Since their inceptions, the BBC and Channel 4 have had their futures guaranteed because of taxpayer ownership. The security afforded to them by this and their funding structures has allowed them to compete in the broadcasting market on an unfair basis. This paper assesses the options available for privatising Channel 4 and abolishing the TV licence fee. It considers the impact of any change on public service broadcasting, governance and how any privatisation could practically be done.
Privatising Channel 4 by floating it on the stock market would end the need for taxpayers to act as the final guarantor for the corporation, since it derives most of its funding from advertising. Selling the company through the stock market also ensures a broader range of potential owners than a direct sale to another company. Similarly, a part privatisation of the BBC would abolish the outdated licence fee and see the broadcaster funded by a direct government grant. This leaner BBC could then return to concentrating on news and culturally-focused programming.
With Channel 4’s licence and the BBC’s mid-term review upcoming, now is the right time to alter the relationship between these broadcasters and taxpayers to the benefit of both. Doing so will provide billions in revenues which can be used to cut taxes and enable them to compete more effectively against streaming services while maintaining public service output.
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The ownership and funding structures for the UK’s two publicly-owned broadcasters – Channel 4 and the BBC – have been contentiously debated for decades. The current situation sees taxpayers acting as the final financial guarantor for both organisations, which allows them numerous benefits compared to privately owned broadcasters, like ITV, Sky and Channel 5. This has enhanced calls for broadcasters to be put on a more equal footing.
The financial constraints imposed by covid-19 have added further incentives for the government to change the ownership structures of these organisations, as part or full privatisation could raise significant sums for HM Treasury.
Commercially-funded Channel 4 is the main focus of the government, which recently held a consultation regarding a change of ownership for the broadcaster. This isn’t the first time the government has considered privatising the corporation, as it was previously deliberated in the governments of Margaret Thatcher, John Major, Tony Blair and David Cameron.,
But the BBC’s future should also be considered. Its mid-term review is in 2023 and the licence fee is guaranteed until 2027. This provides the opportunity to rethink the BBC’s model.
A smaller state-funded BBC – producing output focused on high culture and serious news – appeals to many. Yet this is not what the BBC has been for some time. Licence fee money is used to allow the BBC to compete in the commercial market, eliminate local media outlets through its regional stations, and chase a youth audience which is rapidly turning away from traditional public service broadcasters to services such as Netflix, Amazon and YouTube.
Ending the waste of licence fee payers’ money and the forced funding of the BBC has been the core principle behind the TaxPayers’ Alliance campaign – Axe the Tax – which advocates scrapping the BBC licence fee. Recent polling has shown taxpayers support this move, with 68 per cent of working class voters backing the abolition of the licence fee.
This paper will review both broadcasters’ financing and ownership structures, analyse the options available for changing these models, and consider how it could be done. It will also assess the potential consequences of changing the funding and ownership models on the content produced. This analysis will also look at previous privatisations in the UK, as well as other changes made to the funding of public service broadcasters both domestically and overseas.