Impartiality is core to the BBC’s role to effectively inform and educate audiences, and it is necessary that the BBC provides impartial news and information to help people understand and engage with the world around them. The BBC’s impartiality is at the heart of why the BBC is valued both in the UK and globally, and in an era of increasing risks around the prevalence of disinformation, the BBC has been, and should continue to be, a beacon that sets standards to which others can aspire. The current Charter introduced a clear Mission for the BBC: to act in the public interest, serving all audiences through the provision of impartial, high-quality and distinctive output and services which inform, educate and entertain. Its first Public Purpose is to “provide impartial news and information to help people understand and engage with the world around them: the BBC should provide duly accurate and impartial news, current affairs and factual programming”. The MTR has therefore considered how the current governance and regulatory arrangements support the BBC in having the highest possible editorial standards and in how it prioritises, and delivers, its responsibilities on impartiality. The BBC’s first Public Purpose is to “provide impartial news and information to help people understand and engage with the world around them: the BBC should provide duly accurate and impartial news, current affairs and factual programming.” The BBC Board’s responsibilities 76. The BBC Board has specific responsibilities in respect of impartiality. The Charter introduced a requirement for the Board to ensure that the BBC fulfils its Mission and promotes the Public Purposes. More recently, the government agreed changes with the BBC to the Framework Agreement in May 2022 to give the Board stronger and more detailed legally-binding responsibilities relating to the BBC’s impartiality. Ofcom’s responsibilities 77. Ofcom has responsibility for regulating many areas of the BBC’s content standards, including the due impartiality of news and current affairs. Ofcom does this through the Broadcasting Code, which sets out the standards it requires all broadcasters to meet. Ofcom also has to publish an annual report that includes an assessment of the BBC’s compliance with its impartiality responsibilities set out in the Charter. It must publish at least 2 more reviews on the extent to which the BBC is fulfilling its Mission and promoting each of the Public Purposes, and addressing any specific issues of concern identified by Ofcom, during the Charter period. Ofcom must also, where appropriate, carry out and publish additional reviews addressing any specific issue of concern identified by Ofcom relating to the activities of the BBC that are subject to Ofcom’s regulation. The BBC’s Editorial Guidelines 78. The BBC also has its own Editorial Guidelines, which incorporate the requirements of the Broadcasting Code, but which differ by going further in some areas. They require due impartiality across all its output. Recent developments 79. On 29 October 2021, the BBC published a review led by Sir Nicholas Serota, ‘The Serota Review - BBC editorial processes, governance, and culture’, following the Lord Dyson Report into the Bashir incident. This examined the BBC’s editorial oversight, the robustness and independence of whistle-blowing processes and the wider culture within the organisation. On the same day, the BBC published a 10-point action plan on editorial standards and impartiality which incorporated the Corporation’s response to the review. In July 2022, the BBC published a progress update on the 10-point action plan.
Impartiality as a concept, and the BBC’s commitment to it
What we learnt 80. We received only limited feedback during the evidence gathering phase of the MTR on the concept of “due impartiality”. There was some feedback that the concept is not fit for purpose and requires fundamental review, although we did hear that it is a complex concept, and the complexity of the concept is growing as the way people engage with news is evolving. 81. Alongside publication of its report ‘How Ofcom regulates the BBC’ in June 2022, Ofcom published research conducted by Jigsaw, an independent research organisation, on the drivers of perceptions of due impartiality, exploring audience attitudes towards the due impartiality of BBC services in the context of the wider news landscape. The report concluded that the BBC is operating in a “complex and demanding news landscape” as audiences have access to news in more ways than ever before and a charged cultural climate and divided opinions add a further layer of complexity, and it is not just content but also several “wider non-programming contextual factors” that influence perceptions of due impartiality. The report also concluded that “BBC TV, radio and online news are judged differently by audiences in light of the distinct roles they play. On due impartiality, BBC TV is judged more stringently by audiences compared to radio and online, and is expected to satisfy a wider range of audiences and represent the whole of the UK, in contrast with other TV broadcast brands which are seen as better able to appeal to a specific audience.” 82. In terms of the BBC’s performance, we heard some concerns that the BBC has made significant failings, such as pro-EU bias over a number of years, and more recently concerns that the creation of the BBC’s new Verify unit has resulted in legitimate debate being inaccurately assessed as disinformation. We also heard concerns that the BBC does not accept the significance of those failings, particularly in relation to coverage of the UK’s exit from the EU. We also heard evidence that the BBC, including the Board, puts adherence to the Corporation’s impartiality responsibilities, and its own editorial standards, at the heart of its work, and this is driven at the most senior levels. That commitment is evidenced by impartiality being one of the Director General’s 4 strategic priorities. The BBC’s Editorial Guidelines also outline that the BBC’s commitment to due impartiality is “fundamental to our reputation, our values and the trust of audiences”. 83. We heard in the course of evidence gathering that delivery of the 10-point action plan and the ongoing actions to embed the necessary changes in business as usual within the BBC is regularly monitored by the BBC Board, as well as the EGSC - a sub-committee of the BBC Board responsible for developing, and ensuring compliance with, the BBC’s editorial guidelines. The government’s response 84. The impartiality of the BBC, as a publicly funded broadcaster, goes to the heart of the contract between the Corporation and all the licence fee payers whom it serves. In addition to its responsibilities to UK audiences, the BBC’s third Public Purpose is to reflect the United Kingdom, its culture and values to the world through high-quality news coverage to international audiences, firmly based on British values of accuracy, impartiality, and fairness. Whilst there are many different factors that influence an individual’s perception beyond the content in question, it can never be the BBC’s role to judge, or appear to judge, the diverse values of people from across the country it serves, even if achieving impartiality is complex and challenging. In an era of disinformation, public service broadcasting that provides accurate, trustworthy and impartial reporting is more important than ever. The BBC has been, and should continue to be, a beacon setting the highest possible standards to which others can aspire, and it must hold itself to these standards. Whilst the BBC has assured us that it puts impartiality at the heart of its activities, we are clear that both Ofcom and the BBC must continue to monitor their activity and strive to effectively meet the challenge. We make a number of significant recommendations for change later in this chapter and, importantly, to how the BBC handles complaints in the next chapter. Whilst the BBC has assured us that it puts impartiality at the heart of its activities, we are clear that both Ofcom and the BBC must continue to monitor their activity and strive to effectively meet the challenge. 2.1 The impartiality of the BBC, as a publicly funded broadcaster, goes to the heart of the contract between the Corporation and all the licence fee payers whom it serves. 2.2 We recognise that the concept of impartiality is complex. We conclude that there is clear evidence that adherence to impartiality and editorial standards is now at the heart of the BBC’s priorities, but also that the BBC and Ofcom need to continue to strive to fulfil their responsibilities.
The BBC’s performance and ongoing work
What we learnt 85. We received some feedback expressing concern about the BBC’s performance on impartiality. This included a suggestion for an external impartiality unit to improve the BBC’s performance, overseen by an Ombudsman for impartiality who would report directly to Parliament through DCMS. Other evidence was less concerned. In its fifth annual report on the BBC, Ofcom concluded that the BBC had broadly met the standards Ofcom expect of broadcasters in 2021/22. 86. In its sixth and most recent annual report on the BBC’s performance, pointed to having completed 3 standards investigations in 2022/23 – 2 concerned a broadcast in 2021. All 3 were examined against the BBC’s obligations in respect of due impartiality (amongst other obligations), with 1 breach recorded and 2 instances where Ofcom concluded that there was no breach of impartiality rules. However, Ofcom concluded that in 1 of those 2 instances, the BBC had made a serious editorial misjudgement in its news report broadcast on BBC One about an antisemitic attack on Jewish students on a bus in London. At the same time, Ofcom also published an opinion in November 2022 in response to a BBC News online article about that attack. This stated that the BBC had failed to observe its Editorial Guidelines on due impartiality and due accuracy in not updating the article to reflect a dispute about its interpretation of audio from inside the bus for almost 8 weeks[footnote 5]. 87. There are contrasting views and evidence for changes in trust, with some surveys showing a decline[footnote 6] and others a recent increase[footnote 7]. While acknowledging that audience attitudes on due impartiality continue to be driven by multiple factors, Ofcom also concluded that the BBC must continue to focus on addressing audience perceptions of impartiality, stating in June 2022 that the BBC’s impartiality is a “key area of concern” among audiences and “one where they consistently rate it less favourably than trust and accuracy”. Ofcom concluded that the BBC should address the apparent disparity between audience attitudes to its impartiality and its good record of compliance with the due impartiality broadcasting rules. Ofcom also stated the BBC would need to find creative ways of demonstrating its approach and commitment to due impartiality. Ofcom confirmed again in November 2022 that impartiality was still consistently rated lower for the BBC website/app and BBC TV than trust and accuracy, based on subsequent research. More recently, Ofcom concluded that whilst people in the UK value the role the BBC plays in news provision, impartiality is one of the areas where the BBC is perceived less favourably compared to other aspects of news delivery, with perceptions of impartiality not changing over the past year. Ofcom noted that whilst it recognises that changing audience perceptions of the BBC’s due impartiality is a complex process, to maintain audience trust, a focus on impartiality is critical and it is important the BBC retains its focus on this area of work. 88. In terms of practical developments, the BBC has now completed implementation of its 10-point action plan. This includes publication of its first external thematic review in January 2023, and announcement of commencement of the next review in May 2023. By the time of Ofcom’s fifth annual report on the BBC in November 2022, the BBC had also improved its transparency by publishing the reasoning behind its decisions to not uphold complaints on due impartiality and due accuracy that reached the final stage of its process, and Ofcom’s sixth and most recent annual report noted the BBC is also working to deepen audiences’ trust in its news provision by providing more transparency about how it reports the news, with innovations such as BBC Verify and setting out its approach to Generative AI. 89. We heard from a wider range of stakeholders that the 10 point-action plan was a welcome start and a step in the right direction. The progress update published in July 2022 was however considered to lack detail and specificity to allow audiences to properly judge progress. Stakeholders suggested that the BBC needed to consider publishing regular public updates and to emphasise the BBC’s ongoing commitment to the 10-point action plan going forward. We also heard limited evidence that the 10-point action is too little too late, and its commitments are not significant enough to achieve real change. 90. We received specific feedback about specific elements of the 10-point action plan, particularly the BBC’s implementation of the internal content reviews. The BBC already uses audience research to inform decisions about which individual programmes to review, and detailed feedback from audiences is provided to the programme makers as part of those reviews. However, we also heard that there needed to be audience engagement in the BBC’s internal content reviews to reduce the risk of subjective outcomes in favour of the BBC. Stakeholder feedback also suggested that the internal content reviews could be published in the same way as the external thematic reviews. There were limited concerns raised about how the external thematic reviews were actually being undertaken. We also heard a suggestion that impartiality training provided to staff and freelancers should be published to improve audience understanding of, and trust in, the BBC’s work, particularly around how it was defining and addressing impartiality. The government’s response 91. It is right that the BBC remains operationally and editorially independent of government and that the government has no say on the BBC’s day to day decisions, including on the content it shows. 92. The government welcomed the BBC’s 10-point action plan when it was published, and we said at the time that the BBC needed to demonstrate clear and continued progress on this plan. We also welcomed the progress set out in July 2022. For example, the appointment of 2 external Editorial Advisers in July 2022 as part of the 10-point action plan implementation, to provide additional editorial advice and an external perspective, is a valuable way to support the EGSC in delivering its vital responsibilities. These external advisers must be empowered to provide effective challenge, including by ensuring they can access all the information they consider necessary, and if needed they should be given additional powers beyond those being given to the EGSC as a whole (discussed in Chapter 3). 93. It remains the government’s conclusion that we will want to see clear and substantive evidence that the 10-point action plan has had sufficient, long-term concrete impact at Charter Review. This is also important to allow Ofcom and stakeholders to consider the BBC’s performance. We note that the BBC has now implemented all of the 10-point action plan, that the BBC has now dedicated permanent resource to ensure delivery of impartiality (the 10-point action plan has now been embedded into business as usual activity), and that it has said it intends to consider what additional steps are necessary to further advance improvements and cultural change. We will continue to monitor the BBC’s adherence to the 10-point action plan closely. 2.3 We recommend that the Board ensures detailed, timely reporting of progress against the 10-point action plan’s commitments, with clear deadlines and milestones, impact, and more detail on how it intends to respond to Ofcom’s challenge that the BBC needs to maintain its focus on impartiality to maintain audience trust, and how commitments are being embedded in long-term plans. We intend to assess progress during the next Charter Review. 2.4 We also recommend that the effectiveness of the EGSC external Editorial Advisers is kept under review by the BBC to ensure they continue to have sufficient powers to fulfil their responsibilities, and that this is reported on regularly as part of the BBC’s wider work to provide updates on its impartiality efforts. 94. We do not think there is sufficient evidence to support the establishment of an external, independent impartiality unit at this time. It would also have the potential to duplicate the role of Ofcom and complicate the current regulatory framework. This would undermine the principle of clear roles and responsibilities that Sir David Clementi considered important when recommending that Ofcom take on BBC regulation, rather than the creation of a new regulator, and that as a result underpin the current Charter. 95. However, we do consider there must be sufficient separation between those responsible for the impartiality of the BBC’s output and those responsible for addressing complaints about the BBC’s impartiality. This is covered in the chapter on complaints. We note the BBC now has dedicated permanent resource and ongoing oversight by EGSC on behalf of the Board. 2.5 We recommend that the BBC continues to ensure it has the right governance structures to drive its work on implementation of the 10-point action plan and long-term continuous improvement. We will assess whether this has been the case as part of Charter Review. 96. Audiences also need to be satisfied that the BBC is implementing its commitments, so that they have trust that the BBC is committed to continuous long-term improvement. We propose the following recommendations to improve the way the BBC engages audiences on issues around impartiality. Audiences need to be satisfied that the BBC is implementing its commitments, so that they have trust that the BBC is committed to continuous long-term improvement.
Background
117. The feedback of licence-fee payers is invaluable in helping the BBC both to understand what its audiences care about and how to make its services better. Editorial complaints are an important form of audience feedback and, in recognition of this, Sir David Clementi assessed the effectiveness of the BBC’s processes for handling complaints as part of his 2016 review of the BBC’s governance and regulation. 118. Sir David Clementi concluded that the pre-2017 process was complicated and inefficient. This was because it was a dual complaints system, involving both the BBC and Ofcom, who had overlapping remits. Ofcom could hear complaints against the BBC, subject to certain exclusions of which the most important is editorial complaints about due accuracy and due impartiality. Whereas the BBC Trust could investigate any complaint, even if it was within Ofcom’s remit. 119. Sir David set out that any new system should meet the following criteria: a simpler, clearer and proportionate complaints system for the BBC, which offers value for money and removes the current dual regulatory system an appeals system that is independent of the BBC a complaints system that is able to prioritise and resolve the most serious matters, with appropriate ‘step-in’ rights for the regulator a complaints system that maintains the confidence of complainants, is easily accessible by them, and deals with them fairly in a way that holds the BBC publicly accountable a complaints system that continues to inform programme makers 120. Sir David found a broad consensus for simplifying the process. Complaints should be dealt with by the BBC in the first instance, with complainants having the right of appeal beyond the BBC to an independent body in Ofcom. This system has become known as ‘BBC First’. The BBC’s responsibilities 121. In response to Sir David Clementi’s review, the current Charter formally introduced the principle of BBC First in 2017, making the BBC unique among broadcasters by giving it the opportunity, and indeed responsibility, to resolve complaints about its services first, before their consideration by Ofcom. Article 56 of the Charter also outlines the broader principles the BBC must adhere to in the establishment of its framework for handling and resolving complaints, informed by Sir David Clementi’s criteria. 122. The Framework Agreement further specifies that the BBC must publish information about its complaints handling in a form and at intervals determined by Ofcom. Ofcom sets these requirements in its ‘Complaints Handling Determinations’ and increased what the BBC should publish in both 2020 and 2022. The BBC’s governance of complaints 123. Oversight of the BBC Executive’s establishment of its complaints framework is provided by the BBC Board. Article 20 of the Charter sets out that the Board must ensure the BBC fulfils its Mission and promotes the Public Purposes by, among other things, setting a framework within which the BBC must handle complaints The Editorial Guidelines and Standards Committee (EGSC) 124. More detailed governance of the process is provided by the EGSC. As set out in previous chapters, the EGSC is a subcommittee of the Board with responsibility for overseeing the BBC’s editorial standards and compliance with them across its services. The EGSC’s Terms of Reference, developed by the BBC, specify that the members of the Committee are appointed by the Board and must consist of at least 3 non-executive directors, one of whom should be the chair. They are joined by the Director-General and the CEO of News and Current Affairs, and the 2 external Editorial Advisers appointed following the Serota Review to provide an external perspective. This means that governance of the complaints process is provided by some members who are independent of the Executive, and some who are independent of the BBC. 125. The Terms of Reference give the Committee specific responsibilities to both ensure that the BBC complies with its complaints framework, and report to the Board on the effectiveness of the framework with recommendations for any proposed changes. The BBC First Process 126. Beyond the obligations set out above, the Charter and the Framework Agreement allow the BBC to define the details of how its complaints process works in practice. The BBC sets this out in full in its Complaints Framework and Procedures. Figure 1 summarises the process. Figure 1: The BBC First process for resolving editorial complaints 127. The MTR has considered how the current governance and regulatory arrangements support the BBC in delivering a process for handling and resolving editorial complaints that is of the highest possible standard. The Executive Complaints Unit (ECU) 128. The ECU, which provides the BBC’s final substantive response to a complaint, is an internal team, recruited on the basis of proven editorial judgement, experience of complaints handling, and informed engagement with issues around editorial standards. It investigates alleged instances of non-compliance with the BBC’s editorial guidelines and standards raised through editorial complaints. 129. The governance arrangements around the ECU aim to ensure it is able to make complaints decisions independently and impartially of programme-makers, and of the wider organisation’s reputational interests. The ECU is structurally separated from output teams. New members of the unit do not work on investigations about their former programming areas for a certain period of time. When the ECU finds a breach of standards, this is reported to the manager of the output area, and to the EGSC. The ECU operates a devolved authority from the Director-General, as editor-in-chief, and only the Director General can overturn or intervene in ECU decisions. Ofcom’s role in the regulation of complaints 130. When exploring options for creating a point of appeal in complaints handling that would be independent of the BBC, Sir David Clementi concluded that Ofcom should become the final arbiter. This - as opposed to creating a new body independent of both the BBC and Ofcom - was felt to be simpler, consolidating all regulation within Ofcom. Ofcom already had the necessary expertise and legitimacy to undertake this function. Sir David Clementi found that this would help to strengthen audience confidence in the wider complaints process. 131. Article 56 of the Charter specifies that Ofcom will normally consider a complaint only after the complaint has been made to the BBC. Ofcom assess complaints against the Broadcasting Code, the standards against which it regulates all UK broadcasters, including the BBC. Section 57 of the Framework Agreement provides more detail about Ofcom’s role in the complaints process.
The BBC First process
What we learnt 132. The quantitative evidence suggests that BBC First delivers fair complaints decisions that withstand scrutiny from the regulator. In 2021/22, Ofcom considered 160 complaints which complainants chose to escalate after having completed Stages 1 and 2. Of the 160 cases, Ofcom upheld one complaint that the ECU had not. In the previous year (2020/21), Ofcom did not consider that any of the 185 cases escalated to it raised issues under the Broadcasting Code, and it therefore did not open further investigations. This data suggests that the regulator agrees with the vast majority of the BBC’s complaints decisions. 133. The majority of stakeholders who provided evidence through the MTR wanted to see the principle of BBC First maintained. Stakeholders explained that the current process provides: a means for licence-fee payers to hold the BBC directly to account; fulsome responses from those best placed to explain editorial decision-making (that is, the BBC itself); and a clear feedback loop to enable the BBC to learn from issues raised in complaints. 134. However, stakeholders also argued that, given the unique position the BBC holds in our public life, the BBC’s complaints process should be a gold standard. Stakeholders therefore felt that key improvements should be made to BBC First, and the themes of that feedback has informed this chapter. 135. In June 2022, following a review of the BBC’s complaints handling as part of its review of BBC regulation, Ofcom concluded that the BBC First model appropriately reflects the unique relationship between the BBC and its licence-fee payers. However, Ofcom recommended that: the BBC should be more transparent about how it reaches its decisions in its editorial complaints handling; and the BBC should make the process clearer and easier for audiences to navigate. 136. In parallel to the MTR, Ofcom committed to review BBC First again before Charter Renewal, in part to assess how any improvements made to the process by the BBC had impacted the experiences of complainants. 137. In November 2022, the BBC responded to Ofcom’s findings by announcing key commitments to improving BBC First, including: making the complaints web pages easier to find giving greater prominence to how to make an editorial complaint video content explaining how the BBC handles complaints, and how audience feedback is shared across the Corporation ensuring the next step is clearly flagged in all responses to complainants improving the quality of editorial teams’ responses to complaints at Stage 1B through an internal comms programme, templated guidance, and compliance secured through BBC leaders improving guidance to editorial teams to boost the speed of replies at Stage 1B 138. There were, however, some stakeholders who were critical about BBC First. They considered that BBC First is not delivering a fair means of resolving complaints for audiences because both the BBC’s process at Stage 2 and Ofcom’s process at Stage 3 are unfit for purpose. These stakeholders argued that the ECU is unsuitable for hearing complaints because it: sits in private will not hear oral evidence is staffed by BBC employees and is therefore not independent of the BBC lacks an independent chair has no appeals process is not required to act fairly has no teeth to order remedial actions where breaches have been identified 139. They felt that Ofcom should not handle appeals because it assesses complaints against a different criteria (the Broadcasting Code as opposed to the BBC’s Editorial Guidelines and Standards), and opens a low number of investigations, suggesting its default is to agree with the BBC’s findings as opposed to acting in the interests of complainants. These stakeholders said it is unjustifiable that the BBC should not be subject to an independent system of handling complaints, given its licence fee funding, and wanted to see an independent tribunal process - external to both the BBC and Ofcom - replace Stages 2 and 3. The government’s response 140. To meet its Charter obligations to serve all audiences, the BBC must listen to what its audiences think, and seek to understand their views and priorities. The complaints process is therefore an essential tool in the BBC’s wider relationship building with licence fee payers. This is particularly important given there was evidence to suggest that, in 2022, trust in the BBC as a news source was declining[footnote 9] (although data from 2023 suggests that trust has started to increase). For this reason, it is critical that the right model for handling complaints is in place. The BBC must listen to what its audiences think, and seek to understand their views and priorities. The complaints process is therefore an essential tool in the BBC’s wider relationship building with licence fee payers 141. When considered in the round, the evidence received through the MTR suggests the BBC First model continues to broadly deliver the outcomes it was intended by the Charter. We therefore conclude that fundamental changes to the BBC First system are not needed at this point in time, though the government will review this again at Charter Review. 142. However, we have received evidence pointing to specific areas where BBC First could be improved - this is set out in the sections that follow. The work already undertaken by both Ofcom and the BBC to improve complainants’ experiences of complaining to the BBC is therefore welcome. We want to build on that work to address the full range of concerns heard through the MTR. In particular, we have identified the need to increase complainants’ confidence in BBC First, improve the clarity of the process, and continue to build a research picture of complainants’ experiences. We therefore set out a number of recommendations in the remainder of this chapter. Their implementation is critical if the BBC is to continue to enjoy the relative privilege of BBC First. 3.1 We will review the complaints process at Charter Review and consult on alternative models to BBC First. We will invite the cooperation of both the BBC and Ofcom in this process. 143. Finally, the concerns of some stakeholders about the unsuitability of Stages 2 and 3 point to a lack of confidence in BBC First that the BBC can and should do more to address. Our proposals to address these concerns are in the sections on increasing independent and external scrutiny of complaints handling and Ofcom’s role.
Increasing Independent and External Scrutiny of Complaints Handling
What we learnt 144. While the majority of stakeholders reported that BBC First has clear benefits, we also heard limited concern about the appropriateness of the model. Some feedback highlighted that the approach to the reporting line of the ECU, where it reports to the role responsible for editorial policy, had the potential to compromise perceptions of independence. A small number of stakeholders also said the relatively low number of editorial complaints either upheld or partly upheld by the BBC was evidence that the ECU was too close to the BBC, and working ultimately to protect the Corporation as opposed to genuinely learning from complaints. 145. Ultimately, these stakeholders did not support the principle of BBC First but, in the event that the government continued to support it, they made a number of recommendations to reform the ECU and Stage 2, including: the ECU’s investigations should be made in public to ensure that its decision-making is transparent to licence fee payers complainants should be able to give oral evidence to the ECU. This would allow for more fulsome evidence than the current written word limit the ECU should be given powers to award compensation in favour of the aggrieved complainant to ensure there are sufficient consequences for breaches the ECU should be staffed by a minority of BBC employees. External employees will ensure a greater separation between the BBC and its complaints handling 146. We heard some concerns around the ability of the EGSC to hold the ECU and the BBC Executive accountable over complaints handling. We heard that the EGSC is limited in its ability to oversee BBC First, and suggestions that EGSC did not always have access to the right information to allow members to closely engage with issues arising out of complaints. We also heard suggestions that EGSC lacked the ability to direct action to ensure that issues arising out of complaints handling are responded to appropriately within the organisation. The government’s response 147. It is understandable that the quantitative data showing that a relatively small number of editorial complaints are upheld at Stage 2 has raised questions for some stakeholders around how complaints are handled. However, there is not a straightforward correlation between the total number of complaints received by the BBC annually and the number of complaints that are upheld at Stage 2 by the ECU. This is because BBC First is a multi-stage, complainant-led process: in most instances, complaints are resolved at an earlier stage and complainants choose not to proceed to Stage 2 where a case is formally upheld, partly upheld or not upheld. 148. It is imperative that licence fee payers trust that their complaints will be fairly considered. It is clear that there is a gap between the BBC’s record for handling complaints fairly and audience perceptions of the system - the BBC can and indeed should do more to increase confidence in its processes. It is right that we take this opportunity to strengthen the governance around BBC First to ensure that audiences feel the BBC is considering their complaints impartially of programme-makers and independently of the Corporation’s interests. It is clear that there is a gap between the BBC’s record for handling complaints fairly and audience perceptions of the system - the BBC can and indeed should do more to increase confidence in its processes. 149. The government has had constructive engagement with the BBC on these matters and the concerns identified through the MTR. As a result of these discussions, a series of major reforms to the complaints process will be made to create legally-binding obligations on the BBC Board; to create structural changes to the management of the ECU; and, to strengthen the oversight of the ECU. These reforms must provide greater external and independent scrutiny of the BBC’s complaints decisions. 150. The government has agreed with the BBC to update the Framework Agreement to create a new obligation for the BBC Board to hold the BBC Executive accountable in its handling of complaints. The Charter requires the BBC Board to oversee the establishment of a complaints framework but the Board has no specific legal responsibilities to ensure that the framework is working effectively. As agreed with the BBC, we will therefore amend the Framework Agreement in line with the BBC’s proposal to create a new, legally binding responsibility for the Board to oversee the day to day delivery of the complaints framework by: monitoring the operation of the framework assessing its effectiveness in responding to complaints ensuring the framework complies with the requirements of the Charter 3.2 We will amend the Framework Agreement in line with the BBC’s proposal to give the BBC Board explicit responsibility for overseeing the Executive’s handling of complaints. 151. Following constructive discussions with the government initiated through the MTR, the BBC has changed the reporting line of the Director of Editorial Complaints and Reviews - the role responsible for the ECU. That individual now reports directly to the Director General of the BBC. The ECU was previously structurally separated from programme and content divisions, and this was critical in ensuring that the unit makes objective judgements about potential breaches independent of programme and content makers. However, the Director of Editorial Complaints and Reviews reported to the Director of Editorial Standards and Policy, who is also responsible for advising output teams on compliance with those editorial guidelines against which complaints are assessed. 152. We felt that arrangement created risks that complaints decisions and editorial policy were too close together, and the independence of complaints decisions could be compromised. While evidence received did not indicate that this risk had materialised, the risk did exist, and this created an ongoing challenge around the perception of the ECU’s ability to make fair complaints decisions. The government therefore asked the BBC to consider moving this reporting line. The BBC acknowledged these perception challenges created by the reporting line and made this change in September 2023. This change will provide greater separation between editorial policy and the assessment of complaints decisions. It is also a move that demonstrates the seriousness with which the BBC views editorial complaints, with closer oversight of the ECU’s decisions being provided from the very top of the Corporation by the BBC’s Editor-in-Chief. 3.3 Following the government’s request to the BBC that it considers moving the reporting line from the ECU, the BBC has created a direct reporting line between the Director of Editorial Complaints and Reviews and the Director General. 153. Through the MTR, the government raised with the BBC the evidence received about the current limitations of the EGSC’s powers, and asked the BBC to consider whether, and how, EGSC could be better empowered to hold the Executive to account. The BBC has committed to strengthening those powers to oversee the ECU’s processes and outcomes and the wider delivery of the complaints framework. The BBC has committed to: strengthening the remit of the EGSC to explicitly include a responsibility to oversee the delivery of the BBC’s complaints framework, with a specific focus on impartiality strengthening the role of independent advisers on the EGSC, including through giving one independent member explicit responsibility for challenging the ECU; the ability to conduct deep dives into specific issues; and sitting on the appointment panel of the Director of Editorial Complaints and Reviews shifting the EGSC’s focus from monitoring of the complaints process to enshrining active challenge functions through an updated Terms of Reference, as suggested by the government affording the EGSC access to the information it needs to perform this enhanced role, including having the authority to commission research through its dedicated research resource or the Executive, as suggested by the government 154. Taken together, this set of reforms - which the BBC will reflect in the EGSC’s Terms of Reference where appropriate - will increase independent scrutiny of complaints handling, providing a valuable outside perspective that can constructively challenge the Executive’s thinking. 3.4 Following the government’s request to the BBC that it considers giving the EGSC a more enhanced, active role, the BBC has committed to both giving the EGSC greater oversight of the complaints process (including the processes of the ECU), and the ability to commission research to improve the EGSC’s access to information. 155. Finally, we have explored how to provide greater and more robust external scrutiny of the ECU’s handling of complaints in ways that will create more confidence among audiences. Ofcom currently scrutinises the ECU’s decisions when complainants escalate their case to the regulator at Stage 3, where Ofcom assesses a complaint against the Broadcasting Code. This is only done when a complainant has appealed to the regulator. Escalated complaints are therefore not a representative sample of the BBC’s wider decision-making at Stage 2, given that it will in part depend on whether individual complainants have been satisfied by the BBC’s response. Ofcom also scrutinises the ECU’s published decisions at Stage 2, but this process is not formalised. 156. We will therefore create a new regulatory responsibility for Ofcom to review a representative sample of ECU decisions that have not been escalated to Ofcom on the basis of the following core principles: the sample of complaints cases should span the full range of content standards principles contained in Ofcom’s Broadcasting Code in order to assess a range of the ECU’s decision-making Ofcom should assess the content raised in a complaint against the Broadcasting Code Ofcom should publish a summary of its findings 3.5 We recommend that Ofcom conducts regular reviews of a representative sample of the ECU’s complaints decisions and makes public a summary of its findings. This new regulatory function will be made a formal requirement through an amendment to the Framework Agreement. 157. These are significant changes that provide a new, legally binding obligation for the Board to provide a vital independent challenge function within the complaints process for the remainder of the current Charter period. The EGSC will be empowered to provide closer oversight of the ECU’s processes and outcomes, while Ofcom will provide external accountability through sampling complaints decisions at Stage 2. This will materially increase independent scrutiny of the BBC’s complaints handling, maintaining the fundamental principle of BBC First, but giving audiences greater confidence in the process. These changes will materially increase independent scrutiny of the BBC’s complaints handling, maintaining the fundamental principle of BBC First, but giving audiences greater confidence in the process. 158. We consider these reforms preferable to those suggested by stakeholders, outlined earlier in this section, for the following reasons: making the ECU’s investigations public - while we think it is important that the BBC is more transparent about how the ECU works in practice, we do not think the details of individual investigations should be made public (beyond the complaints decision published by the BBC). This would inhibit free, frank and robust internal discussions, thereby risking the ability of BBC First to ensure programme-makers are able to learn from complaints, a core tenet of reforms proposed by Sir David Clementi complainants should give oral evidence to the ECU - this stemmed from a concern that complaints to the BBC are subject to a limit of 1,000 words. The BBC does however outline that this may be exceeded in exceptional circumstances if complainants identify why their complaint should be longer and provide a one-page summary. Evidence in the round has not indicated the word limit inhibits either the ability of complainants to complain or of the ECU to investigate satisfactorily giving ECU powers to award compensation - we received no other evidence to suggest that the remedial actions the BBC takes when the ECU finds a breach are inadequate. Practically, it would be very difficult to determine who specifically had been harmed by a breach in editorial requirements and therefore identify a victim who should be compensated. Individuals can use other legal routes if they believe the actions of the BBC have caused legal harm the ECU should be staffed by a minority of BBC employees - we understand the broader aim of this suggestion - to increase independent scrutiny of the ECU’s decisions - but consider the BBC’s proposed reforms to the EGSC set out above will better achieve this outcome. Changing the composition of the ECU in this way would create significant complexity by introducing an element of external regulation into what is an Executive function, undermining the key principle of BBC First and blurring lines of accountability and responsibility for decision-making
Background
199. The Charter sets out the Public Purposes of the BBC, many of which speak to its relationship with the wider creative economy. The current Charter introduced major changes to how the BBC would be regulated in regard to its market impact. It also included an explicit requirement for the BBC to ensure its services and output are distinctive and that it is supporting the creative economy across the UK through a number of specific obligations. The current Charter introduced major changes to how the BBC would be regulated in regard to its market impact. It also included an explicit requirement for the BBC to ensure its services and output are distinctive and that it is supporting the creative economy across the UK 200. The BBC’s mission to serve all audiences does create an inherent tension around the market impact of the BBC, where the BBC receives billions in public funding but also directly competes with commercial market participants for audiences. The need to strike the correct balance between delivery for audiences and for the creative economy was discussed in Sir David Clementi’s 2016 review of the governance and regulation of the BBC, where he highlighted a number of important principles required to achieve this balance, which the current Charter seeks to deliver. 201. Sir David’s review highlighted the need to “give sufficient certainty to industry about the scope of the BBC’s activities and protect them against undue adverse market impact”. He also set out the need for “the BBC [to] be duly open and accountable with appropriate consultation and transparency of decision-making, particularly in relation to managing change which should take due account of the interests of audiences, Licence Fee payers, citizens and the market impact”. In addition, Sir David noted the need for the new regulatory approach to changes to the BBC’s services to be “a less rigid system” than that under the BBC Trust governance model. He argued that the new regulatory approach should allow decisions to be “reached in the minimum amount of time, whilst allowing for transparency and due consultation” to “the benefit of the BBC, industry and audiences”. The current Charter sought to achieve this balance. 202. The Charter does not preclude the BBC from having an adverse impact on the market if the BBC Board and Ofcom believe it is necessary for the effective fulfilment of the BBC’s Mission and Public Purposes, and in this way the current Charter does not establish the BBC as a market failure intervention. It is therefore for the BBC to rise to the challenge and make sure the correct balance between its obligations is struck. As the BBC’s independent regulator, it is for Ofcom to ensure that any adverse impact on the market is necessary for the effective fulfilment of the BBC’s Mission and Public Purposes, and to robustly hold the BBC to account in meeting its obligations to both its audiences and the market. The BBC’s responsibilities 203. The current Charter sets out an explicit requirement for the BBC to “show the most creative, highest quality and distinctive output and services” and that its services should be distinctive from those provided elsewhere. The BBC is also explicitly required to support the creative economy across the United Kingdom. The BBC is required to have particular regard to the effects of its activities on competition in the United Kingdom, and the BBC must seek to avoid adverse impacts on competition which are not necessary for the effective fulfilment of the Mission and the promotion of the Public Purposes. The BBC is also required to have regard to promoting positive impacts on the wider market. In turn, Ofcom is required to have regard to the desirability of protecting fair and effective competition in the United Kingdom, and to set requirements in the Operating Framework to protect that. The BBC is also required by the Charter to work collaboratively and seek to enter into partnerships with other organisations, particularly in the creative economy, where to do so would be in the public interest. The BBC’s regulatory framework 204. Figure 2 provides a summary of the BBC and Ofcom’s roles under the Charter and Framework Agreement for assessing and regulating the competition impact of the BBC’s public services. Requiring the BBC to assess the materiality of change first means the BBC must seek to understand the potential impact of a change at an early stage, allowing it to shape its plans while they are still in development to mitigate competition impacts. While Ofcom does not have a specific role to review materiality conclusions where the BBC has found that a change is not material, it has the power to step in and direct the BBC to conduct a Public Interest Test (PIT) if it disagrees on materiality. Where evidence emerges of harm to competition from ongoing BBC activities, Ofcom has regulatory tools to step in and address these using a BBC competition review (BCR). Figure 2: Summary of the BBC and Ofcom’s roles under the Charter and Framework Agreement for regulating the competition impact of the BBC’s public services. Recent consideration of the regulatory framework 205. In June 2022, Ofcom’s review of the BBC’s regulation looked at all areas of its regulation of the BBC’s market impact and considered whether any changes were required to ensure that regulation remained effective for the remainder of the Charter period. Its report considered how, in the current market context, material changes to the BBC’s services should be assessed against both their public value and their potential to harm commercial providers in the market. 206. Ofcom set out that the regulatory process for approving a change should adapt to become more effective and flexible, supported by greater transparency for the BBC’s competitors. Ofcom also set out its intention to consult on how greater transparency could be achieved, and recommended 3 changes to the Framework Agreement to allow for a more effective and flexible process, particularly where the BBC had already undertaken extensive, and robust, market engagement and existing processes may unnecessarily lead to delays and duplication of work: Ofcom should have discretion over whether or not to conduct a BBC competition assessment (BCA) or a shorter assessment following a BBC PIT. This change would give Ofcom the ability to approve a change without taking additional assessments if it agrees that the BBC has appropriately considered competition and public value assessments in its PIT, effectively engaged with stakeholders and appropriately taken account of their concerns. Ofcom would retain the ability to conduct a BCA or a shorter assessment if it felt the BBC had not done enough, or Ofcom had access to information the BBC did not. Ofcom should have the power to use a shorter assessment to approve a BBC change with conditions. Currently, Ofcom is only able to approve a BBC change with conditions if it conducts a full BCA process (even though this might not be necessary if the BBC has conducted a thorough and effective PIT process). New BBC services should not automatically be considered ‘material’ changes. Under the current Framework Agreement, any new BBC service is automatically classed as a ‘material’ change. This means that even very small new services that are highly unlikely to have a significant impact on competition are required to undergo a full PIT. Ofcom has recommended removing the automatic need to undertake a PIT for new services to avoid unnecessary PIT processes where the level of risk to UK competitors from a new BBC service is low. But the launch of a new service would, like any other change, be subject to a materiality assessment in relation to its potential market impact. In practice any new service would still fall within the main definition of a material change if it may have a significant adverse impact on fair and effective competition. This change would allow the BBC to respond more quickly to changing audience tastes where there is low risk to UK competitors. 207. Ofcom consulted on changes to its guidance to create greater transparency for the BBC’s competitors in November 2022. This followed significant stakeholder concern that the BBC does not take its obligations to consult and be transparent with competitors seriously. Ofcom subsequently published a statement in April 2023 which set out its intention to update its guidance aimed at encouraging greater transparency from the BBC about changes to its public services, and facilitating more positive engagement between the BBC and affected stakeholders. Market analysis 208. During the course of the MTR, we commissioned independent market analysis to provide information about the market context the BBC is operating in. 209. We commissioned Oliver Wyman to conduct analysis to contribute to our overall evidence base on media consumption in the UK, the media market in the UK, consumption of BBC media, and the interrelationship between the BBC and other media market operators. The report focused on how this has evolved since the start of the current Charter period. In audio, this market analysis noted that online audio listening is growing, especially among younger audiences. It noted the opportunity for the BBC to partner with the UK commercial audio sector on a more ambitious scale, given the increasing dominance of international platform players in the UK audio market. 210. We also commissioned Alma Economics to carry out an independent study to examine the relationship between online news content published by the BBC and local commercial news organisations, as a means of helping to understand the extent to which the BBC acts as a complement to, rather than substitute for, commercial news. Alma Economics’ research analysed the differences in content and type of local news coverage provided by the BBC and the commercial sector. This analysis found that content duplication between the BBC and commercial providers in online local news exists in a way that is consistent with multiple providers covering the same news events. However, it also highlighted concerns within the local news sector about the market impact of further expansion of the BBC into online local news coverage and calls for greater collaboration. 211. This research informed the government’s understanding of the media markets in which the BBC operates. The research was not set up to, and therefore did not set out to, answer specific questions on the BBC’s regulatory and governance framework. Therefore, while the research has been useful in providing additional context for our evaluation of the more directly relevant evidence, it has had limited direct impact on the recommendations we have reached. The broader contextual information provided by the research will inform the government’s thinking as we continue to consider the BBC’s market impact in preparation for renewal of the BBC’s Charter. The focus of the MTR 212. Our focus has been on ensuring the underpinning regulation to assess the BBC’s market impact is appropriate to ensure the BBC and Ofcom can take informed decisions and that commercial providers have clarity over decisions that affect their own business assumptions and planning. Whilst the BBC is operating in an increasingly competitive environment and its regulation needs to remain fit for purpose, this should not come at the expense of competition and choice for audiences. 213. The Terms of Reference for the MTR set out our intention to have regard to commercial radio and local news sectors and other content makers and distributors in conducting the review.
Transparency for stakeholders, and meaningful engagement
What we learnt 214. Stakeholders, including those operating in audio, audiovisual and local news markets, have identified a lack of transparency and effective engagement when the BBC seeks to make a change to its services. Some have argued that they have had to go to great lengths to get the BBC to engage with them on changes it plans to make to its services and the potential impacts on their business. When the BBC has engaged, some have felt this engagement to be largely superficial in nature, and that the arguments those stakeholders make to the BBC, however well informed, will not make any difference to the BBC’s plans nor to Ofcom’s approval processes. We also heard that the BBC does not announce changes to its services early enough to allow stakeholders to explain to the BBC the potential impact on their business, limiting their ability to substantively influence the BBC’s plans. Similarly, stakeholders have expressed dissatisfaction with the level of detail the BBC shares, limiting those stakeholders’ ability to properly understand the BBC’s plans, and their ability to engage the BBC on those plans. We also heard that stakeholders felt that the BBC breaks a large change into several smaller change assessments so that the cumulative impact is harder to identify. 215. Some stakeholders argued that the BBC publicly announces planned changes to its services with the potential for market harm ahead of any formal process having started, and often with highly positive framing. This can discourage them from talking to the BBC about their concerns, as they feel decisions have already been taken. Stakeholders were also concerned by the agency afforded to the BBC when assessing the materiality of a change. They thought it inappropriate that the BBC determines how it will consider if a change is material. They also argued that the BBC should not have the agency to determine where taking into account the views of third parties is appropriate. Some stakeholders felt unable to ask the BBC to conduct a materiality assessment, even if they felt the change may be detrimental to their business. Others noted that assessments are not required to be published, and therefore there is no opportunity for scrutiny of the need for a PIT. Even when a PIT is conducted, many felt the BBC shares insufficient detail and analysis, hindering their ability to consider proposals meaningfully and raise concerns about potential market harm. 216. We heard from some stakeholders that engaging in a BBC change process can be complex and resource intensive for those potentially negatively affected. However, they noted that any alternatives should not remove the objective scrutiny of the current process, particularly Ofcom’s own consultation and oversight. 217. Overall, stakeholders argued that the effect of these concerns significantly hinders their ability to effectively advise the BBC and Ofcom on how proposed changes might affect the market. In turn, this can be said to hinder the BBC and Ofcom’s ability to fully understand and take into account the potential impacts of its proposals. They felt that Ofcom should be tougher on the BBC in making sure stakeholders’ views are heard and meaningfully inform the BBC’s decision-making processes. 218. It has also been argued that the BBC is subject to robust external regulation by Ofcom of potential negative impacts arising from changes to its services, and that there is no evidence that the BBC is crowding out other players. Over the Charter period, Ofcom has found that the BBC has been correct in its assessment about the materiality of a change in all but one instance. The BBC has increased its transparency when publishing planned changes to its services, including within its Annual Plan and Annual Report and Accounts. It also chooses to list all changes it is aware of that it will likely be assessing for materiality in its Annual Plan, not just those that it thinks will be material. Where changes do not fit within the annual planning cycle, the BBC has set out its plans in other ways such as in speeches, blog posts, and media releases. We understand that when the BBC proposes a change to its plans, the BBC seeks to engage widely with stakeholders on those plans specifically, and takes into account the concerns raised by others operating in the market accordingly. However, some stakeholders do not feel this goes far enough. 219. We also heard arguments making the case for more flexibility in the processes to allow the BBC to respond with agility with regards to changes in the media markets more broadly. We heard that for the BBC to be able to thrive in a market with increasing competitive pressure, the regulatory system needs reform – to become quicker and more agile, and to reflect the pace of change in the modern media markets. The ability to move at pace to best deliver for audiences was argued to be crucial, particularly in digital technologies where the market will move swiftly. It was also highlighted that a strong and responsive BBC has demonstrated an ability to draw investment to the UK and pave the way in developing platforms and reducing risks in these developments for other commercial players. 220. Ofcom has raised concerns around the BBC’s transparency and engagement with stakeholders when it seeks to make a change in each of its Annual Reports on the BBC since the beginning of the Charter. Its November 2022 consultation included proposals to support more effective engagement between the BBC and stakeholders, particularly during the materiality assessment stage, and more generally improve these processes. Ofcom set out a number of principles: encouraging a more productive dialogue between the BBC and its stakeholders; providing clarity on its approach on public value and its expectations of the BBC’s assessment; providing stakeholders with a better understanding of how regulatory processes work; and enabling greater flexibility for Ofcom to decide whether it is necessary to consult on whether a change is material. 221. Ofcom subsequently set out in April 2023: that the BBC will be subject to an enforceable specific requirement to publicise changes that are likely to be subject to a materiality assessment more guidance on what Ofcom will consider a reasonable and proportionate approach to engagement during the materiality process a clearer expectation of the information that the BBC should provide to stakeholders when it consults as part of a PIT; more detail about Ofcom’s role in the assessment of materiality; and further guidance about what Ofcom expects to see in the BBC’s public value assessment. 222. The BBC agreed with Ofcom’s proposals in principle but objected to some specific elements. Most other stakeholders welcomed Ofcom’s proposals, including the new enforceable specific requirement for the BBC to publicise changes that are likely to be subject to a materiality assessment, as a step towards improving the BBC’s transparency. Some argued that Ofcom should go further, particularly on materiality assessments. In response, Ofcom set out that it did not feel further new requirements or formal measures were proportionate, as many of the changes the BBC considers as part of its materiality assessments are small in scale and highly unlikely to have a significant impact on fair and open competition. However, it did strongly encourage the BBC to act on a number of additional, more specific suggestions on how it should increase transparency. These changes came into effect in August 2023. 223. In line with these arguments, and the progress that has been made, Ofcom has recommended changes to the Framework Agreement to allow a swifter competition assessment process if Ofcom is satisfied with the work the BBC has carried out, including its stakeholder engagement. Ofcom’s intention is that the changes to its guidance and its recommended changes to the Framework Agreement should work in tandem to encourage greater BBC transparency and more meaningful engagement with stakeholders, and allow Ofcom to streamline the market impact assessment process where appropriate. 224. Ofcom also set out its general views on the BBC’s position in the audiovisual and audio sectors and where there is likely to be risk that changes to the BBC’s services in these sectors might harm competition. Its aim was to give the BBC and other stakeholders more clarity about how it is likely to consider the materiality of proposed changes to BBC services, and how it might approach future competition assessments, in some of the sectors in which the BBC operates. Ofcom set out that this does not change the fact that the BBC and Ofcom will still need to consider the competition impact of proposed changes on a case-by-case basis. The government’s response 225. Our focus in the MTR has been on ensuring the underpinning regulation to assess the BBC’s market impact is appropriate to ensure the BBC and Ofcom can take informed decisions. Without understanding the full picture from meaningful engagement by the BBC, stakeholders are not able to effectively engage with the BBC and Ofcom, and Ofcom and the BBC are not able to make fully informed decisions. 226. Higher standards for stakeholder engagement and transparency are needed, enabling the BBC’s competitors to more effectively provide input to the BBC and Ofcom before changes are made (while calibrating those requirements so the BBC can continue to deliver its Mission and Public Purposes). Similarly, it is imperative for the BBC and Ofcom to adequately consider collaboration and information sharing when making decisions about changes to BBC services. 227. We consider that the new guidance set out by Ofcom broadly achieves a proportionate level of transparency, and sets out a clear framework for stakeholder engagement. It therefore meets our objective of driving higher standards in these areas, whilst allowing the BBC to deliver for its audiences. However, Ofcom’s responsibility to hold the BBC to account remains crucial, and as this approach represents a change to the current regulation, we will keep its efficacy under review as we approach the renewal of the BBC’s Charter. The BBC should not seek to, nor should it be allowed to, take advantage of these changes to processes in a way that disadvantages others operating in the media markets. The BBC should ensure stakeholder engagement is undertaken which will enable it to be sufficiently informed about how proposed changes to its services meet the right balance between delivering for audiences and the wider creative economy when making decisions. Ofcom has said it will engage with stakeholders to understand how well the transparency requirement is working in practice and will comment on the BBC’s progress in its annual report on the BBC next year. The BBC should not seek to, nor should it be allowed to, take advantage of these changes to processes in a way that disadvantages others operating in the media markets. 228. Ofcom should have the ability to approve a change without taking additional assessments if it agrees that the BBC has appropriately considered competition and public value assessments in its PIT, effectively engaged with stakeholders and appropriately taken account of their concerns. Ofcom could then reduce the length of the process, and reduce duplicative processes. It would provide Ofcom the flexibility not to undertake a review if it were satisfied that the BBC had undertaken this work appropriately. Ofcom would retain the ability to conduct a BCA or a shorter assessment if it felt the BBC had not done enough, or if it believed that Ofcom had access to information the BBC did not. Importantly, Ofcom should not use this power if stakeholder engagement has not been conducted fully and meaningfully, or if the BBC has not been sufficiently transparent. Ofcom should clearly and transparently set out why it has chosen to take the approach it has in assessing the BBC’s PIT, and should ensure the time it takes in which to make an assessment of a material change is both efficient and proportionate. 4.1 We agree with Ofcom’s recommendation to change the Framework Agreement so that Ofcom has discretion over whether or not to conduct a BCA or a shorter assessment following a BBC PIT. 229. As an alternative to blocking a BBC proposed change to its services, Ofcom is able to approve a change with conditions attached to address unjustified competition impacts. Currently, Ofcom is only able to approve a BBC change with conditions if it conducts a full BCA process (even though this might not be necessary if the BBC has conducted a thorough and effective PIT process). Ofcom should be able to conditionally approve a BBC change using a shorter assessment as this would reduce duplication, and therefore lower the barrier to conditions being attached to approval of a BBC change. It will provide both the BBC and its stakeholders with certainty on the approach more quickly than if a full BCA process were required. However, it should not be used if the BBC has not conducted a thorough and effective PIT process. 4.2 We agree with Ofcom’s recommendation to change the Framework Agreement so that Ofcom has the power to use a shorter assessment to approve a BBC change with conditions. 230. Under the Framework Agreement, any new BBC service is automatically classed as a ‘material’ change. We recognise that there are instances where this rule could lead to unnecessary delays and bureaucracy that could act against the interest of audiences. While we recognise that some stakeholders will be concerned that this reduces Ofcom’s ability to scrutinise the potential competition impact of changes to the BBC’s services, in practice any new service that may have a significant adverse impact on fair and effective competition would fall within the main definition of a material change and would have to undertake a PIT. 4.3 We agree with Ofcom’s recommendation to change the Framework Agreement so that new BBC services are not automatically considered material changes. 231. Stakeholders who are likely to be affected by BBC changes need as much transparency as possible. Further transparency and scrutiny from Ofcom of the BBC’s impact on the audiovisual and audio sectors, and how it is likely to approach consideration of the competition impact of changes to the BBC’s services is helpful, in that it can open the door for further conversations with the regulator on its views of the BBC’s position in those sectors. It does not change the requirements that the BBC and Ofcom must carry out when assessing a proposed change to a public service. They will still need to consider the competition impact of specific changes the BBC intends to make on a case-by-case basis and take into account how these specific changes will affect competitors. 4.4 Publication of Ofcom’s high-level view on the BBC’s position within the audiovisual and audio sectors is helpful, as is Ofcom’s commitment to use its Annual Report on the BBC to confirm its current view, or update that view based on any market changes that have taken place. 232. However, while we are pleased to see Ofcom update its high-level view on the BBC’s position within the audiovisual and audio sectors in its most recent Annual Report on the BBC, we think it is crucially important that Ofcom scrutinises the impact of the BBC in the news sector, and particularly in the local news sector. Indeed, the Cairncross Review, published in 2019, recommended that Ofcom should explore the market impact of BBC News, and Ofcom indicated a willingness to look at this issue further. Recent BBC announcements surrounding its plans to increase its investment in online news, and the sector’s concerns about its impact, demonstrate that it is increasingly important for Ofcom to set out its views on the BBC’s impact on the sector. Alongside the changes above, we are recommending that Ofcom publishes annual summaries of its view on the BBC’s position in the local news sectors, and how it is approaching consideration of the competition impact of changes to BBC local news services as it has done for the audiovisual and audio sectors. The first summary of the BBC’s impact on the local news sector should be published as soon as possible, while allowing Ofcom sufficient time to meaningfully engage with stakeholders and conduct substantive research. Ofcom should consider whether providing an initial view by May 2024 could provide clarity and confidence to stakeholders. The review should be complete by November 2024 to inform government thinking, including in the lead up to the renewal of the BBC’s Charter. Separately, Ofcom has set out that it will monitor the competitive impact of the BBC’s recent changes to its online local news offering over the next year - and share its findings - as part of its new work on local media. 4.5 We recommend that Ofcom should annually publish its view on the BBC’s position in the local news sectors, and set out its approach to considering the competition impact of changes to BBC local news services. Ofcom should do this for the first time by November 2024, and subsequently use its Annual Report on the BBC to update this view alongside its views on the audio and audiovisual sectors. 233. This package of changes to the BBC’s competition and market impact requirements as a whole delivers the right balance between driving higher standards for stakeholder engagement and transparency. It will enable the BBC’s competitors to more effectively provide input to the BBC and Ofcom before changes are made, and calibrate those regulatory requirements so the BBC can continue to deliver its Mission and Public Purposes in a changing market. Reflecting the evolving media sector it is important that Ofcom’s decisions on the BBC’s market impact continue to take the wider market dynamic into account, including the presence of competitors with a global footprint, as it confirms in its guidance about BBC change assessments. It is also important that the regulatory process does not allow so great a focus on the changing market dynamic that negative outcomes are inadvertently created in those sectors in which the BBC can be said to hold a stronger market position, for example in the local news and radio sectors.
How the BBC could use partnerships to the benefit of other organisations, particularly in the creative economy, where to do so would be in the public interest
What we learnt 234. We heard that, when acting in partnership, the BBC plays a vital role in supporting the creative economy. For example, stakeholders were broadly complementary about the role that the BBC had played in supporting local journalism through the Local Democracy Reporting Service (LDRS). However, many stakeholders wanted to see the BBC’s obligation to support the creative economy applied to their sectors more meaningfully. Stakeholders suggested that the BBC could do more to provide, or guide audiences to, third party content on its online services like iPlayer and BBC Sounds. Stakeholders also wanted to see the BBC provide audience insights, share product development information and collaborate on talent development. The government’s response 235. The BBC’s ability to have a positive impact on the market can be demonstrated through its existing partnerships with those that might otherwise see it as a competitor. Partnerships is an area of specific BBC competence, and they need to be of mutual benefit. Our recommendations therefore focus on improving transparency in the process. It should be clear to all how the BBC is fulfilling its obligation to work collaboratively and seek to enter partnerships with other organisations, particularly in the creative economy, where to do so would be in the public interest. This will make it easier for organisations in the creative economy to understand how and why the BBC goes about entering partnerships. It should foster greater opportunities for formal partnerships between the BBC and its competitors. 236. A BBC partnerships strategy could first and foremost focus on supporting the BBC’s ability to deliver to all audiences, but also examine how the BBC’s competitors can help inform and deliver this objective. A published strategy would benefit both the BBC and its competitors by being more transparent about how the BBC makes partnerships decisions, and the criteria they need to meet. 4.6 We recommend that the BBC does more to demonstrably and transparently take account of its obligation to undertake partnerships, including with its competitors in the creative economy. The BBC should publish a partnerships strategy, and the objectives of that strategy should clearly align with its obligation to support the creative economy, and demonstrate how it plans to meet that obligation. 4.7 We recommend that the BBC provides clear entry routes for organisations who wish to partner with the BBC. 237. Local and regional news outlets are vital pillars of communities and local democracy. They play an essential role in holding power to account, keeping the public informed of local issues and providing reliable, high-quality information. We are committed to a pluralistic media landscape, where citizens are able to access information from a range of sources in order to form opinions. The public’s ability to access a wide range of news, views and information about the world in which we live is central to the health of our democracy. We think the BBC has an important role to play in supporting the plurality of local news services in the UK, not just when assessing its market impact, but as a desirable outcome in itself. We think the BBC has an important role to play in supporting the plurality of local news services in the UK, not just when assessing its market impact, but as a desirable outcome in itself. 238. We welcome the BBC’s commitment to continue to support the LDRS until at least 2027. The LDRS is independently run by the BBC and, while we would support any further efforts by the BBC to grow the scheme, operational decisions such as these are for the BBC to make. The DCMS Select Committee’s report into the Sustainability of Local Journalism has recently considered the BBC role in this space. Additionally, the Cairncross Review recommended that the BBC should do more to share its technical and digital expertise for the benefit of local publishers. Our externally commissioned research highlighted that the desire for collaboration is increasing as the BBC expands further into online local news coverage. We believe the BBC has an important and ongoing role to play in collaborating with the press sector, in line with its obligation to work collaboratively and seek to enter partnerships with other organisations, particularly in the creative economy, where to do so would be in the public interest. In particular, we firmly believe that it is very important that the BBC considers what more it can do to support all parts of the local news sector.
Background
246. The BBC carries out commercial activities through its 2 wholly owned commercial subsidiaries. BBC Studios produces, licences, and distributes content domestically and internationally, as well as owning and operating channels and streaming services such as UKTV and Britbox International (a joint venture with ITV). BBC Studioworks provides TV studio facilities, equipment, crew, and post-production services to the BBC and independent production companies. 247. BBC Studios was launched as a commercial entity in 2017, with the BBC moving a significant proportion of its production staff into BBC Studios. BBC Worldwide was merged into BBC Studios in 2018 to bring together the BBC’s commercial production and distribution activities. 248. The governance and regulation of the BBC’s commercial activities have evolved. The Charter prevents the BBC’s commercial activities from being undertaken directly by the BBC or funded by the licence fee. They must be carried out by commercial subsidiaries. They must also fit with the BBC’s Mission and Public Purposes, be undertaken with a view to generating a profit, not jeopardise the good reputation of the BBC or the value of the BBC brand, and not distort the market or create an unfair competitive advantage as a result of their relationship with the BBC public service arm. 249. The BBC’s commercial activities benefit the UK’s creative industries through their investment in the sector, help bring BBC content to audiences beyond BBC broadcast channels and iPlayer, and export British content and journalism across the world. These activities also directly support the BBC’s licence fee funded public service arm, including through an annual cash dividend which the BBC can invest in BBC services and output that directly benefits UK audiences. 250. The government therefore wants to see the BBC’s commercial arm succeed and grow, delivering greater investment in high quality programmes and the domestic creative economy, greater cultural impact from distinctive British content abroad, and more support for the BBC’s public service arm. 251. The BBC Director General has also said that growing the BBC’s commercial arm is 1 of his 4 strategic priorities, and the BBC has set out plans to deliver a step change in ambition by doubling the size of BBC Studios from 2021/22 to 2028 In the 2021 Spending Review, the government agreed to increase the BBC commercial arm’s borrowing limit from £350 million to £750 million in stepped phases between 2022-23 and 2026-27. This will support the BBC’s investment in its commercial growth strategy, benefitting the creative economy across the UK. 252. The higher debt limit also increases the level of risk the BBC is able to take on. We also recognise that the BBC’s commercial arm and the scale of its activities has already grown and developed significantly since the start of the Charter period. We therefore decided to look at the governance and regulation of the BBC’s commercial activities in the MTR, to ensure that the arrangements are working effectively and supporting the BBC’s commercial arm to thrive and deliver ambitious growth, while managing risks appropriately and competing fairly in the market. Looking further ahead, in the BBC Funding Model Review and Charter Review we will look at opportunities for the BBC to further increase revenue from its commercial activities, while ensuring that we get the right balance between commercial success and the BBC’s public service broadcasting obligations and impact on competition. 253. We received limited feedback from stakeholders about the BBC’s commercial governance and regulation as these are highly technical in nature. We therefore focused on looking at the BBC and Ofcom’s own evidence on the basis of a more technical assessment, including on the basis of views from UK Government Investments (UKGI).
The BBC’s commercial governance
254. The BBC Board oversees the BBC’s commercial activities. As part of its duty to ensure that the BBC fulfils the Mission and promotes the Public Purposes, the BBC Board sets a strategy for the BBC’s commercial activities. 255. The BBC Commercial Board oversees the delivery of the Corporation’s commercial ambitions. It reports to the BBC Board on the delivery of BBC Studios’ objectives, in line with the BBC’s overall commercial strategy, and on BBC Studioworks. In March 2022, the BBC announced a refresh of its commercial governance, with Sir Damon Buffini as the new chair, and for the first time a majority of non-executive directors bringing greater commercial, financial and digital experience and global expertise across media and technology. The BBC said that driving commercial growth is the principal concern of the new BBC Commercial Board, and that the refresh would help accelerate growth and maximise value for licence fee payers. What we learnt 256. Through the review, we wanted to be reassured that the BBC’s governance arrangements were effective and would support the BBC commercial arm in driving growth while maintaining appropriate oversight of the higher level of debt and risk that it can now take on. 257. There is evidence that the refreshed BBC Commercial Board is successfully fulfilling its role. This view has been supported by DCMS and UKGI engagement with the Chair and BBC Studios senior executives throughout the MTR, BBC Studios plans for its future growth ambitions, and views from UKGI on the BBC Commercial Board’s oversight of that plan. The government’s response 258. The government considers the refresh of the BBC’s Commercial Board to be encouraging, and the move to a more balanced board with greater commercial skills should support the BBC’s plans to grow the BBC commercial arm. However, at this stage it is too early to fully assess the effectiveness of the new governance arrangements and the BBC should keep the effectiveness of the new BBC Commercial Board under review. The Charter and Framework Agreement require the BBC to carry out a further review of its commercial activities within this Charter period, which may be an appropriate opportunity to assess the refresh. 259. As its commercial business grows and transforms, we want to see the BBC continue to ensure it has appropriate commercial governance arrangements in place, and ensure that the Commercial Board delivers its role effectively to support the sustained growth of the business and management of risks. 5.1 We recommend that the BBC monitors the effectiveness of the BBC Commercial Board as the new governance arrangements bed in.
The BBC’s commercial regulation
260. The Charter requires the BBC and Ofcom to ensure that the BBC’s commercial subsidiaries do not gain an unfair competitive advantage or distort the market as a result of their relationship with the BBC public service arm. This means that the BBC public service arm, and by extension the BBC licence fee, cannot be used to fund or subsidise commercial activities. 261. Ofcom put in place requirements and guidance to regulate this in 2017 when it became the regulator of the BBC. Following further consultation, Ofcom modified these requirements in 2019, and published an updated consolidated version of these requirements in 2021. The BBC must put in place appropriate and robust controls and procedures to ensure that it complies with Ofcom’s regulation, and publishes an annual Statement of Operational Separation setting out how it has done so. 262. Given the changes in the market that had taken place, and the continued evolution of BBC Studios, Ofcom undertook a review to better understand how the BBC has implemented Ofcom’s regulation of its commercial activities. Ofcom’s Review of the interaction between BBC Studios and the BBC public service was published in June 2022. What we learnt 263. Through the MTR, we wanted to be reassured that the BBC is compliant with the commercial separation requirements, that the BBC commercial arm is not gaining any unfair advantages, and that stakeholders are confident that is the case. 264. Ofcom’s review found that in some areas, the BBC had appropriate processes and measures in place. However, Ofcom identified 2 significant areas where it was not satisfied. The BBC has since taken appropriate steps to rectify these issues, as set out by Ofcom in its statement on how Ofcom regulates the BBC’s impact on competition, published in April 2023. The government’s response 265. These steps demonstrate appropriate and effective action by both the BBC and Ofcom to ensure regulation of the BBC’s commercial activities is working effectively. 5.2 We consider the regulation of the BBC’s commercial activities to be working effectively.
Background
266. The government wants the BBC to be at the forefront of representing diversity, both on and off screen. A BBC that reflects, represents and serves all communities, by providing output and services that meet their needs, and ensuring diversity of thought across the organisation, is vital to the BBC’s fulfilment of its obligations to licence fee payers. We have considered whether the BBC has the right governance mechanisms in place to help it meet its responsibilities, including how it ensures diversity of thought and opinion is taken into account. We have also considered whether the current regulatory arrangements provide sufficient scrutiny. The BBC’s responsibilities 267. Representing the UK and its nations, regions and communities has been a Public Purpose in the Charter since 2007. The current Charter makes the BBC’s diversity obligations even clearer by introducing specific requirements to reflect underrepresented communities and support the UK’s regional and minority languages. 268. In order to serve all communities, the BBC needs to understand the diversity of thought, experiences and needs that exist across the UK. The BBC can achieve this by effectively and regularly engaging with a diverse range of audience members to gather feedback on its performance, and working to improve audience perceptions. Article 10 of the Charter sets out certain specific duties for the BBC to engage with the public, including to ensure the views of audiences across the UK are factored into decision-making. The BBC’s governance framework 269. The Framework Agreement was updated in 2022 to introduce new requirements on the BBC Board to oversee and report annually on plans to increase diversity within the organisation to reflect and represent the UK more effectively, and to deliver the Across the UK programme. The BBC Board is therefore accountable for ensuring the BBC is making its best endeavours to more fully represent people and perspectives in the UK that are currently under-represented in its content by the end of the Charter period. 270. The Charter mandates the appointment of a non-executive Board Member for each of the UK’s 4 nations. These Nations Members must represent the interests of licence fee payers and provide challenge and scrutiny from within the BBC to ensure that its output and services meet the needs of audiences in each nation. The BBC’s regulatory framework 271. Ofcom has set specific regulatory conditions in the BBC’s Operating Licence to secure the promotion of the BBC’s fourth Public Purpose, as set out in the Charter, “to reflect, represent and serve the diverse communities of all of the United Kingdom’s nations and regions and, in doing so, support the creative economy across the United Kingdom.” The Operating Licence includes requirements for the BBC to publicly report on both representation and portrayal and audience satisfaction, as well as to provide Ofcom with detailed information on the diversity of its UK public services workforce on an annual basis. 272. While those conditions in the Operating Licence are enforceable by Ofcom as they are ‘specified requirements’, the regulator cannot enforce against the BBC’s own diversity targets. It can however publicly hold the BBC to account by drawing attention to areas where the BBC has not met its targets in the course of reporting on the BBC’s performance.
The BBC’s progress towards its diversity commitments
What we learnt 273. Many stakeholders who provided feedback felt that the BBC had set out clear commitments to achieve its diversity responsibilities, and that the BBC had made progress towards meeting these commitments. They welcomed BBC initiatives to improve the way it reflects and represents different communities, including the Creative Diversity Commitment, the 50:50 The Equality Project, and the Across the UK initiative. 274. We also heard extensive feedback from stakeholders about the BBC’s progress against its Diversity and Inclusion Plan for 2021-2023, which contains plans to build a workforce that is demographically reflective of the UK population. The BBC’s progress was of particular importance to stakeholders because people from a diverse range of backgrounds can bring different thoughts, experiences and opinions to the table, and can help the BBC to create content and services that are relevant to different communities across the UK. As set out in Figure 5, the BBC has made progress against some of its workforce diversity targets: it has reached balance in its workforce between men and women, and the percentage of “Black, Asian and minority ethnic” staff (as described by the BBC) has increased year-on-year since the current Charter was introduced. Representation of people from “Black, Asian and minority ethnic” backgrounds (as described by the BBC) has increased year-on-year since the current Charter was introduced. Representation of people from minority ethnic backgrounds in leadership roles has also increased, but remains lower than representation at an all-staff level. 275. We heard that there are areas where the BBC has gone further than others in its efforts to reflect, represent and serve all communities. For example, the BBC has introduced a target of 25% of staff to be from lower socio-economic backgrounds by 2027, making it the first UK broadcaster to have a specific target for socio-economic diversity in the workforce. The BBC reported on the representation of people from lower socio-economic backgrounds in its workforce for the first time this year. 276. However, as acknowledged by some stakeholders and Ofcom’s Annual Reports on the BBC for 2021/22 and 2022/23, the BBC has further to go to meet some of its workforce diversity targets. The percentage of disabled people in the BBC’s workforce has decreased since the beginning of the current Charter period. As discussed in more detail in the rest of this chapter, we also heard concerns that the BBC has further to go to ensure diversity of thought and opinion is reflected in its workforce. [Image] Figure 5: Demographic makeup of the BBC’s workforce (2017 and 2023) and targets for workforce representation * Target for socioeconomic diversity is for 2026/27. 277. The BBC has informed us that it is committed to improving the representation of disabled people and people from lower socio-economic backgrounds in its workforce, and is taking part in several initiatives to facilitate that improvement. [footnote 10] This includes the TV Access Project, which focuses on improving accessibility for disabled people in productions, studios and facilities; and an apprentice training scheme with a target of 1,000 apprentices by 2025, 80% of which will be based outside London. The government’s response 278. A BBC that accurately reflects, represents and serves the diverse communities of the UK is vital to the BBC meeting its objectives as a PSB. Having a diverse workforce is an important part of that: different thoughts, perspectives and backgrounds help create services and output that serve all audiences. 6.1 The BBC says it understands the importance of reflecting, representing and serving all communities and has set out a clear commitment to improving the diversity of the organisation, both on and off screen. We acknowledge the BBC’s evidence that it has made good progress towards meeting its diversity commitments. 279. The evidence shows that the BBC does have further to go to meet some of its workforce diversity targets. Its targets are set out in the Framework Agreement, and the BBC Board has a specific responsibility to oversee the BBC’s plans to increase diversity within the organisation. 280. In its Annual Report on the BBC for 2021/22 Ofcom advised how the BBC can further improve the representation of some groups in its workforce. This included continuing to make progress on existing commitments and initiatives in order to improve workforce representation, providing updates to Ofcom to help it monitor progress, and to consider setting workforce retention targets to help retain staff and create a more inclusive workplace. 6.2 We expect the BBC to follow the advice set out in Ofcom’s Annual Report on the BBC for 2021/22 to improve workforce representation of disabled people and people from lower socio-economic backgrounds.
The role of the BBC Board in ensuring diversity of thought and opinion
What we learnt 281. As a result of our evidence gathering, we heard concerns that the BBC is not accurately reflecting diversity of thought and opinion across the organisation, and that some audience groups may feel underserved by the BBC as a result. As set out in earlier chapters, audience perceptions of the BBC on issues like impartiality have declined over time, and there is a risk that any lack of diversity of thought within the organisation could fuel negative perceptions and/or limit the BBC’s own ability to best serve and represent audiences. 282. The BBC Board is responsible for ensuring diversity of thought and opinion is reflected both within the organisation and in how it serves the UK. Sir David Clementi noted that the BBC Board has an important role to play in representing the diversity of the public it serves, and this is reflected in the Framework Agreement. The BBC Executive also has a role: the Director of Diversity & Inclusion has strategic oversight of all of the BBC’s diversity commitments, and is responsible for overseeing the development and implementation of workforce diversity initiatives, commissioning guidelines, diversity and inclusion training programmes and metrics to measure progress, reporting to the Chief People Officer. 283. We heard that it is important for the BBC to have a diverse workforce in order to ensure people with a wide range of different views about the world are reflected. Feedback highlighted that the BBC has experienced issues reflecting diversity of thought and opinion across the organisation. The recent external thematic review of the impartiality of BBC coverage of taxation, public spending, government borrowing and debt found evidence of “lack of impartiality caused by uninformed groupthink” within the BBC, and the Serota Review referred to the need for the BBC to “seek diversity of opinion and foster open editorial debate”. The BBC has itself reflected on the need to ensure there is diversity of thought and opinion within the organisation: its 10-point action plan sets out an action for the BBC to challenge itself creatively to ensure it reflects a wide range of viewpoints, and the BBC has commissioned internal content reviews to assess the BBC’s editorial standards and culture, including diversity of voices. 284. The evidence shows that the BBC recognises the need to ensure a focus on diversity at a senior level. Furthermore, the BBC’s Director-General has said that the BBC Board and Executive Committee have discussed the need for “people with different backgrounds, different points of view and with different life experiences to be coming into the BBC”. The BBC’s Director of Editorial Policy has also emphasised the importance of “people across the whole of the BBC’s audience thinking that their viewpoints are being expressed, challenged, heard and seen in output”. He stated that the BBC “does not subscribe to cancel culture”, meaning that even views which are considered controversial should be given a platform on the BBC. These views are supported by information the BBC shared during evidence gathering for the MTR. 285. Reports indicate the BBC is considering ways to ensure that it is recruiting people with diverse opinions, to prevent homogeneity of views amongst employees. It is also investing in its Across the UK initiative to ensure the thoughts and opinions of people outside London are reflected within the organisation. The government’s response 286. A BBC that accurately reflects the diversity of thought and opinion that exists across the UK is vital. Our society is made up of people with a wide variety of perspectives and views, and audiences need to feel that their lives are accurately and authentically represented and portrayed by the BBC, both off screen and on. A BBC that accurately reflects the diversity of thought and opinion that exists across the UK is vital. 287. We recognise concerns that diversity of thought and opinion may not be adequately reflected within the BBC. There is therefore a risk that the organisation is affected by groupthink, which could have an impact on the BBC’s ability to fulfil its responsibilities to be impartial and deliver output and services that reflect diverse perspectives. 288. The BBC has reflected itself that an organisation with groupthink is unlikely to be accurately reflecting, representing and serving the diverse perspectives of communities across the UK. We note that it is considering ways in which it can take action to ensure that a diverse range of viewpoints are reflected in its workforce. The BBC Board has an important role to play in overseeing this work and reporting on progress as set out in the Framework Agreement. It is important that the BBC’s ability to reflect diversity of thought and opinion is kept under review, and the government will look again at the BBC’s progress in this area as part of the upcoming Charter Review. 6.3 We expect the BBC Board to continue overseeing the organisation’s plans to increase diversity, and to consider how diversity of thought and opinion could be better reflected in decision-making.
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