The BBC is not just one of Britain’s best-loved institutions, but also one of its most political.  After a year of sniping from both Labour and Conservative front benches, the Ross/Brand affair, uproar over executive pay and expenses, pressure to reveal talent costs in detail, jaw-dropping overruns on major capital projects and a fierce battle over possible top-slicing of the licence fee, the BBC has pulled its tanks back to a more defensible line, ready for a possible second onslaught after the election.

The strategic review published on Tuesday attempts to secure some high ground.  No longer will every outpost of imperial expansion be supported.  The damaging thrusts into vulnerable territory held by local newspapers, commercial radio and online investors will be withdrawn.  Token sacrifices will be left on the field of battle: a couple of obscure digital radio services, a thousand little-visited programme websites, unduly expensive US programme acquisitions and sports rights, magazine publishing in the UK, and Lonely Planet-style deals by BBC Worldwide.

The planned re-grouping is cleverly designed.  Quality will be put first (where was it previously?).  BBC websites will carry links and click-throughs to their beleaguered rivals.  Overheads will once again be cut back (or rather, New Labour-style, cuts announced in 2008 and again in 2009 are re-announced).  Eventually, £600m a year will be added to the BBC’s programme-making budget, concentrating on the core activities one always imagined were the BBC’s prime purpose anyway: journalism, factual programmes, arts, children’s, “ambitious” drama and comedy (bye-bye lazy drama and comedy), national events.

What’s to say no to?  This conversion to the true path may be late, but is surely welcome.  Yet it leaves major issues unmentioned that the BBC’s role in our media landscape begs be discussed.

Despite the headlines about “cuts” so artfully generated by the advance identification of sacrificial lambs, the BBC will be no smaller at the end of this exercise: just less thinly spread.  The licence fee will continue to rise until it is reviewed in 2013, and the increase in the number of homes paying the licence fee will turbo-charge this surge of guaranteed revenue.

This year, the BBC’s total income will top the £5 billion mark for the first time, if we include BBC Worldwide revenues and grants to the World Service and BBC Monitoring.  £3.6 billion will come from the licence fee, whereas ITV has just reported that for the first time in a generation advertising income for ITV1 has fallen below the £1 billion mark.  Total advertising revenue for all the commercial terrestrial channels will be £1 billion below the BBC’s licence fee income.  Barely 20 years ago, ITV1’s advertising revenue alone was double the BBC’s licence fee income.

Nobody intended the BBC to loom so large in the media landscape.  Although BSkyB and – to a lesser extent – Virgin Media have successfully mined the potential for subscription payments, they are primarily channel platforms rather than broadcasters.  Sky Sports and its movie channels are in the business of buying rights.  The combined budgets of Sky One, Virgin 1 and Sky News barely register on the BBC Richter scale.  The proposed increase in the BBC’s origination spend is larger than the entire programme budget for Channel 4, and represents 70% of ITV1’s.  The discarding of two digital radio services will still leave the BBC with 49 slots on the Sky electronic programme guide for its wholly-owned and editorially controlled channels.

Although the BBC is explicit in saying it will encroach no further in provision of local radio and television services, it will continue to spend nearly £1 billion a year providing existing services.  Online spend will eventually be cut by 25%, but will remain at £135 million a year, double what it was spending five years ago, and dwarfing all other UK online activity.  Paradoxically, a more efficient BBC spending more on content may strike its competitors as even more of a threat than the current incarnation.

The new emphasis on programme-making and core public service content reverses a trend that Ofcom identified last year: a 13% reduction between 2004 and 2008 of spend by BBC1 and BBC2 on production, especially in the main public service genres.  The BBC was busy diverting cash to its huge infrastructure projects – not just Broadcasting House, but the massively expensive conversion of all its terrestrial transmitters to digital – and to an array of new digital services. 

Yet the BBC resuming its responsibilities in this area only underlines the rapid reduction in supply of such content from the commercial terrestrial channels.  Do we really want to find ourselves overwhelmingly dependent upon a single supplier for our current affairs, documentaries, arts and regional news programmes?  Yet the BBC has fiercely opposed even diverting the ring-fenced digital switchover funds it has been granted to supporting regional news on commercial channels after switchover is complete.

This could all yet back-fire.  During the wrangling over the Government’s proposal to divert the switchover money to non-BBC public service content, the chairman of the BBC Trust, Sir Michael Lyons, cited opinion poll research showing that people would prefer that money to be spent on BBC content rather than non-BBC content.  Intriguingly, the same poll, commissioned by the BBC, showed that far more people would rather have the money returned to them, thank you very much.

An incoming government might conclude that, if the BBC can squeeze its own activities so as to generate a new programme spend of £600 million a year, that sum might also allow a reduction in the licence fee of £25, without negatively affecting a single current service, as presently delivered, that the BBC proposes to maintain.

We have even had a hint from the Labour Culture Secretary, Ben Bradshaw, that the licence fee might not, in the future, be the best way of funding the BBC anyway.  Mark Thompson, the BBC’s Director-General, announcing his strategic review, claimed that the BBC “should defend the public’s right to choose rather than to have choices made for them”.  The public’s right to choose whether or not to pay for the BBC’s many services is probably not what he had in mind.  But once that issue is on the political agenda, this tactical retreat may yet turn into a strategic rout.

This column was first published in the The Times