18 February 2020

The case for the BBC licence fee is based on bad arguments

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At the weekend, I put up a tweet suggesting that supporters of the BBC make mutually exclusive claims when they say that the organisation produces world class, universally adored programmes for a bargain price but that it would be financially ruinous if the licence fee were replaced by a subscription (in which those who pay can watch and those who don’t are locked out).

A business that is confident in its product does not require legal compulsion. If nearly everybody wishes to consume the BBC’s product, they will pay their £154.50 a year voluntarily. If, on the other hand, a large proportion of the public would happily go without the delights of Eastenders and Panorama, perhaps the BBC isn’t as widely admired as we thought. If the latter is true, it would be immoral to force those who don’t want to watch the BBC to subsidise those who do.

The initial tweet has been viewed over half a million times and drew over a thousand replies. Most of them were along the lines of ‘defund the BBC’, but others put up a defence. Although I have yet to hear a compelling argument against a subscription model, I have become familiar with the most common justifications for keeping the licence fee. They fall under the following categories:

1. A subscription to the BBC would be as absurd as a subscription to the royal family or the army.

The royal family provides a non-excludable service. Whatever it is that people get out of having a royal family (entertainment, mostly) can be enjoyed regardless of whether you pay taxes or not.

The same is true of the military. It is a public good in the true sense of the term. It is non-rivalrous (the military protection it gives me does not reduce the military protection it gives you) and it is non-excludable (you get the benefits of having an army whether you pay tax or not).

The BBC’s output is non-rivalrous (your consumption of Mrs Brown’s Boys does not affect my consumption of Mrs Brown’s Boys) and it used to be non-excludable (anyone with a TV aerial could tune in and become a free rider). The best reason for having a licence fee used to be that the BBC was a public good. That is not longer true, at least for television. Its website and radio stations are different and will require a different approach, but the technology exists to lock out those who don’t subscribe to BBC TV. Free riders can be excluded. It is not like the royal family.

2. A subscription to the BBC would be as absurd as a subscription to NHS/pensions/education.

On its face, this is the same argument as above, but the issues are quite different. Take the NHS, for example. Healthcare is not a public good because it is both rivalrous and excludable. Providers can withhold healthcare from those who do not pay.

We do not have universal coverage of healthcare, paid through taxation, because of free riders, but because we want everybody to have access to it, including those who would otherwise not be able to afford it.

Even those who prefer the more privatised versions of universal healthcare seen in Europe are happy for the healthcare of the poor to be subsidised by taxpayers. The same is true of education and pensions. It is a question of equity and redistribution.

The BBC licence fee is almost the opposite of this. It does not ensure that the poor have access to world class television at the expense of the rich. On the contrary, it forces the poor to pay the same as the rich to watch any television.

There is nothing wrong with a television network charging every household the same amount – unlike healthcare, pensions and education, it is not an essential service – but forcing them to pay it regardless of whether they watch it or not is ethically dubious

3. The quality of programming will decline under a subscription model.

For the BBC to thrive under a subscription system, it will have to appeal to everybody, just as it is supposed to appeal to everybody now. Personally, I would be inclined to buy a subscription, but the prospect would be significantly less appealing if it decided to get rid of the excellent BBC4. For other people, CBeebies or BBC Parliament could be the deal-breaker.

There is no reason to assume that the BBC will have to ‘dumb down’. There is plenty of serious, high brow programming on commercial and/or subscription channels such as Channel 4, ITV, Sky Arts, Netflix and Amazon. Why? Because lots of people want it – and if they want it, they will pay for it.

4. The licence fee gives the UK ‘soft power’.

The BBC is admired abroad, largely thanks its journalism. There is no doubt that the BBC’s World Service has been an inspiration to people around the globe, but this is paid for by the Foreign Office, not the licence payer.

With the licence fee abolished, the BBC may choose to broadcast BBC News/BBC World free-to-air, as Sky News does. It only costs 1% of the BBC’s budget and it would be a good advertisement for the corporation abroad (where it should be looking to attract many subscribers). Given that all other major global news stations are free-to-air, it would be odd if they chose to put their news channel behind a paywall.

Beyond its news coverage, it is doubtful that the BBC gives the UK any more ‘soft power’ than Harry Potter, Harry Styles or Harry Kane, none of whom demand payment on pain of imprisonment.

5. Those who want a subscription system are in thrall to ‘free market ideology/dogma’.

When your opponent accuses you of being ‘ideological’ it is usually a sign of defeat. What, exactly, is the ‘ideology’ behind replacing the licence fee with a subscription? It is not about selling off the BBC to the highest bidder; the BBC should be owned by its subscribers. It is not about making a profit. The principle is simply that those who don’t want to watch a set of television channels shouldn’t have to pay for them.

It is a principle that we accept for most other services and all other television networks. If that is free market ideology, we are all free market ideologues.

6. Getting rid of the licence fee would be unpopular.

Unpopular policies can be the right policies but, as it happens, abolishing the licence fee is both right and popular. A survey conducted in December 2019 found that 74% of Britons want the licence fee abolished. Those who voted Remain or Lib Dem are somewhat less likely to support reform, but there is a clear majority among all groups, and there is little difference between Conservative and Labour supporters.

In its place, 51% favour an ITV model in which the BBC is funded by advertising. My preferred option of a subscription model is supported by 31%, although a further 25% were undecided. Personally, I am doubtful that there is enough advertising spend available to sustain the BBC, particularly since TV advertising is a fading force, but it is a conversation worth having. Either way, the status quo does not have sufficient public support to be sustainable.

It seems to me that there are three groups of people who are resistant to reform. First, there are the small-c conservatives who are reasonably happy with the way the BBC has performed over the years and are fearful that changing it could break it. It is true that change can carry risk, but change is sometimes forced upon you. We cannot pretend that we still live in a country in which three or four channels are beamed into our homes via an aerial.

Second, there are left-wingers who oppose any form of marketisation, even if the alternative is legal compulsion. It is difficult to rebut this since it is more an impulsive reaction than an argument.

Finally, there are those who use flowery talk about ‘public service broadcasting’ to justify having their preferences subsidised by others. They like the BBC and so you should pay for it. This is no more than selfish rent-seeking and should be recognised as such.

Rather than face the future with fear, the BBC should embrace the opportunities. Critics say that the huge debts amassed by Amazon Prime and Netflix show that a subscription service is not viable for the BBC. But these companies are building up an archive, scaling up their audience and running at a temporary loss. The BBC has perhaps the largest and most valuable television archive in the world and has a ready-made audience that is already paying for it, albeit involuntarily.

Replacing the licence fee with a subscription will inevitably mean that some people who are forced to pay for the BBC now will cease to do so. It is only right that they should be free to opt out, but if the BBC is confident in its service, there should not be too many of them. But it will also mean that those who evade the licence fee at the moment (and there are many) will be cut off from the service. Some of these people, surely, will pay up. And, if the BBC gets its act together, it has a potential audience of billions from around the rest of the world.

The licence fee is guaranteed until 2027, giving the BBC has seven years to adapt to the present and embrace the future. It should enter its second century with optimism.

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Christopher Snowdon is Head of Lifestyle Economics at the Institute for Economic Affairs