BBC must consider household ‘TV tax’ and Netflix-style subscription or face decline, peers warn

The BBC faces “stagnation and decline” unless it considers alternatives to the licence fee including a household “TV tax” and Netflix-style subscriptions, an influential group of peers has warned.

The cross-party Lords Communications and Digital Committee said the current £159-a year licence fee was a “regressive” charge which “hits the poor hardest,” while the link to television sets has become “outdated” in the streaming era.

Faced with rapid changes in the media landscape, the BBC must “set out a bold new plan for its future, including options to reform the licence fee”, ranging from a compulsory household levy to a voluntary monthly subscription, it said.

The alternative is “a future of gradual stagnation and decline”, warned the committee, whose members include Lord Hall of Birkenhead, the former BBC director-general and ex-Arts Minister Lord Vaizey of Didcot.

“A universal household levy linked to council tax bills is one option which could take greater account of people’s ability to pay,” the committee’s report said. “A ring-fenced income tax is another. Reforming the existing licence fee to provide discounts for low-income households is a third.”

Each option “merits serious attention,” the committee said, adding that the BBC will also need to expand its commercial operations. “We are calling for it to be open minded about exploring more ambitious commercial options, such as domestic or international hybrid subscription services,” it said.

The Prince of Wales speaks to BBC team members in the News studio at BBC Wales’s new Headquarters in Cardiff (Photo: Getty)

Rejecting advertising as an alternative source of income, the peers said some form of public funding for the BBC would remain necessary.

A universal household levy – a mandatory “TV tax” whether viewers watched the BBC or not – “could offer a viable alternative to the licence fee,” it added, which 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,” the committee said.

The peers accepted that “compelling households to pay for a service they are currently able to opt out of may prove unpopular”, but said that if everybody paid the fee the costs to each household would be lower. “This might help mitigate the potential unpopularity of a universal charge, particularly if it were progressively applied,” it added.

The report also found that offering a £15-a month Netflix-style 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” that 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”.

The BBC could offer a “premium top-up” service under which it would continue to provide a full range of genres including entertainment and drama, it said, but suggested that over time its more expensive content, including high-end drama, “could be put behind a paywall”.

This solution “might be unpopular if people felt they had to pay extra for something that used to be free” and a subscription BBC would bring “significant commercial risk with no guarantee of success”.

Additionally, the report said the BBC should not be funded directly by a government grant as this could compromise the broadcaster’s independence from politicians.

The report will feed into an inquiry, set to be announced by Culture Secretary Nadine Dorries, which will recommend alternative funding mechanisms for the BBC from the end of its current Royal Charter in 2027.

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The peers said that for any form of continued public funding to remain legitimate, the BBC “must do a better job of representing the full range of perspectives and communities that make up our diverse society”.

Baroness Stowell of Beeston, chair of the committee, a Conservative backing Kemi Badenoch for Prime Minister, said the current political uncertainty shouldn’t prevent the BBC from proposing reforms.

“The BBC needs to step up now and become the architect of its own destiny,” she told i. “The challenges facing the BBC are real, not political.

“Decisions about how it is funded are important to get right and becoming increasingly urgent,” she said.

“The real danger is if the BBC doesn’t seize this opportunity to reform and demonstrate why it’s of value to audiences in this new world of endless choice.”

Government media policy is currently in limbo until a new Prime Minister is chosen. The department for Digital, Culture, Media and Sport (DCMS) was due to have named the figure who will lead the licence fee review before Parliament goes into recess.

Details of the controversial plan to privatise Channel 4, the centre-piece of a Media Bill, have also been shelved until autumn.

Baroness Stowell said it would be “very concerning” if measures backed by all UK public service broadcasters, such as ensuring their apps have prominence on smart TVs, were delayed.

A BBC spokesperson said: “We welcome the Lord’s report. We agree we need to keep reforming which is what we have been doing at pace.”

“Clearly the BBC needs to keep relevant and we welcome the report’s finding that a market failure BBC wouldn’t be a good outcome. Beyond that, we are open minded about the future and it is right there is a debate on whether the licence fee needs to evolve and if so, what comes next.”

The BBC has begun to examine options internally including a levy on council tax or broadband bills to pay for BBC services.

Baroness Stowell said it would be wise for the BBC to “dip its toe” into a limited subscription service with a trial, so it is ready to respond when technology makes the option more practical as a widespread alternative.

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