Our view on the clauses to the Deregulation Bill approved by MPs today
Andrew Scadding
Head of Corporate and Public Affairs
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Today, MPs approved clauses in the Deregulation Bill that will set up a review into whether non-payment of the licence fee should carry civil rather than criminal penalties.
A campaign led by Andrew Bridgen MP had called for this change to be immediate. The Government, with the support of the Opposition, is going to consider the idea and following a review look at it alongside negotiations on the BBC’s Charter.
This approach is a sensible one as it means that all parties will be able to consider any changes to the current system with a clear understanding of the consequences that will follow – not least the potential impact on the services that the BBC is able to provide for its audiences.
The licence fee is by no means a perfect system, but for 40p a day it does provide a television, radio and online service that is the envy of much of the world. It provides the Proms, the iPlayer, Radio 4, CBBC, Strictly Come Dancing, Line of Duty, Sherlock, BBC Local Radio, coverage of the Olympics and World Cup, and from next month the World Service as well. It gives the whole nation, not just a privileged few access to fantastic Arts coverage - available to all – and given a huge boosts by our announcements today.
The licence fee is good value because it means we all share in each other's investment. The alternative proposed by some has been a service funded by subscription. In summary, it would mean less, more expensive programmes enjoyed by fewer people. It would immediately change the BBC's incentives. Profit would quickly become more important than universality. Rather than making programmes for everyone we would be incentivised to make programmes for those with the highest willingness to pay. Some audiences would become more important than others. And for those who did pay, the costs would be higher as not everyone was contributing. What about advertising as a funding mechanism? Lack of advertising is one of the key attributes that audiences value about the BBC. Alongside this the resulting loss in revenue to ITV and Channel 4, would be catastrophic for a British broadcasting industry that is unique in its breath of quality and choice.
The public as a whole recognise these arguments which is why there is strong support – over 50% - for retaining licence fee funding. This is up from a figure of 31% in 2004. In 2014 the licence fee is the top choice for funding the BBC across all ages, all socio-economic groups and whether people are in a Freeview, Sky or Virgin household.
But despite this popular support for the licence fee, why is an effective enforcement mechanism also required? Primarily because the BBC can’t turn off its services for those who don’t pay.
Unlike, pay-TV broadcasters who can exclude non-payers or, the utilities, who can install pre-payment meters, the BBC is vulnerable to evasion. The idea has been floated that it might be possible to encrypt transmissions or allow the BBC to turn off our services somehow. In order to make this change, all UK TV equipment would need technology installed to control access. There are currently more than 40m Freeview and Freesat TVs and set top boxes in use across the country. To alter all of these would be no small undertaking with costs estimated as upwards of £500m in addition to significant on-going costs.
Under the current system licence fee evasion has been steady at 5% for the last 5 years. We have one of the lowest evasion rates in Europe. If just 5% more of homes refused to pay, it would result in a loss of revenue equivalent to about £200m. This is the same as the budgets for CBBC, CBeebies, and BBC Four.
Some have argued that this could be met through lower salaries, less managers, more efficiencies. They are absolutely right that we should be ensuring we are an efficient organisation - we have and we are doing more - reducing layers of management, capping severance pay, scrapping boards . On some real specifics for example, in 2006 we employed 635 people in the BBC’s core finance team. By 2016 we plan to employ around 280. The cost to make an hour of our continuing dramas like EastEnders has fallen by a fifth. We’ve reduced our spending on talent and done longer-term and better deals with programme suppliers. Since 2007, our like-for-like programme prices in television have been reducing or holding flat year-on-year. By moving BBC Sport from TV Centre in London to Salford, we saved more than £2m per year from the cost of our football programmes.
But already with our planned savings - £800m – or 23% a year by the end of the Licence Fee period, we are having to take tough decisions affecting the services we provide for the public, such as the closure of BBC Three as a linear TV channel. So we are not crying wolf when we say that a loss of income through an increase in evasion would means a loss of more services.
The current system is by no means broken, but it is right to examine it and we will engage with all sides of the debate when the Government's review takes place. At the BBC we want a system that works - one that is simple, proportionate, cost effective and ensures evasion remains as low as possible. But in finding this system it's important that we do not let ideological motivations cloud a debate that will take place in the context of Charter review and a decision on what the BBC of the future should look like. If we do that we will be doing the next generation of viewers and listeners a disservice.
Andrew Scadding is Head of Corporate and Public Affairs at the BBC