Sunday 8 September 2013 11:08 pm

Scrap the licence fee – and drag British TV into 21st century

THERE is a simple solution to the scandal that is currently engulfing the BBC, centering around the size and scope of payoffs to former staff and the implication that public money was squandered. The answer is to reform the way the BBC is funded, and to allow it to spend its own money hiring and firing people as it sees fit, just like any other company.

Why, in 2013 and in an age where people can download hundreds of thousands of films and TV programmes on demand from around the world, is the corporation still financed through a compulsory (if you want to watch any kind of TV) licence fee? Why do we pay for one of the world’s biggest broadcasters via a tax? Why not finance it via a normal, freely chosen commercial fee, just as we pay for Sky or all sorts of other services?

As the official TV Licensing website puts it, you need a valid TV licence if you watch or record TV “as it’s being broadcast.” This includes the use of devices such as a computer, laptop, mobile phone or DVD recorder – and the requirement applies even if you never watch any of the BBC’s programmes. People who don’t pay their TV licence are prosecuted and punished severely – rather than merely losing access to the service, as would happen to those who stop paying for the Virgin or Sky subs. Of course, the TV licence rules have been superficially updated for the rise of digital media but they remain fundamentally antiquated. They are anathema to the principles of free consumer choice that govern the rest of our society.

The solution, fortunately, is relatively straightforward: Thanks to modern technology and the end of analogue TV, it is easy for broadcasters to exclude those who don’t pay. The BBC’s TV channels and website (including the iPlayer) need to become a subscription service of the sort operated by hundreds of media companies around the world. Most consumers – probably in excess of 85 or 90 per cent – would continue to voluntarily pay the BBC’s fee; the corporation would retain the bulk of its revenues but it would have to do much more to fight for its customers.

A small minority would choose to stop paying, and thus would no longer be able to access any of the BBC’s TV output or its website. They would still be able to watch other TV channels – including those, such as ITV, that are free to view, and those that require paying a subscription. That is the way it should be. Radio might have to be treated a little differently because it might be harder to exclude non-payers for the time being, but the difficulties are not insurmountable.

Other features of the BBC need not change – the corporation should still seek to be balanced and could still refuse to run adverts. But the BBC would suddenly face much stronger market incentives, could no longer be accused of using taxpayer-financed content to compete unfairly with its private sector rivals (including on the internet) and would gain far greater autonomy over spending decisions because its income would no longer be provided via a tax. It’s certainly the sort of proposal the coalition should be debating ahead of the BBC’s Royal Charter renewal in 2016.

You might think that China’s foreign exchange reserves, now just under $3.5 trillion, or 44 per cent of its GDP, are a great success story. But as Diana Choyleva of Lombard Street Research points out, the returns on that great cash pile have been lousy.

The Chinese made just 2.8 per cent in 2012 on their foreign assets (including many government bonds), pathetic compared to the 5.8 per cent earned by foreigners on the Chinese assets they held. That’s the problem with the political allocation of resources: imagine just how much wealthier the world would be if this money were put to proper use.
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