How to fix the BBC

The licence fee is unsustainable

Anne Strickland is a researcher at the Taxpayers’ Alliance

When the BBC’s new Director General describes his own organisation’s funding model, the licence fee, as “a busted flush” and “yesterday’s model”, your initial inclination might be to take him at his word. You might hope that Matt Brittin, a former Google executive only weeks into the job, might have retained a natural inclination for the free market, as many in big business do. But has he gone native?

Brittin’s suggestion to fix a broken compulsory levy is, it turns out, a new compulsory levy. He and BBC chair Samir Shah have suggested that the Government should reconsider a household charge collected through utility bills – broadband, mobile, or electricity – and apply it to every home in the country.

To put it simply, this would be a levy on all households regardless of whether they watch television or consume a single second of content from the BBC. It would be another TV tax, applied to more people, because many Brits are now refusing to pay the current licence fee.

The free market case against the licence fee is not complicated and has been made time and time again. In a functioning market, you pay for what you choose to consume, and producers compete for your custom by making it worth consuming or, in this case, watching. If they fail, you can choose to spend your money elsewhere. A subscription to Netflix, a ticket to the cinema, a newspaper: all of these involve a voluntary transaction between a willing buyer and a willing seller. That mechanism is how resources get allocated to things people actually want, rather than things institutions have decided they should want.

The licence fee circumvents this mechanism entirely. It is a compulsory levy backed by the threat of a criminal fine of up to £1,000, extracted from every household that watches live television or uses iPlayer, regardless of whether they watch the BBC specifically, with prosecution the consequence of refusing to pay.

In the year to June 2024, nearly 30,000 people were taken to court in England and Wales for not paying the licence fee. The majority of these prosecutions resulted in fines of up to £1,000. Those fines hit the elderly and those on fixed incomes the hardest, people least likely to have direct debits in place and the least able to absorb the penalty when they don’t. That makes the licence fee not just an outdated funding model, but a coercive tax. The utility levy proposed by Brittin wouldn’t change any of that; it would simply make the tax harder to escape.

And the market, for all that it has been denied a formal role in this debate, has been voting anyway. The number of households paying the licence fee has fallen to 23.3 million – the lowest level since 1999. In the last three years, more than a million licence fee payers have decided to stop paying, with over half a million stopping just in the last year. Taxpayers are more than ever deliberately choosing not to pay the licence fee for all sorts of reasons. The well-documented sexual abuse scandals, questions about impartiality, and the editing of Donald Trump and his subsequent defamation lawsuit. There are countless reasons why someone might want to take a principled stand against paying for the BBC. But many are also simply choosing to consume media in a more modern way through streaming platforms.

In any other industry, a million customers leaving in three years would prompt a reckoning, a genuine questioning of whether what’s being sold is still what people want. At the BBC, it has instead prompted the top leadership to propose more of the same. At least under the current licence fee, a household can opt out by no longer watching live television or using iPlayer, an inconvenient escape route, but a real one. The proposed utility levy would stop that. This is what happens when an institution is insulated from the consequences of its own decisions. Instead of adapting, it reaches for the coercive power of the state. It stops asking whether it deserves your money and starts finding new ways to take it.

Photo by K. Mitch Hodge on Unsplash

While taxpayers face prosecution and fines for non-payment, the salary disclosures from this year’s annual report give you a sense of what a permanently guaranteed income enables. Scott Mills, dismissed in March following a police investigation, was the BBC’s highest earner last year at just under £750,000. Greg James came in at around £440,000, and Stephen Nolan at around £425,000. Over the same period, the BBC collected £3.88 billion from the licence fee, £36 million more than the previous year, but from half a million fewer households.

When the fee goes up, the money comes in regardless of what anyone thinks of the product, because the people funding it never had a meaningful way to say otherwise. That is the freedom the licence fee removes; not just the freedom to stop watching, but the freedom to withhold payment from an institution you have lost faith in.

The BBC’s royal charter expires at the end of 2027, and the review now underway will determine its funding model for the following decade. That ought to be an opportunity to ask the question that those running the BBC have all carefully avoided: not how to fund the BBC, but whether compelling people to fund a broadcaster they have stopped choosing to watch is compatible with living in a free society at all.

There are alternatives. Gough Whitlam’s Labor government abolished the Australian television licence in the 1970s, replacing it with direct government funding of a leaner, more focused public broadcaster. That is precisely the model the TaxPayers’ Alliance has long advocated for the BBC: strip it back to its genuine public service core, fund it transparently through a government grant that has to be justified to Parliament each year, and sell off the commercial operations that have no business being subsidised by taxpayers in the first place. A subscription model is another option for those parts of the BBC that can sustain one.

What is not an option – or should not be – is extending a coercive levy to households that have already decided they want nothing to do with it.

What we’re reading

1. Climate of opinion. Our friends at Epicentre have made the case that the European Commission is undermining its own climate objectives by layering an ever-growing number of technology-specific targets and regulations on top of the EU Emissions Trading System (ETS) rather than relying on carbon pricing to reduce emissions at the lowest possible cost. The proliferation of overlapping targets raises the cost of decarbonisation and weakens public support.

2. Devolution revolution. For his Substack, Sam Freedman has argued that Labour’s creation of ‘Number 10 North’ and Andy Burnham’s broader focus on devolution represent a major opportunity to address Britain’s overcentralised state. But he also warns that success will mean swerving several key pitfalls. Decentralisation can make government more responsive, but also brings unavoidable trade-offs, including greater regional disparities and increased complexity.

3. Taxing times. Dan Neidle, a leading tax expert, has suggested that Britain’s social care system has become a “lottery” in which families face vastly different financial outcomes depending on whether they happen to need expensive long-term care. Neidle suggests that this uncertainty is a greater threat to family wealth than inheritance tax – readers may disagree – and suggests there may be some merit in Burnham’s reported plan for a flat-rate national care levy.

4. Something fishy. James Hodgkinson of the Adam Smith Institute has written for CapX about how property rights could save British fishing. Stronger property rights over fishing quotas would give fishermen a long-term stake in the resources they manage. The sector has continued to decline post-Brexit, with the current quota system leaving many smaller operators with insecure access to fishing rights, discouraging both investment and good stewardship.

5. Not a Chabad idea. Over at Works in Progress, Sonja Trauss has examined the practices of Chabad, an ultra-Orthodox Jewish movement, to investigate how high-fertility communities create environments that make raising children easier and more socially valued. Chabad’s success in sustaining large families is not simply a result of religious beliefs, but also part of a broader culture that treats children as essential to daily life, making them visible and integrated.