Just a few weeks into 2022, the UK’s culture secretary set off an earthquake in the decades-old debate over the funding of the BBC, the country’s national broadcaster.

Nadine Dorries took to Twitter, writing: “This licence fee announcement will be the last. The days of the elderly being threatened with prison sentences and bailiffs knocking on doors are over. Time now to discuss and debate new ways of funding, supporting and selling great British content.”

Any UK household watching BBC programmes, online or not, is required by law to hold a television licence, with the licence fee contributing three-quarters of BBC revenues. At £159 a year, the fee is no small change – evasion is thought to cost the corporation more than £210m each year.

The licence fee, an institution older than women’s right to vote in the UK, is protected in law until 2027. With that deadline fast approaching, debate is raging around whether to continue the current system.

Defenders of the licence fee fear that plans to change the BBC’s funding model will harm its ability to honour its founding duties – to inform, educate and entertain the public. Others argue that these principles would be better served by a radical overhaul of the funding model, or even that they should be reconsidered altogether.

A favourite Auntie?

The depth of the BBC’s penetration in British cultural life is difficult to overstate. Quite simply, there cannot be a Brit who has not heard of it. In fact, so familiar, and almost familial, is it, that it is known affectionately to many in the UK as ‘Auntie’.

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The numbers bear this out. A 2021 survey by regulator Ofcom found that 92% of Brits had used the corporation’s services at least once in the past three months, while almost half of Brits consume BBC News every day, with another third tuning in at least once per week. 

Engagement is high across all four constituent countries of the UK and across all socio-economic classes, with the highest daily viewership among the least well-off. Young people make less use of BBC News than their parents and grandparents, but two-thirds still use it at least once per week. 

“In terms of the UK media sector, the BBC has a huge impact,” says Robert Haigh, strategy and insights director at brand valuation consultancy Brand Finance. “You could see it almost as a kind of keystone species. There are lots of countries around the world that have well-established, thriving media ecosystems, but the UK is unique in its [remit of creating] ‘something for all’, thereby fostering projects that otherwise might be commercially unviable.”

The BBC retains a hegemonic position in the UK television landscape, and not just in news. Three in every five survey respondents told Ofcom that they watched BBC One, the broadcaster’s main entertainment channel, every day – well ahead of the number who said the same of the BBC’s main commercial competitor, ITV.

“The BBC is the bedrock of British culture, an essential and valuable part of our national fabric, creating memories for audiences of every generation for a century,” says Philippa Childs, head of the UK’s Broadcasting, Entertainment, Communications and Theatre Union (Bectu). 

“Over the past two years its value has only become more evident: helping parents homeschool their children, entertaining viewers during lockdown and helping to keep the nation safe through its unrivalled network of local news coverage.”

The BBC’s radio channels are just as dominant as their television counterparts, providing services that are consumed by 60% of the public each month – almost three times the figure of the corporation’s closest competitor, Heart. 

Thanks to the BBC’s early entry into the field of on-demand TV and film, the broadcaster has ensured that it remains a top player in this sector, too, with penetration of BBC iPlayer only slightly lower than that of the UK’s most popular streaming service, Netflix.

Beyond the North of England, the BBC adds £1.1bn to Cardiff’s local economy, supporting almost 2,000 jobs. By 2025, the BBC expects to employ 1,000 apprentices as part of its £100m investment in skills and training to make the British creative sector the best in the world. 

“The BBC is a truly national broadcaster and a model for the government’s levelling up agenda," says Childs. "With 50% of its employees working outside of London, it is a true Northern Powerhouse, directly or indirectly supporting 6,400 creative jobs in Salford through its presence at MediaCity.”

How the BBC builds the UK's brand abroad

The BBC also benefits from an international profile unlike any other public service broadcaster. For many non-Brits living outside the UK, the brand may be practically synonymous with that of the UK.

At the forefront of the BBC’s global news reach is its flagship radio platform, the World Service, whose audience stands at 364 million a week. Its television equivalent, BBC World News, reaches more than 112 million a week

The BBC’s global reputation goes back as far as the Second World War, according to Dr James Rodgers, a reader in international journalism at City, University of London. During the war, he says, the BBC took what was then the unusual decision of reporting both good and bad news. The logic was that by building trust with its audience, the good news it put out about the Allied war effort would more likely be believed.

“Today, in a world where malicious actors and states are spreading disinformation and undermining democracy, the BBC plays a critical role in promoting British values abroad,” explains Childs. 

“Calling the future of this soft power asset into question seems an odd way of expressing the [Conservative government’s post-Brexit] ambition of ‘Global Britain’,” she says, in reference to Culture Secretary Nadine Dorries’s unconfirmed plans to reformat the BBC’s funding model, which may reduce its funding.

The UK’s national brand is indeed very strong internationally. Much like its economy, the country punches far above its weight, ranking as the world’s third-strongest soft power, after the US and Germany, in Brand Finance’s Soft Power Index

“Based on our research, the BBC plays a very significant part in the success [of the UK's international brand],” says Haigh. “Its authoritative news content and documentaries, such as [David Attenborough’s] Planet Earth series, helps to maintain international perceptions of the UK as a trustworthy, logical and authoritative nation. 

“That has a halo effect on all sorts of industries, not just the media, but also the likes of the UK’s huge professional services sector and the creative industry, including advertising.”

Haigh points to tourism as one example where the BBC's impact seeps into areas away from the media, with shows such as Sherlock driving interest in the UK’s cultural sector – something that also has an effect on foreign investors, by making the UK a more appealing place to live and work.

Haigh suggests the influence of the BBC also extends to trade. “If someone sees the British flag on a product they might associate it with the high quality and overall brand that the BBC helps promote," he says. 

“BBC programmes, especially the more traditional ones, really help market the UK’s heritage and countryside, thereby supporting positive associations of manufacturing, agricultural goods and other popular products such as whiskey.”

Vocal support for keeping the licence fee

Dorries's tweet unleashed a torrent of debate around the BBC’s funding model. Among those opposing the culture secretary’s statement and in favour of maintaining the licence fee is the creative industries union Bectu.

“The government’s threat to scrap the licence fee and force the BBC to compete directly with the streaming giants fundamentally misunderstands the essential role the BBC plays in our national story, and risks the services and benefits to the UK’s economy that only the BBC provides,” says Childs. 

“Despite numerous attempts to undermine the licence fee, no one has come up with a better funding model that would protect its unique local, national and international reach. Its [current] model allows it to be a truly public service broadcaster – commissioning innovative content, taking a chance on British talent, and investing in jobs and newsrooms across the country as part of its £5bn contribution to the UK economy," she adds. “Removing the fee will necessitate huge cuts – hitting jobs, regional economies and ultimately the content that British people know, love and trust.”

Since the BBC is not primarily commercially funded, it does not need to be driven by market demand. Supporters of the licence fee argue that this allows it to back content that might not be profitable but provides something for all. 

“Any suggestions that the BBC should be funded by subscription or advertising revenue are wide of the mark," says Childs. "The public service ethos of the BBC to inform, entertain and educate is something that we should fiercely protect and fund properly.”

The dilemma here is clear. If the licence fee were to disappear, there is no guarantee that some of the content would not disappear with it, which would place the ‘something for all’ offering of the BBC under dire threat.

A significantly reduced budget for the BBC might also reduce funds across its flagship services, such as the World Service, thereby damaging 'brand Britain' and the UK’s soft power over the longer term. 

Alternatives to the licence fee

Among the most vocal critics of the licence fee are members of the Defund the BBC campaign. The group, which does not identify its funders, would like to see the licence free scrapped through a referendum. 

Defund the BBC campaign director Rebecca Ryan recently told the Scottish Daily Express: “The licence fee is a relic of a bygone era. A guaranteed stream of money for the BBC has meant the broadcaster has felt free to lower the quality of its output and push its own campaign agenda. Britons have been patronised and insulted, whilst being bullied and coerced on their doorsteps.” 

The group has also taken issue with what they allege is the BBC’s left-wing political bias and “woke” culture.

Other critics of the licence fee, however, are less concerned with the politics of the BBC and more concerned with its business model.

“The BBC has got to ask itself what its role is,” says Lis Howell, director of broadcasting at City, University of London. “It is great that we have so much entertainment produced by the BBC, but it is not strictly necessary now that there are so many other entertainment sources, and it is not essential to its function: to provide neutral services in news, children's programmes and religion.”

This tension between the BBC’s three guiding principles is a decades-old issue, manifested today in the balancing act between the likes of BBC News, high-end drama, niche documentaries, and mass entertainment such as Strictly Come Dancing.

Howell suggests that there are three main models available for funding the BBC. “It could remain a hypothecated tax for essential functions, like the news, but then with a subscription on top for entertainment," she says. "Or, you could make the whole thing a subscription – which I think would be a mistake. Lastly, there is central taxation, as with the NHS budget – something that has not necessarily made the NHS less independent.”

A mixed model for the BBC?

One of the most articulate supporters of a part-subscription of the BBC is David Elstein, an executive producer at Portobello Films and a former chair of independent global media platform OpenDemocracy. Elstein would like to see the BBC’s public service content, including news, funded through central taxation as part of a public service fund administered at arm’s length. 

He says: “In terms of original UK [entertainment], BBC investment in new content has collapsed in recent years to below £1bn per annum (as reported by Ofcom) – and less than 10% of all new high-end UK TV drama is now funded by the BBC, with Netflix, Amazon, Sky, ITV, Channel 4 and the British taxpayer putting in the rest.”

For Elstein, the best hope of reviving this strand of influence is by allowing the BBC to run its drama and entertainment as a subscription-funded service, with the ability to set its own prices, tap into the most dynamic revenue stream available and roll out its offering worldwide. The alternative, he contends, is decline and increasing irrelevance.

“Of course, all BBC content could be funded through taxation, but it seems eccentric to use taxes to pay for Strictly Come Dancing when it is a perfectly commercial proposition that people would willingly pay for," he says. "You only need intervention for non-market products.

“The decline in BBC investment in new TV content has been steady over the years, as inflation and non-core commitments have eaten into spending power. In the key area of drama, it is the massively inflationary impact of spending by the streamers that has squeezed output from all the terrestrial channels.”

From this camp of thought, the BBC would deliver much more high-quality products if it used the dynamics of subscription, as well as the global opportunities that it would offer. 

“Of course, some people in the UK would stop viewing that type of BBC output if they chose not to pay for it, but the public service broadcast elements would remain free to air, and used no less than currently," says Elstein. "The worldwide audience [for entertainment] would meanwhile soar.”  

As most production staff working on high-end TV are freelance or on short-term contracts, Elstein suggests, the creative impact of the change in funding would be mostly invisible. “There are very few entertainment programmes that are quintessentially BBC – the industry is notoriously imitative, and the top producers, writers and directors work for multiple broadcasters at the same time," he says. "Whatever ‘good’ is being performed by this non-[public service broadcasting] output cannot be attributed solely to the BBC, if it can be quantified at all.”

While leaving entertainment in the hands of market forces may increase quality and global viewership, the question is whether it would come at the cost of backing for ventures that are neither public service broadcasting in the strictest sense nor commercially viable, but nonetheless meet important needs – whether that be experimental film, high culture or output targeted at underserved audiences with little market power.

To much fear surrounding BBC reform?

The financial position of the BBC has become more and more perilous in recent years. Licence fee funding, which makes up 95% of BBC income, has fallen by 8% since 2016–17, just as inflation in the television sector increased costs. 

The reduction in licence fee revenues is partly a result of a long-term increase in competition from innovative rivals such as Netflix and Amazon Prime, as well as the corporation’s relatively weaker hold on young audiences.

The decline in its audience since 2015–16 is estimated to have cost the BBC £186m per year, with the additional investment needed to counteract this adding another £150m to the corporation’s bill.

The issue was significantly exacerbated in 2015 when the government offered free television licences to over-75s – a policy that is now costing the BBC an estimated £700m per year.

The move came just as the BBC was engaged in its first cost-cutting effort, which resulted in annual savings of more than £720m by 2017. This was immediately followed by a new round of cuts, with the BBC adopting a target of £800m in annual savings by March 2022 – a target later raised to £1bn.

Despite delays to cost-cutting measures in the news division, a result of the need for extensive coverage of the UK’s unusual political turbulence in recent years, the BBC is estimated to have made £971m in annual savings, just shy of its ambitious target.

A new set of cuts is expected to be announced later in 2022, with the target set to be determined through licence fee negotiations with the government. Concerns have been raised, however, that efforts to reduce inefficiencies may have run their course – meaning further cuts are likely to come from a reduction in the quality and quantity of the BBC’s output.

To solve the aforementioned issue, the BBC recently sought to increase the licence fee, an idea that Dorries seems to have shut down, for now. This means that the BBC will have to find several billions of pounds in cost savings in the coming years. 

In the meantime, it seems very likely that Dorries and the Conservative government will investigate alternative methods of funding. 

“There is a lot of fear around BBC reformatted funding," says Howell. "Like any ruling class, they are terrified of losing their position, and that is what they like at the BBC. There is lots of lovely people there, but they really have a very strong sense of entitlement, and any challenge is seen as a threat.”

She believes that the crux of the issue with the BBC’s finances is not actually one of funding or balancing the books, saying: “The heart of the malaise is the lack of trust between the government and the BBC, a fundamental problem since prior to 2007, when they got rid of the board of governors, who were more or less trusted by the government.” 

For Howell, the solution is some form of Royal Commission or long-term inquiry into the BBC’s funding and governance. “The trouble is, as soon as you start looking at it, hysteria on all sides is unleashed,” she says.

Hysteria it may be, but it comes with the territory when an establishment that is so intertwined with people's lives comes under any perceived threat. An independent inquiry would serve the debate well by providing clarity on whether reform is necessary, what reforms are available, and what different options would mean for the BBC’s century-old duties of informing, educating and entertaining the entire British public. The BBC will not disappear from public life, but it may take a very different shape before the decade is out.