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BBC Charter renewal: Key issues for the 2015 Parliament

When asked which national institutions they most trust, British people continue to place the BBC at or near the top of their list. Despite the criticism it attracts and the crises that periodically engulf it, the BBC remains widely respected at home and around the world.

Many would say that this prestige is due to its unique structure, the fact it is largely independent of the state and funded by those who watch television, the licence fee-payers.

The BBC's constitution is set out in a Royal Charter, while the rules under which it operates, including its editorial independence and the details of its public obligations, are described in an Agreement between the BBC and the Culture Secretary.

The current Royal Charter and Agreement came into force in 2006 and are due to expire in December 2016.

The renewal of the Charter and Agreement provides a rare opportunity for Government, Parliament and the public to influence how the BBC is financed and operated. The previous Government put the consultation process on hold until the General Election, but it will be a priority for the next administration.

The process

The process for renewal is not tightly prescribed, but we may expect it to follow a similar pattern to that seen ten years ago, albeit on a shorter timescale. On the last occasion, the Secretary of State started the process by announcing a lengthy public consultation process. In comparison with earlier renewal rounds, there was greater emphasis on public involvement and “transparency”: perhaps a reflection of the fact that the BBC's position as a “public service” broadcaster was under scrutiny as never before.

The Government next issued a Green paper, followed by a White, Paper; the BBC responded with a number of consultation documents of its own, seeking to engage both Government and with the public at large. There were inquiries by the Culture, Media and Sport Committee in the Commons and a dedicated Committee in the Lords.

The final settlement was a matter for negotiation between the BBC and the Government of the day. Drafts of the new Charter and Agreement were published.

The Agreement between the Culture Secretary and the BBC, published as a Command paper, was subject to an approval motion in the Commons. The motion was passed after a long debate in July 2006.

It is not a statutory requirement for the Agreement to be approved by both Houses of Parliament, but it is convention for both the Commons and Lords to debate it.

Otherwise, Parliament's only formal involvement with the BBC's affairs is through the regulations needed to implement the licence fee settlement. Normally, these go through without debate.

The current fee, which was agreed in 2010, is fixed until 2017.

The issues


Last time, Charter renewal was used to reform the BBC's governance: the Board of Governors, widely seen as discredited, was replaced with the present BBC Trust. The Trust in turn has since been criticised for its dual role as both “cheerleader” and “regulator” and is likely to come under the spotlight during the renewal process.

Some think that Ofcom, which already regulates commercial broadcasting, should regulate the BBC as well. The Commons Culture Committee has called for the Trust to be replaced by a unitary BBC Board, with a separate Public Service Broadcasting Commission empowered to hold the Corporation to account.

Others argue that the BBC could be made more accountable through “mutualisation” – giving “membership” and voting rights to everyone who pays the licence fee.

Changing viewing habits

Most of the BBC's television (and that of the other major broadcasters) is still watched at the time that it is broadcast, on a TV screen. But younger audiences in particular are increasingly watching content on other devices, using the BBC's iPlayer service.

Although keeping pace with technology is expensive, it could also present cost-saving opportunities. For instance, the controversial decision to stop broadcasting BBC Three as a terrestrial channel is expected to yield £50m per year in savings; and it was defended on the grounds that the channel's young target audience were “the most mobile and ready to move to an online world”.

But changing viewing habits also pose challenges for the collection of the licence fee

The licence fee

Predictably, opinion polls show that the licence fee is far less loved than the BBC as an institution; but the alternative funding models command still less public support.

It is difficult to see, moreover, how they could be made compatible with the BBC's cherished independence and universality of access.

This helps to explain why the licence fee has long been seen as the “least worst” means of funding the BBC.

But technological change, together with long-standing complaints that the fee is regressive, and an unfair charge on those who do not wish to enjoy the BBC's output, may place this model under increasing scrutiny, though it is likely that it will remain at the core of the BBC's funding settlement during the next Charter period.

Chart: Annual licence fee, inflation-adjusted (RPI)

After a six-year freeze, by 2016 the licence fee will be at its lowest level, in inflation-adjusted terms, for 25 years annual licence fee, inflation-adjusted (RPI), £, 1946-2016

Chart showing the BBC annual licence fee from 1946-2016 in £ and adjusted for inflation using RPI

The six-year freeze on the licence fee is due to end in April 2017, and discussion over the right level of funding for the BBC, and hence the appropriate scale and scope of the Corporation, is likely to form part of the Charter negotiations.

The last settlement in 2010 saw the licence fee used to fund Government objectives, such as broadband roll-out and local television, leading to questions over the appropriateness of “top-slicing” the licence fee for other purposes.

We can expect vigorous debate on the future of a much-cherished institution.

BBC funding – the options

Licence fee
Difficult to collect in the Internet age

General taxation
Dependence on Government

Competition for a limited pot

Loss of universality

Household levy
Those not watching and listening to BBC still pay

Party Lines

  • Conservatives: freeze the licence fee and deliver a comprehensive review of the royal charter to ensure it provides value for money
  • Greens: funding of the BBC guaranteed in real terms and enshrined in statute
  • Labour: ensure the BBC provide value for money
  • Liberal democrats: ensure the fee will not rise faster than inflation
  • SNP: the licence fee should be retained with any replacement system, which should be based primarily on the ability to pay, in place by the end of the next BBC Charter


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