BBC: is the national treasure worth its weight in gold?

The BBC brand is among the best recognised and most trusted in the world. But in its 80 year history the corporation has rarely been far from controversy, and never more so than today, says Stefan Stern

'This is London', intones a serious yet reassuring voice. The Lillibulero tune may not always be played on the BBC's World Service any more, but for listeners and viewers all over the planet the BBC remains a provider of a reliable and unequalled service.

But at stake is the BBC's very future existence. It is not surprising that this should be the case. Technological, social and political change all influence the workings of the modern media. And because of the BBC's special status - established under Royal Charter, funded by the taxpayer with the compulsory levy of the licence fee - any discussion of its future is inevitably highly political.

The case for the prosecution is easily made. The BBC is too big, feather-bedded with its guaranteed £2.5bn of licence fee revenue, a law unto itself, and now providing unfair and distorting competition in a whole range of media markets: the Internet, digital multi-channel television, publishing, education. The UK and international media and information markets are being compromised by this muscular state-backed competitor. It is like turning up at the Olympics for the final of the 100 metres, only to find that the UK's plucky representative has been bulked up by a lavish diet of steroids.

Critics, distinguished and otherwise, have been lining up recently to share their concerns about the BBC. David Cox, a former London Weekend Television executive, has labelled the licence fee a 'poll tax', rather like the unpopular local government tax that caused Mrs Thatcher so much difficulty. Like the poll tax, he wrote in the New Statesman last year, the licence fee takes no account of the ability to pay, hitting rich and poor alike.

'At least Margaret Thatcher's poll tax paid for vital public services. This surviving poll tax essentially funds entertainment,' he wrote. 'Since the BBC's output is consumed disproportionately by the middle classes, the system picks the pockets of the poor to fund the pleasures of the better off.'

Another Cox, Barry (no relation, but deputy chairman of Channel Four television, and also visiting professor of broadcast media at Oxford University), has also spoken out at length on the future of the BBC. He sees an end to the licence fee, with subscription taking its place, while retaining the essentially public nature of the corporation to provide some security for the public service broadcaster.

In an important lecture in Oxford earlier this year, he said: 'The BBC is in effect a self-perpetuating department of state but without an elected politician at the head of it. Like other departments of state it is funded by taxpayers' money but, unlike them, it is guaranteed more money than it needs to do the job for which it has been created.

'By this I don't mean that the BBC is part of the Government - far from it. It is worse than that. We can at least get rid of the Government at a general election. We have no effective way of registering dissatisfaction with the BBC as an institution - we can't stop paying for it, which is our normal recourse with services we have a quarrel with. Of course, if most of us stopped watching its programmes this would have a big effect; but this is precisely what the BBC understandably bends all its efforts to prevent - and given its extraordinarily privileged position, it would take extraordinary incompetence to lose viewers on such a scale.

'In short the BBC is, in its current form, a cultural tyranny - a largely benevolent one, admittedly, but a tyranny nonetheless. I think historians 100 years from now will wonder how a liberal democratic country tolerated such an institution for so long.'

The politics of all this are coming to a head for two reasons. First, the BBC's charter will be up for renegotiation in 2006, after the next general election. The secretary of state for culture, media and sport, Tessa Jowell, announced in January that the BBC would be the subject of a 'wide ranging' review into all aspects of its remit in the run-up to charter renewal in 2006. The BBC has agreed to open its books to an independent audit by the Audit Commission. Government officials have said that Jowell is 'determined to test to destruction the arguments for the licence fee'.

But second, the opposition Conservative party sees in this issue an opportunity to make some headway. It has appointed the former chief executive of Channel Five, David Elstein, to chair a panel of enquiry into the BBC.

His views are well known. In a digital future, with increasing electronic sophistication, a licence fee funded BBC will be harder to justify, Elstein feels. In 1999, while still at Channel Five, he wrote: 'The licence fee, though imperfect, is the only practicable means of funding the BBC for many years ahead - not just to 2006, but beyond. However, when electronic collection becomes a reality, the licence fee will evolve naturally into a form of subscription - flexible, sophisticated, socially equitable and politically attractive.'

The case for the defence is led, vigorously, by its current director-general Greg Dyke. Rejecting the charge of inefficiency and over-manning, Dyke points to £331m of cost savings, as well as £700m of revenue from international sales. In a recent interview in the Guardian, Dyke said: 'Those critics who say we have too much money were the same people who said we weren't efficient - they can't have it both ways.' Fixed overheads as a percentage of revenues are now 13%, down from 24% in the last year of Lord Birt's tenure (Dyke's predecessor, in charge till 2000).

The status quo of the licence fee and the BBC's protected position are also defended by Dyke. 'If you just rely on the economic marketplace, or if you allow the advertisers to make the total running, it is a mistake; I think you want a television system that reflects our culture and not that of the United States,' he said in the same Guardian interview.

Dyke, who came to the BBC from the private sector with a reputation as a rumbustious commercial operator, is emerging as an unlikely latter-day Reithian. When (Lord) John Reith founded the BBC in 1922, he had a vision of an organisation that would 'inform, educate and entertain'. 'Nation shall speak peace unto nation' ran the tag on the BBC's crest. There was a seriousness and sobriety about the BBC's purpose that had much to do with Reith's somewhat Victorian puritan background. Reith was no great fan of television, and abhorred vulgarity in any form.

But Dyke's great achievement has been to take a demoralised and confused BBC and help confirm it as a confident and modern media player. The current controversy has to do with the BBC's strength, not its weakness.

In truth it is all a bit hard for commercial competitors to stomach: the magnificent BBC website, commercial and ratings grabbing programmes, the strangle-hold on some educational and publishing markets. New digital channels compete, supported by licence-payers' money, with commercial channels desperate for (hard to win) advertising.

But let's see what happens when you apply the always useful 'It's a wonderful life' test (you may remember the Frank Capra film starring James Stewart where, as the character George Bailey, he is shown what would have happened to his home town of Bedford Falls had he not been there): no BBC news and current affairs. No sports coverage. No BBC national radio or local radio. No Open University. No drama. No educational programmes. Quite probably no World Service (even though funding for this section of the BBC comes directly from Government). Public service broadcasting would cease almost completely to exist. The trash would be undiluted.

Moving forward, the challenge for the BBC is to justify its 'poll tax' licence fee in a world of increased digital choice. And certainly, merely duplicating what already exists in the private sector is absolutely not what the BBC is supposed to be about. But when you think about what you have to pay to receive Rupert Murdoch's TV programmes on BSkyB - around four times the cost of a BBC licence fee - then perhaps the Beeb's poll tax doesn't seem quite so outrageous after all.

Stefan Stern is a regular contributor to the specialist press and an expert on work, management and industrial issues.