Why it’s time to fund the BBC from central taxation

Opinion

In an excerpt from a new book, How Do We Pay for the BBC After 2027?, Roger Parry argues for a new charter to fund the Beeb with a direct grant from central taxation.

One of the oldest and most groan-inducing comedy club jokes is some variant on the apocryphal traveller in Ireland who asks directions from a local, only to be told he’d be best off “not starting from here”.

This is where we are with the BBC licence fee.

It’s a mad format that was dreamed up, more or less by accident, almost exactly 100 years ago and has developed into a wholly illogical, inefficient mechanism. It is doing increasing damage to the organisation it exists to support.

BBC expands to meet income

Most commercial organisations grow their income by providing more goods and services to greater numbers of customers. In practice, the BBC has operated on exactly the opposite principle. The size of its income being a simple mathematical by-product of the number of households forced to pay the fee and the government approved amount.

The BBC’s argument since its earliest days has been that its mission was to “inform educate and entertain” — a laudable set of objectives — and even more desirable in the face of the digital media explosion. But to talk in terms of the BBC addressing market failure is a little simplistic. If the BBC did not exist, there are few aspects of its output which would not be provided on a wholly commercial basis. However, there is a very strong argument that overall quality would suffer.

My plan

Since first being employed by the BBC in 1978, I have worked in broadcasting, publishing, advertising and media buying. There are millions of learned words written by academics and economists on the funding issue. My views are, admittedly, simply the prejudices of a practitioner.

To me, the core central issue is about scale, not existence. There would be a perfectly viable public BBC service which operated on a budget of £1bn a year. There would be an equally viable, but much larger service, if the budget was £10bn a year. The real question is not so much the mechanism of public funding but the amount.

In solving the licence fee conundrum, perhaps the easiest place to start is by working out what is least likely to be a satisfactory solution.

Advertising not a starter

Funding broadcasting by advertising (and its close cousin sponsorship) is based on the simplest of principles which goes back to mediaeval Commedia delle’arte.

Attract an audience and then sell them something. In mediaeval pageants, you might flog them some roasted hazelnuts or you might simply steal their purses when they were distracted. The principle of advertising in broadcasting is exactly the same. But if you’re funded by commercial interests, no matter how much you may protest to the contrary, you will always to some extent be in hock to those paymasters.

However, the real argument against advertising on the BBC is not undue influence but the incalculable damage it would do to the existing commercial broadcasting environment. The pool of advertising funding is limited. If the BBC were to try to extract billions of pounds from the, at best slow-growing, broadcast advertising market, there would be substantial commercial casualties.

Subscription

Subscription is the purest mechanism for matching demand with supply, as people will only pay for shows that they really want. It is a good way of monetising the BBC’s most popular programmes. However, it is an ineffective solution for funding minority interests and providing the sort of material that meets the “inform and educate” parts for the BBC’s mission.

The BBC’s iPlayer could easily be converted to a subscription collecting device, but this would only work for some of the output.

The cost per hour of great news and current affairs will be normally higher than the subscriber wants to pay. It is noteworthy that research for newspapers often shows the thing that readers value least is the news. They pay for the comment and the colour.

Commerce

The licence fee is a regressive, hypothecated tax which is unpopular, hard to collect and results in nearly 50,000 prosecutions a year.

The BBC already generates around £2bn from commercial activity. It has the capability to do far more. Without government money, it will survive and probably thrive in some ways, but be diminished as a valued national institution.

The solution? After 2027, a new charter should be drawn up to make the BBC funded by a direct grant from central taxation.

In the first year, the budget should be set at £3.5bn and that should be frozen for five years. After that, it should rise in line with inflation. This will force the BBC into uncomfortable, and in many cases unpopular, cutbacks to reduce bloated management and focus on the sort of free-to-air output that British citizens really value.

At the same time, the commercial arm of the BBC — BBC Studios — should be unfettered and encouraged to create additional high-quality commercial content which will be available only on subscription.

The charter will dictate that all subscription content which is wholly or majority-owned by the BBC must become available on the UK free-to-air service after 36 months.

The BBC will not be allowed to generate any advertising income from UK audiences but can do so abroad (as they do now). The results of this structure will be a dynamic broadcasting organisation focused on high-quality domestic output which might not ever get made under a purely commercial model.

The current licence fee was created by amending, or arguably abusing, the intentions of the 1904 Wireless Telegraphy Act. It was not fit for purpose then and it certainly is not now. The BBC deserves better.

Roger Parry is non-executive director at Uber and chairman at Oxford Metrics and West Eight Investments. He was a former broadcaster on the BBC, ITV and LBC, and was previously chairman at a number of organisations including Clear Channel, Future, MSQ Partners and YouGov.

John Mair’s new book, How Do We Pay for the BBC after 2027?, is a selection of essays written by authors including Greg Dyke, John Ryley, Maggie Brown, Marcus Ryder and The Media Leader columnist Raymond Snoddy. It is published by Mair Golden Moments and will be available from 14 January on Amazon