Economic Theory

The licence fee is obsolete – but a new BBC poll tax would be just as bad

BBC director-general Lord Hall must have thought all his Christmases had come at once. For years, the corporation has been on the defensive about the future of the TV licence fee. Campaigners had highlighted how it is being rendered obsolete by the increasing numbers watching TV via iPlayer catch-up services, on tablets, computers and on mobiles. In short, the difficulty of answering “what is a television?” had exercised management at the Beeb, who feared that any move away from its “gatekeeper”-like hold on TV would force it to compete for subscribers or advertisers like its commercial rivals.

How pleasing it must have been, then, to hear politicians on the Culture, Media and Sport Committee recommend protecting the Beeb’s privileged position by another means. Recognising the difficulties faced by the licence fee in an internet age, the Committee has suggested replacing it with a broadcasting levy poll tax on every household in the country, applied whether you watch or have a TV or not. This would allow money to be collected from the 500,000 households that claim not to watch TV or to simply watch online. Having steadfastly defended the licence fee for years, yesterday Lord Hall outlined his Damascene conversion to such a new levy – in perhaps the least surprising about-turn since Nick Clegg and tuition fees.

Rhetorically, this was justified because it would offer new, guaranteed funding “for an internet age”. In reality, replacing the licence fee with a tax-like funding method would simply protect the Beeb from the key development of our era: the erosion of the case for a universal public service broadcaster. The role of the BBC and its funding method are inextricably linked. Shifting to a broadcasting levy simply sends the message that we want to deny the developments of the past 50 years.

When the licence fee was first established, the BBC was a monopoly broadcaster. Since programmes were broadcast free-to-air via masts, one person watching the BBC didn’t affect the ability of others to do so. And it was hard to prevent someone from tuning in. The BBC was what economists would describe as a “public good”. A separate funding stream to preserve editorial independence while guaranteeing revenues for the state-owned monopoly made sense.

All of this has changed. The BBC is no longer a monopoly. A raft of commercial operators have shown that it is possible to survive and thrive without recourse to guaranteed public funds. A range of rivals produce similar content to the BBC, from soaps to documentaries, sports coverage to news shows. Furthermore, the rise of digital decoders means you can stop people watching your stuff if they don’t pay.

If the BBC didn’t exist, we would not invent it. True, there may be certain programmes that would be underprovided by a free market, and so there is a case for limited public service broadcasting. Children’s TV might be an example. But the case for an all-singing, all-dancing BBC has withered away. A public service broadcaster would probably need one TV and one radio station each. Yet the BBC does far more than that. Acknowledging this would mean either the BBC competing as a privatised operator through subscription or advertising, or instead scaling down to provide only what the market can’t – with a tiny levy.

So far from being a solution to the overriding problem of technology, the move to a broadcast levy just covers up the fact that the justification for the BBC’s existence is ebbing away. The “debate” surrounding the adoption of a new TV poll tax crowds out the real debate we should be having: should the BBC maintain its privileged position in the twenty-first century?

This article first appeared in City AM.

Head of Public Policy and Director, Paragon Initiative

Ryan Bourne is Head of Public Policy at the IEA and Director of The Paragon Initiative. Ryan was educated at Magdalene College, Cambridge where he achieved a double-first in Economics at undergraduate level and later an MPhil qualification. Prior to joining the IEA, Ryan worked for a year at the economic consultancy firm Frontier Economics on competition and public policy issues. After leaving Frontier in 2010, Ryan joined the Centre for Policy Studies think tank in Westminster, first as an Economics Researcher and subsequently as Head of Economic Research. There, he was responsible for writing, editing and commissioning economic reports across a broad range of areas, as well as organisation of economic-themed events and roundtables. Ryan appears regularly in the national media, including writing for The Times, the Daily Telegraph, ConservativeHome and Spectator Coffee House, and appearing on broadcast, including BBC News, Newsnight, Sky News, Jeff Randall Live, Reuters and LBC radio. He is currently a weekly columnist for CityAM.

10 thoughts on “The licence fee is obsolete – but a new BBC poll tax would be just as bad”

  1. Posted 05/03/2015 at 09:00 | Permalink

    Even if you agree with a publicly funded broadcaster (and one funded to the same extent as the BBC currently is), the TV licence system is indefensible. It is effectively a highly regressive tax – which makes it so surprising that those on the left defend it. Surely the whole argument in favour of public sector funding of anything is to make it accessible to those who cannot afford it. If we are to have a wholly publicly-funded broadcaster (which would not be my preference), then it should be funded by general taxation.

  2. Posted 05/03/2015 at 11:48 | Permalink

    Absolutely agree. I’ve been saying for years that a public service broadcaster only needs 1 television and 1 radio channel. There is no need for the BBC to broadcast pop music, sport (except perhaps a few iconic events such as the FA Cup Final and the Boat Race), quiz shows, reality TV and many others.

    A Public service should broadcast news and a few other items like messages for missing persons. There could be occasional slots to give new entertainers opportunities, but no need for regular programmes of that nature.

  3. Posted 05/03/2015 at 16:20 | Permalink

    The BBC has become very important as an employment opportunity for well-connected types, a sort of modern day version of a comfortable living in the church or a sinecure in the 17th century civil service.

    It’ll be very hard to reduce its size and funding just because it isn’t needed in its current bloated state.

  4. Posted 05/03/2015 at 17:11 | Permalink

    With the appalling bias in the state run BBC the licence fee is abhorrent to replace it with a poll tax is even more so.

  5. Posted 05/03/2015 at 18:21 | Permalink

    I’m not sure that the original case for PSB was ever convincing anyway – TV developed using advertising revenue on a free to view basis from very early days. The case for the BBC has been slim for years, yet it has grown, not declined

  6. Posted 05/03/2015 at 19:56 | Permalink

    Licence fee should be scrapped…BBC split up and sold to highest bidders…all TV companies should be required to provide a limited public broadcasting service.

  7. Posted 06/03/2015 at 02:14 | Permalink

    The case for a public service broadcaster is that its obligation is to the ones that are paying the bills – the public at large.

    The loyalties of a commercial broadcaster lie elsewhere. Its obligation is to its shareholders. Its job is to reap as much money as possible from advertisers, and it does this by competing for ratings. Ratings are a measure only of quantity. Quality matters little, this tends to a race to the bottom in the competition to lure as many eyes and ears as possible.

  8. Posted 06/03/2015 at 11:14 | Permalink

    @quem mittam – You are wrong. Commercial broadcasters don’t just chase ratings, they also chase demographics. They are as interested in the demographic of viewers as they are in the number. There would be little point in advertising expensive cars (for example) to a demographic dominated by low income viewers. High quality specific interest programming may attract fewer viewers, but it may attract far more of the viewers they want (i.e. their potential customers).

  9. Posted 06/03/2015 at 14:20 | Permalink

    @HJ – You write that I am wrong, yet you reinforce my point. We both agree that a commercial broadcaster is in the business of selling a commodity, the eyes and ears of an audience. Yes, a part of their craft is to design programmes that appeal to particular segments of the population, with the intent to persuade the customer, the advertiser, that there will be an attractive return on investment. I used the term ‘ratings’ in a broad sense to cover such matters. I am not one of them. I am what they sell.

  10. Posted 06/03/2015 at 15:09 | Permalink

    @quem mittam – no I am contradicting you. They are not just selling a commodity. A commodity is something generic and undifferentiated. I am saying that they are selling access to (and by, in the case of subscription and PPV TV) different segments of the market (audience) depending on the programme, time, etc.. The only thing we agree on is that they are selling what they offer – which is surely obvious.

    I did not say that there is no case for public service television – I was merely challenging your assertion that quality doesn’t matter to commercial broadcasters and they are just chasing quantity (as if those two things were necessarily contradictory). If the quality and subject matter isn’t what your target demographic wants, then they won’t watch and you will gain no revenue.

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