New model Auntie

This article is taken from the June 2026 issue of The Critic. To get the full magazine why not subscribe? Find our subscription offers here.

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Matt Brittin started work as the BBC’s director-general in May. The public have two key expectations of the Corporation: that it provides excellent programmes and accurate, impartial news. There is nothing Brittin can personally do on either front. He has never had anything to do with programme making and has no experience of journalism. Of course, it is a long time since any DG had involvement in programming decisions (it ended badly for Alastair Milne, with abrupt dismissal). Even DGs with a background in current affairs (Greg Dyke, George Entwistle) have come unstuck over journalistic mishaps. 

Brittin might hire a deputy to oversee news, but the last time a DG had a deputy with that role (Mark Thompson and Mark Byford), they unfortunately went on holiday at the same time, just as another scandal broke in the mocking of actor Andrew Sachs by Jonathan Ross and Russell Brand on BBC Radio 2. 

The most recent deputy DG, Anne Bulford, handled finance and operations for DG Tony Hall, leaving him as editor-in-chief, where he oversaw the re-hiring of Martin Bashir, whom he had previously wrongly cleared of dishonesty in his dealings with Princess Diana. If he had not already departed the BBC by the time Lord Dyson finally reported on the Bashir affair, he would have been forced to resign (instead, he resigned as chair of the National Gallery).

Brittin will just have to hope that any editorial issue that arises — as it inevitably will — is not terminal. What he needs is enough breathing space to address the fundamental problems facing the BBC. These are essentially financial: and on both sides of the ledger, income and spending, the challenge is formidable. 

The great bulk of the BBC’s income has always come from licence fees. Commercial activities generate large revenues these days, in gross terms, but the net benefit to the BBC is modest — about £200m pa, compared with nearly £3.7bn from the licence. For a mechanism devised more than a century ago, the licence fee has proved remarkably resilient. The roll-out of transmitters, the creation of ITV (which saw the fee converted from a BBC licence to a TV licence), the launch of colour (incurring a premium charge), the emergence of single-person households (all obliged to buy a licence) and the swelling of the population have combined to bring the total number of households with televisions to nearly 28 million.

Almost in parallel, the number of TV licences in force rose to a peak of over 26 million in 2018. In 2019, non-payment of the licence was restricted to fewer than 7 per cent of homes. Since then, however, the number of non-payers has risen by several million, for at least three identifiable reasons.

First, enforcement of payment has substantially diminished since the Covid epidemic, which temporarily made home visits by licence fee inspectors impractical. Prosecutions for licence fee evasion have collapsed from 150,000 a year to about 25,000. Given the scale of non-payment, the chances of being prosecuted these days, if you do not have a TV licence but should, are less than 0.01 per cent. 

Moreover, even a successful prosecution only results in a fine of around £200, barely more than the £180 cost of a licence (and these days, a conviction does not result in a criminal record). The BBC sends out some 46 million letters each year to households reminding them to pay — roughly 2 per household — and spends over £160 million a year on collection and enforcement: but seemingly to minimal effect. The non-payment trend is accelerating just as enforcement is weakening.

Secondly, the shift in consumer behaviour from watching live television to downloading video streams has meant that millions of homes genuinely fall outside the requirement to pay for a licence — they do not watch live transmissions or recordings of live transmissions or the BBC iPlayer. This trend is also accelerating, as broadband uptake passes the 90 per cent level amongst households, and consumers discover that they can subscribe to Netflix for less than half the cost of a TV licence. 

This cost comparison is growing in significance, as even the BBC now recognises. After years complaining that the licence fee was not keeping pace with inflation, the BBC’s recent response to the public consultation on its future funding — launched in February by culture secretary Lisa Nandy — has floated the idea of reducing the fee so as to induce more people to pay. If the fee level had been inflation-proofed (rather than regularly being frozen by past governments), it would be about £240. One can only imagine what the level of non-payment would be at that price.

The third broad reason for the decline in licence fee take-up is a measurable level of dissatisfaction with BBC output. Constant hostile scrutiny of BBC journalism in the Mail and Telegraph has clearly had an effect. When a leaked internal report by an editorial standards advisor, Michael Prescott, fell into the hands of the Telegraph in October, the revelations confirmed the doubts felt by millions of viewers over the BBC’s supposed commitment to impartiality.

One of the areas of coverage questioned by Prescott was climate change: not that stories were necessarily inaccurate, but that their editorial thrust was too single-minded. Yet Prescott seems not to have noticed that in the BBC’s annual report, in the section covering the Corporation’s strenuous efforts to achieve net zero in its operations, there is a claim that, in commissioning programmes from external producers, the BBC asks them to “consider including climate themes in their editorial content”.

It is hard to conclude anything other than that the BBC’s approach to this subject is characterised as much by evangelism as journalism. And Brittin’s appointment will bring little reassurance: one of the few outside directorships he has held during his years running Google in Europe was of the Climate Group, a charity campaigning for net zero on whose board he has sat since 2009.

It is not just perceived editorial bias that has caused disillusionment. The BBC’s long-standing reputation as a broadcaster of high quality programmes has been undermined by financial constraints on the one hand and the comparative largesse of investment in new content by the streamers such as Netflix and Amazon Prime, who deploy drama budgets far in excess of anything the BBC thinks it can afford. They also display an appetite for innovation that the BBC can rarely match: Adolescence (Netflix), Slow Horses (Apple TV), Shogun (Disney+). 

Ten years ago, the US cable companies such as HBO and Showtime were outspending the BBC by several multiples in terms of drama budgets, but their efforts were US-focused and only shown on Sky in the UK. Now the streamers are spending more on original UK content than the BBC, and, in April, HBO Max joined the array of low-priced viewing options available. Eighty per cent of households currently subscribe to one or more of these services.

Until recently, the response from the BBC and the DCMS to the surge in explicit licence fee cancellations,and in the failure to renew licences, had been surprisingly complacent. Non-renewal is categorised as illegal “evasion”, even though many thousands of the new non-payers have simply given up live television. BBC research suggests that 50 per cent of non-payers continue to view some live television — but equally, that suggests the other 50 per cent are non-users, rather than “evaders”. 

The BBC claims that its 229 licence fee inspectors make two million household visits each year (on the face of it, a deeply improbable average of almost five calls per hour) and has announced its intention to cross-match iPlayer registrations with its household database, to catch “evaders”. This is unlikely to have much effect, other than to deter such registrations. 

After all, teenagers who watch content on their laptops and tablets would not be liable for licence fee payment unless they were heads of households. In any event, any householder can refuse entry to a BBC inspector, thus rendering prosecution impossible. It is unlikely that the use of such scare tactics will endear the licence fee to the population.

One of the most surprising elements in the BBC’s response to the current consultation on its future was the revelation that fewer than 80 per cent of households are currently paying for a TV licence.

The BBC, as recently as last year, felt able to take comfort from the fact that the cost of the licence was rising at a faster rate than uptake was falling, keeping income (in cash terms) fairly steady. At the new annual rate of £180, the cost has risen 13 per cent in just three years. Even so, licence fee income in 2024/5 was just £3.66bn, down from the peak in 2017/8 of £3.83 bn: and inflation in those nine years has eroded the real value of that reduced income by over 30 per cent. 

It seems that the “terms of trade” for the BBC have turned decisively downwards. Viewing of live broadcasts is in precipitous decline. Under-25s watch very little live television. Half of all Channel 4 viewing is through downloads. The days of linear television seem numbered: digital terrestrial transmission may end in less than eight years. 

For the first time, in its response to the government consultation, the BBC warns that it faces “managed decline” unless its outdated funding model is reformed — a decline it fears will render it irrelevant as it is overshadowed by the streamers.

The problem for the BBC is that it wants any new model to be fair (whatever that means), sustainable (indeed) and “universal” — which is BBC code for compulsory. As the government has ruled out funding the BBC from general taxation, the options remaining are limited. 

The BBC has a fixed and visceral objection to subscription

Ideas include a surcharge on broadband subscriptions or a levy on the streamers. Whether anyone in Downing Street would have the courage to suggest such a tax on a dozen major US companies whilst a vengeful Donald Trump is in the White House (and capable of retaliating against UK exports to the US) must be doubtful. In any case, the notion that successful broadcasters should be forced to subsidise an unsuccessful one is surely a step this government would be wary of taking.

A variation of this idea is to require the streamers — jointly? — to collect the licence fee on behalf of the BBC. Why these businesses should be compelled to double or treble their subscription charges, because the BBC cannot face dealing with consumers directly, is hard to understand (and the need to share information about subscribers, so as to avoid duplication of charges, would surely be banned by the competition regulators).

An option often mentioned by the BBC is a household charge designed as a percentage uplift on council tax. One of the reasons why this idea is favoured by the BBC is that council tax is more progressive (and therefore “fairer”) than the flat rate licence fee. However, this alternative is fraught with difficulty. 

To begin with, cumulative arrears on council tax greatly exceed the shortfall in licence fee payments. Trying to add an average of £180 to annual council tax bills will inevitably drive up those arrears. It is not at all obvious why councils — already struggling with cash flow — would make paying the BBC a priority. Some — e.g. in Scotland — might have political reasons for deprioritising the BBC. The corporation’s income would become unpredictable and irregular. 

The question that begs to be asked is: why can the BBC not generate sufficient income without compulsion? 

The two obvious available options are advertising and subscription. The BBC already generates advertising revenue on its portfolio of domestic commercial channels, UKTV, but is forbidden to do so on its public service channels as long as it has the licence fee. However, to replace £3.7bn of licence fee income with advertising is an almost impossible task.

The TV advertising market has been in long-term decline, and the chances of significant expansion are minimal: indeed, Channel 4, Five and even ITV warn that the entry of the BBC into this market could be devastating for them. 

BBC Radio would have a decent chance of surviving on advertising, especially the stations offering popular music. But the only substantial alternative for BBC television is subscription, which has served the streamers, satellite and cable so well and is now fully accepted by consumers.

The problem is that the BBC has a fixed and visceral objection to subscription which borders on the irrational. So determined has it been in the past to fend off subscription that it has persuaded itself that subscription services “exclude” certain audiences, especially the elderly. There is no evidence of such behaviour by subscription services: the only people “excluded” are those that prefer not to pay. 

What the BBC is trying to say is that the streamers concentrate on certain types of content — films, TV movies, drama series, some documentaries, some sport — rather than on the linear flow of cheap daytime programmes that appeal to the housebound and elderly. 

That linear flow is nothing to do with the licence fee as such. ITV, funded by advertising, offers its own version of low-budget daytime pap. Indeed, daytime audiences for most linear ad-funded schedules are disproportionately old, largely because of inertia and limited access to streaming content. The notion of deliberate exclusion by streamers is simply perverse.

It is hard to conclude anything other than that the BBC is simply petrified at the prospect of having to engage directly with audience choice. So hostile has it been to subscription that in recent years it repeatedly rejected every opportunity to use subscription technology, despite the current BBC Licence and Agreement making specific provision for the BBC to do so to boost its commercial income.

Everything “saved” is spent on something else

That income stream is sometimes seen (by politicians such as Lisa Nandy) as a magic bullet to fix the BBC’s funding problems. Revenues from the BBC’s commercial activities can exceed £2bn in a good year, but the net benefit to the BBC, after all expenses and costs (reported as “returns” of a little over £200m a year) is a drop in the ocean compared with licence fee income. Even the commercial division’s stated ambitions do not stretch that figure to above £300m a year, for good reason.

The gross revenues (which include monies from BBC-owned “independent” production houses) are generated by the sale of programmes, domestically (mostly to the BBC itself) and internationally, by subscriptions and advertising generated by its wholly owned commercial channels both in the UK and abroad, by licensing brands under its control and by renting out facilities such as studios and outside broadcast units. All these businesses are fully exposed to commercial competition, and the opportunity to expand them is limited.

Indeed, digging into the BBC’s annual reports, we find each year a cost attributable to the public service part of the accounts of around £200m (£230m last year) to generate commercial income. No explanation is ever given for this surprising amount, but it inevitably raises doubts about the reliability of the reported “returns” from BBC Commercial. 

Without any detailed explanation, the accounts claim that over £3bn is spent on “content”. Successive Ofcom reports say the BBC spends only £1.2bn a year on first-run UK originated TV content — a figure confirmed in the government green paper. This is little more than 30 per cent of TV licence fee revenue.

One of the oddest of the BBC’s attempts to persuade politicians of its commitment to efficiency is the boasting about internal cost reductions. Hundreds of millions are reported as “savings” every year, with the cumulative total five years ago declared as £890m since 2016/7. Nearly as much has apparently been “saved” since, with the response to the consultation claiming £1.5bn “saved” during the current Charter period, with a further £500m promised before it ends. It is all a mirage.

No actual cash is saved. Everything “saved” is spent on something else. “Production and operational efficiencies” simply mean that budgets are stretched a little further. “Re-mixing our programme slates” is code for replacing expensive programmes with cheaper ones. A “focus on high-impact content” means replacing unpopular programmes with popular ones. Savings from “third-party investments” and “growing commercial income” are not savings at all. 

Perhaps the easiest metric to refer to is overall headcount. The BBC announced in April that it would be forced to cut 10 per cent of its workforce, in order to balance the books. Job losses are estimated at about 2,000.

The BBC response to the government consultation claimed that 2,000 jobs had been closed in recent years, yet last year’s annual report revealed that total employment had fallen by just 22 out of the previous year’s 21,795. Indeed, ten years ago, that total was 21,271 — so more than 500 had actually been added in that decade. Yet the BBC spent over £125m on re-structuring and redundancies in less than three years: it seems the gaps these processes create are somehow then re-filled. 

Indeed, even the stated figures are misleading. Over the years, some 35 per cent of all BBC TV and radio production had been shifted to the independent sector. None of the thousands of people employed making those programmes is counted when compiling the staff totals.

In a curious way the two tasks — restoring revenue and matching costs to income — are interrelated. Were the BBC to replace the licence fee with subscription, the discipline of reshaping its output to match consumer preferences would force change. An astute chief executive would see this opportunity as a one-off chance to transform the organisation and realign its programming ambitions to a dynamic revenue source. 

With a broad domestic base and a strong international brand, the BBC could shift from supplying programme packages for overseas broadcasters to selling its own subscription package direct to consumers around the world. It might never be a Netflix (325m subscribers), but it could be a player.

Is Matt Brittin, with his long experience of the digital economy, the person to deliver that change? Perhaps: but time is short. Charter review will run till 2027. Even if Lisa Nandy supplies a temporary patch to the licence fee, just two years further on lies an election which results in a government pledged to abolish the licence fee. Such abolition might happen with minimal notice. Coping with such a seismic development would be the biggest challenge of Brittin’s career, by far.