Azara Blog: The BBC license fee is not going up as much as the BBC wanted

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Date published: 2006/12/22

The BBC says:

The culture secretary and chancellor have agreed a below-inflation rise for the TV licence fee, the BBC has learnt.

The agreement reached by Tessa Jowell and Gordon Brown has not yet been approved by Tony Blair.

Under the plan, the fee would rise by 3% next year and the year after, and 2% for the following three years. The Retail Price Index is currently 3.9%.

The decision would mean the licence fee rising to £135.45 next year from its current level of £131.50.

By 2012, the cost of a TV licence could be as low as £148.05 or as high as £151.

The level of increase is unclear for year six, because of the uncertainty over the financial cost of the changeover from analogue to digital TV.

The BBC, which had asked for an increase of 1.8% above inflation for seven years, said discussions continued and it awaited an announcement in the new year.

The agreement would mean the BBC had failed to convince ministers of its case for an above inflation increase, which it has often enjoyed in the past.

The settlement would also bring the BBC more closely into line with other public sector bodies, as the licence fee will not be linked to inflation at all in future.

The license fee is archaic and the BBC should just be funded from general taxation (which would remove the cost of collecting the license fee). But given this archaic system, there is no good reason the license fee should be rising at a level substantially above inflation. Further, the Retail Price Index is not the measure of inflation that the government uses, for example, to set interest rates. And the article completely ignores the question of how many licenses there are. The income from the license fee is of course the product of the license fee times the number of licenses. Given that the number of households in the UK is increasing, the BBC license fee income is (probably) going to be increasing more than is implied in the article.

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