The licence fee model is broken. What should replace it?

“I think it is an outdated charge. It belongs to a different time. I am keen that we should agree this year on a new mechanism to fund public service broadcasting... and have it in place for 2025.”

These words spoken in the Dáil last week by Taoiseach Leo Varadkar in reference to TV licences highlight the challenge facing the Government.

Funding for public service media in Ireland was already in crisis prior to the recent series of scandals afflicting RTÉ, reflecting forces that have disrupted the economics of television worldwide – such as the rise of digital distribution and changing viewing habits. Ireland’s predicament is accentuated by reliance on a dual system of public service media funding involving a licence fee that is in long-term decline and commercial advertising income that is under strain.

Against this background, and in the face of recurrent expressions of concern about the state of RTÉ's finances, the Government set up the Future of Media Commission (FOMC) in 2020 with a remit to consider how the broader media sector in Ireland could deliver public service aims over the next decade. It was asked to make recommendations on funding mechanisms that are sustainable, are future-proofed, ensure value for money for the public and protect the editorial independence of media.

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The commission’s work included extensive consultation with stakeholders and detailed analysis of international best practice. Its consultation uncovered evidence that the public in Ireland recognises and values a strong system of public service media.

The existing licence fee model presents a major problem. An increasing proportion of households and businesses in Ireland do not own a TV set

The FOMC’s final report, published in July 2022, made 50 recommendations, 49 of which were accepted in principle by Government, and many of which have already been actioned or are in the process of being implemented. The 50th recommendation concerned public funding.

The FOMC concluded that, despite pressures on advertising, it makes sense to carry on with a dual system in which funding is drawn from both commercial and public sources. But the existing licence fee model presents a major problem. An increasing proportion of households and businesses in Ireland do not own a TV set and, among those that do, evasion rates are high and growing. Recent figures provided by Minister for Media Catherine Martin indicate that evasion rates in Ireland, already running well ahead of other European countries at around 13 per cent in 2019, had climbed to 19 per cent by the end of 2023. Given the recent RTÉ scandals and public antipathy towards an increasingly anachronistic charge, further slides in compliance seem inevitable. The Government needs to transition to an alternative and more sustainable model of funding for public service media.

It is instructive to consider the various alternatives and the criteria against which they can be compared and evaluated. The European Broadcasting Union (EBU) is the world’s foremost alliance of public service media organisations, with members in 56 countries. It has identified four principles that can act as a benchmark against which funding models can be assessed. They are: stable and adequate; independent from political interference; fair and justifiable; transparent and accountable.

One option is to switch to a media charge levied on households and businesses, irrespective of device ownership or public service media usage. This is the approach in Germany and Switzerland. The FOMC report noted that a household charge would be preferable to the TV licence fee because it would allow costs to be spread more widely, bring in adequate revenue, enable the introduction of a fairer, progressive approach and be better future-proofed. On the other hand, Ireland currently lacks suitable mechanisms to implement a household charge and, with mass opposition to water charges still fresh in many memories, political concern about this approach is clearly a potential stumbling block, especially with a general election looming.

A second option would be to finance the public component of public service media funding via a taxation approach. A number of countries across Europe, including Finland, Sweden, Norway and Denmark, have recently scrapped their licence fee and adopted this approach instead. A taxation-based model can work either as a specifically earmarked charge (the YLE Tax in Finland) or else as a fully integrated one (as exists in Norway) whereby public service media is designated as a core expenditure item alongside other essentials (such as health, education) and funded from general taxation. As with a household charge, an advantage of both taxation approaches is that the cost burden for provision of media content, the availability of which benefits everyone (such as accurate news), is spread widely across the population. The FOMC concluded that taxation-based funding is preferable to the TV licence fee because it is fairer (drawing on Ireland’s highly progressive tax system), more effective, more stable and better future-proofed.

But, to make a taxation-based model acceptable, measures that are effective in fully protecting the autonomy of public service media and in ensuring independence from political interference are essential.

The impetus behind the setting up of the FOMC was that Irish citizens deserve a properly functioning system of public service media that delivers benefits to society

What form might these take? The EBU has highlighted how a structure in which funding arrangements are overseen and assessed by a separate arm’s-length body of experts, independent of both Government and media management, is a good way of ensuring that decisions are made on the basis of cost and the public interest, not politics. Both Comisiún na Meán and New Economy & Recovery Authority (NEWERA) may be in a position to play useful roles in this context.

The use of multiyear financial allocations, which avoid the annual government budgetary process, ensures stability and enhances independence from political interference. The EBU also points out that countries may periodically face serious economic crises requiring exceptional political and economic responses. In such circumstances, where cuts are necessary, they should always be applied proportionately across all State services. This avoids the risk of politically motivated measures being taken against public service media under the guise of public cuts. Models combining the protective features outlined above operate effectively in other European countries.

The impetus behind the setting up of the FOMC was that Irish citizens deserve a properly functioning system of public service media that delivers benefits to society. Currently, an ever-worsening funding crisis threatens audience access to impartial news and distinctive, high-quality content, and the Irish courts are clogged with prosecutions for TV licence evasion. Now is the time to phase out this broken mechanism in favour of a stable, progressive and sustainable model of public service media funding.

Prof Brian MacCraith was chair of the Future of Media Commission and former president of Dublin City University. Prof Gillian Doyle was a member of the Future of Media Commission and is professor of media economics, University of Glasgow