BBC warns of £285m funding black hole after licence fee freeze

The corporation has rejected a Netflix option using subscribers for finance

Tim Davie, the BBC's Director-General, has warned the corporation is facing a £285 million funding gap. (Photo by Andrew Milligan/PA Images via Getty Images)

The BBC’s director general rejected suggestions that the global broadcaster could move to a subscription funding model after Britain’s culture secretary announced a drastic cut to the corporation’s finances.

While acknowledging the security of a six-year budgetary timeframe, Tim Davie estimated that by 2027 there will be a gap of about £285 million ($388m) from the inflation-tracking estimated future revenue in the corporation’s finances as a result of the government’s decision. Other estimates suggested the gap could be as high as £2bn once inflation was taken into account.

Nadine Dorries, the culture secretary, announced a freeze on the licence fee on Monday and said she believed the broadcaster had to find a new funding model similar to that of Netflix.

To strong opposition in parliament, the MP confirmed that the £159 annual licence fee would be frozen for two years, but would rise in line with inflation for the subsequent four years.

Director general of the BBC, Tim Davie, dismissed the idea that the Beeb could be funded by subscriptions. AFP

Mr Davie said he was disappointed with the decision but refused to be drawn on speculation that the issue is being used by the government’ to “throw red meat” at Conservative backbenchers who are outraged over the partygate scandal engulfing Downing Street.

“We are disappointed. We would have liked to have seen an inflation rise throughout the period. We’ve got four out of six years, and on we go,” he told BBC Radio 4’s Today programme.

He said the BBC’s disappointment stemmed largely from the “years and decades of below-inflation demands on its funding” which has led to the group becoming lean.

He said the government's announcement will undoubtedly “affect our frontline output”, meaning viewers’ favourite programmes and services risk being cut.

He said no programme was truly safe from being slashed, saying: “Everything is on the agenda.

“Inevitably, if you don’t have £285 million you will get less services and less programmes,” he said. “Now, I still think the BBC can offer extraordinary value for the £13 a month.”

Mr Davie said the BBC's decision makers would “take stock” of the looming funding gap and “take clean decisions” on what should and should not be cut.

Pressed on the idea of funding the BBC through a subscription, he dismissed it, saying it would not be a suitable way of financing the corporation.

“The truth is we have built an incredible creative industry here in the UK and we’ve got a universal broadcaster that is admired around the world and that is because it serves the British public – and all the British public,” he said.

“The principle of universality is absolutely the debate here.”

Laying out the plan in the House of Commons, Ms Dorries did not challenge fellow Conservative MPs who called for the licence fee to be phased out altogether.

A TV licence is a legal requirement in the UK for any household in which live television is watched, whether on a TV set, laptop or other device.

A leading Boris Johnson loyalist, Ms Dorries was accused of being part of the prime minister’s strategy to deliver “red meat” policy announcements to shore up his position after the revelations of Downing Street lockdown parties.

She made her announcement for the next half decade of funding, which gives the BBC an income of £5 billion ($6.8bn) from fee-payers.

Ms Dorries made a direct appeal to poorer households that face rising energy costs.

“I have to be realistic about the economic situation facing households up and down the country,” she said.

The BBC's  funding will be frozen for the next two years. Unlike other subscription services, the BBC faces a number of challenges, including finding a way to charge users, while continuing to provide-free-to-air content over its numerous radio stations.  Getty

The BBC’s proposed increase of an extra £21 a year would, Ms Dorries said, “expose families to the potential threat of bailiffs knocking on their door or criminal prosecution”.

Denying an increase would mean “more money in the pockets of pensioners, in the pockets of families who are struggling to make ends meet”.

But she did say that the government would double the borrowing limits of the broadcaster’s commercial arm to £750 million, allowing access to private finance to pursue its commercial growth strategy.

The BBC now had to be “forward looking” and an organisation that could “thrive alongside Netflix and Amazon Prime”.

Ms Dorries accused the BBC of having a left-wing bias and was condemned by Labour’s opposition culture spokeswoman for articulating the right-wing Conservative “long-standing vendetta” against the broadcaster.

“It’s part of Operation Red Meat to save the prime minister from becoming dead meat,” said MP Lucy Powell.

“The BBC is a well-trusted British treasure. It is the envy of the world, but the government is in trouble and the prime minister is casting around for people to blame, and the culture secretary has stepped up to provide some red meat.”

Ms Dorries denied Ms Powell’s accusation that the government wanted to abolish the broadcaster. “It is nobody’s intention to destroy the BBC,” she said.

But former Conservative minister Peter Bottomley argued against the government plan.

“I’m not impressed by the process or the proposal,” he said. “I don’t think it necessarily leads to progress.”

The cut was supported by former TV executive and Conservative party peer Lord Michael Grade.

“£159 a year may not be a lot of money to Gary Lineker or many of the BBC executives and the commentators, but it’s a heck of a lot of money for the majority of people in this country,” he told the BBC earlier.

Updated: January 18, 2022, 10:42 AM