How might the BBC be funded if the licence fee is scrapped?

1. A tax

Funding public service media from general taxation is deployed in Sweden, Norway, Finland and Denmark. It has the benefit of being proportionate with income, making it fairer than a flat fee. There’s just one problem – it is the one option the culture secretary, Lisa Nandy, has already ruled out.

Labour and government figures immediately saw the political dangers of tying the BBC’s funding to the whims of politicians. With Reform UK riding high in the polls, such a system would represent a major threat to the corporation.

Likelihood: 0/5

2. Subscription model

In the age of the streamers, subscriptions have become ubiquitous. Many news and media companies more generally are moving to subscription models. Many people already pay their licence fee with a monthly £14.54. That is more than the £12.99 a month it costs for an ad-free Netflix subscription. However, the BBC covers far more, from all its local and national news coverage to its radio output.

There is one glaring problem with the subscription model – it is extremely unlikely that subscription income could replace all of the BBC’s current licence fee funding, which stood at £3.8bn last year. Meanwhile, seeking subscriptions transforms the BBC from aiming at a universal service for everyone, to one that aims at a market of potential subscribers.

Likelihood: 1/5

3. Advertising

Samir Shah, the BBC’s chair, is vehemently opposed to advertising. The likes of ITV, Channel 4 and 5 – all of which rely on advertising for their funding – would also oppose such a change. Since 2019, advertising flowing to commercial TV has declined by more than £600m in real terms, according to Ofcom.

Even a BBC proposal to run advertising on some of its podcasts for UK listeners led to a backlash from commercial rivals. The corporation ultimately abandoned the plan.

1/5

One option discussed within the industry is for the licence fee to be supplemented by an additional fee for extra content. The notion of premium content has become commonplace in the media world.

While this would be less radical than simply ending the licence fee, it raises some knotty issues. Arguments would rage over what popular shows should disappear behind a paywall. This model would also break the idea of universality – with wealthier people effectively given more from the BBC.

Likelihood: 2/5

5. Household levy

A household levy is used in other countries, including Germany. It would deal with the growing problem of non-payment, as everyone would face the charge. The system means certain groups can be excluded if the government wishes to increase the levy’s fairness. Attaching it to council tax bands could also make the BBC’s funding more progressive, replacing a flat fee.

It would lead to an inevitable and potentially toxic political row, however. Those opposed to the BBC would regard it as a forced payment and comparable to a tax.

Likelihood: 3/5

6. Another licence fee fudge

Both the government and the BBC’s leadership have talked about thinking radically about the BBC’s future funding, pointing to huge changes in the media landscape. However, there is a reason governments of different colours have stuck with the licence fee. The other options create serious problems for delivering a universal service – or create problems for the BBC’s commercial rivals.

While the number of people not paying the licence fee fell by 300,000 last year, there are about 24m licence fees in place. An agreement to muddle along with the licence fee – perhaps with limited increases – will start the BBC’s charter renewal process as the most likely outcome.

This may be the last time the argument over the licence fee can be dodged – but that has also been said before.

Likelihood: 4/5