My Lords, it is both a privilege and a pleasure to chair the Communications and Digital Select Committee, and I am delighted that so many fellow members will contribute to this debate on our report published in July, Licence to Change: BBC Future Funding. My colleagues bring a breadth of knowledge and expertise from across the media, digital and creative sectors and are a joy to work with, as is the outstanding team who advise and support us: Daniel Schlappa, our clerk, Emily Bailey Page our policy analyst, administrator Rita Cohen and, for this particular inquiry, communications officer Lucy Dargahi. However, the committee does not exhaust the House of Lords’ expertise and interest in this area, so it is very welcome to see so many other noble Lords signed up to speak in this debate. I look forward to everyone’s contribution.
The questions of the BBC’s purpose and how it should be funded are becoming more and more urgent. Media consumption is increasingly digital, audience habits are changing and people have unprecedented amounts of choice about where, when and how they consume entertainment and news. Political debates about the BBC’s future and the way it is funded can become a distraction from the real threats to its future, but talking about the licence fee should not be a taboo subject, and neither should we avoid highlighting the BBC’s flaws and that there are certain audience groups who do not feel well served. Safeguarding the BBC’s future and the public value it generates requires us all to have an open conversation about what we want of our national broadcaster and how we should fund it. There are opportunities to be seized, but they will be lost if we make our goal protecting the status quo or defending the institution for its own sake.
We therefore launched this inquiry to provide a cross- party, non-partisan, objective view on these big questions. Unusually, our conclusions and recommendations are aimed at the BBC as well as at the Government, because we were clear in our conclusions that the corporation itself must lead the debate about the way forward. Facing up to the real threats to its future requires the BBC to define a clear purpose for itself that makes it relevant to today’s world, not the world it entered 100 years ago.
Let me say more about the committee’s findings before I say more about our expectations of the BBC. We found that the BBC has an important role to play in our national life in bringing people together in an increasingly atomised society and reflecting the nation in times of celebration and hardship, as we have been proud to see it do well during Covid, in Ukraine and when we celebrated and mourned our late, great Queen. We, the members of the committee, believe in a public service broadcaster to help us avoid the fate of polarisation that we see in the USA. However, to remain relevant and valuable in future, the BBC needs to grapple with major challenges around serving audiences in a fast-changing world.
There is more competition than ever. The traditional broadcasters’ share of UK viewing fell from 97% in 2010 to 70% in 2021. This downward trend is continuing, with sector analysts predicting it will fall to 50% in five years’ time, and it is lower still among younger people. The cost of TV drama production is rising, and international streaming businesses have transformed the market. In 2021, the BBC’s content budget was £2.5 billion, Netflix’s was $14 billion and Disney’s $18.6 billion. By contrast, the licence fee fell by 30% in real terms between 2010 and 2020.
A flat licence fee, which does not take account of people’s ability to pay, cannot rise to meet the costs of production without being unacceptably expensive for the less well off in society. However, cost is not the only thing which leads people to question the licence fee, and straightforward value-for-money arguments do not convince all those who can afford to pay. The BBC also needs to do much better in reflecting all sectors of UK society. Ofcom data shows that audiences with disabilities, those in Scotland and those who are less well off are the least satisfied with the BBC. If people are not properly represented, they will be even less inclined to pay the licence fee when alternatives are available. We were clear that the legitimacy of public funding, and the BBC itself, can be maintained only by doing a better job of representing the full range of perspectives and communities that make up the UK.
Since our report was published, evidence of the urgency of these issues has continued to mount. Ofcom’s most recent report on UK media consumption showed that UK broadcasters continue to lose viewing share to streamers such as Netflix, despite the improved performance of on-demand services such as BBC iPlayer.
In its annual report on the BBC published at the end of November, Ofcom found that the BBC needs to do more to reach and resonate with audiences on lower incomes, although—as was noted in a different debate yesterday—the BBC’s promise in response to provide more lighter drama and other genres, together with factual entertainment competitions, perhaps illustrates a lack of understanding of why some audiences have turned away.
To address all these challenges, the BBC needs a new, bold and ambitious strategic vision that sets out its role and answers the question of why it exists, as well as how it will deliver distinctive value in a rapidly changing world. Pleasingly, the BBC has signalled a desire to be more open and front-footed. The chairman, Richard Sharp, told us that the BBC board is currently overseeing a detailed strategy review of the corporation, and Tim Davie’s substantial speech to the Royal Television Society earlier this month was a welcome step forward in addressing some of the points raised in our report. He acknowledged that the BBC needs to articulate a clear, market-leading role for itself in the digital age, and that tough choices are needed to secure its future.
This is a good start, but it remains unclear what the BBC wants to be, beyond being a significant player in this global media world; it needs to offer greater clarity and avoid attempting to be all things to all people. Mr Davie said that the BBC needs to differentiate itself. That recognition too is welcome, but we need to see more detail on what this means in practice—what the BBC will do more of, what it will continue to do and what it will stop doing. For that to be meaningful and give us confidence, we need clarity on the strategic purpose driving the plan.
Previous attempts to map out distinctive territory have not always been convincing. Talking about high-quality, unique content is confusing because some of what makes the BBC unique is not necessarily high quality, and what it does that is high quality is not always unique. That is a problem because, if the uniqueness is the way the BBC is funded, what is left of its distinctiveness once the licence fee diminishes in importance or disappears altogether?
That is not an argument to keep defending the licence fee as the BBC’s primary source of income, or defining the BBC’s output as a way to justify the licence fee. What it demonstrates is the danger of that approach in a world where more people question the licence fee because they can get what they want elsewhere.
Like it or not, the BBC must be more open to discussion about alternative options than it has been in the past. Our report explored a variety of models, ranging from full commercialisation through to full state dependency. We did not set out to recommend any individual funding model, although our evidence was clear that some would not work. Advertising, for example, is highly unlikely to be viable, leading to a multi-billion pound reduction in the BBC’s income and damaging other public service broadcasters; a pure subscription model would generate insufficient income while facing major technical challenges and creating barriers to access; and funding the BBC by government grant would risk eroding the BBC’s editorial independence.
We were clear, however, that a BBC designed to benefit the nation would require some form of public funding, and there are viable alternatives that deserve serious consideration. For example: a hybrid subscription model—either domestic or international—which you might describe as a “top-up” approach, where some features are available for an additional fee; a hypothecated tax; progressive reform of the licence fee itself; or a progressively applied household levy.
For the BBC to be serious about safeguarding its future, it needs to be a lot more open about ambitious new proposals for its funding model. I was pleased to see that the Government welcomed our analysis, and the new Secretary of State’s recent commitment to launching the independent review of the licence fee is most welcome. We were clear that an independent, evidence-based process to take this work further is what is required.
I am concerned, however, that the review has not yet been launched. It was originally due last summer but, only last week, the Secretary of State seemed no closer to announcing further details on its timing or terms of reference. It would be very good news if my noble friend the Minister were able to say today when this independent review will start.
This matters because any possible changes will take time. Decisions about the BBC’s future funding cannot be left to the last minute in charter discussions. Parliament and the public must be given adequate time to engage and must be provided with information about the implications of change. If delays continue, we risk losing the opportunity for the BBC and the Government to consider a broad range of models.
I acknowledge the Government’s position that there will be public and parliamentary consultation as part of the BBC charter review, but the committee remains concerned that more extensive engagement is required for an issue of such importance. We heard from members of the public during our inquiry that their voices were not being represented in this debate. Decisions on the BBC’s role and future must be taken more transparently than has previously been the case.
Securing the BBC’s future will also involve action on the regulatory front. It is vital in a fast-changing media world that the BBC has the flexibility to adapt, and that is why we called for a more nimble regulatory framework; but, at the same time, this must also be balanced with transparency and engagement with stakeholders from the commercial media sector.
I have written to Ofcom to emphasise the importance of ensuring that more flexibility does not lead to the BBC crowding out domestic competitors from the market. It will also be interesting to see what changes to the BBC’s internal governance are recommended as a result of the current mid-charter review.
The Communications and Digital Committee has been glad to see both the BBC and the Government signal in response to our report that they are committed to a proactive, constructive discussion on future funding. This will only get more important in the years ahead. We want to see in the decades to come a strong BBC that thrives and delivers value for all audiences across the UK and the world, but achieving that vision will involve tough decisions and bold action.
Now is the time for the BBC to step up and lead this debate, rather than wait for others to decide its fate. It is also time for all of us as parliamentarians to encourage the BBC and demand that it be bold in responding to the challenges that we have set out in our report. There is so much to gain if it does so. I beg to move.