A vision of the future

A long-awaited report on the funding of the BBC is published today. Its authors explain to Ian Burrell why they think the licence fee should be scrapped altogether

Imagine a world where you tune in to the 10 O'Clock News, only to be told by the BBC that you must pay a subscription fee. Or finding that your children's obsession with EastEnders and Fame Academy has sent your television bill through the roof.

It is an alarming prospect for those who associate the 81-year-old corporation with the principles of the Scottish engineer John Reith - to "educate, inform and entertain the whole nation, free from political interference and commercial pressure". But the idea of charging audiences to watch the BBC is being seriously considered by an influential group of industry figures who have spent the past year probing the workings of the institution and suggesting a blueprint for its future.

The Broadcasting Policy Group, set up by the Conservative Party and chaired by David Elstein, the former chief executive of Channel 5, has reached a series of radical conclusions and made 19 recommendations in a 22,000-word report.

It says that the licence fee (currently £116 a year) should be scrapped altogether in favour of a system funded by subscriptions. Some of the BBC's digital channels - such as BBC3, BBC4 and CBeebies - would become subscription-only as soon as 2007.

The report also recommends that a new organisation, the Public Broadcasting Authority, should be set up by the Government to offer public funding to all broadcasters for content deemed "merit good", such as investigative current affairs shows and education programmes. This new organisation would be largely financed through the VAT from extra subscriptions.

Other recommendations include the new Government media watchdog Ofcom taking over many of the responsibilities of the BBC board of Governors, including monitoring the accuracy of its reports, and privatising parts of the corporation, in particular its production operation.

Although the findings will cause outrage at Broadcasting House, they will be of considerable interest to Government officials who are themselves trying to map out the future for the corporation after its current charter expires in 2006.

Elstein and David Cox, the former head of current affairs at ITV and author of much of the report, say that it is not another example of the current trend for BBC bashing. According to Cox, the group's plan would enable the corporation to make better programmes, have more money and probably hire more staff. "We are not about trying to reduce the scale of the BBC," he says. "We think that if it was released to become primarily subscription it might well become bigger."

A central tenet of the 70-page report is that the licence fee, which raises £2.7bn a year for the BBC, must be abandoned. "There is no justification for imposing this cruelly regressive tax," says Cox, who points out that £2.7bn is more than five times the amount of public money received by the rest of the arts. "Why is it being spent on Fame Academy, a copy of ITV's Pop Idol?" he says. "If subscribers want Fame Academy they can pay for it."

Cox claims that the licence fee has "restricted the BBC's natural growth" and points to Sky's success as proof that viewers will pay much more than £116 if the package of programmes is right. But such talk will not assuage those convinced that the BBC is such a special beast purely because of its "not-for-profit" ethos.

According to Cox, the group's plans would enable the BBC to concentrate on producing the type of quality programming associated with the American broadcaster HBO - maker of three of Channel 4's most popular imports - Sex And The City, Frasier and The Sopranos.

"At the moment, Britain does not have much that competes with Frasier and Sex And The City," he says. "What would happen in the world we are talking about is that the BBC subscription operation would become like HBO, which is the best television station in the world."

The BPG argues that it is impractical to try and "force" broadcasters to make the kind of "public service" programmes that are deemed vital to a healthy democracy. ITV and Channel 4 in particular, it claims, do all they can to evade their obligations.

The five-member group (two members resigned over disagreements with the findings) claims that the BBC is failing to provide sufficiently good programming in such public service areas as education, current affairs and the arts.

Cox attacks the arts strand Imagine, presented by the BBC director Alan Yentob, as "a lot of gossip", and argues that the dropping of programmes like Correspondent and On The Record demonstrates how the BBC has "dumbed down" its current affairs output.

But he cites Newsnight as an example of a BBC programme that could be regarded as a "merit good" and funded by public money. "Newsnight has a high cost and a small audience but it is valuable to society as a whole, even those who do not watch it," he says.

The Public Broadcasting Authority, the group envisages, would be staffed by "less than 100 people" and would preside over a budget from the Treasury that it would compete for with other public bodies.

The PBA would invite broadcasters to pitch for specific public service output, such as a prime-time current affairs show or an education strand, driving up the quality of such programming through competition. Elstein says that the new authority is at the heart of their plan.

"Once you have solved the most difficult problem - how to deliver what the market cannot - it gives you a clue to all the other answers," he says. The group also believes that news need not be publicly-funded. "Broadcasters around the world tend to find that it's in their interests to supply it anyway. They like to produce news because it projects the right brand image to the outside world." If the proposals are implemented, the result will be a dual-role BBC. Cox says: "One operation would be basically producing Sex And The City and Frasier, and another arm would be saying 'What money can we get from the PBA by making Newsnight much better?'".

Subscriptions would be introduced within three years, with the BBC switching to a Channel 4/E4 model so that new programmes could be offered first to paying customers of the BBC digital channels. "Programmes like The Alan Clark Diaries would be on subscription on BBC4," says Cox. "People paying the BBC subscription would get to see the good stuff first." Ultimately, the report recommends that people should pay for the amount of television they consume in the same way that they are charged for their telephone calls.

But its authors already know that their plan will be rejected - not just by the BBC but by almost the entire broadcasting industry. Despite this initial knock-back, Cox believes the timing is good. Post-Hutton, he claims that nobody thinks the BBC is perfect, and that the status quo is regarded as indefensible. "They will take it a lot more seriously than they would have three months ago," he concludes.