My Lords, this has been a thoughtful and well-informed debate this morning, and I thank all noble Lords who have taken part in it.
The BBC is a great national institution. Over the past 100 years it has touched the lives of practically everyone in the United Kingdom and many people the world over. It makes an important contribution to our culture, our creative economy and to the strength of our democracy. I am therefore grateful to the members of your Lordships’ Communications and Digital Committee for their report on the future funding of the BBC, and in particular to its chairman, my noble friend Lady Stowell of Beeston, for securing today’s debate and for the way she set out the committee’s conclusions. I have an advantage over the noble Lord, Lord Addington, in that I did serve on the committee, albeit very briefly, so I can see from my 10 days with her and with noble Lords who have spoken today how richly she deserves the plaudits they have given her for the way she chairs it.
The committee’s inquiry took evidence from a wide range of prominent figures in the industry, experts and academics, and its thorough report has been helpful in informing the Government’s thinking on the future of the licence fee. Today’s debate has built on many of the findings in its report and highlighted the range of complex issues that will need to be considered as part of the review and as part of the Government’s decision-making on the future of the licence fee.
This debate has also explored many of the benefits and drawbacks of a number of alternative models for funding the corporation. I recognise that many noble Lords may wish to understand the Government’s position on the various alternatives which have been set out, but I should be clear at this stage that I must refrain from putting forward a detailed view on the potential alternatives. The Government are preparing to launch a review of the future funding of the BBC, as noble Lords mentioned, and we should rightly consider the findings of that review and fully assess the evidence before setting out any conclusions. However, today’s debate and the report of your Lordships’ committee are valuable contributions to that ongoing review and to informing the Government’s thinking.
I am afraid that I cannot give noble Lords an early Christmas present by setting out the precise date for the launch of the review but perhaps I can set out a few more details about our approach to it. The Government recognise that decisions over the BBC’s funding model will and should be tied up with the question of what the BBC is for in its second century, as the noble Lord, Lord Hall of Birkenhead, said. We welcome the committee’s recommendations that the BBC should set out its own thinking on the role of the corporation in the future and how the BBC can best adapt to the changing media environment. The review will focus on the BBC’s funding model and will not look at the BBC’s mission and public purposes—that is, its role and remit. Final decisions will be made as part of the charter review, which is where the future role of the BBC will also be decided, and we will certainly want the public and Parliament to be engaged in that process.
As your Lordships’ committee’s report found, there are benefits to the licence fee but its drawbacks are becoming more salient. There are a number of issues at the heart of the debate about the future of the licence fee, and the first point I will address is sustainability. As we set out in our broadcasting White Paper, there are clear challenges on the horizon, posed by rapid changes to the sector, not just for the BBC but for our public service broadcasting system as a whole.
As I outlined in the recent debate we had to mark the centenary of the BBC and explore the future of public service broadcasting, technological advances are moving in tandem with changes to how people watch television. Internet-delivered services are revolutionising how content is distributed and consumed. Some 79% of households with a television set now choose to connect it to the internet. Alongside this, viewers have continued to move away from linear television to on-demand viewing. Two-thirds of households subscribe to video-on-demand services, such as Netflix and Disney+, and YouTube reaches 92% of online adults in the UK.
As noble Lords noted, US-based streamers are increasingly using their significant financial resources to compete very effectively with both our public service and commercial broadcasters. In 2019, the UK’s public service broadcasters were collectively able to spend just under £2.8 billion on new content. At the same time, as my noble friend Lady Stowell said in opening, Netflix alone spent an estimated £11.5 billion on production globally.
The Government have set out a range of proposals to support our public service broadcasters in response to challenges such as these. This includes a new online prominence regime, updates to the listed events regime and expanded powers for Ofcom to regulate larger, TV-like, on-demand providers. We will legislate to introduce these changes when time allows.
On top of these broad reforms, it is vital that we address the specific challenges facing the BBC’s funding model. In this environment, a licence fee linked to watching live television seems increasingly anachronistic. Licence fee uptake is also in decline, with the number of households choosing to hold a television licence falling by around 1.2 million people from a peak of 26 million in 2017-18. If this trend continues, the BBC’s licence fee income will come under increasingly significant pressure unless the licence fee is raised commensurately. The director-general and chairman of the BBC have acknowledged this, with the director-general recently saying that the BBC is open-minded about new funding mechanisms.
The Government agree with the view that has been raised today that the licence fee funding model is unfair. As noble Lords have noted, it is a regressive tax. The current licence fee model also involves enforcement by criminal sanction, which we see as disproportionate in a modern public service broadcasting system, particularly because of the strain, stress and anxiety that this can cause people. These concerns about fairness are highlighted by data that show that around three-quarters of people who are convicted for television licence evasion are women—an issue that has persisted for many years. In addition, we remain concerned about the risk of prosecution for vulnerable older people, although the BBC has confirmed that no enforcement action has been taken against people over the age 75, at this stage.
The future of the BBC is a vital issue for our nation and we remain committed to reviewing its funding model. The Secretary of State was clear in her recent appearance before the Digital, Culture, Media and Sport Select Committee in another place that the BBC is a great national institution, and that the Government need to make sure that its funding is sustainable over the long term. She also set out that she holds fairness and choice to be important issues, and that they will need to be reflected properly as we consider the future of the BBC’s funding. The media landscape has changed, and the appetite for choice—an important factor—has been enhanced.
The Government want to work constructively with the BBC on the review. We see it as a positive opportunity for the corporation to bring about change, without which the BBC will be increasingly constrained in its ability to fulfil its purpose. We will need to work with the BBC to understand how different funding models could affect and support it.
It might be helpful for me to outline how the review fits into the Government’s wider road map for reform of the BBC. The funding model review will be one part of the preparations for the charter review, which is the process whereby any decision on a new funding model, and on the role and remit of the BBC, will be determined. The funding model review will aim to provide the Government with the evidence to approach the charter review with a strong understanding of the options and their potential impacts.
With the support of these findings, the Government will carry out a formal consultation on any changes to the BBC’s funding model as part of the next charter review. This will enable a public debate on the options, ahead of any decision being made. Any final decision on the BBC’s funding model over the next charter period would be made only following this public and parliamentary engagement, as part of the charter review.
A number of noble Lords rightly paid tribute to the work of the BBC World Service. The Government strongly value its work in promoting our values globally through its independent and impartial broadcasting. We recognise the challenging fiscal environment in which the BBC is operating, and that it is having to make tough financial decisions, but the Foreign, Commonwealth and Development Office will continue to provide the BBC World Service with over £94 million annually for the next three years, supporting services in 12 languages and improving key services in Arabic, Russian and English. That is in addition to nearly £470 million that the Foreign, Commonwealth and Development Office has already provided, through the World2020 programme, since 2016. In the current financial year, the Government are also providing the BBC with an additional £4.1 million of emergency funding to support the World Service to continue to deliver services in Ukraine and Russia, which are vital in the current circumstances.
I will touch on the future of the BBC more broadly. Everyone who has spoken today agrees that the BBC has been informing, educating and entertaining us for 100 years, with remarkable effect. We want that to continue for many years to come. As the debate today has highlighted, the future success of the corporation is about much more than just funding. Your Lordships’ committee’s report contained a number of recommendations for the BBC on this theme too, including the need for it to develop a long-term vision for its role and how it will deliver value and distinctiveness in a continually changing world.
We agree with the BBC on the need for the corporation to reform over the coming years and recognise that there will be challenges as it makes this transition. These reforms will involve difficult decisions, as was demonstrated by the concerns raised again today about the BBC’s plans to reduce its local radio output. The Government want to work with the BBC to support it in making this shift, but it must take audiences with it on this journey. We believe that the BBC needs to clarify how it will manage long-term decisions while modernising and becoming more sustainable, while also maintaining its core public service function and output.
The noble Baroness, Lady Rebuck, invited me to say a little about our progress on delivering nationwide gigabit connectivity, which is important to the way that people increasingly consume television. We are investing £5 billion, as part of Project Gigabit, to ensure that hard-to-reach areas of the UK get fast, reliable broadband as swiftly as possible. Gigabit coverage is currently at 72% across the United Kingdom, up from 6% in January 2019—a huge shift in a short period. We have a target for a minimum of 85% gigabit-capable coverage by 2025 and we will seek to accelerate that to as close to 100% as quickly as possible. We have now awarded four Project Gigabit contracts, having recently announced a £108 million contract in Cumbria—the home of the noble Lord, Lord Liddle—and there are a further 11 live procurements running, with more in the pipeline.
Like everyone who has spoken today, the Government want the BBC to succeed. It provides high-quality services to the entire nation and globally. It acts as a key driver to the success of our creative economy and represents the United Kingdom very proudly abroad. As the debate has highlighted, there are challenges with the licence fee funding model, but alternative models also come with their own challenges and trade-offs. I am very grateful to noble Lords, particularly the members of your Lordships’ committee, for their detailed thoughts and contributions to this vital debate. I look forward to that continuing.