Licence to change: BBC future funding Contents


We are publishing this report in the midst of a rapidly transforming media landscape. Change is occurring at unprecedented scale and pace—both in the UK and across the world. Linear TV consumption looks set for long-term decline. Digital alternatives are proliferating. Consumer habits are evolving rapidly. Production costs are rising and the global market is dominated by international giants that enjoy vast strategic advantages in financing, data, and economies of scale. These changes are transforming the way audiences choose and consume media.

There is a vital role for the BBC in a changing world characterised by political realignments, technological revolution and expanding choice. We want to see a BBC that remains at the heart of British broadcasting—bringing the nation together, serving all sectors of UK society, and delivering a world-leading service that is respected across the globe. But its role must be more clearly defined. And the BBC must change to ensure it can deliver value for audiences and society in the years ahead.

The BBC must do more to maintain the legitimacy of public funding by doing a better job of representing the full range of perspectives and communities that make up our diverse society. It must adapt its services to remain relevant to younger audiences while supporting those who will rely on linear TV for at least the next decade. And it must make choices and be honest about what it can and cannot deliver in the context of rising costs, restricted funding, and a ruthlessly competitive future marketplace. It otherwise risks a future of gradual stagnation and decline.

The way in which the BBC is funded in future could have a major impact on how well it can navigate these challenges, and what it is able to provide. But discussions on funding have too often become locked in a binary for/against licence fee debate. This is unhelpful. Our inquiry sought to move beyond this impasse and set out clearly the complexities and consequences of changing the funding model.

Our evidence was clear that some form of public funding for the BBC remains necessary. The licence fee is one option, but not the only one. It retains several benefits, but its drawbacks are becoming more salient. The link to a television set looks increasingly outdated. Its regressive nature means that regularly raising the fee to the levels the BBC requires will hit the poorest hardest.

There are alternatives to the current system. A universal household levy linked to council tax bills is one option which could take greater account of people’s ability to pay. A ring-fenced income tax is another. Reforming the existing licence fee to provide discounts for low-income households is a third. Each of these merits serious attention. The BBC will also need to expand its commercial operations. We are calling for it to be open minded about exploring more ambitious commercial options, such as domestic or international hybrid subscription services. There are several variations on how these could operate.

It is important to be clear about what will not work. Substituting the licence fee entirely for advertising would provide insufficient income whilst decimating the revenues of other public service broadcasters. A full subscription-based model would likewise deliver inadequate revenues and face major technical hurdles and accessibility barriers. Funding the BBC through Government grant would risk undermining editorial independence.

Ultimately the decision on the funding model depends on what the BBC should be for and what it exists to provide. We are therefore calling on the BBC to publish a bold new vision. This must propose a strategic purpose that will guide it through the next quarter of the 21st century and set out what it will do differently, what it will stop doing and where it needs to innovate. This must include costed options for future funding mechanisms and how these would affect the corporation’s ability to deliver on its purpose. This should represent a step change in how the corporation approaches the funding debate. Such work is essential to ensuring that discussions ahead of the next Charter renewal are sufficiently open minded, transparent, and well informed.

Any changes to the BBC’s funding will require public support. We were concerned about the lack of plans for public engagement, and we call on the Government to commit to holding national consultations before proposing changes to the funding model. We also noted the need for a more nimble regulatory framework.

The BBC has a central role to play in the life of the nation, the creative economy, and the UK’s soft power. But the status quo is not an option. Now is the time for the BBC to redefine its role and use this opportunity as a catalyst to drive much-needed change.

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