BBC boss questions viability of subscription-based alternative to licence fee as UK Government imposes freeze

The BBC’s director-general has warned that adopting a subscription-based alternative to the licence fee risks creating a “commercial agenda” that would mean a substantial change to the corporation’s output.

Tim Davie told BBC Radio 4’s Today programme on Tuesday that if the publicly-funded broadcaster became even largely subscription-based, rather than wholly so, it would “not do what it does today”.

His comments follow confirmation from UK culture secretary Nadine Dorries on Monday the licence fee is to be frozen at £159 for two years, until 2024, after which it will rise in line with inflation for the following four years.

A number of alternatives to the licence fee have been floated, including an opt-in subscription service similar to that used by streaming giants such as Netflix, the introduction of advertising, or a broadband levy.

BBC Scotland office in Glasgow. Picture: John Devlin

Mr Davie said: “Once you’re trying to serve a subscription base and a commercial agenda – and, believe me, I’ve run commercial businesses – it is a completely different situation, because suddenly you are doing things that are there to make profit and make a return to a specific audience.”

Asked if he agrees with the debate that the licence fee is “over”, Mr Davie said: “I think the debate is more centred around ‘do we want a universal public service media organisation at the heart of our creative economy, which has served us incredibly well?’ And if we want that, we have to support a publicly-backed and not a fully commercialised BBC.”

Mr Davie said the broadcaster could transform into a commercial operation, but if it did “it will not do what it does today”.

“We have built an incredible creative industry here in the UK, and we’ve got a universal broadcaster that is admired around the world,” he said.

“That is because it serves the British public and all the British public … the principle of universality is absolutely the debate here.”

The settlement holds the licence fee below inflation until 2024, meaning a real-terms cut in funding, after which it will rise in line with inflation for four years.

Mr Davie said calculations by the broadcaster suggest that, in the final year of the settlement, the funding gap will have grown to around £285 million.

However, it is understood there will also be funding gaps in the preceding years, meaning the overall shortfall will be much higher.

Mr Davie said: “Our estimate is, and just to set this clearly for everyone, by the year 2027, the licence fee income will be about £4.2 billion based on our assumptions around inflation.

“Guessing games around inflation are obviously difficult. We estimate our settlement gives a £285m gap, but at the end of the period.”

He said the BBC has made “very good progress in terms of cutting costs that don’t affect the licence fee-payers” as the organisation is “utterly focused on making sure people get value for the licence fee”.

The licence fee plans will take effect from April 1. Later this year the Government will “start to consider the overall governance and regulation of the BBC”, as part of the mid-term review of the BBC Charter, it was announced on Monday.