People could be left paying the BBC licence fee for years even if the Government decides to abolish it, due to the lengthy time needed to transition the country to new ways to fund the beleaguered organisation.
The BBC licence fee is set to top £200 within five years as the number of paying viewers dwindles, according to official forecasts – placing fresh urgency on the BBC’s need to overhaul a funding mechanism that its own director-general admits is a “busted flush”.
Ministers are set to announce proposals to reform the £180-a-year charge in a White Paper setting out the terms of a new BBC Charter next month. Options for reform include extending the licence fee to cover streaming subscribers – and replacing the charge altogether with a monthly levy added to utility bills.
However, there is still no consensus around any proposal, and with streaming companies and broadband providers potentially required to administer a new charge it could be years before any major overhaul is implemented – while the BBC’s financial position continues to deteriorate.
New Charter by New Year’s Day
The BBC Charter, which needs parliamentary approval, must be in place by 1 January 2028. It could set out the principles for how the BBC will be funded while details are thrashed out.
Insiders believe a transitional system could be put in place, with the licence fee gradually being replaced by a new structure over several years.
Implementing a new funding mechanism could mean giving a fresh remit to TV Licensing, which spent £190m last year conducting household visits and collecting the licence fee.
‘£6.25 a month’ streaming tax
The Government is looking at plans to make up to four million households start paying for the BBC again, by extending the charge to streaming services in a so-called “YouTube tax”.
Currently, the licence fee does not cover streaming services such as Netflix and Disney+ unless subscribers are watching live programming like Champions League football, or scheduled broadcasts such as Netflix’s Beat Luke Littler, which aired at 7pm on October 30.
Analysis by the Social Market Foundation (SMF) found that a streaming subscription levy could add £6.25 a month to bills.
However, with streamers likely to object to customers having to pay to subsidise a rival service, there could be months of wrangling over how such a system would be introduced.
Implementing it fully could then take another few years, as streamers would have to agree to send new bills to customers showing clearly where there was a BBC surcharge.
£11 a-month broadband levy
A “home internet levy” was the fairest method of funding the BBC and the one most likely to command public consent, the SMF report found.
A BBC broadband charge would cost £11 per month, which is an average increase of 35 per cent on the current cost of internet bills. But that would work out to £4 a month cheaper than the current licence fee.
Internet providers would be compensated for the cost of collecting the charge.
With 95 per cent of households now having home internet access, the infrastructure is in place for a broadband levy to be introduced relatively quickly – though people who do not watch any BBC programmes could object to having to pay for it.
£12-a-month German-style household levy
BBC director-general Matt Brittin has suggested that that a new funding model for the BBC could be introduced that mirrors a scheme in Germany called Der Rundfunkbeitrag.
All households in Germany pay €18.36 per month (£15.70) to fund all public TV and radio broadcasters across different states.
Brittin predicted the scheme would enable the current fee to be reduced by 20 per cent from its current level – meaning the cost of watching television would be cut by £36 a year.
However, the Treasury is said to have vetoed a “household levy” on the grounds that it would be presented as a new “TV tax” rise by political opponents. Nandy has previously said: “We ruled out a new tax on households because of the cost of living crisis.”
Netflix-style subscription
The BBC could morph into a subscription service, charging a monthly fee for its services, just like Netflix, Amazon Prime and Disney+.
Proponents say viewers would happily pay £15 a month to ensure they can watch hit shows like The Celebrity Traitors. The BBC could introduce such a system from 2027, using iPlayer as a sign-in mechanism.
But the BBC is opposed to any move to subscription, arguing that it undermines its commitment to universality. Public service genres like news and education could be dropped from such a service, with the broadcaster forced to chase ratings to retain subscribers.
The BBC would also need the technology to prevent non-payers from accessing its content, which would currently be impossible to achieve with radio.
Advertising
The Department for Culture, Media and Sport (DCMS) has looked at whether the BBC should be allowed to take advertising around some of its services.
However, ministers accepted that allowing the corporation to sell advertising would kill the market for commercial rivals such as ITV and Channel 4, which are already struggling to maintain their funding as viewers migrate to streaming platforms.
Another option is that Channel 4 could be given a portal on iPlayer to showcase its programmes, which would include adverts, with the revenues returning to Channel 4.
Licence fee stays but BBC pays for itself
One option could be to let the licence fee continue its decline and give the BBC the commercial freedom to raise more funds itself.
BBC Studios, the corporation’s commerical wing, generated £2bn in revenues last year – compared with the licence fee bringing in £3.8bn.
Steven Knight, the Peaky Blinders creator, has proposed an international iPlayer with the BBC selling subscriptions to US viewers.
The BBC has already introduced an $8.99 a month subscription to its US app, giving users unlimited access to its global news and reporting, including a 24/7 livestream of the news channel.
A BBC spokesman said: “We have consistently argued that the current funding model is outdated and needs reform. We will continue to engage with government to secure a new Charter that provides sustainable, sufficient and universal funding so the BBC can deliver for audiences for generations to come.”
A Government spokesman said: “The BBC must be funded by a model that is sustainable and fair to all those that are paying it. Through Charter Review, we are looking at a range of options, including how the BBC can operate more efficiently, generate more commercial revenue, and how the licence fee could be reformed.”
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