The TV licence: where are we now and where to next?

In the months following the revelations of barter accounts, excessive spending and doomed-to-fail musical ventures, licence fee payments to RTE dropped some 30%. 

This drop put enough pressure on RTÉ’s finances that a government bailout of €56 million was required to keep the broadcaster running.

However, the controversies that led to the deterioration of RTÉ’s finances last year are best seen as the final straw that broke the camel’s back. In the context of changing media consumption habits and a shifting advertising landscape, the licence fee as a funding model was always going to need reform to avoid becoming obsolete. 

So where are we now and what changes is the Government likely to make to the increasingly controversial fee over the coming years? 

How does the licence fee currently work?

Since 2016, the licence fee has remained at €160 a year, and is collected by An Post. Licences can be bought or renewed at post offices, or online. 

Any premise that has the ability to decode television signals is liable to pay the licence fee. There are exceptions for those over the age of 70, the blind, and some social welfare recipients. The shortfall on these exemptions is covered by the Exchequer.

The licence fee funds approximately 55% of RTÉ’s activity, with the rest of the funding coming from advertising and other commercial arrangements. 

Notably, Ireland is one of only three countries in Europe that still relies on the postal service to collect licence fees - the others being Czechia and Poland. 

Why is the licence fee not working?

Who pays?

One of the longest standing complaints surrounding the licence fee is in its very definition. 

Collecting a fee from each premise with a television set means that, for example, a single person living alone pays the same licence fee as a hotel or office block. 

Therefore, the licence fee in many ways is a regressive tax - made starker by the fact that the majority of prosecutions for non-payment are of people on lower incomes. 

Not only is this model unfair, it also means that the licence fee does not tap into potentially greater revenues by targeting larger buildings and businesses with higher fees.

Another issue with the remit of the licence fee is that a device that receives television signals is required for the fee to become applicable. 

Around 1/8th of Irish households have formally declared that they do not own a television set, excluding them from the obligation to pay. This number is bound to increase in the future, as more content is consumed digitally rather than over the airwaves. 

This is despite the fact that content produced through licence fee funding can be found readily available online, and is almost certainly consumed by some people who don’t own a television set.

Therefore, tying the licence fee to the notion of a premise and specific devices limits the overall collection pool from whch An Post can collect, while also being regressive and increasingly out of sync with modern media consumption trends.

Evasion

Another issue constraining the amount of money the licence fee collects is the high rate of fee evasion in Ireland.

Currently, the evasion rate in Ireland stands at just over 15%. This compares unfavourably to the evasion rates seen in other countries - for example the rate of evasion is 2% in Germany, 5% in Austria and 7% in the UK. 

RTÉ claims this costs them €65 million annually, and it also induces uncertainty over finances year on year, as the amount collected can easily fall depending on the number of people who simply decide not to pay.

The ability of An Post to enforce payment of the licence fee is also limited.

An Post uses a database of addresses to monitor licence fee payment, and to identify non-payment. However, this database is chronically out of date, and An Post cannot access data from TV providers and the ESB to help with enforcement.

Even when an address found without a licence fee is identified, due to the lack of identifying information, letters are only addressed to the ‘Occupier’ - making any notices easy to ignore. 

Increasing the enforcement capability of An Post will cost money - for personnel, equipment and legal fees. This then produces a cost-benefit dilemma as to whether this increased outlay will increase revenues by more than enforcement costs.

Ultimately, for any publicly funded broadcast service to function sustainably and fairly, enforcement of payment so that everyone who is liable to pay does so, is essential.

Ageing population

Ireland’s ever-ageing population is one of the biggest challenges currently facing the State, and will require huge social and economic reform to solve.

The demographic shifts in Ireland’s population will also have an impact on the take of the licence fee.

People aged over 70 are exempt from the licence fee. The proportion of the population that will be eligible for this exemption is set to grow massively - in the last census the demographic growing the fastest was those over 70 at +26%. By the middle of the century, well over a quarter of the population will be exempt from the licence fee under current rules.

The shortfall created from exemptions to the licence fee is covered by the Department of Social Protection. As the proportion of the population exempt increases, the greater the proportion the state will play in funding public broadcasting. 

The quandary these demographic changes present is a ticking time bomb for both the collection of the licence fee, as well as the state, and will require careful reform to ensure fairness and efficacy. 

What are other countries doing?

The challenges facing the licence fee are not unique to Ireland, with many other countries also faced with a need to reform public broadcasting. 

The UK

The BBC is one of the world's oldest public broadcasters, and also relies on a licence fee model. 

Unlike RTÉ, the BBC does not generate advertising revenue to supplement the licence fee, instead it generates income by selling commercial rights for its programming abroad. 

The BBC collects the licence fee itself, and has better technology and enforcement ability than An Post to ensure payment.

However, the licence fee in the UK, like in Ireland, is also facing scrutiny, for similar reasons of value for money and suitability for the digital age.

The Nordics

The model in most Nordic countries closely resembled the model employed in the UK by the BBC. 

However, due to aforementioned issues with the licence fee model, reform has taken place across Scandinavia in recent years. 

The Danish, Norwegian and Swedish public broadcasters moved to a taxation model in 2022, 2020 and 2019 respectively. 

Norway’s public broadcast model is funded by income taxation, whereas Denmark, Sweden and Finland have media taxes. 

In Finland, the media levy is progressive, meaning that those on the lowest incomes do not pay, while large corporations pay more. This tax, known as the YLE, generates close to half a billion euros a year, getting rid of the need for commercial relationships. Additionally, because the tax is for a predefined purpose, there is little room for state interference. 

Italy

Revenue for public broadcasting in Italy is generated by adding a €70 levy on top of electricity bills, paid throughout the year.

This was lowered from €90 to help with the cost of living crisis. 

In the current energy crisis, it is easy to imagine such a model being grossly unpopular in Ireland, and has also been brought to question by the European Parliament. 

The two extremes

The licence fee model is a juggling act between raising necessary revenues while maintaining independence from the eyes of the state.

The alternative to an independently funded public broadcaster is visible in both the superpowers of China and the USA. 

On one extreme, China operates a completely state controlled media, essentially operating as a mouthpiece for the one-party state.

The USA is on the other extreme, where private money, whether it be corporate or philanthropic, controls the media ecosystem. Therefore, broadcasters answer to the hand that feeds them, rather than the American public as a whole.

Both of these extreme models have no issues with funding, but they clearly have significant drawbacks for the function of healthy democracy in both countries. They also highlight the tightrope that needs to be walked when formulating a broadcast model.

What is being proposed for Ireland?

Exchequer funding

A common solution mooted to replace the licence fee is to have public broadcast funded directly from the Exchequer. This would likely require a change to taxation to accommodate the additional funding requirements. 

This model would essentially eliminate evasion and free riders, and is therefore seen as a solution to the shortfalls RTÉ has been experiencing, as well as fairness concerns. 

If made a largely blanket tax, it could also ensure revenues do not suffer as a result of a societal shift away from traditional television sets.

However, there are two primary concerns associated with such a model.

The first issue is the matter of state interference. If funding for public broadcast is set and decided upon by the State, then the ability for the Government to exert control over broadcasting increases. 

Funding could also become more unpredictable, as allocated funds become vulnerable to the political whims of the time. 

In France, public broadcasting moved to a tax funded model in 2022, based on VAT. This led to mass strikes in the media industry in response to such concerns. 

One way to avoid this issue is to have a specifically stated tax for public media, such as those seen in Scandinavia. However, such a tax would need careful crafting to ensure independence and sustainability.

Additionally, there has been pushback from the Government itself regarding Exchequer funding. 

In an interview with the Irish Times, Michael McGrath said: 

“I do not favour 100 per cent exchequer funding, because funding for RTÉ and other public service broadcasting would then be competing with the health service, education and other vital front-line services,” 

Therefore, Exchequer funding is an attractive model to eliminate shortfalls associated with free riding and evasion. Moreover, depending on implementation, it could also make public broadcast revenue safe from changes to media consumption habits. 

However, a careful line needs to be tread surrounding the implementation, for both financial certainty and independence of public broadcasting.

Revenue collected licence fee

Another model proposed is to retain the existing licence fee, but to hand responsibility for collection from An Post over to Revenue.

This would help reduce free riding and evasion, creating a greater certainty of funding. 

Eliminating shortfalls associated with collection would help RTÉ bridge its funding gap, and make the licence fee more sustainable in the long run. 

However, reform would still be required to avoid longer=term concerns around the ageing population and device-specific charges, to ensure revenues remain stable in the long run. 

In the UK, where the licence fee is more strictly enforced, high levels of resentment have been generated, particularly during times of discontent and scandal within the BBC. Such resentment could also occur in Ireland if this model is adopted. 

Overall, making Revenue responsible for licence fee collection would help plug immediate gaps in RTÉ’s funding and keep the licence fee as a model of public broadcast funding. However, the licence fee may still require further reform to remain relevant in the long term. 

Broadband levy

The latest funding model proposed is a so-called ‘digital media levy’. This would be added to broadband bills, adding an estimated €10 to €15 to monthly outgoings. 

The proposed levy, suggested by a cross-departmental group, was met with immediate backlash. 

Firstly, concerns were raised about how exemptions for the elderly and those on social welfare would be handled, as this could end up falling with the suppliers to help enforce.

Secondly, how the levy is applied to different packages also complicates implementation, as broadband packages often include TV and phone deals, as well as discounts. 

Moreover, it was suggested that the levy could deter rural broadband takeup, hampering the National Broadband Plan, as well as creating a new pool of free riders without broadband contracts.

While the levy would circumvent the issues associated with multi-media usage, it would then be an additional bill - essentially a compulsory tax. This would likely be highly unpopular with the general public. 

In summary

Over the course of the next year, decisions will have to be made regarding the future of the licence fee, once the interim Government funding for RTÉ expires. 

Keeping the public broadcaster sustainably funded, with minimal state interference is a difficult space to navigate, and achieving such a model is not something to be sniffed at.

Having a sustainable public broadcast model is an important part of maintaining healthy democracy. A broadcaster with the Irish public in mind, rather than the interests of the State or big corporate money helps nurture constructive debate and representation. 

So despite the tumultuous year for the broadcaster, the ultimate question remaining really is how, rather than if, RTÉ should be funded

Whether the reform options previously laid out are adopted, or something else is formulated, the cost of public broadcasting will continue to weigh on household budgets, be it through taxation, levies or licence fees.

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