17 JAN 2022

BBC funding will be frozen for two years and license fee to be abolished in 2027

The future of the licence-payer funded British Broadcasting Corporation is a perpetual topic of political debate, with Prime Minister Boris Johnson's government most recently suggesting its funding needs to be reformed.

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The BBC will have to make deep cuts to its programme budgets after the government said the broadcaster’s funding would be frozen for the next two years, with the licence fee abolished completely in 2027. The culture secretary, Nadine Dorries, is expected to confirm that the cost of an annual licence, required to watch live television and access iPlayer services, will remain at £159 until 2024 before rising slightly for the following three years.

The future of the licence-payer funded British Broadcasting Corporation is a perpetual topic of political debate, with Prime Minister Boris Johnson's government most recently suggesting its funding needs to be reformed. Set against an inflation rate expected to reach a 30-year high of 6% or more in April, freezing the licence cost at its current 159 pounds ($217.40) would provide some relief to consumers battling sharply rising costs of living. But it would also be a large blow to the BBC's finances as it tries to compete with privately funded news outlets and the likes of Netflix and other entertainment streaming services funded by consumer subscriptions.

In November, the government launched negotiations to agree how much the TV licence would cost, part of a five year funding settlement due to begin in April 2022. The culture secretary, Nadine Dorries, is expected to confirm that the cost of an annual licence, required to watch live television and access iPlayer services, will remain at £159 until 2024 before rising slightly for the following three years. She said this would be the end of the current licence fee funding model for the BBC, raising doubts about the long-term financial future and editorial independence of the public service broadcaster under a Conservative government. Dorries said: “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.”

The opposition Labour Party said the funding cut was politically motivated. "The Prime Minister and the Culture Secretary seem hell-bent on attacking this great British institution because they don’t like its journalism," said Lucy Powell, Labour lawmaker and culture policy chief. The BBC's news output is regularly criticised by UK political parties. Its coverage of Brexit issues - central to Johnson's government - has long been seen as overly critical by supporters of leaving the European Union. Last week, one Conservative lawmaker said BBC coverage relating to parties in Johnson's Downing Street residence during coronavirus lockdowns amounted to a "coup attempt" against the prime minister.

The BBC will have to negotiate with the government over an entirely new funding model when the final licence fee funding deal expires in 2027 – with potential options including a subscription service, part-privatisation, or direct government funding. The Mail and The Guardian quoted an ally of Dorries as saying: “There will be a lot of anguished noises about how it will hit popular programmes, but they can learn to cut waste like any other business. This will be the last BBC licence fee negotiation ever. Work will start next week on a mid-term review to replace the charter with a new funding formula. It’s over for the BBC as they know it.”

Although the BBC will continue to receive £3.2bn a year in licence fee income, the costs of making its programmes are increasing rapidly due to rising inflation and competition from the likes of Netflix. As a result, the corporation will have to make hundreds of millions of pounds in spending cuts in order to balance its books. If the BBC had been allowed to increase the licence fee in line with inflation – currently at 5.1% – the annual cost would have risen to £167 in April.

The BBC has already made substantial cost savings behind the scenes, meaning the next round of cuts are likely to hit on-air services. As a result, the public should prepare for the BBC to provide less high-end drama and sports coverage, pad schedules with cheaper programmes, and potentially close some channels or services altogether. This could in turn erode support for the BBC if the public no longer feel they are receiving value for money from the licence fee.

The new licence fee deal will cover a five-year period to 2027, with the cost to the public likely to rise in the final three years – although this increase could also be at a below-inflation rate, meaning further cuts to BBC output could be required. Dorries’ allies said there would be no further licence fee deal under a Johnson government and they would start negotiations on an entirely new funding model for the corporation. The BBC’s existence and ability to raise money is underpinned by a royal charter that expires at the end of 2027.

The BBC has already been preparing for the end of the licence fee, with proposals including a universal levy on broadband subscriptions or funding the broadcaster with a grant from general taxation – although this could undermine its editorial independence and leave it even more at the whim of government anger. Making the BBC a paid-for subscription service similar to Netflix is difficult due to the widespread popularity of broadcast radio and Freeview television services, which cannot be put behind a paywall.

Negotiations over the amount the BBC can charge for the licence fee have been ongoing for some time, with a final deal delayed by Dorries’ appointment in the autumn. The government has repeatedly criticised the corporation’s news output, claiming it is biased against the government and linking negative coverage of the prime minister to the licence fee negotiations.