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It's always good to start a speech like this with a quote. Indeed I know some people whose sole claim to being considered intellectual rests on this habit. So here goes; see if you can guess who this is:

Broadcasting represents a job of entertaining, informing and educating the nation, and should therefore be distinctly regarded as a public service.

Not in fact the words of the great Lord Reith, but of David Sarnoff, the American radio pioneer. He was writing in June 1922, some months before the creation of the British Broadcasting Company.

But while American radio was developed primarily through private enterprise, the ³ÉÈË¿ìÊÖ was to develop as a great public monopoly.

Reith himself was very keen on monopoly. He referred rather fondly to the 'brute force of monopoly' as one of the four fundamentals of broadcasting. The others being public service, a sense of moral obligation and assured finance.

He was wrong about monopoly. But he was right about the rest. And the clarity of his vision has carried the ³ÉÈË¿ìÊÖ through the subsequent eighty years of technological and creative development.

Through those eighty years the ³ÉÈË¿ìÊÖ's security of funding has helped to protect its independence as a part of the public realm that is beyond the control of the State.

The consistency of its public service mission is also striking. The line borrowed from Sarnoff is still there at the front of the Royal Charter.

And from my first weeks inside the ³ÉÈË¿ìÊÖ, I know that the sense of moral obligation remains strong too. Reith talked about it being 'better to over-estimate the mentality of the public than to under-estimate it'. That thought bears repeating day by day. It is what makes the ³ÉÈË¿ìÊÖ the greatest broadcaster in the world.

Of course, the landscape now is very different. Public service broadcasting extends well beyond the ³ÉÈË¿ìÊÖ. There has been an explosion of competition across television, radio and the internet.

But the values of the ³ÉÈË¿ìÊÖ remain the same. The benefits it gives us as citizens remain the same. And the public's expectations of the ³ÉÈË¿ìÊÖ remain as strong as ever.

In other words, new technology hasn't changed the fundamentals. In fact, technological change ought to reinforce some of the things the ³ÉÈË¿ìÊÖ does best.

But that will require a ³ÉÈË¿ìÊÖ that is clear and confident about its purpose and that holds tight to its public service mission. I'm going to talk today about how I think it can do that.

I want to make an idealistic case for the existence of the ³ÉÈË¿ìÊÖ. Emotional, even. Because I think that's how it is for many members of the British public, even if it doesn't come across in the sort of policy wonk debates that some people enjoy so much.

A lot of wonks start with market failure. And as the broadcasting market has developed it has undoubtedly been less of a failure. We now have much wider choice, new pricing mechanisms and better consumer information than ever before.

Despite this, you can still make a strong market failure case for public service intervention in broadcasting. When Ofcom made this case in 2004 it defined the purpose of public service broadcasting as 'bridging the shortfall between what a well-functioning broadcasting market would provide and the wider ambitions of UK citizens'.

I'm sure that's right. It's certainly the right language for an economic regulator. But as ³ÉÈË¿ìÊÖ Chairman I feel I need to provide a bit more inspiration.

My sense is that the ³ÉÈË¿ìÊÖ itself needs to be less apologetic and less defensive about its mission and its cultural value.

I think the ³ÉÈË¿ìÊÖ is a core part of our civic humanism in this country. What do I mean by civic humanism? I mean our sense of shared citizenship, regardless of our different backgrounds. I mean the understanding that citizenship is underpinned by a common set of values, a common conversation. And an acceptance of mutual responsibility for our individual and collective welfare.

How does the ³ÉÈË¿ìÊÖ fit into that? By providing a public space for argument and creativity. By being a party to the public's engagement with democracy. By allowing citizens to test the trustworthiness of the information they get from those in authority. And beyond politics, by connecting different people and different communities to one another in all sorts of other ways. From EastEnders to the Proms. From Glastonbury to the new initiative that has put 200,000 of the nation's oil paintings online.

The ³ÉÈË¿ìÊÖ is both personal to each of us and universal for all of us. It creates a form of social capital.

The ³ÉÈË¿ìÊÖ can do all this because it has a licence to be different. Its scale, security and independence allow it the freedom to experiment, to be creative, to take risks. To surprise, sometimes to shock and even sometimes, unfortunately, to offend. It has the courage to do all that. And it must retain that courage, and keep its nerve.

All this points to the value of the ³ÉÈË¿ìÊÖ as an independent institution. Not for its own corporate sake, but for what it has come to represent for the rest of us.

Edmund Burke thought that long-existing institutions had effectively proved their usefulness over time. As a man with some experience of institutions, good and bad, I wouldn't myself take that to be a universal truth. But I do think it applies to the ³ÉÈË¿ìÊÖ. You might not invent it the way it is now if you were starting today. But it has become an immovable part of our daily lives. Over 80 per cent of people say they would miss it if it wasn't there. Overwhelmingly, people trust and believe in it. Even if, for each individual, the precise value of the ³ÉÈË¿ìÊÖ will be different.

Like any institution, the ³ÉÈË¿ìÊÖ comes in for its fair share of public criticism.

Some of that criticism is unfair. We should not become too fixated by it. It is an oddity about this country that the things we do best are often the institutions that attract the most criticism or hostile analysis.

The ³ÉÈË¿ìÊÖ is sometimes criticised for reasons that are nakedly commercial.

Sometimes the critics dislike the fact that a challenging brand of journalism or drama takes programme makers into ultra-sensitive areas.

Sometimes criticism focuses on alleged political bias; indeed, that has been the charge of almost every government since the ³ÉÈË¿ìÊÖ was founded as an independent broadcaster.

But some of the criticism should be taken very seriously indeed. The fact that we are paid for by the public through the licence fee should make us sensitive to the care we take in spending that money. Waste, self-indulgence and inefficiency at the ³ÉÈË¿ìÊÖ are inexcusable as they are anywhere else in the public sector. Openness and transparency are the best custodians of responsible house-keeping, and the newspapers that spot our falls from grace are doing us a favour.

As the biggest journalistic organisation in the democratic world, we should also take any mistakes in reporting, let alone the use of dubious evidence, as an assault on our own values. The brave journalism that uncovers cruelty in a welfare home is devalued when we fall short of our own highest standards in other programmes. Criticism that we are not impartial should keep us on our toes, determined to tell things as we see them while taking account of the full breadth of opinion that exists on most controversial topics. That is what I believe our best journalists attempt to do every day, whether it's Nick Robinson, Stephanie Flanders, Martha Kearney, Jeremy Bowen or a host of others.

We should also listen hard to those who accuse us of drowning our viewers and listeners in a small metropolitan pond of stereotypes and prejudices, what Flaubert called "received ideas". The customarily "unreceived" deserve to be considered and reflected too. And audiences in every different part of the UK should feel the ³ÉÈË¿ìÊÖ is relevant to their everyday lives.

Above all, we should pay greatest heed to any justified assertion that we are guilty of descending to a tasteless common denominator. Were that to be true, it would be a real act of treason to all that we are supposed to stand for.

Public support is central to the ³ÉÈË¿ìÊÖ's ongoing success. And I believe that support is dependent on a ³ÉÈË¿ìÊÖ of real ambition. There is a nice line from Burke where he condemns the excessive rationalism of the sort of philosophers who 'consider men in their experiments no more than they do mice in an air-pump, or in a recipient of mephitic gas.' And it's important to understand that the public response to the ³ÉÈË¿ìÊÖ, as an institution, is not entirely rational. It's also emotional. It's idealistic.

The ³ÉÈË¿ìÊÖ is something we are rightly proud of as a Nation. In fact when people are questioned about the relative importance of the ³ÉÈË¿ìÊÖ's different public purposes, it's the international purpose – bringing the world to the UK and the UK to the world – that scores highest. That is a reflection of the ³ÉÈË¿ìÊÖ's position in the public realm. As a counterweight to the political classes. Independent of whatever Government is in power. For the Nation; not of the State.

For as long as the public has a strong connection with the ³ÉÈË¿ìÊÖ as an institution, market failure will not be the only test of whether it should continue to exist.

But the ³ÉÈË¿ìÊÖ won't maintain its special place in the public's affections unless it continues to earn their respect.

The ³ÉÈË¿ìÊÖ needs to distinguish itself from the rest of the market and hold the trust of the people who pay for it. And the strategy the Trust has set for it has four clear, simple objectives to achieve that:

Increase the distinctiveness of the programmes

Improve value for money

Set new standards of openness and transparency

Do more to serve all audiences across all four Nations.

It's been said that these aren't terrifically earth-shattering new concepts. But that's not really the point. The point is that they are the right things to focus on. And I promise to be resolutely boring in sticking to them for the next four years.

But it's not just whether the four objectives are fulfilled that matters. It's also how. And that's about the ³ÉÈË¿ìÊÖ's culture and its mode of behaviour.

Public trust suffers whenever there is evidence of corporate behaviour that doesn't fit the ideal. The ³ÉÈË¿ìÊÖ should always remember this and understand how it looks from the licence fee payers' point of view. That's why, watching from the outside, the issue of senior executive pay has looked so toxic for the institution as a whole.

Licence fee payers don't expect the ³ÉÈË¿ìÊÖ to pay sky-high commercial rewards to people that work for a public service. They do expect the ³ÉÈË¿ìÊÖ to deliver the highest quality programmes and services. It needs – and indeed it has - excellent people to do that. The challenge is to balance these demands in the right way.

To its credit, the ³ÉÈË¿ìÊÖ has now understood and acted on this. In 2009 there were 640 senior managers in the ³ÉÈË¿ìÊÖ. Already that has been reduced by over 15 per cent, on target for the 20 per cent cut we want to see by the end of the year. And pay at the top is falling. So this year the Director-General is being paid 26 per cent less than he was two years ago.

I believe there is further to go – both in making further reductions and securing public confidence. One of my first acts as Chairman has been to ask the Director General to review again the approach to senior pay. I want to share a few headlines today:

There are still too many senior managers – currently three per cent of the workforce. I want to see this cut to more like one per cent by 2015 at the latest, to create a smaller group of people more clearly accountable for spending the licence fee. That means some further reductions and it will also mean a re-drawing of the boundaries around who is and is not a senior manager.

The freeze on bonuses for the most senior executives will continue. No Executive Board member will get a bonus in future - the public service ³ÉÈË¿ìÊÖ needs to distance itself, in this way, from the market. And private health insurance will be phased out for senior managers. Senior staff shouldn't have those sorts of benefits if they are not available to everyone.

Finally we need to be more transparent about the pay structure. So we will be the first organisation to introduce one of the most important elements of Will Hutton's recent review of public sector pay and I hope where the ³ÉÈË¿ìÊÖ is leading the way, others will follow. Every year we will publish a pay multiple so the public can see exactly how the pay of those at the top of the ³ÉÈË¿ìÊÖ compares to the rest of the organisation. We will do this by comparing the median pay of Executive Board members to median pay within the ³ÉÈË¿ìÊÖ.

Why are we doing this? Partly because transparency is a good thing in itself and partly because it brings its own disciplines. We have agreed with the Non-Executive Directors, who decide pay levels for Executive Board members other than the Director General, that we will regard the current multiple in effect as a cap within which executive pay should be managed. Moreover, although of course the ³ÉÈË¿ìÊÖ must continue to strive to attract and retain outstanding candidates for senior posts, the Trust's intention is that over time this multiple will fall. If however in exceptional circumstances the Non-Executive Directors were to believe that they needed to raise the multiple, this would have to be subject to a process through which they would write to the Trust to explain why this was necessary and seek our explicit agreement to this course of action.

The Trust is itself responsible for the remuneration of the Director-General. It will report on the multiple of the DG's pay to the ³ÉÈË¿ìÊÖ median each year and it will regard the current multiple as a cap. And when the time comes – I hope no time soon – to appoint the next DG, I would expect to adopt the same approach as for other executives and secure the right candidate at a lower multiple.

This action on pay is important. Because the ³ÉÈË¿ìÊÖ must do right by the licence fee payers who pick up the bill and by all the staff that work throughout the organisation at every level.

When I arrived in this job I discovered that the Trust's slogan is 'Getting the best out of the ³ÉÈË¿ìÊÖ for licence fee payers.'

That means the Trust is neither a cheerleader nor a regulator. Instead, it should be the conscience of the ³ÉÈË¿ìÊÖ. Passionate about the institution; correspondingly demanding of the people running it.

I don't think the governance structure of the ³ÉÈË¿ìÊÖ has ever commanded particular consensus. There was no 'golden age' of governance. But because the way it is governed is in part the means by which we guarantee the organisation's independence, it helps to have maximum certainty and security about how it works. So on taking the job, I agreed to conduct my own quick review of ³ÉÈË¿ìÊÖ governance.

A great deal of the governance structure is laid down by the Charter and Agreement. So even if I wished to do so I couldn't change everything overnight. And to be frank for the most part the present structure seems to be working pretty well.

The system of Service Licences and Public Value Tests has imposed a new discipline on the ³ÉÈË¿ìÊÖ. It is now more accountable and more careful about its impact on the wider market. The Trust can assess more clearly the benefits that licence fee payers get from any given service, and can identify areas for improvement.

But there remain some things we ought to improve. And I'm very grateful to Lord Inglewood and his House of Lords Select Committee for helping to identify a number of them.

I think there are four issues to address:

The ³ÉÈË¿ìÊÖ needs to provide greater clarity about what its two separate Boards are there to do – the Trust and the Executive Board.

It needs a complaints system that is quicker and easier to understand

The Trust needs to do what it can to simplify its regulatory systems and it needs to help the Executive keep a limit on the so-called 'compliance culture'

And the Trust should be more confident about seeking advice from external regulators like Ofcom.

We will be publishing the full results of the governance review later this month. But let me expand on these headlines now.

The Trust should be more clearly focused on its role as a strategic governing body. The Executive Board is there to provide editorial and creative leadership – that's why the Director-General should continue to chair it. And the Executive Board also needs to ensure the day-to-day delivery of services and to apply the necessary tests of financial and legal compliance.

The Non-Executive Directors can play a stronger role here. I have agreed with the Director-General that they should provide a specific assurance function in areas including remuneration, audit, major investments and commercial activities. If the Executive Board's oversight of these areas can be strengthened by a greater involvement of the non-executive Directors, then the Trust will be able to focus on its strategic role, without straying into micro-management.

Both the Trust and the ³ÉÈË¿ìÊÖ management share a desire to simplify our processes and make them easy to understand for everyone inside and outside the ³ÉÈË¿ìÊÖ.

That is why the Director-General plans to streamline the editorial compliance systems. So that there are fewer forms, fewer layers of checking, and more space and freedom for programme-makers. That has to be right for a creative organisation.

And to help deal with the particular complexities of the complaints system, a new position of Chief Complaints Editor will be appointed, reporting direct to the DG. That person's job will be to make the internal systems as fast and effective as possible. I hope that will mean issuing a clear and early apology if that's what needs to happen.

I also hope this will help to reduce the number of appeals that are brought to the Trust. For our part, we will be much clearer in handling any appeal about how we will investigate and assess the matter. And while we are prevented by the Charter and Agreement from transferring such appeals wholesale to Ofcom, we will also make it clearer to complainants when they have an option to go to Ofcom instead of us.

None of that means that the Trust will step away from its responsibility to set the ³ÉÈË¿ìÊÖ's editorial standards, and to help maintain its reputation for impartiality. This is central to the ³ÉÈË¿ìÊÖ's stated ambition to provide the best journalism in the World.

So the Trust will continue with its programme of annual impartiality and accuracy reviews of output. The subject of its next review will be the ³ÉÈË¿ìÊÖ's coverage of conflict, in particular the Arab Spring. And to allow us to look at other current or relevant issues within the year, we will now start up a series of more regular impartiality seminars.

Aside from its work on editorial standards, we will do what we can to simplify the Trust's regulatory requirements. For example, we have already radically shortened the annual Statements of Programme Policy to keep them to a one page statement from each service Controller.

We will now think again about Service Licences. These are probably the most important part of the governance system. They define the essence of each ³ÉÈË¿ìÊÖ service. By 2012 the Trust will have completed a full assessment of the performance of every service. And at that point we will look again at the licences and will try to re-cast them in a simpler format.

The current quotas and targets are useful in guaranteeing minimum levels of public service output. And they provide some certainty and transparency for the rest of the industry. But they can be a crude tool. We want to be sure they do not inhibit creativity. So we will remove any that we think are unnecessary.

In doing that I recognise the need to maintain the confidence of the rest of the industry. So we will ensure there is a full consultation on any proposed changes.

We will also improve the transparency of the processes we use to assess proposals from the ³ÉÈË¿ìÊÖ management for new services or activities. In particular, we want to make more use of Ofcom's market expertise and understanding.

In the past, the Trust has used a range of different approval processes to take decisions about whether the ³ÉÈË¿ìÊÖ should be able to start up new activities. In the future, we will standardise this around two tests. First, a test of 'significance' - is the proposal a 'significant change' to the ³ÉÈË¿ìÊÖ's services in any way? Secondly, wherever a change is significant, the Public Value Test.

Before the Trust reaches a decision on either test, I would want to seek a formal view from Ofcom on the potential market impact of the proposal. We are already in constructive talks with Ofcom about exactly how that might work.

Governance is endlessly fascinating to some. My ambition is to stop talking about it once this review is over. But I hope one result will be that it is clearer to the outside world where the Trust is focused as a governing body - on the ³ÉÈË¿ìÊÖ's strategy, its performance, its audience and its independence. We are not trying to run the organisation. And we are not trying to become an economic regulator. Where the ³ÉÈË¿ìÊÖ management or Ofcom is better placed to fulfil any given function, we want to give them the space to do that.

The same goes for the National Audit Office. We have accepted that in future the NAO itself should choose the topics for its value for money studies. It's important that we commit to transparency in this way and give the NAO room to do a valuable job.

But the ³ÉÈË¿ìÊÖ is not a State broadcaster. It is not under Parliamentary control. And the Trust is there to protect its independence, including in its relationship with the NAO. To help with that, I agree with Lord Inglewood that it is important for the NAO to have a work plan that it sets in advance. And I hope that we can agree a way to make this work.

I want now to talk a bit about where I see opportunities for the ³ÉÈË¿ìÊÖ in the internet age.

I think that the ³ÉÈË¿ìÊÖ's mission to inform, educate and entertain will be just as relevant for the next 80 years as it has been for the past 80 years. Perhaps more so, since the internet can mix together all three elements of this mission simultaneously.

The internet world is fast, immediate, personalised, interactive and social. All of these trends play to the ³ÉÈË¿ìÊÖ's strengths.

Both the internet and the ³ÉÈË¿ìÊÖ form part of the public realm. Both are fundamentally democratic. Combine the social and personal elements of the internet with the editorial and curatorial ambition of the ³ÉÈË¿ìÊÖ and we can create something exceptional.

Of course there are challenges ahead.

First, the ³ÉÈË¿ìÊÖ has to try to keep pace with new technology without leaving its core audience behind. That may not be easy in a world where different generations use media in different ways: older people staying with the media they know; digital natives behaving rather differently.

The ³ÉÈË¿ìÊÖ needs to provide a service to digitally literate 20 year-olds just as much as to old-fashioned newspaper-reading 70 year-olds. This goes beyond the sort of editorial challenge that has always existed for a broadcaster trying to reach a universal audience. It's now also a challenge with a technological dimension.

Even if average trends show a very slow pace of change in TV viewing, there may be little value in studying average trends when different parts of the population are behaving so differently. We need to try to spot and plan for potential tipping points that could bring more fundamental shifts in viewing patterns.

The ³ÉÈË¿ìÊÖ also has to contend with the threats posed to the online world by the market. The history of all other media is of a fight for greater control, with a risk of oligopoly. We should do what we can to avoid the shrinking of the internet as an open, democratic territory.

Consolidation and control don't always stem from bad motives, but they tend to have bad effects. The internet promised the end of problems of scarcity and consolidation. But the temptation will always remain for some to try to control the flow of information between producer and consumer.

Any number of network operators, gadget manufacturers or other intermediaries in our daily internet experience may in future wish to exert more control over our choices. The risks are the same as they ever were – a reduced diversity of opinion and content.

The ³ÉÈË¿ìÊÖ must navigate such threats and try to preserve its direct and open relationship with the public who pay for it. As a part of the public realm, it must remain a part of the open internet.

Its strategy is rightly now about creating content, not trying to own and control all the possible means of distribution. But where it is still involved in distribution deals, ventures and activities, it must continue to focus on maintaining an open environment for the public. One that isn't exclusive or proprietary, and doesn't always need a subscription.

Because the online revolution has huge positive potential for the ³ÉÈË¿ìÊÖ. I've found it interesting to look at which programmes do better than others on iPlayer. They include children's programmes and some of the best output from ³ÉÈË¿ìÊÖ Three and ³ÉÈË¿ìÊÖ Four. The numbers here are still tiny compared to broadcast television. But the trends increase my confidence that long into the future public service programming will work online.

More immediately, the ³ÉÈË¿ìÊÖ is at an important moment. For the first time in recent memory, it is facing a real-terms reduction in income.

As a result, the ³ÉÈË¿ìÊÖ has to look hard right across the board at what it does. How should we run a great public service broadcaster on the budget we have been given? Given, mark, not been obliged to go out and earn.

This work has not been completed. We are still looking at where we will have to make some changes and where we will have to conclude that some activities are expendable.

In doing so, we will put efficiency first, over long-existing ways of doing things. So that we protect as far as possible the services that audiences love.

And we will try to make choices that protect our public service mission. That promote the most distinctive programming within a universal service of popular appeal.

Commercial services

Those same ambitions for the public service ³ÉÈË¿ìÊÖ are central to the value I place on the ³ÉÈË¿ìÊÖ's commercial services.

It's hardly surprising that the quality of ³ÉÈË¿ìÊÖ programmes has translated into a helpful source of income. But the very success of our commercial services has led to much speculation about their future.

My starting point is that the ³ÉÈË¿ìÊÖ runs commercial services for one reason only – to generate income for its public services through the exploitation of our intellectual property. That way we make the most of the ingenuity of our programme-makers and the investment of licence fee payers.

In any potential conflict between delivery of the public purposes and any other ambition for Worldwide as an organisation, the public purposes win hands down, every time.

That doesn't mean the Trust wishes to constrain growth, but the ³ÉÈË¿ìÊÖ's commercial activity must be tied to its core public service mission.

If we get it right, Worldwide can continue to generate international commercial profits that both support and effectively subsidise the ³ÉÈË¿ìÊÖ's public service content. Including, in future, the World Service.

It makes no sense to sell Worldwide. Its symbiotic relationship with the ³ÉÈË¿ìÊÖ could not survive privatisation; competition requirements would likely cut that to shreds. Privatisation would destroy not enhance value. Moreover it is difficult to see how public policy concerns about Worldwide and its role in promoting the exports of other creative businesses would sit alongside shareholders' commercial and fiduciary responsibilities.

So there is a core of commercial services that the Trust believes must stay completely within the ³ÉÈË¿ìÊÖ because they are central to the future of the corporation strategically, reputationally and commercially.

They include programme sales and distribution, all ³ÉÈË¿ìÊÖ-branded channels, digital services and the new international iPlayer, bbc.com and ³ÉÈË¿ìÊÖ World.

We will not be willing to consider any proposals for privatisation either in whole or in part of any of these core elements.

Beyond this core, it may be that there are other ways to structure parts of the ³ÉÈË¿ìÊÖ's commercial businesses that could help to bring in external investment and promote growth. That's something I've asked the Director-General to look at.

I've also asked him to look again at how Worldwide could work more closely with other UK broadcasters and producers, who make so many excellent programmes. The UK has two advantages over the rest of the world: the quality of much of our television and the English language. I want to know whether there is scope for Worldwide, with its scale, to make more of those advantages for the benefit of the whole economy.

I started by outlining an ideal of the ³ÉÈË¿ìÊÖ as an institution that the public love and trust. And in each of the areas I've talked about tonight, I believe that it is by keeping that ideal ³ÉÈË¿ìÊÖ at the front of our minds that we will be best able to live up to the high standards that the public expect. We can take old values, apply them to new technologies and have real confidence about the ³ÉÈË¿ìÊÖ of the future.

It is, in my experience, very rare to be offered a second chance in life. Having turned down the opportunity of working for the ³ÉÈË¿ìÊÖ as a young graduate 44 years ago (to the bewilderment of most of my friends) it is gratifying to find myself back at 'Go' albeit via a circuitous route, taking in Belfast, Westminster, Brussels and Hong Kong among other places. As I hope I have made clear today, I regard it as a great privilege to be chosen to Chair the ³ÉÈË¿ìÊÖ Trust. The ³ÉÈË¿ìÊÖ is a very fine broadcaster with a world-wide reputation. I feel as proud to be working with it as I hope do all its employees. The ³ÉÈË¿ìÊÖ faces many challenges, some of which I have mentioned today. It will be an honour to work with the organisation to overcome them in the months and years ahead.