How good a deal did the BBC strike?

Yes, the Government has struck a hard bargain with the BBC. But don't worry too much, writes Ben Dowell, it's not all doom and gloom and at least the Corporation has some form of financial stablity

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When the Chancellor George Osborne rattled his sabre over the weekend and threatened the BBC with his plans to force it to pay for licences for the over 75s there was consternation among the BBC’s supporters.

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The cost of the commitment – around £650m – represented a little under one fifth of the BBC’s total licence fee revenue (£3.17bn) and would cripple the Corporation, many believed.

Osborne’s warnings came complete with veiled threats about the BBC’s “imperial” ambitions regarding its online offerings and suggestions that this was an area where it spent £171m in 2013 and could find more room for savings.

Here, the doom-mongers wailed, was final proof that the Government was paying back Rupert Murdoch and others for the support most newspapers gave the Tories in the 2015 general election. Here was final proof that the dire warnings issued by the likes of Russell T Davies before the election that the Tories really had it in for the liberal pinko BBC and were determined to kill it had come true.

But the truth is rarely that simple. And while there were obvious problems with the process – a behind-the-scenes stitched up deal hurried together in less than a week – greater detail has made it seem less perilous.

First the way it was handled. The Chair of the BBC Trust Rona Fairhead didn’t like the way the deal was cooked up, writing to culture secretary John Whittingdale and Osborne with the not unsniffy complaint: “We accept this decision is a legitimate one for the government to take, although we cannot endorse the process by which it has been reached“.

But the fact is, in the 20 years I have been writing about the BBC, charter renewal is always done this way – months of posturing, claims of a measured and open process, always coming down to a late night game of brinkmanship between the director-general and the Government.

And the fact is that the current DG Lord Hall really has struck quite a good deal for the BBC given the circumstances.

The over 75s cost will be phased in, for starters. The first impact of taking on the cost of free licence fees for over-75s will be felt by the BBC in 2018/19, when it will amount to £250m. Its financial commitment will nearly double to £450m the following year, and £750m by 2020/21.

There were fears before charter renewal that the BBC would have its licence fee frozen for another ten years, a very real possibility that people like Russell T Davies said would see the BBC endure “death by a thousand cuts”.

That is not to be.

The licence fee will, the signs are, remain in place for at least another five years, by which time the BBC may be able to work out a way of charging for services in our multi-platform world. And the BBC will have its £145.50 increased in line with inflation. That is what I call a secure financial footing.

Hall also secured a promise to introduce legislation within the next year to modernise the licence fee and close a loophole covering catch-up TV.

Yes, there are problems. Former DG Lord Birt said yesterday in the House of Lords that the “deeply shocking deal” amounted to a breach of the BBC’s independence.

“This has happened again, taking a huge slice out of the BBC’s budget. Again it happened with no public discussion of any kind. This government and the last government have essentially set a very dangerous precedent,” he said.

And yes, while people are claiming that the BBC’s independence is compromised by the commitment to pay for over 75s – is it now in the business of funding the Government’s welfare budget? – it is not as if this kind of cost burden is a new thing. Under the terms of the current charter the BBC was committed to funding superfast broadband around the country by 2020 at a cost of around £80m – something Hall has now freed the BBC from in the current pact with the Government.

The BBC was always going to face a tough financial future and it is no good pretending that this deal is flawlessly brilliant.

There is trouble ahead, many more cost savings to be made, and threats by Whittingdale that decriminalising non-payment of the licence fee will be “carefully considered” by the Government which will not make Hall sleep any easier. Already the perception among a growing section of the population that use iPlayer is that the TV licence is optional.

The BBC boss is also not ruling out closing services in future, a threat no doubt dismissed in Whitehall as political posturing, but one which people who enjoyed watching BBC3 on terrestrial TV know can be all too real. But at least the BBC has some sort of security.  At least it has not been killed by a thousand cuts. And this is something it can build on.

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