How UK could end up paying second highest TV licence fee in Europe

The BBC licence fee could soar to £191 due to the inflationary shock from the US-Israeli war with Iran, potentially pushing the cost for watching TV in the UK ahead of Germany.

Viewers face a major rise in the £180 a-year charge after the Bank of England warned that a spike in energy prices due to the continuing Middle East conflict could see inflation hit 6.2 per cent next year, when the licence fee is next due to be uprated. The cost already rose by £5.50 in April this year but could go up by £11 next year. 

A high, inflationary rise could give the BBC a £260m windfall at a time when it is cutting staff and programmes in a £600m savings drive. But ministers would face a political backlash if they awarded the BBC a full 6.2 per cent increase during a cost of living crisis.

A £191 licence fee would make the UK the second-most expensive country to watch TV across Europe, edging ahead of Germany.

Germans pay a household tax of £190 a year, regardless of whether they watch the country’s equivalent of the BBC.

Shrinking licence fee base

The Bank of England has modelled a number of scenarios as the US-Iran war fuels inflation and uncertainty in global markets. The most adverse would see inflation soar to 6.2 per cent if the price of oil stays above $120 a barrel for the rest of the year.

Under the previous Conservative administration, then culture secretary, Nadine Dorries, froze the licence fee at £159 for two years from 2022 to ease cost of living pressures.

Media analyst Alex DeGroote said: “There is no way that a 6.2 per cent level of fee increase would be supported by the UK public in these times. The simple answer is more cost-cutting at BBC.”

The BBC declined to comment on future licence fee levels. The broadcaster pointed to its submission to the Department for Culture, Media and Sport’s (DCMS) charter review which warned that any inflationary rises in the licence fee would be swallowed up in rising productions costs including energy bills.

BBC insiders have acknowledged that the shrinking number of viewers who pay the licence fee cannot continue to shoulder annual inflationary increases while others watch or listen for free.

The Commons Public Accounts Committee found that there are 3.6 million households who now say they no longer need to pay, costing up to £617m in fees. A further 300,000 households stopped paying last year.

The BBC’s charter submission suggested looking at European equivalents to help solve a rising funding gap between the 94 per cent of households who use BBC services and the 80 per cent currently paying. “Germany and Austria changed their licence fees into universal household charges” which helped restore “universal funding,” the document noted.

The German fee of €18.36 (£15.90) per household has been frozen since 2021 but the independent body which sets the rate has recommended a rise of 28 cents at the start of 2027 which would see the annual cost increase to £193.

Netflix subscribers could pay for BBC

New BBC director-general Matt Brittin has begun negotiations with ministers over a reformed licence fee and a new charter, which sets out how the broadcaster is run and funded. The Government is said to be looking at plans to force Netflix and Prime Video subscribers to pay the licence fee – a move likely to be unpopular with the public.

France abolished its annual €138 (£120) television licence fee in 2022. The €3.7bn annual budget for broadcasters is now covered entirely by state subsidies derived from general VAT revenue.

Analysis by The i Paper found that Switzerland operates the most expensive licence fee with a charge of CHF 335 (£317) paid to the national broadcaster.

In March, Swiss citizens overwhelmingly voted to reject a proposal to slash the cost to the German level of £190 over fears it would hit foreign and sports news, and could harm national cohesion among different language-speaking groups.

Austria, previously the second most expensive in Europe, is now fourth behind the UK.

It replaced its €322 (£279) licence fee three years ago with a now £160 household tax, paid by all households regardless of whether they own a TV.

Italy and Czechia operate the cheapest licences in Europe charging viewers £87 and £85 a year respectively.

A DCMS spokesperson said: “We have launched the charter review to explore ways that the BBC can have a sustainable funding model that supports its vital work, but which is also fair to those who pay for it.

“We are currently reviewing responses to the public consultation and will set out our decisions in a future White Paper.”

A BBC source said the broadcaster was “open to offering more concessions to support affordability” and the “possibility that more radical reform could involve more households paying, but each paying less”.