Should BBC viewers pay a £10 supplement to watch The Celebrity Traitors? Would adverts during Strictly ruin enjoyment of the samba?
The Government is drawing up “radical” options to reform the £174.50-a-year licence fee under the BBC Charter Review consultation, which begins this autumn.
Nothing is off the table at this stage, allowing officials to float ideas such as asking wealthier viewers to pay more.
Streaming giants believe they have fought off calls to divert a portion of their billion-dollar revenues to support UK public service broadcasting.
But Culture Secretary Lisa Nandy has set alarm bells ringing at Broadcasting House by proposing a hybrid licence fee, introducing “some subscription services” into the mix, along with more “commercial funding”.
Her intervention, ahead of the publication of a green paper setting out options for reform, raised eyebrows at the corporation, which is opposed to changes that could create a “two-tier BBC”, where some viewers pay more for exclusive access to shows.
The temperature of the debate is different under a Labour Government. There is no longer any question of abolishing the fee (the ambition of former Tory culture secretary Nadine Dorries), which brought in £3.74bn last year.
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Yet there is concern that 800,000 licences were cancelled over the past two years alone, raising questions about the ongoing legitimacy of a mandatory charge.
Ministers want a funding solution that will “future-proof” the broadcaster without political opponents being able to accuse the Government of imposing a new “TV tax” on hard-pressed voters.
Despite its resources, inflationary pressures and a 30 per cent real-terms reduction in licence fee income over a decade has forced the BBC to make drastic cuts.
Its news operation has shed hundreds of jobs and flagship drama productions were paused with producers claiming they could not raise sufficient finance to begin shooting.
The green paper will be followed by a white paper, expected at the end of next year, which will detail the Government’s preferred funding mechanism and setting out the size and scope of the BBC for the decade ahead.
So when the talking stops, which of the options are ministers most likely to land on for the licence fee when the current Charter, which oversees the BBC’s governance, ends in 2027?
Subscription service
Licence fee opponents, like Nigel Farage, say the charge should be abolished and replaced by a voluntary monthly subscription, forcing the BBC to compete with Netflix et al.
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Nandy told a Labour conference fringe event that she was looking at a “whole range of options” to replace the charge, including a “mixture of licence fee, commercial funding and some subscription services”.
A reduced annual licence fee could cover “core” essential services like news and current affairs which the market cannot deliver, with viewers paying a “top-up” subscription for entertainment, drama and sport.
Alternatively, viewers could pay a £6.99 month charge to gain early iPlayer access to hit shows – like the new series of Line of Duty, reported to be in the works for 2026 – weeks before they air on BBC TV.
Chance of success:
BBC Director-General Tim Davie is opposed to a subscription model that “serves the few” and does not “pass the test” of a universal, public service broadcaster.
The BBC argues that hit dramas like Happy Valley demonstrate that the licence fee is delivering value for all viewers. It allows the BBC to create creative risks instead of commissioning by algorithm.
Insiders estimate the annual cost of a subscription to fund the BBC’s range of services would be around £600 a year. Programme commissioning would be influenced by the need to produce enough popular shows to keep people paying.
Technology is the biggest obstacle. There is currently no “conditional access” system, allowing the BBC to “switch off” non-paying audiences from watching BBC programmes on Freeview or listening to its radio stations.
Ministers could ask the BBC to test the waters by experimenting with subscriptions for events that super-serve some audiences, such as a digital pass to watch every Proms concert live or each stage at Glastonbury.
Means-tested licence fee
Making wealthier households pay more would allow people on lower incomes to pay less.
Former 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.
Chance of success:
Davie says he is “open” to reform of the licence fee and making it more progressive, which also meets the Labour Government’s “fairness” test. It is likely to be a recommended option, allied with extra support to help families struggling to pay the fee. Ministers could explore using council tax bands to set licence fee levels.
But if the BBC is losing income, with fewer people paying the licence fee, bosses want the Government to step up and take over funding of the World Service, which is currently costing the BBC more than £200m a year.
The BBC said it is lobbying the Foreign Office to increase its contribution and will “continue our discussions with the Government”.
iPlayer charge
Charging UK viewers to use iPlayer is among the draft proposals being considered, according to reports.
The BBC already has the log-in details of millions of users which could be used to create a paywall. iPlayer could remain largely free but with viewers paying extra for early exclusive access to programmes or to view shows from the archive.
Chance of success:
Viewers could object to paying extra for programmes they have already funded by paying the licence fee.
With the BBC shifting from linear TV channels, where viewing is declining, to iPlayer, charging for access to the app would effectively turn the broadcaster into a subscription service.
The BBC is unable to charge international iPlayer users since it does not own individual rights to most of the programmes on the platform.
Charging UK viewers to use the iPlayer app is being considered, reports claim (Photo Yui Mok/PA)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.
But the fee could be axed and replaced with a new monthly household “digital TV” charge that breaks the historic link between using the BBC and paying for it.
European countries have abandoned their own licence fees. Germany replaced it with a household levy of €18.36 per month, paid even by those who do not have a TV or radio. The charge could be paid alongside broadband bills or added to utilities like council tax and weighted according to property bands.
Chances of success
The BBC would have to persuade people that it is a public good to pay for a national broadcaster and its services whether people use them or not.
Opposition politicians would accuse ministers of imposing a new “TV tax” on millions at a time when hundreds of thousands of people are choosing not to pay the licence fee.
Advertising
Advertisers would jump at the chance of reaching the 10 million viewers who watched the latest series of The Traitors.
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.
Chance of success:
Letting the BBC charge advertising would decimate the business model of ITV and other public service commercial broadcasters. But the BBC is selling adverts on some of its podcasts on Apple and Spotify and charges a premium fee for some podcasts internationally. BBC Studios, the broadcaster’s commercial wing, sells advertising on its global channels.
Nandy has acknowledged that increasing the BBC’s commercial activities, reducing reliance on the licence fee, will be central to its future funding.
Last year BBC Studios, which owns rights to Bluey and Strictly, achieved record revenues of £2.2bn, returning £200m to the BBC to spend on content.
No-gos
‘Netflix tax’
Whitehall briefings suggested that subscribers to streaming platforms including Disney, Netflix and Amazon Prime, who say they do not watch any BBC programmes, could be forced to pay for the BBC licence.
With so many people opting out of paying the licence fee, raiding the subscriptions of the 20 million and rising UK households who voluntarily pay for streaming would secure a new long-term revenue stream for the BBC.
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Streaming giants are increasingly moving in to live programming like sports, with Amazon buying rights to Premiership football and tennis.
Wolf Hall director Peter Kosminsky has said streamers such as Netflix should pay a 5 per cent levy on their UK subscription revenues to support public service broadcasting in the UK.
However, former culture minister Sir Chris Bryant said “we haven’t got any plans” to follow other European countries and introduce a streamer levy.
Netflix argues it has spent more than £5bn making TV shows and films in the UK since 2020, boosting the creative economy and showcasing national locations on series like thriller Black Doves.
Taxation
Funding the BBC from general taxation would solve the licence fee 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”. Her comments were seen as a swipe at Reform UK.
Government sources moved swiftly to kill off this option, raised at a time when the Treasury is having to damp down fears of new tax rises. The BBC is opposed to any mechanism that might threaten its independence. Government funding would make the BBC vulnerable to the whims of ministers.
Radio tax
Listeners to the BBC’s radio stations could be made to pay extra, a Bloomberg report suggested. But monitoring the nation’s listening habits would make this extremely difficult to enforce.
What do the Government and BBC say?
The Department for Digital, Culture, Media & Sport said: “As we address these vital issues about the future form of the BBC, we must also ensure that there is a sustainable funding model that is fair for those who pay for it.
“The Government is keeping an open mind about the future of the licence fee, but we are clear that the BBC’s funding and its operation are inseparable.”
The BBC said: “The public cares about the BBC and we will launch our biggest ever public engagement exercise so audiences can help drive and shape what they want from a universal and independent BBC in the future.”
“We look forward to engaging with government on the next Charter and securing the long term future of the BBC.”
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