Analysis: BBC Faces Another Round of Painful Budget Cuts

The BBC’s global reputation has rarely been higher thanks to shows like “Doctor Who,” “Sherlock” and “Wolf Hall,” but this week, for the second time in five years, British politicians have raided the BBC’s finances to leave it facing yet another round of cuts.

As part of a new five-year license fee deal, the BBC will pick up the tab for those 75 years old and older, so seniors won’t have to pay the £145.50 ($223) license fee. That will be phased in starting in 2018. The annual cost of that move is forecast to hit $1.1 billion by 2020-21.

The annual fee has been frozen since 2010.

The move — and how it was done behind closed doors with no public consultation — has infuriated many in British public life, including two former BBC chairmen.

Steve Hewlett, a U.K. media commentator who makes and presents BBC shows, thinks Hall’s upbeat assessment of the deal is mistaken.

“It could have been worse,” he said. “The license fee could have been frozen again (like the 2010 settlement).”

The license fee is currently worth $5.6 billion a year. Hewlett forecasts the BBC will be around $614 million worse off over the next five years, a figure confirmed by the Office for Budget Responsibility.

The real pain, however, starts in from 2020 when the annual cost of paying for free license fees for the over-75 population will kick in.

Former BBC chairman Chris Patten, once an influential voice in the Conservative Party that now rules the U.K., described the deal as “quick and dirty.” He told BBC Radio that the pol who announced it, new media minister John Whittingdale, was “an adolescent ideologue.”

Patten’s former second in command, Diana Coyle, writing in the Guardian, dubbed the deal “shocking,” and an assault on the BBC’s cherished independence. “It is a scandal that such a profound cut to the BBC’s ability to deliver its services to the people who pay for it was imposed by a bullying backroom,” Coyle said. She predicted the closure of BBC services as a result of what she claimed was “a heist.” Spending on independent productions would have to be slashed, she added.

Ex-BBC director general John Birt told the House of Lords the arrangement was “shocking” and “set a very dangerous precedent.”

Showrunner Armando Iannucci, the creator of HBO’s “Veep,” took to Twitter to denounce the deal.

So is the deal really that bad for the BBC? Tony Hall, the BBC director general who negotiated it, took to the airwaves to defend the package. “I think we have a deal here which is a strong deal for the BBC. It gives us financial stability,” he said.

Hall claimed that because the new settlement links license fee increases to the rate of inflation, the pubcaster’s income could even grow in future.

To help fund license fees for the elderly, the pubcaster is being relieved of its commitment to contribute toward the cost of U.K. rural broadband.

The government has said, too, that it intends to close a loophole enabling people to watch the BBC’s British catch-up service on mobile devices and computers without having to pay the license fee.

It is anybody’s guess which of the pubcaster’s services will be axed. Upscale web BBC4 looks vulnerable, as does the rolling U.K. news service. It is hard to see how existing budgets across all genres won’t eventually be hit.

As a point of principle, naysayers argue that in an era of digital abundance, the case for a well-resourced pubcaster financed by a universal tax is wearing thin.

On the contrary, say the Beeb’s defenders, the need for an organization that can satisfy all cultural tastes and is available to all is more necessary than ever. Critics think the org remains inefficient and over-staffed despite years of job cuts.

Insiders, however, maintain that more belt-tightening can only result in a further diminution of services.

On July 2, Hall announced the loss of a 1,000 more jobs because of a $230 million budget gap in license fee income.

Recently it was confirmed the critically feted channel that targets the under-35 audience, BBC 3, is being axed to make way for an online-only channel.

The BBC is paid for out of public funds, but eager to maintain and prove its independence from state and government control. The license fee helps underpin the U.K’s thriving TV sector.

“A dynamic and well-funded BBC making great TV shows must remain at the heart of the U.K.’s creative industries,” insisted Andy Harries, who runs Leftbank Pictures, owned by Sony.

The license fee’s long-term viability looks vulnerable to further attacks and perhaps eventual extinction.

“This deal imperils the BBC and the license fee,” concludes Hewlett. “No one likes paying it but it is a remarkably tolerated tax. Will the British people feel the same way about it when it’s used to fund welfare benefits?”

(Pictured BBC’s “Doctor Who”)

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