The BBC appears to have secured its financial future in the short term but at considerable cost. There has been much criticism and concern about the way the deal was done. It may offer less financial certainty than the corporation hopes. A government green paper will now open the debate about the future purpose and funding of the corporation as part of a regular review of its Royal Charter. The longer-term future of the television licence remains far from certain.
In a desperate deal just days before the summer budget, Tony Hall, the director general of the BBC, agreed to carry the cost of providing free television licences to those aged over 75.
The negotiations were carried out directly with the government, with little reference to the BBC Trust. The outcome anticipates a broader review of the purpose and funding of the BBC.
The BBC executive may have been placed in an invidious position, but by agreeing terms with the government to support its fiscal and social policy its political independence is further eroded.
The chancellor of the exchequer and the secretary of state for culture, media and sport, wrote in a joint letter to Lord Hall: “This Government inherited a challenging fiscal position and we’re grateful the BBC has once again agreed to contribute to reductions in spending. The BBC’s funding is to be streamlined, with the removal of the intra-Government payments for over-75s TV licences.”
This government concession currently costs over £600 million a year and is forecast to rise to around £775 million by 2020. The policy was introduced in the year 2000 by the labour government at a projected cost of £300 million a year. Since then the cost has more than doubled as the number of people aged over 75 has risen.
The BBC current receives this subsidy directly from the department of work and pensions. Under the terms of the agreement, the BBC will receive around 70% of the sum in 2018/19, tapering to zero from 2020.
That represents a potential net loss to the BBC of around £1.3 billion over the next five years, unless it can persuade some of those aged over 75 to pay for their licence voluntarily.
Set against this, the BBC will pay less to the government to subsidise broadband rollout, a previous spurious concession. This will decline from around £150 million to zero by 2020, giving the BBC back about half a billion pounds. The BBC contribution to the funding of S4C, another previous concession, will also be reduced over the period.
There is a provisional agreement that the licence fee will be increased in relation to the retail price index. This is subject to the conclusions of the review of the BBC Charter and to the further cost cutting. So there is no guarantee that it will rise in either absolute or real terms.
The government has in principle agreed to bring forward legislation in the next year to modernise the licence fee to cover public service broadcast catch-up television. There can be no guarantee of what form such legislation may take.
It also says the government will “consider carefully the case for decriminalisation” of non-payment of the television licence. Again, there can be no guarantee of the outcome.
All things considered, it seems the BBC will not be as badly hit as some have suggested. It is certainly nothing like the potential loss of a fifth of its annual budget that some claimed. It looks more like flat cash funding over the next five years, or down by around 10% in real terms.
The BBC director general put a brave face on it, saying “This agreement secures the long-term funding for a strong BBC over the next Charter period.”
Having achieved a meaningful reduction in the public spending, the chancellor made only a minimal reference in his budget statement. He said simply: “The BBC has agreed to take on responsibility for funding free TV licences for the over 75s and in return we were able to give our valued public broadcaster a sustainable income for the long term.”
James Heath, director of BBC Policy, said “We believe that the substance of what has been agreed is a strong deal for the BBC in very tough circumstances.”
However, the outcome of the Charter review and any changes to legislation in relation to the television licence are still less than certain.
A government green paper is due to be published that will reportedly cover the role of the BBC, its system of governance, its future funding, political impartiality, commercial operations, scale and scope.
The department for culture, media and sport has described it as a “root and branch look at everything the BBC does.” Fundamentally, it will question the role of the BBC as a public service broadcaster and whether it should be chasing ratings to compete with commercial services.
The culture secretary John Whittingdale has appointed a group of advisors to review the Royal Charter under which the BBC operates.
Their role will be to provide “strategic independent oversight and challenge” to the Charter review, “bringing to bear their own personal experience and expertise on the policy debates”.
Drawn from a variety of organisations, they will not necessarily offer any favours to the BBC. The only one with a BBC connection is Ashley Highfield, its former director of New Media and Technology, who is now chief executive of Johnston Press, a local newspaper group.
The green paper will be put to public consultation and a government white paper will follow in 2016.
So any apparent agreement on the future funding of the BBC remains up for review. That includes alternative sources of finance, including a means-tested licence fee, a household tax and the possibility of subscription services.
It looks like the BBC has been bullied into making concessions in order to maintain its television licence fee at current levels, while its future role and funding remain open to further question.