Lisa Nandy, the Culture Secretary, has said that nothing is off the table as the Government grapples with one of British broadcasting’s biggest questions: how to fund the BBC as the future of the licence fee comes into sharp focus in the run-up to renewal of the BBC’s royal charter, which expires in 2027. The BBC Director-General, Tim Davie, said in May: “We are not asking for the status quo. We want modernisation and reform. But in doing so, we must safeguard universality.

“All the funding models that have been floated in the debate have their merits and drawbacks. But some, such as advertising or subscription, don’t pass the test of building a universal, trusted public service. Beyond that, we keep an open mind. And we continue to actively explore all options that can make our funding model fairer, more modern and more sustainable.”

At an RTS National Event held last month, media economist Mark Oliver, who was the BBC’s first Director of Strategy, set the scene, reminding us that, for 10 years, BBC coffers have been dwindling as the licence fee has failed to match inflation. A vicious circle ensued as both revenue and weekly reach – the total audience in a week – were locked in a downward spiral; by this metric, weekly reach for BBC TV had declined from 83% to 60% since 2014. Its audience share, however, remained high.

Oliver said there could be no serious debate on how to fund the BBC without first addressing what the scope of its activities should be (a point later echoed by panellist Tony Hall, a former BBC Director-General). He laid out alternatives to the licence fee: public funding through general taxation; a household charge; a progressive licence fee (the better off you are, the more you pay); or even a lottery. Or commercial funding via advertising or subscription, or a mix of the two. The latter, argued Oliver, was likely to erode the BBC’s commitment to “universality”, whereby everyone receives the same service.

"I hope the debate this time can be about purpose, function and what this amazing institution can do"

An advertising model, said Oliver, also risked undermining ITV and Channels 4 and 5 – all public service broadcasters that are feeling the pinch as they compete with deep-pocketed US behemoths.

“What tends not to get discussed is hybrid funding,” noted Oliver. “This is actually what happens at the moment, because the BBC earns quite a lot from commercial sources. Hybrid tends to be rejected because it’s too complicated. It might create a two-tier public service and undermine long-term support for public funding because, if you start to grow your commercial funding, people chip away at your public funding. The hybrid options haven’t been looked at as fully as they might have been.”

Oliver described those who object to the licence fee as “a coalition of the unwilling”, a far from homogeneous group. They include those on low incomes; people who don’t use BBC services; those who think it provides poor value for money and that streamers give better value; free-marketeers, who object to the licence fee on principle; and those who see the BBC as too right- or left-wing. One recent trend is people who ask, “What does the BBC do for me?”, rather than considering the benefits it brings to demo­cratic society, a founding principle that still informs the BBC’s ethos.

“Generally, the licence fee is seen as the least of all evils,” said Oliver. “As for value for money, it depends on which survey you look at.”

Mike Darcey, the former Chief Operating Officer of Sky, made a pithy if controversial point, suggesting that the BBC was already a subscription service. With greater numbers no longer paying the fee – around 17%, said Darcey – Tim Davie’s objective was to once again make payment of the licence fee compulsory. Darcey said. “The BBC never likes me saying this, but to all intents and purposes it is a subscription service. There’s a price, a pool of content and you choose whether you want to pay. We don’t call it that because we’re still pretending it’s not a subscription service. My instinct is that we will go round the houses on all these other things but the political will and courage to make a complex change will evaporate as we get close to the line, and we’ll end up roughly where we are.”

Darcey calculated that, if licence fee opt-outs were removed, the BBC’s income would increase by 20%.

Tony Hall called for greater transparency in how the fee is awarded, recalling that he and a predecessor, Mark Thompson, were effectively mugged by Whitehall in the last two licence fee settlements as a deal was stitched up behind closed doors “You end up in a ferocious combat over the quantum of the licence fee over a period of days. That’s not a grown-up way to run an organisation or to provide the money for the services we want.”

Hall thinks a public debate is needed on what services the BBC provides before any decisions are taken on funding: “The licence fee needs to be reformed, but you can’t have that debate before you’ve worked out what the BBC is for. You need to see the BBC in cultural terms.”

Quoting Andy Haldane, the economist who has run the Royal Society of Arts since 2021, Hall said the BBC was “part of the social infrastructure”. Speaking passionately, he continued: “I hope the debate this time round is about purpose and function and what this amazing cultural institution, which we’re lucky to have, can do.”

He reminded the audience of the soft power wielded by the World Service, and the BBC’s importance in creating a sense of community through its local radio stations. “When Shirley Williams [the late Liberal Democrat peer who, as a Labour MP, served as a minister in the 1960s and 1970s] called it ‘the best soft power since Shakespeare’, she was spot on. If you’ve got local radio stations, you are part of the social infrastructure. People in Cumbria say Radio Cumbria helps to define who we are.”

The former DG wants an independent body set up to look at the BBC’s purposes, how its income has fallen behind inflation and what we pay for other utilities. “The Government can then accept that or not, but at least there’s a proper public debate.”

He also thought the idea of consolidation among Britain’s PSBs should be examined, including a possible merger between BBC Studios and Channel 4.

Caroline Dinenage, Chair of the Commons Select Committee on Culture, Media and Sport is a Conservative MP – but if the audience expected to hear BBC bashing, they had come to the wrong place.

She said the BBC needed to do better at telling its own story to the British public. “The BBC doesn’t do a good enough job in selling itself and telling people why it’s important.”

Licence-fee payers needed to know how the BBC differed from the streamers and other public service broadcasters, said Dinenage. “In a world that is crazy and chaotic, we need trusted sources of information. The BBC has a global reputation for that, and we need to value that and sell that.”

There was a consensus around the table that the licence fee would survive, but with some reform. Hall first came out in support of a progressive licence fee a couple of years ago. The devil, of course, will be in the detail. The fear inside Broadcasting House must be that the fee will be set at such a low level that the vicious circle of real revenue and audience decline will continue, leaving the BBC forced to make further cuts across the board.

The one dissenting voice on the panel was Mark Oliver, who predicted that the licence fee would become a household charge, albeit one with more concessions for the disadvantaged.

Report by Steve Clarke. ‘The future of BBC funding’ was an RTS National Event held at the Cavendish Conference Centre on 24 June. The debate was chaired by Jake Kanter, Investigations Editor at Deadline. Steve Clarke and Nigel Warner produced.