Q&A: BBC licence fee

Chris Tryhorn

Wednesday October 11, 2006

MediaGuardian.co.uk

Why is there a debate about the BBC licence fee?

The BBC has been funded by the licence fee since 1922 and that model has been guaranteed for another 10 years. The level at which this rises is decided by the government but only after a protracted period of industry debate and lobbying from the BBC and its commercial rivals. Given the BBC's privileged position in the media environment and the resentment felt towards it by many of those rivals, the licence fee settlement is a highly sensitive issue.

What did the BBC ask for?

The BBC wanted an annual increase of 2.3% above inflation, which would mean today's £131.50 fee would go up to more than £180 by 2014. This pitch, made a year ago, was based on a gap in the funding the BBC believed was necessary to pay for things such as better quality programming, moving 1,800 staff to Manchester and driving the switch to digital. Today director general Mark Thompson is expected to revise the BBC's estimates downwards.
But still at a level above inflation?Almost certainly: Thompson will argue the BBC still needs a generous deal to fulfil its obligations as set out in the government's white paper. To put it in historical context, the BBC's licence fee was first linked to the retail price index in 1988 and it was only in 2000 that a settlement above the rate of inflation was granted.

What was the problem with the BBC's first pitch?

Inevitably the BBC set its sights high, privately expecting its proposals to be chipped away at a later date. But problems with the corporation's sums were soon identified by independent analysts. A report by accountants PKF for the Department for Culture, Media and Sport questioned the figures on which the BBC had based its initial bid, and a second report commissioned by ITV also found flaws.

What sort of flaws?

PKF argued the BBC didn't need as much of a licence fee handout when it could save more money - especially at its content divisions. The accountants also suggested there could be an alternative to the BBC's "expensive" plans to invest in high-cost genres such as drama and news and urged the BBC to make its commercial wing work harder.

Any other problems?

In July the BBC had £300m wiped from its bid when Ofcom delayed imposing spectrum charges until 2014. The BBC had factored in the likely charges when it forecast costs between 2007 and 2014. The corporation also admitted that its proposal to move several important departments to Manchester would cost £400m rather than the £600m initially claimed.

So what will Thompson ask for now?

Thompson is giving a speech to the Smith Institute in London today and will use it to address the licence fee question. It is understood he will put a new, lower figure on the proposed deal. This represents his last public gambit to win over the government.

Who makes the decision?

It is up to the culture secretary, Tessa Jowell, who is generally thought to be sympathetic to the BBC, though she has already warned it is unlikely to get what it wants, describing projected wage costs as "very high". But both Downing Street and the Treasury will have their say - and it has been reported that the chancellor and PM-in-waiting, Gordon Brown, wants to keep the licence fee increase below inflation.

When is the decision made?

If Thompson's speech today pushes the right buttons, you can expect it sooner rather than later. In any case we're approaching the endgame: a deal must be agreed by the end of the financial year in April. The creative industries minister, Shaun Woodward, has said he hoped a deal would be completed by the beginning of next year.

http://media.guardian.co.uk/bbc/story/0,,1892869,00.html

Summary

The BBC is just about treading water in keeping the liscense fee in place. Director General Mark Thompson has indicated that in order to keep the liscence fee it needs to go above inflation by 2.3%, icreasing the current £131.50 price tag to £180. He stated that this is needed due to high valued productions shown such as the dramas and to fund for the move of 1,800 employees to Manchester. However Ofcom, PKF and ITV have found flaws in his proposal and and wiped £300m from his bid, where certain things stated, would not cost as much. A decision is going to be reached by the end of the financial year in April.

My Opinion:

I believe that there's no point of the lisence fee anymore due to all the competition around, with cable, sky and freeview. They should just resort to advertising like every other channel for fundage. They tried thier best to keep up but innevviatbly, the prices for the lisence fee are going to become rediculously high, where no one is going to be bothered to pay.