Licence to change: BBC future funding
Chapter 1: Introduction
1.We launched this inquiry in February 2022 to examine how the BBC should be funded in future. The BBC’s main source of funding is the licence fee, providing roughly £3.7 billion of its current £5 billion annual income.1 The remainder is generated through other, non-public means. The constitutional basis for the BBC and its governance comes from the Royal Charter (the Charter), which is typically reviewed every 10 years. The current Charter ends in 2027.
2.Questions around BBC funding are not new, but are becoming more pressing. The corporation faces growing competition, rising production costs, changing audience habits, concerns over representation and relevance, and constrained funding. The period between now and the next Charter renewal provides a window for taking crucial decisions that will influence the BBC’s trajectory for decades to come.
3.In recent years successive governments have questioned whether the licence fee should remain. In April 2022 the Government published a White Paper on the future of broadcasting. This stated that there were “clear challenges on the horizon to the sustainability of the licence fee” and confirmed there would be a review of the BBC’s funding model ahead of the next Charter period.2 The Government subsequently confirmed it would launch an independent review in July 2022.3
4.Our inquiry builds on decades of previous debates. In 1986 the Peacock Committee held a major review of the BBC which recommended retaining the licence fee as the ‘least worst’ option.4 Various subsequent reviews have concluded along similar lines.5 In 2021 the House of Commons Digital, Communications, Media and Sport Committee called on the Government to “come out with a strong alternative to the licence fee that it can put to Parliament, or strongly support the current model for at least the next Charter period”.6
5.We sought to move the conversation on by shedding light on the practical implications of alternative funding options, and exposing the challenges which demonstrate why this issue is becoming more time-sensitive. In doing so we sought to move beyond the binary ‘for or against’ licence fee debate.
6.Any decision on changes to the funding model must flow from a clear vision of the BBC’s purpose. To that end, our call for evidence focused on what the BBC should be for and how it should be funded.7 We sought to hear perspectives from all sides of the debate. We held evidence sessions with a range of witnesses and visited the BBC in MediaCity UK, Salford. We held roundtable discussions in Salford with young adults, and online with members of the public from England, Scotland, Wales and Northern Ireland. We are grateful to all who helped with our inquiry.
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£3.75 billion—the amount the BBC received from licence fee income in 2021. This accounts for approximately 75 per cent of the BBC’s total revenue. £1.31 billion—the amount the BBC generated in 2021 from non-public commercial and other activities, such as grants, royalties and rental income. This accounts for approximately 25 per cent of its income. The BBC uses this funding to provide a range of services including a range of TV channels, the iPlayer, BBC Sounds, BBC Online, 10 UK-wide radio stations and over 40 national and local radio stations. The BBC World Service is also partly funded by the licence fee. The annual TV licence fee is £159 for colour and £53.50 for black and white. The fee is frozen until 2024 then will rise in line with inflation for four years. Around 25.9 million TV licences were in force in 2019–20. A licence fee is required to watch or record television programmes as they are being shown on any channel and on any broadcast platform (terrestrial, satellite, cable or the internet) or to download or watch BBC programmes on BBC iPlayer. 27 million or 95 per cent of all households in the UK owned a TV set in 2020. The annual average evasion rate in 2019–20 was 6.95 per cent. |
Source: House of Commons Library, TV licence fee statistics, Research Briefing CBP-8101, 24 January 2022
Source: National Audit Office ‘The BBC Group Departmental Overview 2020–21’ (October 2021): https://www.nao.org.uk/report/departmental-overview-2020–21-the-bbc-group/ [accessed 8 June 2022]
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Public service broadcasting—content that is broadcast for the public benefit, rather than for purely commercial purposes. The UK’s public service broadcasters are BBC, ITV, STV, Channel 4, S4C and Channel 5. Public interest obligations, such as universality, impartiality and programming quotas for independent productions, original UK productions and news are imposed in return for privileges such as prominence. Subscription video on demand (SVOD)—services that provide online video streaming content for a subscription fee. Broadcast video on demand (BVOD)—content made available online and on-demand by TV broadcast stations. Linear TV—the traditional method of viewers watching scheduled TV when it airs on its original channel. |
Source: House of Commons Library, TV licence fee statistics, Research Briefing CBP 8101, 24 January 2022 and Communications and Digital Committee, Public service broadcasting: as vital as ever, para 8
1 The Government can sometimes decide that the fee will be used for other purposes such as the digital television transition and superfast broadband rollout. The licence fee also funds S4C, the Welsh broadcaster. For details on BBC funding see BBC, BBC Group Annual Report and Accounts 2020–21
(9 July 2021): https://downloads.bbc.co.uk/aboutthebbc/reports/annualreport/2020–21.pdf [accessed 10 June 2022]
2 Department for Digital, Culture, Media & Sport, Up next—the government’s vision for the broadcasting sector, CP 671 (29 April 2022): https://www.gov.uk/government/publications/up-next-the-governments-vision-for-the-broadcasting-sector/up-next-the-governments-vision-for-the-broadcasting-sector#chapter-3-a-new-system-of-public-service-broadcasting-for-a-new-era [accessed 8 June 2022]
3 Oral evidence taken before the Digital Culture Media and Sport Committee on 19 May 2022 (Session 2022–23), Q 82 (Nadine Dorries MP)
4 Professor Alan Peacock, Report of the Committee on Financing the BBC (1986)
5 For example, the House of Lords Select Committee on the BBC Charter Review found in 2005 that the licence fee was the “best way to fund the BBC over the next decade”. In 2015 the Select Committee on Communications broadly agreed. See Select Committee on the BBC Charter Review, The Review of the BBC’s Royal Charter (1st Report, Session 2005–06, HL Paper 50) and Select Committee on Communications, BBC Charter Review: Reith not revolution (1st Report, Session 2015–16, HL Paper 96)
6 Digital, Culture, Media and Sport Committee, The future of public service broadcasting (Sixth Report, Session 2019–21, HC 156), para 65
7 The wider public broadcasting sector was out of scope. This has been examined in detail elsewhere. See Communications and Digital Committee, The future of Channel 4 (2nd Report, Session 2021–22, HL Paper 108), see also Digital, Culture, Media and Sport Committee, The future of public service broadcasting and Ofcom, ‘Small Screen Big Debate’: https://www.smallscreenbigdebate.co.uk/research [accessed 8 June 2022]