Andrew Neil is the nemesis as the BBC hits back at its bureaucrats

Simmering resentment at the corporation's 'Soviet'-style board of trustees boiled over in White City last week. Tim Luckhurst reports

The Culture Secretary, James Purnell, said last week that it would be "perverse" not to consider allocating part of the BBC licence fee to other broadcasters. To BBC journalists, the real perversity lies elsewhere. Why, they ask, is their employer facing a perilous future with its strategic direction disputed between the executive group under the director-general, Mark Thompson, and its new regulator, the BBC Trust?

At the BBC's News Festival in the White City media centre on Thursday, the controversy provoked an electric confrontation between the trust's chairman, Sir Michael Lyons, and Andrew Neil, presenter of shows including This Week (BBC1) and The Daily Politics (BBC2).

The annual News Festival is a private gathering for BBC staff. Sessions are scheduled to fit between shifts, and journalists have grown accustomed to dropping in to test new technology and listen to presentations by their leaders. Mr Neil's interrogation of Sir Michael, who was flanked throughout by fellow trustees Richard Tait and Alison Hastings, was unusually aggressive.

Mr Neil began by quoting the view of one senior BBC journalist that: "We are at the mercy of a bunch of amateur regulators throwing their weight around to prove they are as good as Ofcom." Insiders say the presenter then cited internal criticisms that the BBC is being "regulated to death" and "buried in an avalanche of pedantry".

Sir Michael was initially shocked. "The trustees came along like the Royal Family, expecting to dispense their wisdom to the peasants and bugger off," explains one journalist who attended. "After the first few moments you could hear a pin drop. Michael Lyons was bristling."

Briefed by BBC editors who claim the trust's approach to regulation is stifling their creativity, Mr Neil persisted. He asked Sir Michael, "If this sort of top-down regulation worked, don't you think the Soviet Union would have won the Cold War?"

"BBC journalists have never been convinced by Lyons," says one. "He is a former Labour councillor who conducted a clutch of reviews for Gordon Brown when Brown was Chancellor. He came to this job devoid of broadcasting experience. Andrew Neil reflected that by asking him if he is now micro-managing the BBC in the way his mentor once ruled the Treasury."

Insiders say there was support for Mr Neil when he asked Sir Michael whether the trust's interventions in Mark Thompson's strategic planning had forced the director-general to salami-slice budgets. "Neil suggested that Sir Michael is guilty of imposing a lot of pain on BBC journalists when news coverage should really be the corporation's crown jewels," says an editor.

The trust's supporters refute the accusations. They point out that the BBC can now be subjected to judicial review if commercial competitors believe it is unfairly distorting the market. The trust's approach to regulation is, they say, carefully calculated to avoid that fate.

This defence applies particularly to the detailed service agreements imposed on all BBC services in the latest royal charter. The trust did not invent them, but it is required to design their content and to ensure services comply with their commitments.

BBC journalists despise the arrangement. "At a time when we are being knocked very hard by our competitors, do we really need the trust to do it too?" says one who attended the News Festival session. Others accuse the trust of spending "stupendous sums of money" to paralyse the corporation with new layers of bureaucracy.

The confrontation at White City might be dismissed as nothing more than the traditional misunderstanding between a senior journalist and a professional administrator. The trust's problem is that it has not won the confidence of BBC managers.

Top insiders say relations between Mark Thompson and Sir Michael Lyons are formal and never cosy. Senior executives including Jana Bennett, director of BBC Vision, feel stressed by the constant demands from the trust and the Government. Heads of department complain they no longer have time to meet people and develop ideas.

The result is one BBC supporters feared when the trust was devised to replace the Board of Governors. With the future of the licence fee being openly questioned and technological change fragmenting the BBC's markets, the corporation lacks a staunch defender. The trust is supposed to champion the BBC's independence, but it has not yet worked out how to combine that role with its regulatory duties.

Journalists who attended the White City event say that, by the end of Andrew Neil's interrogation, he had begun to listen, not just deny. He should. With the Government thinking afresh about the licence fee, the BBC's future is insecure. It urgently needs to revive the unity that once bound governors to managers and made the corporation robust.

Tim Luckhurst is professor of journalism at the University of Kent