Tessa Jowell today unveiled plans for a radical change in the governance of the BBC as she laid out her vision of how the corporation will be run and funded over the next 10 years.
Announcing the continuation of the licence fee and the replacement of the BBC governors with a new "BBC Trust", the culture secretary said the corporation was "as much a part of British life as the NHS" and should be kept independent of government.
Although her green paper recommends that the licence fee should remain and the royal charter be renewed for another 10 years, Ms Jowell said there had to be changes to how the BBC was run and recommended that its funding should be reviewed within the next charter period.
"Like the NHS it faces the need to change so that it can be as effective in the future as it has been in the past," she said.
The green paper, entitled "A strong BBC, independent of government", signals Ms Jowell's determination to find a compromise between the proposals of the governors and the more radical recommendations of Lord Burns.
In it, the government admits that "governance is the central issue for this charter review" and lays out in detail how the new system will operate and the remits of both the trust and the new executive board.
It rejects the idea of an "Ofbeeb", a separate public service broadcasting commission and bringing the corporation under greater regulatory control by Ofcom.
But it says chairman Michael Grade's efforts to pre-empt the green paper by separating the governors from BBC management have "not gone far enough".
Instead, Ms Jowell proposes a new BBC Trust, which will have responsibility for the licence fee and ensure the corporation fulfils its public service obligations.
BBC Trust to replace governors
The composition of the proposed trust will be similar to that of the existing board of governors and it will have ultimate responsibility for the licence fee.
Trustees will set performance targets for BBC executives, and reflect the views of licence fee payers and safeguard the corporation's independence.
Like the current board of governors, they are to be drawn from all areas of public life and represent the nations and regions.
Members will be appointed by the Queen, as the governors are now, and be subject to full Nolan rules.
The new body will also approve strategies and high level budgets and hold the executive board to account.
Trustees will be helped in their tasks by the new governance unit already in existence.
As with the governors now, the new executive board will be "formally constituted" and be "responsible for the delivery of all of the BBC's activities and accountable to the Trust for its performance".
But the powers of the director general could be impinged upon by the new regime.
The green paper proposes that the executive board will be chaired by the director general, or, "at the discretion of the Trust", a non-executive.
Although the exact number of people on the executive board has not yet been defined, it will be made up of a "significant minority of non-executives".
10-year charter
Ms Jowell says she believes a 10-year charter - from January 1 2007 until December 31 2016 - will give the BBC and viewers "stability" during the switchover to digital.
But she says the government would conduct a review of alternative methods of funding the BBC and investigate the possibility of a subscription-based system before the end of the next charter period.
Ms Jowell says despite its weaknesses there was not yet a "viable alternative" to the licence fee.
Through surveys and focus groups she concludes that although the BBC is "liked and trusted by millions", people "often feel the BBC is too remote, too metropolitan, its accountability unclear, its programmes too dull, or too copy-cat of formats".
In another bid to make the BBC more accountable, Ms Jowell suggests making the new trust's meetings public and electing members of the public to the corporation's national broadcasting councils.
BBC reaction
Mr Grade expressed disappointment that the governors' Building Public Value manifesto, published last summer, had not been given more time to take effect.
The BBC chairman said the manifesto had set out a series of "radical" steps to modernise BBC governance.
But he admitted the changes had been "essentially more behavioural than structural".
"It is regrettable that our own reforms have not had time to prove themselves. But it is important that the issue has now been settled ahead of the new charter, providing the BBC with the necessary certainty and stability," he said, adding that the new model "heralds the biggest change in the governance of the BBC in 77 years".
And Mr Grade welcomed the decision to grant the BBC a new 10-year charter and secure funding via the licence fee.
"This is a strong endorsement of the BBC as the cornerstone of public service broadcasting in the UK now, and through digital switchover," he said.
The BBC director general, Mark Thompson, said the corporation faced "exciting and daunting new challenges over the next decade".
"The green paper endorses the ambitious public purposes we set out in Building Public Value, adding for the first time an explicit purpose for the BBC to lead the building of digital Britain. A 10 year charter and secure funding for the BBC will give us the right foundation on which to take on these challenges," he said.
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The green paper of the future of the BBC has asked for the Board of Governors to be scrapped and replaced by two boards, one representing the public and an executive board. The proposals were announced  by the British Culture Secretary Tessa Jowell in the House of Commons. 

Other things she has asked for is the licence fee be kept, currently at GBP 121 (EUR 176.26) per householder, more independent television to be made on the BBC, currently 10% must be made by independent television companies & to stop chasing ratings, mainly by copycating programmes from other channels. 

She said that the board of governors was  “unsustainable” and lacked “clarity and accountability”. Shadow Culture Secretary John Whittingdale said that the green paper did  “not go far enough” countining saying that they were  “largely cosmetic changes to the structure and oversight of the BBC”. 

The green paper was made as the Charter that is the basis of the BBC is to reviewed in 2007 as required by law.