The licence fee would be cut if the BBC makes poor quality shows under a new “performance-linked” funding model that has been proposed for the corporation.
The radical plan from the influential think-tank Demos will be considered by ministers who are conducting a review into the BBC’s future funding and governance.
The “blueprint for a more independent BBC”, which also includes giving viewers a say in BBC decision-making, will be Demos’s contribution to a public consultation into the broadcaster’s funding held by the Departmentfor Culture, Media & Sport.
Options the Government has already suggested include placing hits like The Traitors and Strictly Come Dancing behind a Netflix-style paywall and allowing the BBC to sell advertising around shows.
Culture Secretary Lisa Nandy wants the BBC to increase its commercial income so it becomes less reliant on the £174.50 charge, which fewer people are paying.
Both licence fee evasion and households opting out of paying the charge cost the BBC over £1.1bn in potential lost income in 2024/25, according to the Public Accounts Committee. Around 800,000 households have stopped paying for a TV licence over the past two years.
A Government green paper, setting out options to reform the BBC, acknowledged the burden the fee places on poorer households. Ministers have ruled out giving free licences to people on benefits but there could be discounts for some groups such as students.
The Government said it was “keeping an open mind about the future of BBC funding,” adding: “We have not yet identified a preferred model.”
A white paper later this year will set out ministers’ preferred option.
Nandy said a new mechanism, giving the BBC “sustainable funding for decades to come” must be in place before the BBC’s current charter, setting out its obligations and funding mechanism, expires during 2027.
So which of the various options are ministers most likely to land on for the licence fee from next year?
Performance-linked funding
Demos, the think-tank which influenced Labour and Tory government policies, including David Cameron’s Big Society, has published the most eye-catching solution so far.
Its “blueprint” for the BBC proposes an Independent BBC Funding Commission, which would set the level of the licence fee, taking the decision out of the hands of politicians.
The commission, made up of broadcasting experts, would assess “whether the BBC successfully fulfilled its mandate” of delivering for the public over the previous year.
Under the “performance-linked funding” system, the BBC would face “targeted reductions” in its funding if it had failed to meet the “standards required”. Viewers could expect a licence fee cut if the BBC had delivered a year of flop shows.
Demos would also make the BBC more accountable by requiring the Board to consult with a “citizens’ assembly” of licence fee payers over major decisions.
Likelihood of success
Licence fee payers might welcome a charge linked to how much BBC content they watch and a possible cut if programming does not meet standards. Politicians may not like the idea of losing control over the BBC’s funding and governance. Who would decide the “standards” the BBC should meet?
The BBC could have the licence fee docked over errors such as the misleading editing of the Panorama Trump documentary (Image: BBC iPlayer)Subscription model
The BBC could charge extra to watch entertainment programmes such as The Traitors and Strictly Come Dancing.
Viewers could pay for early access to hit dramas like The Night Manager and Line of Duty through iPlayer.
The green paper said: “Content that remained universally available could include genres such as news, current affairs, factual and children’s TV. More commercially viable TV content could be provided on a fully commercial basis.”
Nigel Farage has committed a Reform government to scrapping the licence fee, with some public funding made available to support BBC News.
Likelihood of success
Viewers are already familiar with subscription payments to streamers so why should the BBC be any different? But the technology doesn’t yet exist to “switch off” access for non-payers to free-to-air BBC services like its radio channels.
The BBC is wholly opposed to subscription, which it says would mean making programmes purely to appeal to subscribers – generally the wealthier – at the expense of its public service obligations.
Advertising
Advertisers would jump at the chance of reaching the 10 million viewers who watch The Traitors, giving the BBC a new source of funding.
If breaking up programmes is deemed too intrusive for viewers, dramas such as EastEnders could be sponsored, bringing in vital revenue to support production costs.
The BBC already sells adverts on some of its podcasts on Apple and Spotify whilst YouTube users see ads served around some BBC promotional content.
Likelihood of success
Although included as an option in the green paper, ministers say they recognise the outraged response from ITV and other commercial public service broadcasters who fear letting the BBC bid for a declining advertising pot would decimate their business model.
The BBC could experiment with advertising around classic programmes from its archive.
Means-tested licence fee
Making wealthier households pay more for the licence fee would allow people on lower incomes to pay less.
Former BBC director-general Greg Dyke has said people on benefits could get free licences under a truly progressive system.
The principle has already been established with the over-75s who claim pension credit being eligible for free licences, after the scrapping of universal free licences for that age group.
Likelihood of success
The outgoing director-general Tim Davie said he was “open” to making the fee more progressive, which also meets the Labour Government’s “fairness” test. Ministers could explore using council tax bands to set licence fee levels.
BBC insiders are attracted to the idea of discounted licence fees for students since it would encourage a hard-to-reach audience to use iPlayer in the hope that they could be converted to full-price payers when they are older.
The options that have been ruled out
Household digital tax
People currently pay the licence fee if they watch programmes live on TV or streaming services, and if they download or watch programmes on iPlayer.
Broadcasting experts had recommended replacing the licence fee with a monthly household “digital TV” charge.
Germany introduced a household levy of €18.36 (£15.96) per month, paid even by those who do not have a TV or radio with widespread discounts including for people who are jobless or disabled.
However, a household charge, not linked to watching the BBC, was not included in the Government green paper.
Taxation
Funding the BBC from general taxation would solve the evasion and prosecution problem overnight. Evasion stands at 10 per cent and women make up 76 per cent of those prosecuted – an excessive number, which ministers say must be tackled.
It would provide the BBC with a secure funding mechanism and end anguished debates over whether the licence fee is fit for purpose.
Nandy has ruled out this option, claiming it would make it “too easy for politicians of any political persuasion to be able to pull that funding in order to use a stick to beat them with”.
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