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BBC warns 6.7% licence fee rise will lead to £90m further cuts

A funding model review will look at what could replace the licence fee.

By Bron Maher

The licence fee which funds the BBC will rise for the first time since 2021, the government has announced, but at a lower rate than expected.

The government has also put the licence fee itself up for review, with “a panel of independent experts” set to be tasked with deciding whether the 20th century levy is still fit for purpose.

The BBC’s board warned immediately after the announcement that the new licence fee figure will require “further changes on top of the major savings” it is currently delivering, while the National Union of Journalists attacked the government for “reneging” on previous funding promises.

What is the new BBC licence fee settlement and what has changed?

The licence fee is set to rise by £10.50 rather than the anticipated £15, bringing it to £169.50 a year as of April 2024.

The BBC itself reported on Thursday that the new settlement will create a funding shortfall of £90m. This comes atop a two-year freeze to the licence fee enacted by previous Culture Secretary Nadine Dorries in 2022, which BBC executives have said will produce a £400m funding gap by 2027.

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Current Culture Secretary Lucy Frazer told the House of Commons on Thursday: “We know family budgets are stretched, which is why we have stepped in again – following two years of licence fee freezes – to reduce this year’s increase to less than a £1 a month.”

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Previously, licence fee increases have been linked to inflation using the average annualised October to September consumer price index figure – which this year would have been 9%.

However, for this settlement the government has used the annual CPI figure for the month of September alone. Inflation has declined somewhat in recent months, so the fee is set to increase by only 6.7% when it rises in April.

The Department for Culture, Media and Sport said this new methodology “is the approach used to calculate uplifts to benefits”. 

Existing BBC funding shortfall has resulted in cuts to journalist numbers

The already-existing BBC funding shortfall has impacted journalists across the corporation. 

Last week the corporation announced that its flagship political programme Newsnight was to be pared back, with half its 60 staff losing their jobs and original investigative output cut. The Financial Times reported that an internal memo showed the BBC’s news arm was aiming to trim £7.5m from its budget.

In April the BBC merged its domestic BBC News channel with its overseas BBC World channel, at a cost of some 70 jobs. And it cut nearly 400 jobs at the World Service as part of a £28.5m saving drive in September last year.

The BBC board responded to Thursday’s news saying: “We note that the Government has restored a link to inflation on the licence fee after two years of no increases during a time of high inflation.

“The BBC is focussed on providing great value, as well as programmes and services that audiences love. However, this outcome will still require further changes on top of the major savings that we are already delivering. Our content budgets are now impacted, which in turn will have a significant impact on the wider creative sector across the UK.”

The NUJ was more irate, saying the cuts made already are “felt by audiences”.

Paul Siegert, the union’s broadcasting organiser, said: “Cuts have consequences, as we have seen with cuts to BBC local radio this year and new announcements to cut back Newsnight, Panorama and 127 roles in news and current affairs…

“This thirteenth-hour change to funding – coming two years into the existing agreement – makes it very difficult for the BBC to plan and keep within budgets.”

What could replace the licence fee?

As a flat fee paid by most households with a television regardless of their wealth the licence is widely regarded as a regressive tax.

The terms of reference for the government’s review note that fewer Brits watch broadcast television or choose to hold a TV licence, arguing that the BBC should be “supported by a funding model that is sustainable in the age of digital and on-demand media”.

The review, whose members have not yet been named, has been given six aspects to investigate:

  • The context of a rapidly-changing broadcasting and media market
  • The sustainability of the BBC’s current funding model
  • Whether the BBC should provide more services to audiences on a fully commercial basis, and what those services could be
  • The potential for the BBC to generate more commercial revenue
  • The evidence around other funding models to support BBC services and output
  • How the BBC could transition to any new funding model.

Suggestions for what could replace the licence fee typically focus on which parts of the BBC should be publicly-funded and how that public funding is collected.

Critics of the BBC as currently set up have sometimes suggested turning the corporation into a conventional paid-for streaming service. Others have suggested keeping the BBC public and funding it out of an income-linked progressive tax.

Former BBC presenter Andrew Neil proposed last year that the BBC’s core public service functions, including its news output, be funded publicly while the rest – “the Strictly, the drama, the ratings winners and so on, would be like HBO in America – you would pay for a subscription”.

The BBC has already set out to increase its commercial income amid the squeeze on its funding. BBC Studios, the broadcaster’s commercial arm, generated a record £240m in the year to 31 March.

The BBC said of the review: “It is absolutely right that we debate how it is best funded to ensure that the BBC can thrive, not just today, but in the future – performing a role where it projects the UK’s values across the globe, while also producing impartial news, and telling stories through our content that reflect the real lives of people across the UK. That role should not be separated from the debate about funding.”

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Select and enter your email address Weekly insight into the big strategic issues affecting the future of the news industry. Essential reading for media leaders every Thursday. Your morning brew of news about the world of news from Press Gazette and elsewhere in the media. Sent at around 10am UK time. Our weekly does of strategic insight about the future of news media aimed at US readers. A fortnightly update from the front-line of news and advertising. Aimed at marketers and those involved in the advertising industry.
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