The BBC is staring down the barrel of another real terms funding cut after the UK government signaled its intention to renege on the 2022 license fee deal.
Culture secretary Lucy Frazer told BBC Radio 4’s Today show that the government would announce the new level of the license fee “very soon.”
Under a deal struck with the BBC in 2022, the broadcaster’s funding was frozen for two years, but ministers agreed it could rise with inflation from April 2024.
This would guarantee the BBC a funding increase of around 9%, pushing the annual household fee up £15 to £173.30 ($219.53) — the biggest single increase for nearly 40 years.
Asked if the government will halt the 9% increase, Frazer told Today: “I think that is a lot of money and that is one of the things that we are considering.”
The culture secretary said she disagreed with the suggestion that the government was ripping up the deal signed with BBC executives in January 2022.
“I wouldn’t put it like that at all,” she said. “As the government we have taken a number of steps to protect people from the rise of the cost of living over the course of the last few years … we froze the license fee for two years, and it is now due to rise with inflation. And what we’re looking at is the appropriate rate of inflation.”
Frazer argued that 400,000 fewer people opted out of paying for the BBC’s services last year because “they didn’t think it was affordable, or they didn’t want those services anymore.”
She added: “I would be very concerned that if we put it up significantly, even fewer people would be paying the license fee which would of course damage the BBC and its revenues.”
The two-year license freeze left a £2B shortfall in the corporation’s finances. Any deal below the level of inflation will result in a further hole in the BBC’s budget.
The BBC is also operating in an environment where it is grappling with hyperinflation in the content market, as well as competitors putting up prices by as much as 30%.
As it seeks to plug its funding gap, the broadcaster has been forced into making content cuts, including announcing plans last week to scale back flagship current affairs show Newsnight.
The BBC said: “The government and BBC agreed a six-year licence fee settlement in January 2022, which froze the licence fee for two years with increases in line with inflation from 2024.
“As is usual practice the government sets and confirms the cost of a licence each year and this remains unconfirmed for 2024/25. The BBC will continue to focus on what it does best: working to deliver world-class content and providing great value for all audiences.”
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