What is the future of the BBC's funding model?

Credit: Tim Loudon via Creative Commons

The government will soon review how the BBC is funded after Culture Secretary Nadine Dorries tweeted that the latest licence fee announcement is likely to be the last.

This licence fee announcement will be the last. The days of the elderly being threatened with prison sentences and bailiffs knocking on doors, are over.

Time now to discuss and debate new ways of funding, supporting and selling great British content. https://t.co/sXtK25q27H

— Rt Hon Nadine Dorries (@NadineDorries) January 16, 2022

Speaking to the House of Commons this week, Dorries asked whether "a mandatory licence fee is appropriate" and while the fee will rise with inflation after a short freeze, there is no guarantee that it will be extended beyond 2027 when the current royal charter expires.

The picture

The annual £159 payment is required from any household using BBC television channels, radio and online platforms such as iPlayer and BBC Sounds, regardless of the device used to access them.

BBC director general, Tim Davie and BBC chairman, Richard Sharp, said in a joint statement that the freeze will "necessitate tougher choices which will impact licence fee payers".

The corporation has already absorbed an estimated 30 per cent in real-terms cuts in the past ten years.

A DCMS report found that any further cuts could see more repeats, less statement programming and sections of the BBC slashed altogether.

As public service broadcasting such as the BBC is jostled by the likes of Netflix, Mail Online and Sky, how can it maintain the journalism at its core and the money to pay for it?

New funding for the BBC

Cutting off its consistent source of income would force the BBC to search for funding in an increasingly saturated market and expose it to many of the same pressures as commercial media.

Among those touted is a Netflix-style subscription model that would place the majority of content behind a paywall, selling the BBC’s considerable audience numbers to advertisers or selling off the BBC’s back catalogue. Apart from the fact that this would place the broadcaster in a precarious position, it is also impractical as many people still receive their TV via aerial rather than broadband. Since Freeview nor radio can be turned into a subscription service, it would be hard to give people universal access to essential services, as Matt Walsh, head of journalism school at Cardiff University, points out in a blog post.

Both the BBC’s news and entertainment output draws on public money. And while audiences are comfortable paying a premium for entertainment, budgets for news and education – at the core of the BBC’s values – are much leaner.

Senior research associate at the Reuters Institute for the Study of Journalism Nic Newman, said that the intervention of public money has become an issue for many of the brands competing in the marketplace.

"There’s not a huge amount of money in subscription news and if the BBC joins that space then it would create all kinds of problems for additional providers who are trying to attract readers," he said.

One option would be to separate drama and sports and use the revenue they generate to supplement the newsrooms in what would spell a major change for the BBC.

"You could slim it right down and say that the market is going to provide all the drama and focus on news," adds Newman "But it’s a very different BBC to what we have at the moment.

"The future is going to be a mix of funding streams to support an organisation that can still make sense in different ways. But it’s not all free and it’s not all paid."

Newman suggests that while the licence fee based on a television set is outdated and no longer makes sense, there are many different ways to access money from the public purse.

One option is to draw on a levy from another source, most likely broadband. In an update to the current approach, each broadband connection in the UK would bump up to absorb the cost of the licence fee.

Another is to introduce a new means-tested tax that would introduce a new line to payslips. Sweden uses a similar model where, since 2019, one per cent of an individual’s income up to 1,300 kronor (£105) goes directly to a pot marked for public service broadcasting.

"This is clearly going to happen in some form," Newman said. "The question is, what are the other bits beyond that?"

Continuing with the licence fee

After an initial furore, the government moved to soften its stance on the licence fee, leaving the door open for an extension past 2027.

And there is a precedent for the government using the removal of the charter as a tool to express its displeasure with the BBC.

The 1986 Peacock Report into BBC financing, commissioned under Margaret Thatcher, found that retaining the licence fee was the ‘least worst’ option while a better model was developed. This could again be the case.

"The big question is, does the government want the BBC to continue in a recognisable form?" asks Dame Frances Cairncross, author of the 2019 Cairncross Review which explored options for a sustainable future for journalism.

"The government will not want to create something which seriously damages the BBC.

"People have found the licence fee extremely difficult to replace and that accounts for its durability."

Cairncross said that the scale of the BBC, especially its news sites, makes it "an object of particular hatred" for the Daily Mail Group as they compete for the same audience.

The BBC is finding it increasingly difficult to defend itself, she added, and it is likely going to have to charge users of its sites a “modest subscription fee” to supplement income and placate competitors.

"It would be possible to have a front garden that anyone could go into, with a much larger back garden with a modest charge."

The importance of the BBC to the lives of people in the UK makes it worth financing, she added.

"The biggest threat is not what happens to the licence fee but how we deal with the American companies with very deep pockets and no news obligations.

"This is a much bigger threat to the ultimate existence of the BBC than several pounds off the licence fee.”

Take the air out of the political football

The 2019 Cairncross Review advocated for the creation of an Institute for Public Interest News that would have worked to amplify the importance of news in the public interest as an independent body.

The recommendation was largely ignored and the then Culture Secretary Baroness Nicky Morgan said: "Even an arm’s length relationship risks perceptions of inappropriate government interference with the press."

The move could have paved the way for the BBC to gain funding in a similar way to the Arts Council or NHS, guaranteeing its income and status as a public service.

Independent consultant Sameer Padania, lead rapporteur on the global report A New Deal for Journalism, said that removing the public service information outlet from political control is critical.

"It's not even really a carrot and stick model. It's a gruel and stick model. [The BBC] knows it’s going to get clobbered. It's just by how much."

Putting the BBC on a solid statutory footing would remove the temptation to make the broadcaster swallow costs or swallow more responsibility as a political victory, according to Padania.

To be clear, putting the BBC on a statutory footing was just one of a number of possibilities I talked about, and not a silver bullet...

My main point was that, even if it's valid to reexamine the funding model, this particular process is being driven by a political agenda.

— Sameer Padania (@sdp) January 20, 2022

"At the beginning of the pandemic, the government in this country called public service media an essential service and journalists were key workers.

"This is something that really matters to the public and it’s literally been life and death."

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