Redistribution and economic growth by replacing the BBC Licence Fee
The BBC Licence Fee acts as a regressive poll tax. I make the case for a progressive, redistributive replacement.
September 2024
First published in the Young Fabian Anticipations Journal in September 2024. This version is without the copy-editing of the version published there.
Taxation is often considered a no-go area for new Labour governments in a first term. But in 2024, this new Labour government has an opportunity to reform an unpopular, regressive poll tax, and reduce the tax burden on working people. It can do this while keeping to both fiscal rules and promises to voters – by replacing the BBC Licence Fee.
This article seeks to make a case based not on emotional ideas of British culture and intellectual enrichment, or oppositely based on obsolescence or bias (those cases are well made elsewhere), but on practical economic and political reality. Fabians are interested in ideas that are realistic and pragmatic, as it is only ideas that are made in actionable steps that make a difference for working people. This article therefore does not make the case for the abolishment of the BBC, or for removing its primary reliance on public funds, instead focusing on reform towards redistributive taxation.
The television licence fee is a poll tax levied across almost all households that consume television programmes whether traditionally or online (the vast majority of households). Like all poll taxes, it is therefore inherently regressive, resulting in the poor shouldering the heaviest burden while the rich shoulders the lightest, similar to Thatcher’s ill-fated ‘community charge’. This fee is not an appropriate way to fund a modern public broadcaster. The BBC’s role is shifting from solely providing linear TV and Radio to focusing on providing online public services, where the majority of young people now engage with the BBC. Thus, a funding model based on notions of families gathered around TV sets is outdated, unsustainable, and unfairly exacerbates the hardships faced by working families.
When looking at reform of the Licence Fee, any replacement funding model that continues to be based on public funding must be made on the basis of a strong, well-evidenced benefit to wider society. This article seeks to provide this on an economic basis. In the UK, the BBC serves as the single largest investor in the creative economy; it commissions tens of thousands of hours for broadcast each year - contributing £4.9bn to the UK economy each year, nearly a billion more than its income from public funds. The BBC is crucial to the UK creative economy. The newly elected Labour government puts economic growth as its highest priority, envisioning public funding as an investment vehicle to rebuild Britain – it should continue the basis of a BBC based on public funding as it serves as a charger to the creative economy, in the same way as GB Energy is envisioned for UK energy security.
This article, based on the regressive nature of the current Licence Fee and the strong economic case for a publicly funded BBC, proposes a new Public Broadcasting Tax levied on existing income tax bands to replace the Licence Fee, with rates set by a new commission independent of both Government and the BBC. Rates would be set every fixed number of years attached to conditions and targets set upon the BBC in performance of its public purposes which it must fulfil in order to justify its tax income to the commission. These considerations would include how well the corporation serves people across the country, including across income, class, and educational distributions. The commission would report annually on the corporation’s progress in meeting these targets. While existing Ofcom structures would continue to regulate output and standards, the new commission would focus solely on the BBC’s financial settlement.
Such a reformed system would transform the funding basis of the BBC away from one dependent on negotiations with Government, which has been used to pressurise the corporation in the past, towards a system that directly incentivises performance towards public purposes.
A redistributive public broadcasting tax model shows how the BBC could be funded to a similar extent as under the current License Fee system. For example, a tax of 0.35% at the basic income tax rate (£12,570-£50,270), 0.70% at the higher rate (£50,270-£125,140), and 0.90% at the additional rate (£125,140+) would yield approximately £3.8bn for the BBC annually, matching existing public funding. This approach would be significantly fairer: the average person living alone in the basic tax rate would pay just £49 per year compared to the current £169.50, while someone earning £500,000 would contribute £4,500. This illustrates how this new redistributive model would reduce the unfair burden on working people while ensuring that those with higher incomes contribute more, supporting the growth of the creative economy.
There is also a strong case for bringing international streaming giants within the remit of a Public Broadcasting Tax, these corporations having consistently avoided paying tax in the UK. However, international agreements between the UK and the US mean that the UK cannot impose digital service taxes unilaterally, therefore this is not a realistic or pragmatic proposal in the medium term, but should be kept open for future discussion.
Reform through a Public Broadcasting Tax would be in keeping with the new Labour government’s fiscal rules and promises on which it was elected. While based on income tax bands, this tax is entirely separate from income tax and set independent of government, while reducing the tax burden for the majority of working people. It is therefore compatible with the Government’s promises not to raise taxes (including income tax) on working people, while in pursuit of its missions on kickstarting economic growth, and restoring confidence in our intuitions.
This Labour government could begin work today on replacing the regressive BBC Licence Fee, today beginning work to create the independent commission these proposals centre around, such that it can consult and realise the details of these reforms prior to implementation. To do so would be popular, 64% find the current Licence Fee system unfair according to YouGov, with BBC Director General Tim Davie admitting the need for reform, opening a review of how the system “could be more progressive”. This Labour government should take this opportunity, and that of a new administration, to make a difference to working people by continuing in its strong tradition of redistribution and public service reform.