Why the BBC thinks it can get Labour to give it more funding

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Tim Davie struck a gloomy tone when discussing the BBC's finances on Tuesday, as he renewed calls for extra funding.
'I want proper investment and not begrudging, grinding cuts to the BBC, which you've had in the last 10 years, which have just not helped,' the director general said.
The timing of his comments was key.
Davie is currently locked in talks with ministers ahead of the BBC's Charter renewal in 2027, as he fights for the future of the licence fee.
Bosses in W1A acknowledge that the funding model requires reform in the modern media age.
But how this will affect the BBC's stretched finances is a critical question as it continues to lose viewers at an alarming rate.
The licence fee has existed in some guise since the BBC's launch in 1922, when the government decided the new broadcaster should be publicly funded.
This, the corporation says, allows its UK output to remain 'free of advertisements and independent of shareholder and political interest'.
While the BBC was initially limited to radio services, the first combined radio and TV licence was issued in 1946 for £2.
Fast-forward to the 21st century and the BBC has transformed from a fledgling broadcaster into a public service behemoth.
Income from the licence fee stood at £3.7bn last year, a significant chunk of the UK's entertainment and media market, which is valued at around £100bn by PwC.
However, this scale does not tell the full story.
With the emergence of streaming rivals such as Netflix and Disney, as well as social media platforms such as YouTube and TikTok, the BBC is facing an identity crisis.
While the public service broadcaster continues to dominate the UK media space – around 86pc of adults consume its services each week, according to the latest Ofcom figures – it is losing ground.
This is particularly acute among 16 to 24-year-olds, who spend just 5pc of their in-home video time with the BBC, compared to the 23pc for over-35s.
Waning interest has meant lower income as viewers vote with their feet.
The number of households paying the licence fee dropped to 23.9m last year – a 500,000 fall that sucked £80m from the BBC's budget. The figure is 2.3m lower than the peak of 26.2m between 2017 and 2019.
Cost is likely to be a factor. At £174.50 per year, the licence fee comes in at around £14.50 a month. That compares to £5.99 a month for Netflix's ad tier, or £12.99 for its standard ad-free service. Disney charges £4.99 with ads and £8.99 without.
While the BBC argues it offers good value for money given the breadth of its service, this is unlikely to win over apathetic youngsters who consider Auntie irrelevant.
The fall in licence fee payers is not the only driving force behind the BBC's squeezed finances, however. Over the last 15 years, repeated government interventions have taken their toll.
In 2010, George Osborne announced the licence fee would be frozen for seven years at £145.50. Nadine Dorries, the former culture secretary, then froze the levy again in 2022, even as inflation surged.
The fee will now increase in line with inflation until the end of the Charter in 2027, but only after another Tory culture secretary, Lucy Frazer, stepped in to prevent a 9pc – or £15 – rise amid concerns it would fuel the cost of living crisis.
Adding further strain to the budget, the government in 2015 forced the BBC to take over the cost of providing free licence fees to the over-75s, while it also handed over the main burden of funding the World Service.
Analysis shows that government interference, coupled with a decline in licence fee payers, amounts to a real-terms decrease of around 30pc – or £1.4bn – in the broadcaster's domestic funding over the last 15 years.
The question, then, is how to plug the gap.
Davie has been wielding the axe on both staff and programming as he seeks to strip £700m from the BBC's annual budget.
Yet this whittling down of resources has fuelled anger and concern about the impact on the quality of the broadcaster's output, with spending on new shows poised to fall by £150m this year.
The BBC has also ramped up enforcement of the licence fee, with 41m warnings sent out in the 2024 financial year – an increase of almost 13pc year on year.
Another method championed by Davie, the former BBC Studios boss, is to boost the broadcaster's commercial income to help balance the books.
Measures so far have included taking full control of BritBox International, the BBC's joint streaming venture with ITV, after buying out its rival for £225m.
The BBC has also struck a co-production deal with Disney to air Doctor Who overseas, worth an estimated $100m (£73m).
But other schemes, such as its plan to run adverts around radio and podcast output, have been scrapped in the face of fierce opposition from commercial rivals.
Despite its bold aims, the BBC's commercial income fell to £1.7bn last year from just under £2bn the year before.
Overall, the BBC is forecasting a £33m deficit for the coming year. While this is down from the eye-watering £500m shortfall the previous year, it highlights the ongoing strain on the corporation's finances.
It is against this precarious backdrop that the BBC has entered discussions with the Government.
Ministers have made it clear, however, that reform, or even scrapping, of the licence fee is top of the agenda.
While the licence fee is now lower as a proportion of average household income – 0.46pc last year compared to 0.64pc in 2012 – the levy is facing scrutiny in a world where viewers have a plethora of entertainment options.
What's more, the licence fee is regressive, with poorer households paying more relative to their income and women disproportionately prosecuted for not paying.
So if the licence fee were to be scrapped, what could take its place?
One option is replacing it with a subscription model, similar to those of streaming services.
However, critics have warned that such a move risks undermining the BBC's ability to serve its audiences and would limit the scope of its output.
'A subscription funding model would be antithetical to the BBC's public service mission, necessarily ending universality of access and undermining its breadth of content,' said analysts at Enders Analysis.
Similarly, funding the BBC through advertising has been viewed as a non-starter as it would draw too much money away from the commercial TV and radio sector.
Both Davie and Samir Shah, the BBC chairman, have pushed to retain the licence fee with reforms, acknowledging the shortcomings of a regressive flat tax. But what would this look like?
Lisa Nandy, the Culture Secretary, has pushed back against the idea of funding the BBC through general taxation, saying it would leave the broadcaster exposed to political interference.
Another option is a household tax similar to the one used in Germany.
This would boost the BBC's income by widening the payment of the licence fee to all households, rather than just those who use its services.
It could also be linked to council tax bands, creating a more progressive system where wealthier households pay more.
Other options under consideration include linking the levy to broadband bills – a measure that would take on particular relevance as Britain prepares to switch off terrestrial TV and move to a streaming-only model.
It is thought that any of these reforms would reduce the rate of evasion, though ministers will no doubt be reluctant to introduce new taxes, especially in light of the upcoming spending review.
In a speech last month, Davie said: 'When it comes to funding, we are not asking for the status quo. We want modernisation and reform. But in doing so, we must safeguard universality.'
Alternatively, as the BBC's Charter comes up for renewal, ministers could opt for a bolder rethink.
The corporation retains its Reithian principles – named after John Reith, the first director-general – to inform, educate and entertain. But in the modern age, does the BBC still need to be all things to all people?
Some industry watchers note that the BBC could drop some of its more peripheral services, such as its education unit Bitesize.
BBC bosses are themselves alive to this possibility, and the broadcaster in March launched its largest ever public survey to ask audiences what they want from the broadcaster in the future.
A more radical view espoused by a number of industry bigwigs is a merger between the UK's public service broadcasters.
Sir Peter Bazalgette, the former chairman of ITV, says: 'There's no doubt in my mind that there ought to be mergers between domestic broadcasters, not just in England, but right across Europe, in order for those broadcasters to survive and have big enough businesses in their streaming services.'
Speaking at a conference in London this week, Wayne Garvie, Sony Pictures' international boss, said: 'We've got five public service broadcasters in Britain. The rest of the world might have one.
'It is unsustainable and the future has got to be, surely, Channel 4 and the BBC coming together.'
The idea of slimming down the BBC or combining it with its rivals will no doubt rankle supporters who view the universality of access as a key tenet of its purpose.
But as competition grows and audiences continue to defect, it is clear the status quo cannot continue.
Instead of trying to do more with less, it may be time for the public service broadcaster to simply do less.
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