UK ministers are to cut about £90mn from the BBC’s annual budget after announcing a smaller than expected increase in the corporation’s licence fee next year given the cost of living crisis.
The government’s move came on Thursday alongside a review into the future of the licence fee and alternative funding options, including advertising and subscription models similar to those of commercial broadcasters and streaming services.
Under a 2022 agreement, the BBC licence fee was frozen for two years at £159 a year, rising with inflation thereafter. The BBC announced about £500mn of cuts as a result of the freeze.
But culture secretary Lucy Frazer said she had used a lower level of inflation based on September figures rather than a blended number drawn from the previous 12 months in deciding the increase to the BBC’s budget for the year from April 2024.
As a result the licence fee will increase to £169.50 from April — about £20 lower than the expected figure under the 2022 agreement, the department for culture, media and sport said.
BBC executives said the lower rate means about a further £90mn would be cut from its budget next year.
The previous methodology for calculating inflation was the averaged annualised October to September CPI figure of 9 per cent. The new methodology for 2024 uses the annual rate of CPI in September 2023 of 6.7 per cent.
The government said the move was “in recognition of the ongoing cost of living pressures faced by families”.
Frazer said: “This is a fair deal that provides value for money for the licence fee payer while also ensuring that the BBC can continue to produce world leading content.”
The BBC board stated that the cuts will require additional changes on top of the already achieved major savings.
Our content budgets are being affected, which will also impact the creative sector throughout the UK.We will confirm the consequences of this as we work through our budgets in the coming months.”
The announcement was met with anger by some BBC executives. One said the move was in “bad faith” given the broadcaster had been working on the basis of the higher amount.
Another said: “This will strip tens of millions from the UK creative sector which the government says that they want to help. You won’t see the impact now — but it will be obvious about what’s on air in three years.”
The broadcaster has already been forced to announce cuts to the funding of its news teams, including flagship nightly current affairs programme .
Frazer has launched a review to determine how the BBC should be funded in the future. A panel of independent experts from broadcasting and business will support this review.
The findings of this will determine the government’s decision on whether to pursue alternative funding models when the BBC charter is reviewed in 2027.
The review will assess if the BBC should offer additional services to audiences through commercial means, and explore how the broadcaster can increase its commercial revenue.
Samir Shah, a veteran TV executive, has been appointed as the new chair of the BBC for four years.