UK Agency Body Backs Study on BBC Licence Fee Hike

25 May 2006

The Institute of Practitioners in Advertising - the official body representing British advertising, media and marketing communications agencies - on Wednesday endorsed the findings of a study commissioned by ITV, the nation's largest commercial broadcaster.

Carried out for ITV by Indepen, a London-based management and economic consultancy, the study examines the BBC's proposals for an increase in the mandatory licence fee levied on all UK home with one or more colour TV sets - irrespective of whether on not they watch BBC programmes.

The ITV study supports the joint submission made by the IPA and ISBA (Incorporated Society of British Advertisers) in March, which highlighted many of the same issues.

Says IPA director for media affairs Geoff Russell: "The Indepen study underpins all our concerns - and those of the commercial sector as a whole. Everyone knows that the BBC licence bid is excessive and unnecessary - for the health of UK media as a whole, it is now down to the government to trim it back severely."

The main findings of the Indepen study are:

  • The BBC has underestimated household growth revenue which, on its own, at up to £800m, is sufficient to cover the BBC's 'overstated' (£640m) digital switchover costs.

  • Increased funding of the BBC appears, in part to be fuelling the super-inflation it is designed to offset. Steady increases in staff costs for the BBC relative to the commercial sector will make it more difficult for the commercial sector to attract talented staff/talent. The proposed increase would further exacerbate this trend.

  • This level of unconstrained expansion in the scope of the BBC's activities would crowd out innovation and investment in new services by the commercial sector.

  • Overall, the report demonstrates that if the BBC only achieves economy-wide level productivity growth of 2% pa, then an inflation indexed licence fee would be required (Retail Price Index +0). However, if the BBC achieved higher growth, more in line with the communications sector of the economy, then they would only need RPI-2.

  • As the BBC's proposed increase exceeds the Treasury forecast rate of growth in incomes, affordability would decline over the settlement period, with the most pronounced impact on low income groups - poorer households would suffer disproportionately. A settlement in the range of RPI-2 to RPI +0 would see increased affordability over time.
To view a copy of the Indepen study click here.

Data sourced from Institute of Practitioners in Advertising; additional content by WARC staff