Welfare

Scrap the free TV licence – and scrap the TV licence


On Question Time last week, the issue of the restriction of television licences to over-75s was raised. Nobody spoke in favour of the decision. This is a triumph of special interests over rationality or justice – a problem that was predicted to occur as the population ages in various IEA publications.

Let us put aside for the moment distributional issues and think of this in purely economic terms. One line of argument (which is frequently used in relation to benefits for old people) was that old people had contributed to the system and therefore should now get the benefit of free TV. Where is this argument going? To what system have they contributed? There is not a system of funding the BBC which involves people paying in when they are young in order to receive a benefit when they are older. Should old people get free food because they have contributed to a system of funding food in their lifetime? Should they get free theatre tickets because they have contributed to a system of funding theatre tickets? Other arguments related to the perceived needs of pensioners to have a television for company and their inability to pay for it.

When it comes to free TV licences, it is difficult to find a policy for which there is a less convincing economic justification other than perhaps the pensioners’ winter fuel allowance.

We give money (or things) to pensioners for two reasons. One is that many pensioners are poor and they receive income through redistribution like other poor people do. The correct approach here is to determine according to a variety of criteria (economic and the desire to ensure that all people can have basic needs met or other principles of distributive justice) the extent to which older people’s incomes are raised by welfare payments. The treatment of old and young people might differ and older people who need specific services (such as long-term care) and who cannot afford it might get other needs-based payments.

However, there is no justification for giving pensioners free TV licences on this basis. We should give them money, like we give everybody else money. When we give them free “things” instead of money it reduces economic welfare and prevents people who for ethical or other reasons do not wish to have a TV from having the same level of welfare as those who do wish to have a TV.

Of course, there is a sense in which pensioners receive money from a system into which they have paid – that is how the state pension is marketed. The fact that the fund and the process of paying in is a fiction, we will leave for another time. According to this criterion, we pay money to pensioners according to how much they have paid into the system in terms of national insurance contributions. This might not be the best way to run a pension system, but it is not totally irrational. But, why would we give such people TV licences rather than money? We would only do so if we wished to reduce the welfare of older people by imposing our choices on them.

On what ground should we give somebody a TV subscription simply because they are old? It is difficult to think of any. If we believe that old poor people do not have enough money to live in dignity, then we should give poor pensioners more money and allow them to spend it as they wish. If we believe that old people in general do not have enough money as a result of getting too little for what they have paid in, we should increase the non-means-tested, contributory benefit, the state pension. Indeed, if the “paid in” argument is accepted, then we would have the perverse conclusion that we should give free TV licences only to (generally) richer pensioners in receipt of the state pension.

The BBC should go further than it has and cease providing free TV licences altogether. They are a relatively recent innovation and there is no justification for this benefit.

Perhaps the support for free TV licences arises from recognition of a fundamental injustice. People should not have to pay for TV channels they do not watch just because they have a TV. The BBC should move to a subscription model and be a members’ organisation rather like the National Trust. All other free TV channels would remain free, but, when people’s TV licence runs out, they would continue to be able to watch all free TV channels. To continue watching the BBC, they would have to pay the subscription. Subscribers would then receive a pin number which would allow them to watch BBC services on all devices. Free-to-air TV would still remain for pensioners, but they would have to pay for the BBC.

If it is an injustice to require pensioners to pay for TV channels because it is, in effect, a television tax, then it is an injustice for everybody. We should stop taxing televisions and start charging for the BBC.

 

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.


6 thoughts on “Scrap the free TV licence – and scrap the TV licence”

  1. Posted 17/06/2019 at 16:02 | Permalink

    The principle of paying pensioners and others their non means tested benefits as part of their monetary benefits and not as an arbitrary waiver of fees and charges makes good sense.

    1. The true costs of the related services are better controlled and accounted for.
    2. The relevant providers can receive the necessary funding based on the appropriate budgets using market determined costs.

    I agree with Prof.Booth that a government provided free service if relevant and justified should not be treated as free service only to selected persons without means testing whilst being paid for as a licence fee by others. Payment of licence fees becomes tantamount to a form of tax.

  2. Posted 17/06/2019 at 21:45 | Permalink

    No to this conclusion The BBC should move to a subscription model
    Why?
    Because I, Philip Booth of the Professorship recommends it, seems to be the reason. But what about the principle of having some representation for your taxation, and being accountable to the people that pay for you?
    If the people who pay the licence want a subscription model, and are able to express that view when they vote for elected Trustees who run on such a platform, then I would be with Professor Booth. But for crying out loud, give the people who have paid the licence fee all these years under threat of court the chance to make that decision. Or to choose some other changes to the system. Or even to keep it the same. But let’s start by making the BBC formally accountable to people who have already paid for the buildings, training, infrastructure and back catalogue i.e. the existing licence fee payers.

  3. Posted 19/06/2019 at 03:00 | Permalink

    I am not sure that we disagree. So, step one, the BBC is turned into a body like the National Trust where all its current licence fee holders are members and, yes, they can vote for the trustees. Step two is that next time anybody’s licence fee comes up for renewal non-renewal has only one consequence: the non-renewer cannot watch the BBC. A simple process has created a mutual run on voluntary lines.

  4. Posted 20/06/2019 at 22:39 | Permalink

    I am sure that we disagree.
    I want the Trustees to be elected by the licence fee payer, and for the Trust to have the power to reflect their collective views on cost, scope, coercion, universality and content, that sort of thing. Personally, I’d vote for a candidate for Trustee who said they’d get rid of content provided by the free market ( 24 hr news, soaps, breakfast tv etc ), halve the licence fee, but kept the universality as it’s an institution that binds us as a nation by our requirement to pay for it and the quality and reputation internationally that might result. My candidate might not win, and I’d accept that.
    Professor Booth’s essential view is different. You care about people having the right to stop paying and walk away, but expressed no preference for breaking the link to the structures of State ( in this case the DCMS ) for those who want to continue subscribing.
    If given a choice between two worlds:
    1. A State controlled broadcaster you don’t have to pay for. ( What sort of ideas do you think the State will come up with to plug that funding gap when lots of people cancel their DD? It’s dreadful to contemplate )
    2. No State controlled broadcasters. But a citizen controlled broadcaster exists which you do have to pay for but is accountable to you and whose cost and content you can affect.
    I’d rather take my chances with the second, thanks.

  5. Posted 21/06/2019 at 14:25 | Permalink

    okay, i see. It might not be as clear as it should be, but without question, i want the trust to be totally independent of the state. As i say, like the National Trust (the governors of which are elected by the members). But, you are right i don’t believe in compulsion.

  6. Posted 16/12/2019 at 17:29 | Permalink

    There is no justification for a tax to be payed by all viewers to go to just one company.

    The bbc should be forced to move to a subscription model asap.

Leave a Reply

Your email address will not be published.


SIGN UP FOR IEA EMAILS