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Paying for BBC – TV

By Alastair Fischer and Harry Hayfield

In 2015, the government cut the BBC's budget by 20% in stages over 5 years, saying that the BBC could recoup its losses by charging pensioners the full TV licence fee. The BBC refused to do this until now and has undergone some severe cuts in its revenue as a result. However, it is now proposing to charge pensioners not on supplementary benefits for the licence fee. The licence fee for colour TV is £154.50 (£52 for old black and white sets) per property, and covers TV, home computers and mobile phones.

We think that the TV licence should be abolished entirely. In its place, the BBC should be financed out of the government's general revenue, that is, by taxation of all forms. TV licences are not required in many countries, though in some, that is because there is no national broadcaster to fund. However, many countries which have a national broadcaster do not rely on a licence fee for funding. In Australia, New Zealand and Canada, along with a number of European countries such as Estonia, Bulgaria and Sweden, governments provide the funding. In other countries, a mixture of government grants, advertising and even payment as part of the electricity bill are used to fund the state broadcaster.

Here are some of the advantages of funding via the tax system.

  • The TV tax is regressive. Very poor people have to pay the same as very rich people. Under our proposal, it seems that about two-thirds of the elderly will also have to pay for a licence where they live. If the same rules apply to people in social care homes as for students, they may all have to pay to watch what may be the only TV. Some elderly in social care may be exempt (if they receive additional benefits) but not others.
  • In effect, it is worse than a poll tax. People who live alone have to pay the full amount, but people who live in joint tenancy only have to pay for one licence for the dwelling. However, if students and others share a house that is not in a joint tenancy, each tenant has to pay separately for a full licence.
  • Its enforcement is intrusive. Contractors in vans still go around trying to find out whether someone has a TV but has no licence. They knock on doors and can obtain a search warrant if denied entry. Most people without a licence confess at the door, however, having the fear of a criminal record if the matter is taken further. The maximum fine for not having a licence is £1000 but the actual average fine seems to be about £200. A small number of people who fail to pay the fine are sent to jail. None of this nastiness need happen if the government pays through taxes.
  • Its enforcement hits poor and vulnerable people hardest, and it is where the highest proportion of non-compliers come from: single mothers, people with learning difficulties or mental health problems, people for whom English is not the first language and students living away from home. It is part of the hostile environment against the poor and disadvantaged.
  • It is inefficient. The collection costs of a licence system are about 2.5% of the amount collected, compared with about 0.5% from general taxation. That means it costs about 5 times as much to collect the tax through a licence fee as it does to collect other forms of tax.
  • Extending the tax to the over-75s can be expected to lead to an increase in loneliness and isolation for those unwilling or unable to pay, which will result in increased depression among the elderly. If so, the cost to the government of the adverse effects of re-introducing the fee may even exceed the amount of additional revenue gained by imposing the fee.
  • Removing the licence fee creates a market for short-term TV rental. In some parts of the world, people hire a TV for a month to cover an event such as Wimbledon or a World Cup event. TV rental is almost non-existent where an annual licence has to be paid.
  • Now that a majority of people have smart phones or tablets capable of providing a TV service, determining whether a licence fee should be paid by owners of such phones in the absence of a traditional TV at their home becomes very difficult. Currently it is estimated that a little over 5% of households with a TV do not pay a licence fee. The ambiguity of whether a smart phone acts as a TV, and of who owns it, will only increase in future. Should homeless people with a smart phone be required to have a TV licence?
  • Adding the 2.5% cost of collecting the fee to the 5% loss due to people who have not been caught would suggest that the real cost of administering the scheme is at least 7.5%, which is about 15 times the cost of collecting other forms of tax. It is likely that this inefficiency is actually worse. This is because the 0.5% cost of collecting income and other taxes is an average figure, rather than a marginal one (the cost of collecting a little bit more of an existing tax).
  • Displaced staff, previously involved in licence fee collection, could be absorbed into other central, regional or local government agencies.

When paid by a government through taxes, the national broadcaster may be less inclined to criticise a government for fear of having their funding cut. This of course also may happen under a TV licence, but is unlikely to happen to the same degree. To protect the broadcaster from the fear of not speaking out against its payer, the government should base funding on a proportion of the previous year’s GDP. Only very small changes in this proportion from one year to the next should be allowed by law, and should be built into the national broadcaster's charter.

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