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Select committee: Communications and Digital Committee

BBC future funding

Closed Opened 3 Feb 2022 Closed 16 Dec 2022 14 recommendations 23 conclusions

Communications and Digital Committee Inquiry on parliament.uk ↗

Inquiry scope (the committee's words)
This inquiry will consider how the BBC should be funded in future to deliver what is needed from a national public service broadcaster.

Where it stands

The inquiry is closed, opened 3 February 2022.

The committee has published 1 report, most recently 1st Report - Licence to change: BBC future funding on 18 July 2022.

The government's response

Published 26 October 2022. The deadline was 13 October 2022.

Summary written by Accountability Index from the government's response. It is not the government's own words.

The Government welcomes the Committee's report and says it "remain[s] committed to conducting a review of the funding model", with further details to be set out "in due course".

  • It agrees with the Committee's view that the licence fee's drawbacks are becoming more salient and that a comprehensive review is "a necessity", and says it will take the Committee's proposed core principles into account as it prepares to launch a review.
  • On independent market impact studies, it says it "will consider" the recommendation, and the potential for commissioning and publishing them, "as planning for the review progresses".
  • On the three funding models the Committee does not recommend (recommendations 9, 10 and 12), it says it "will set out its position" "following the review", and on radio behind a paywall it does "not want to rule out options at this stage".
  • On public engagement, it expects the review to "engage widely with stakeholders" and says the Charter Review will follow the requirement to consult the public and Parliament; it does not commit to a separate plan or citizens' assemblies.

Read the government's response ↗ Report an error

Recommendations and conclusions

All 37 recommendations and conclusions

Reports

All reports

Evidence

  • 13 oral evidence sessionsLatest 7 June 2022
  • 50 witnesses
All evidence

Recent activity

Recommendations and conclusions 37 shown

Conclusion 1

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The BBC plays a key role in bringing the nation together—most importantly at times of crisis, celebration and big national moments, such as sporting events. This role as a national glue will only become more important, and more complex, in the context of increasing social, cultural and demographic change.

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Conclusion 2

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The BBC’s mission to ‘inform, educate, entertain’ has stood the test of time. But the way in which it is delivered needs to change for it to remain relevant in this rapidly changing market and society. The BBC needs to be guided in how it should change by a clearly articulated strategic purpose and vision, as we set out in Chapter 3.

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Recommendation 3

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The concept of universality remains integral to the BBC but suffers from a lack of clarity. It does not necessarily mean delivering everything for everyone across every platform, or that everyone must pay the same. We call on the BBC to provide a clear definition of its understanding of universality in response to this report, detailing how this, alongside its strategic purpose, will shape its future decisions on its programming and allocation of resources.

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Conclusion 4

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The BBC plays an important role in providing services that are underserved by the private sector. But this should not be its sole focus: we do not support a market failure model for the BBC. The corporation also plays a central role in supporting and shaping the UK’s creative economy. This market-shaping work should feature prominently in the future vision we are calling for.

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Recommendation 5

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
When responding to the independent review the Government must set out how the BBC’s future funding model and remit will incentivise the corporation to strike the right balance between addressing market failure and shaping markets for the benefit of the UK creative industries and wider economy. In response to this report the Government should commit to commissioning and publishing independent market impact studies ahead of any decision on the BBC’s future funding model.

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Recommendation 6

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The BBC continues to provide an essential international service which promotes UK democratic values and informs people across the world. It delivers this through a range of means, including entertainment. This is ever more important in an era of declining press freedom and rising authoritarianism. When responding to its independent review the Government should commit to safeguarding the work of the BBC World Service, and if necessary enhancing it.

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Recommendation 7

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
When responding to the results of its independent review the Government should publish an assessment of the benefits that the BBC’s international output , including the World Service, provides to UK soft power and wider objectives in foreign policy, international trade and inward investment . This should set out how changes to the BBC’s funding might affect these benefits. The BBC should provide the Government with scenarios and estimates to inform this work. The Government should provide an interim update on this work by 1 December 2022.

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Conclusion 8

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The BBC faces major challenges. The decade ahead will be characterised by rising competition and costs, and constrained funding. It will need to adapt to a digital future while serving those who will continue to rely on linear services for at least the next decade. It must deliver programming and news that matter, and balance the growing expectation for personalised content against its enduring unifying mission. It must compete with vastly better funded international streaming giants and respond to growing questions about its value in the face of expanding consumer choice and failure properly to represent all sectors of the UK. And it will need to explain more clearly to audiences the relationship between what it is for and how it should be funded. Achieving this will require a more clearly articulated strategic vision that goes beyond its existing published strategies.

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Recommendation 9

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The BBC should publish a comprehensive long-term vision that sets out its role, and how it will deliver value and distinctiveness in a rapidly changing world. This vision must include costed options for future funding mechanisms, and how these would affect the BBC’s ability to deliver on its mission in the next decade and beyond. This vision must be driven by a positive approach from the leadership. It will require fresh thinking and a more open-minded approach than has been shown in the past. It should include what the BBC will stop doing, what it needs to do differently and what it will start doing. This would provide clarity to the commercial sector, and greater structure and transparency to help Ofcom, Parliament and the public hold the BBC to account. The BBC should submit this work to the Government’s independent review.

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Conclusion 10

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The BBC cannot provide content that pleases everyone all the time. Yet we continue to hear that the BBC is not representing widely held perspectives in the UK, which often do not divide neatly along party political lines. The legitimacy of a future funding model risks being undermined by dissatisfied audiences and declining viewing share. We note the BBC’s diversity initiatives and encourage it to continue to improve its on- and off-screen representation. The BBC should also embrace this opportunity to show more overtly that it respects, understands and reflects all sectors of UK society.

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Recommendation 11

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The BBC will need to operate in a more flexible and nimble regulatory framework in future. It currently takes too long for sensible changes to be introduced. We welcome Ofcom’s recent proposals to update the BBC’s Operating Licence better to incorporate the BBC’s online services and give the BBC greater flexibility in how it meets audience needs. In response to this report, Ofcom should set out how it intends to provide a swifter approach to regulatory changes. The Government should likewise outline its plans for introducing regulatory updates.

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Recommendation 12

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
When responding to the results of its independent review, the Government should publish its assessment of how alternative funding options relate to the principles of independence, transparency, legitimacy, sufficiency and sustainability, fairness, and proportionality.

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Conclusion 13

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The licence fee is one option for funding the BBC. But it is not the only option. Our evidence was clear that many of the apparent advantages of the licence fee are under threat, and it has several drawbacks. Making the licence fee more progressive would be an improvement, as fees could be raised without disproportionately targeting those least able to afford them. But this should not preclude a comprehensive assessment of alternative funding options.

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Conclusion 14

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A purely advertising-funded BBC is highly unlikely to be viable. It would likely mean a multi-billion pound reduction in income for the BBC whilst damaging the rest of the public service broadcasting sector which relies on advertising. The BBC’s programming may need to scale back to refocus on core public service programming under a significantly reduced budget, and still generate income from these genres that are typically least attractive to advertisers. Alternatively, the BBC may be incentivised to refocus on entertainment attractive to advertisers and spend the minimum amount possible to meet its public service broadcasting obligations. As the overall funding level would be significantly less, both entertainment and core public service programming would likely decline in quality. We do not recommend the BBC moves to a purely advertising -funded model.

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Conclusion 15

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A subscription service would generate insufficient income whilst introducing disproportionate barriers to access. This would undermine the BBC’s ability to deliver a valued service to the UK. There would also be major technical difficulties to overcome. We do not recommend the BBC moves to a purely subscription-funded model.

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Conclusion 16

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
As these fully commercial options are not viable, continued public funding must be retained to ensure the BBC can deliver on its purpose.

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Recommendation 17

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
We reiterate our view set out in previous reports that an independent body should be established. This would provide recommendations to Government on the level at which the licence fee, or a new form of public funding, should be set.

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Conclusion 18

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A hypothecated income tax could be a more progressive model of public funding which takes account of individuals’ ability to pay. However, it may be more exposed to fluctuations than the current system, may prove politically controversial, and raises questions about its fairness, particularly for households with multiple occupants.

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Conclusion 19

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A telecommunications levy would offer few advantages over the licence fee, and its potentially negative impact on broadband access would make it less fair.

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Conclusion 20

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A universal household levy could offer a viable alternative to the licence fee. It would need to be means-tested to make it fairer than the current model. Linking the fee to council tax offers one route to achieving this via an existing system. This could also reduce collection costs.

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Recommendation 21

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
When responding to the results of its independent review, the Government should analyse the implications of retaining an opt-in approach, or changing the funding model to a universal levy which everybody has to pay , as would be the case under a household levy, communications levy, or hypothecated income tax. The BBC should undertake a similar assessment.

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Recommendation 23

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
We do not recommend contestable funding as a primary alternative to the licence fee. However, the Government should consider the merits of contestable funding as an additional supplement to support underserved areas of public service content. This would need to be separate from the BBC’s existing income.

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Conclusion 24

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
We welcome the BBC’s commercial strategy and encourage it to continue to diversify its sources of revenue. But such income is limited. Without major changes, this will not offset the BBC’s reliance on wider public funding in the near future.

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Conclusion 25

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A hybrid domestic subscription offers an opportunity for the BBC to maintain a broad range of quality programming without requiring regular rises in the licence fee or alternative method of public funding. It would give audiences choice over whether to pay for the full range of BBC output while ensuring the BBC’s core programming remains universally accessible. But there would be significant commercial risk with no guarantee of success. It may involve trade-offs with universal access, which would have to be viewed as acceptable by audiences.

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Conclusion 26

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
There are a range of possible versions of such a service, with varying levels of investment and risk. For an expansive version, multi-billion upfront investment would be needed to build a sufficient content library. A less expansive version, experimenting with new payment models and content strategies, would involve less investment and risk, but could provide a basis for possible future expansion.

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Recommendation 27

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
An international subscription service offers a further option for generating commercial income. It would avoid compromising universal access for domestic consumers. As with a hybrid domestic subscription, an international subscription service would involve commercial risk with no guarantee of success. We recommend the BBC explores and publishes costed options for hybrid domestic and international subscription models.

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Conclusion 28

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The costs and complexities of developing conditional access technology for digital terrestrial television would be disproportionate to the benefits. We do not recommend the Government pursues this.

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Conclusion 29

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
We do not recommend a funding model that places BBC radio behind a paywall unless and until both FM and DAB radio listening decline to the point that a switch- off is feasible. We do not believe this is likely within the next 15 years at least.

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Conclusion 30

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
A second digital switchover, whereby digital terrestrial television, and DAB and FM radio would be turned off, is unlikely to be feasible until the early 2030s at the earliest. If conditional access were not developed for DTT and DAB, this would make full subscription unfeasible until this point. Were such a plan to become feasible its benefits would need to be balanced against the needs of households less able to pay for and use new technologies.

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Conclusion 31

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
Current connectivity would support a hybrid online subscription model, as described in paragraph 157. The feasibility of these models will be determined primarily by decisions about the BBC’s purpose and commercial viability, not technological factors.

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Conclusion 32

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
The market for subscription services is becoming increasingly competitive and saturated. If the BBC were to develop a top up subscription service, preparations to launch would need to begin before the end of the current Charter period.

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Recommendation 33

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The political constraints surrounding the decision on the BBC’s funding raise serious questions about the commercial viability of a hybrid subscription model. The Government must take account of how the timetable of the political process will affect the viability of some funding models. This should not, however, delay the BBC coming forward with the new strategic vision that we are calling for.

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Conclusion 34

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
We were concerned that the Government did not have a specific plan for public consultation on the future BBC funding model. This risks undermining the legitimacy of any changes it may propose.

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Conclusion 35

Conclusion · 1st Report - Licence to change: BBC future funding

Concluded (the committee's words)
Decisions on the BBC’s role and future must not be left to the last minute before the renewal of the next Charter. And these decisions should be taken more transparently than has previously been the case.

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Recommendation 36

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The Government should publish a plan and timeline for how it intends to engage the public in discussions and decisions about the BBC’s future funding model. It must commit to holding national public consultation in advance of it proposing a funding model. These could take the form of citizens’ assemblies. The Government’s proposed funding model must be debated in Parliament in advance of any decision to introduce it.

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Recommendation 37

Recommendation · 1st Report - Licence to change: BBC future funding

Recommended (the committee's words)
The BBC must use the debate on its future funding to embrace its challenges and seize the opportunity to generate momentum for change. The Reithian mission must be adapted for the next quarter of the 21st century. This will require confident and clear proposals from the BBC. Urgent thought is required about how the BBC fulfils its purpose in a changing society and market context. Regulation and the Government must play their part in furnishing the BBC with the tools it needs to transform itself successfully. But it is a discussion the BBC must lead, and it should consider creative and expansive ways to engage citizens. The question of the future funding model is important but only one part of this necessary broader re-evaluation.

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Reports

1 report

Oral evidence sessions

13 sessions

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Date Session and witnesses Source
7 Jun 2022
Oral evidence session
Julia Lopez MP · Department for Culture, Media and Sport, Robert Specterman-Green · Department for Culture, Media and Sport 		View ↗
23 May 2022
Oral evidence session
Clare Sumner CBE · BBC, Richard Sharp · BBC, Tim Davie CBE · BBC 		View ↗
17 May 2022
Oral evidence session
Andrew Neil · The Spectator, Greg Dyke · London Film School, Mr Archie Norman · Marks and Spencer, Sir Peter Bazalgette · Creative Industries Taskforce 		View ↗
10 May 2022
Oral evidence session
Gareth Davies · Department for Transport, Kate Mathers · National Audit Office, Kevin Bakhurst · Ofcom, Louise Bladen · National Audit Office, Siobhan Walsh · Ofcom 		View ↗
27 Apr 2022
Oral evidence session
Dr Cento Veljanovski · Case Associates, Ryan Bourne · Cato Institute 		View ↗
26 Apr 2022
Oral evidence session
Adam Minns · COBA, Khalid Hayat · Channel 4, Magnus Brooke · ITV, Mitchell Simmons · ViacomCBS, Mr Alistair Law · Sky, Sebastian Enser-Wight · Global Radio 		View ↗
5 Apr 2022
Oral evidence session
Antony Walker · techUK, Catherine Colloms · Openreach, Claire Enders · Enders Analysis, Shuja Khan · Arqiva 		View ↗
29 Mar 2022
Oral evidence session
Dr Florence Hartmann · European Broadcasting Union, Dr Helen Weeds · Imperial College Business School, Dr Richard Burnley · European Broadcasting Union, Olav Nyhus · Norsk rikskringkasting (NRK), Peter Weber · ZDF, Professor Robert G. Picard · Yale University Law School 		View ↗
22 Mar 2022
Oral evidence session
Mark Oliver · Oliver and Ohlbaum Associates, Richard Broughton · Ampere Analysis 		View ↗
15 Mar 2022
Oral evidence session
Deborah Williams · Creative Diversity Network, Dr Rob Watson · Decentered Media Ltd, Jasmine Dotiwala, Mercy Muroki 		View ↗
8 Mar 2022
Oral evidence session
Dr Tom Mills · Aston University, Liam Halligan · The Telegraph, Professor Mariana Mazzucato · University College London (UCL), Professor Stuart Allan · Cardiff University School of Journalism, Media and Culture 		View ↗
1 Mar 2022
Oral evidence session
David Goodhart · Policy Exchange, Dr Adrian Wooldridge · Bloomberg, Polly Mackenzie · Demos, Rory Sutherland · Ogilvy Group UK 		View ↗
22 Feb 2022
Oral evidence session
Dr Jeremy Silver · Digital Catapult, Dr Richard Fletcher · Reuters Institute for the Study of Journalism, Paul Lee · Deloitte, Professor Catherine Johnson · University of Huddersfield 		View ↗

Who gave evidence

50 witnesses

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WitnessOrganisationSessions
Adam Minns · Executive Director COBA 1
Andrew Neil · Chairman The Spectator 1
Antony Walker · Deputy Chief Executive techUK 1
Catherine Colloms · Managing Director, Corporate Affairs and Brand Openreach 1
Claire Enders · Founder Enders Analysis 1
Clare Sumner CBE · Director, Policy BBC 1
David Goodhart · Head of Demography, Immigration and Integration Unit Policy Exchange 1
Deborah Williams · Executive Director Creative Diversity Network 1
Dr Adrian Wooldridge · Global Business Columnist Bloomberg 1
Dr Cento Veljanovski · Founder and Managing Partner Case Associates 1
Dr Florence Hartmann · Manager, Media Intelligence Service European Broadcasting Union 1
Dr Helen Weeds · Honorary Research Fellow Imperial College Business School 1
Dr Jeremy Silver · Chief Executive Officer Digital Catapult 1
Dr Richard Burnley · Legal and Policy Director European Broadcasting Union 1
Dr Richard Fletcher Reuters Institute for the Study of Journalism 1
Dr Rob Watson · Director Decentered Media Ltd 1
Dr Tom Mills · Senior Lecturer in Sociology Aston University 1
Gareth Davies · Second Permanent Secretary Department for Transport 1
Greg Dyke · Chairman London Film School 1
Jasmine Dotiwala Not recorded 1
Julia Lopez MP · Minister of State Department for Culture, Media and Sport 1
Kate Mathers · Executive Director National Audit Office 1
Kevin Bakhurst · Executive Director of Broadcasting and Online Content Ofcom 1
Khalid Hayat · Director of Strategy and Consumer Insight Channel 4 1
Liam Halligan · Economics Correspondent The Telegraph 1
Louise Bladen · Director, BBC value for money audit National Audit Office 1
Magnus Brooke · Group Director of Strategy, Policy and Regulation ITV 1
Mark Oliver · Chairman & Co-founder Oliver and Ohlbaum Associates 1
Mercy Muroki Not recorded 1
Mitchell Simmons · Vice President, Government Relations EMEA ViacomCBS 1
Mr Alistair Law · Director of Policy Sky 1
Mr Archie Norman · Chairman Marks and Spencer 1
Olav Nyhus · Director of Legal and Public Affairs Norsk rikskringkasting (NRK) 1
Paul Lee · Global head of research for technology, media, and telecommunications Deloitte 1
Peter Weber · Legal Adviser ZDF 1
Polly Mackenzie · Chief Executive Officer Demos 1
Professor Catherine Johnson · Professor in Media & Communication University of Huddersfield 1
Professor Mariana Mazzucato · Professor in Economics of Innovation and Public Value University College London (UCL) 1
Professor Robert G. Picard · Fellow, Information Society Project Yale University Law School 1
Professor Stuart Allan · Professor of Journalism and Communication Cardiff University School of Journalism, Media and Culture 1
Richard Broughton · Research Director Ampere Analysis 1
Richard Sharp BBC 1
Robert Specterman-Green · Director, Media and Creative Industries Department for Culture, Media and Sport 1
Rory Sutherland · Vice Chairman Ogilvy Group UK 1
Ryan Bourne · R. Evan Scharf Chair for the Public Understanding of Economics Cato Institute 1
Sebastian Enser-Wight · Chief Strategy Officer Global Radio 1
Shuja Khan · Chief Commercial Officer Arqiva 1
Siobhan Walsh · Director, Content Policy Ofcom 1
Sir Peter Bazalgette · Co-Chair Creative Industries Taskforce 1
Tim Davie CBE · Director General BBC 1