05/08/2013 14:00 BST | Updated 05/10/2013 06:12 BST

BBC - Time to Think Again About Licence Fee

The BBC embodies decades of aspirational thinking about public service broadcasting, but little of it has been applied to the unreformed annual TV licence fee. Nor is there any proposal for reform in the strategy paper published by DCMS on 30 July.

Linear, scheduled broadcasting is no longer the only game in town. On-demand viewing on internet-connected devices is rising in popularity and does not require payment of the licence fee.

As viewers increasingly embrace new platforms and broadcasters increasingly embrace on-demand programme provision, limiting the licence fee to the reception of linear services will become increasingly anomalous, not to mention undermining the BBC's income.

The fee itself also grates. It fails to respond to the BBC's changing audience share. It cross-subsidises radio, new media and non-programme activities. And the costs of collection and evasion are high, with enforcement both unpopular and a strain on magistrates' courts.

The first of the BBC's public purposes as enshrined in the Charter is to sustain citizenship and civil society. This is an aspiration for the benefit of the community generally and it would be absurd to suggest that it is only for those who watch linear TV.

The case for the BBC to be funded from general taxation would be overwhelming were it not for significant concern about independence from government, and the stability and security of its funding.

Finland has found a novel way around that problem. Since January, the licence fee has been replaced by a new mandatory Public Service Broadcasting (PSB) tax, payable at 0.68% of taxable income, but not less than €50 nor more than €140.

The tax will fund an appropriation from the state budget to a TV and Radio Fund. The Finnish public service broadcaster will now be sustained by the Fund, maintaining a degree of independence by keeping it at least one step away from government.

Could this be a way forward for the UK? It has several potential benefits.

First, it could end the 10-year cycle of Charter negotiations, which are no resilient guarantor of independence.

It would take the distinction between linear and on-demand viewing out of the debate. And payment would not need to be linked just to TV but would cover radio, online and other activities.

It would make collection efficient, avoiding the indignities of computerised correspondence, detector vans and court appearances. And it would reduce the regressive nature of the licence fee by linking payment more closely to ability to pay.

It would be consistent with the principle of public service broadcasting as a service in the national interest and - last but not least - it might foster the perception that it contributes to sustaining citizenship and civil society generally.

It is perhaps not as widely recognised as it might be that, in its constitutional documents, the BBC has no unqualified right to the licence fee revenue. It is entitled to either the net revenue or "such lesser sums as the Secretary of State may, with the consent of the Treasury, determine". It depends on the government; the new Finnish system looks a more effective guarantee of independence than this.

Achieving PSB aspirations depends on adequate, stable and secure funding and that in turn depends on a public consensus. It is not enough to rely on the old nostrum that the licence fee is the least worst mechanism compared to advertising, subscription and direct government grant. Suitably designed, the Finnish solution could strengthen the BBC's current slender hold on its source of funding and its independence.

Adapting the funding mechanism would foster the vitality of the public service principle not only in passive broadcasting but also in the active world of search and demand for PSB content.