/ Money, Technology

Why the government’s sitting on £1bn of TV licence fees

If you’re one of the millions who pay for their TV licence by direct debit or cash payment plan, did you know you’re giving a £1bn interest-free loan to the government?

When I moved house last year, I took out a new TV licence. Moving is an expensive business, so I thought I’d spread the cost of the licence by paying by direct debit.

What I didn’t realise until then was that anyone who pays for their TV licence by monthly direct debit is charged double for the first six months. You then have to make the regular payment from month seven. This effectively means that your TV licence account is six months in credit all the time.

You don’t get this money back until you no longer have to pay for a TV licence or you switch payment method by paying your licence fee in advance. So yes, for many of us that means holding out until we turn 75 or die. Great.

£1bn of TV licence cash overpaid

I initially told myself to get over it. It’s £72.75 that I’ll get back at some point. But the thought kept festering. Why on earth should they keep my money like this? So I decided to issue a request under the Freedom of Information Act, and that’s when I discovered the sheer scale of this interest-free loan.

14.7 million households pay for their TV licence by direct debit, with a further 1.5 million paying under a ‘cash payment plan’ or ‘monthly cash plan’, whereby you pay regular payments at PayPoint outlets.

Both systems operate on the ‘six months in advance’ principle, with the money held in the government’s Consolidated Fund account, from which the BBC receives a monthly payment.

Considering this amount of TV licences, our calculations show that a massive £1bn of extra payments is earning interest in the government’s coffers.

Protecting the BBC from losses

A government spokesperson told Which? that the system provides ‘an alternative to an annual lump sum payment, while also protecting the BBC from losses incurred if payments stop before the whole amount has been collected’.

Well, I have an impeccable track record of paying my bills on time, so I don’t see why I should have to keep my account over £70 in credit just in case I default.

There are already hefty penalties in place for anyone who doesn’t have a TV licence. And there are plenty of households that could do with that £70 right now. The government shouldn’t be cross-subsidising the cost of non-payers using the money of the responsible majority who choose direct debit.


£1billion may sound like alot, but I bet the Govt is sitting on much more in money invested in premium bonds after the monthly wins have been paid out. Just goes to show you still can’t trust the Govt.

I just looked at the TV Licensing website. It certainly makes the payment scheme abundantly clear but I do agree it appears unduly onerous. Obviously they want people to pay upfront for the whole year and even quarterly payment customers are charged a £1.25 premium each quarter for the privilege of taking it on the drip. Annual payment customers might pay less overall but they lose the use of a [diminishing] proportion of the money as the months tick by and this also accrues for the benefit of the exchequer. I suspect that if it wasn’t structured like this then the licence fee would be set at a higher level.

It is well known that the TVLA is a ruthless and persistent chaser of its revenue and it is part of its culture to suspect that every property must have a television in it used for watching transmissions as they are broadcast and that every occupier is a potential evader who will eventually default and incur debt recovery action. Parliament has kicked the TV licensing system and alternative methods for funding the BBC around for years and, faut de mieux, we seem to be stuck with the present arrangement. I’m not quite sure how they have arrived at the funny figure of £145.50 – £144.00 I could understand or even £156.00. I suppose in most cases people moving home simply change the address on their licence and carry on but I notice that where that refunds are only available [in cases where the licence is no longer required] for whole quarters remaining.

Please delete “that where” in the penultimate line in my post immediately above.

WinstonSmith says:
22 August 2012

“incur debt recovery action” How can this happen? If you don’t keep up the payments your licence becomes invalid therefore you cannot incur a debt. That said I haven’t had a TV licence for over twenty years.

Donna Edmunds says:
20 August 2012

Having recently moved back to the UK after a period abroad, I set up a tv licence by direct debit, assuming that the payments would be the cost of the licence / 12. When I realised it wasn’t, I contacted them.

This was my correspondence:

“I moved into this property at the beginning of the year, so would expect my tv license to start at that time. However, the DD payments that you have set up mean that I will have paid a full year’s fee by May, yet payments will continue throughout the rest of the year. Consequently, within one calendar year I will have paid £230.40, NOT £145.50. Could you please explain this, and amend my DD accordingly?”

“Dear Miss Edmunds,
Thank you for contacting us about your personal payment plan.
Monthly Direct Debit was introduced to offer our customers a way of spreading the licence fee to make it more affordable.
If you choose monthly Direct Debit, you’ll pay for your first licence within six months. From then on payments will be spread over 12 monthly instalments, (six of these will be before your licence is due and six after).
If you cancel your Direct Debit any payments towards your future licence will automatically be refunded.
I hope I’ve been able to explain the situation and thank you for taking the time to contact us.
Yours sincerely,
TV Licensing”

There’s no explanation of why the system is set up in this way, or what they do with the money. If you want to pay by Direct Debit (and as I can’t afford the lump sum in one hit, I have to), you HAVE to go along with this scam. It’s not even as if the licence itself is optional!

The reply to you reads like an invitation to revoke your DD and get a refund. Perhaps the staff are acknowledging that the policy-makers have put them in an indefensible position.

Brett Whitehorn says:
20 August 2012

On the one hand I’m very pleased you have brought awareness to this simple con.
On the other I am annoyed because I totally forgot about this stitch up. It infuriated me the instant I realised what they were up too years ago, but got no credible argument when I made a phone call.
I hope Which are able to put pressure on to offer fairer payment terms. I think it’s a complete disgrace.

Dave D says:
21 August 2012

Years ago I used to pay for my TV licence by DD. This current system was not in place at that time. I cannot remember which year it was, but one year I noticed that the monthly payment had gone up by a small amount over and above any increase in licence fee. When I checked the details on the paperwork (it was before on-line licensing) I discovered that the extra amount was a “Direct Debit Processing Fee” – for customers who did not pay by cheque or cash in one lump sum.
I immediately stopped paying by DD and have always paid in one lump sum since then (I know that many people can’t afford to do this and with redundancy looming I may soon be unable to as well – this is another example of penalising the poor, like token fuel meters).
I don’t know when the present system was introduced because it has clearly been whilst I have been paying up front (some time since 1991), but I would hazard a guess that at least part of the reason is to make sure that TV licensing are able to get that extra money that they once called a “Direct Debit processing fee” without upsetting the banks and everyone else who keep trying to tell us that “Direct Debits are cheaper and so we can pass savings on to our customers”.
Possibly the change came when TV licensing stopped being part of the Post Office? Or when it stopped being NTVLRO?
Anyway, when it happened is immaterial and I hope that Which? manage to embarrass the Government on this.
As an aside, I always wonder why, when the license fee is **SUPPOSED** to fund the BBC, we don’t pay direct to the BBC? Of course, we all know the answer: it’s so that the Government can “top slice” the revenue and only give the BBC a small part of the revenue, keeping the rest for a rainy day, or some quantitative easing, or a new Trident missile, or maybe to pay some MPs’ expenses…….you get the idea.

Cornucopia says:
21 August 2012

@ Dave D

TV Licensing *is* the BBC. You can confirm this if you go to the TV Licensing website (or indeed, do a “whois” on them).

Whilst the Government seem to hold the income and benefit from these over-payments, the BBC is the recipient of the vast majority of the funds – some £3.4bn per year. A small amount is “top-sliced”, but it is not significant. It is therefore not true to say that they “only give the BBC a small part of the revenue”. In truth the BBC is probably the wealthiest public broadcaster in the World.

@ Cornucopia

Thanks for this clarification. I wish I felt confident that the top slice was a small amount: the BBC’s legally audited accounts don’t seem to suggest that it’s so small.

Hah yes, this old chestnut. This angered me too when I set up a direct debit for TVL, but sadly you’re at their mercy and have to agree to these terms or pay the full year in a lump sum – not many people will be happy doing that, especially as they will probably have only just moved into a property at huge expense.

This does seem mad, and especially when you consider that I pay on a monthly basis – £12 a month. It’s not direct debit, as I have to manually do it either online, by text or over the phone, but it’s a standard monthly charge throughout the year. Why can’t they do the same for a direct debit which is more responsible of the payer?

Janet says:
28 February 2013

How do you pay on a monthly basis just £12? as according to the tv licensing site, there is no payment option to do this. Just would like to do same but can’t seem to find a way. Thanks

Cornucopia says:
21 August 2012

There are some misconceptions here (including in the original article). The DD/Quarterly Licence Fee payments are set up as they are for exactly the same reason that 6 month’s road tax is more expensive than 12 months. Taxes fall due in their entirety at the start of the tax year – if you don’t pay in full at that point, then you pay more to avoid disadvantaging those who have paid in full. It is not true to say that monthly DD customers are always £70 in credit until the licence ceases. In fact, the credit amount fluctuates on the basis (after the first 6 months) of being 1-6 months in credit for half the year and 1-6 months in debt for half the year.

The Licence Fee regime has many, many inequities, but this doesn’t seem to be one of them. For the record, and in case Which? would like to follow up on these issues, they are…

– The maltreatment of people who legitimately have no need of a licence (they are bombarded with threatening letters and are asked to demonstrate their innocence to TV Licensing(tm).

– The fact that TV Licencing(tm) staff are financially incentivised in their dealings with the public.

– The fact that around half of people caught evading are let off without prosecution with no clear public interest reason for doing so.

– The fact that the majority of people who are prosecuted are on very low incomes, and are there for reasons primarily of poverty. The public interest in prosecuting them is questionable.

– The fact that TV Licensing(tm)’s processes are highly suspect with regards to honouring citizen’s basic rights (to respect for home & family life, to silence, to counsel and to a fair trial).

– TV Licensing(tm) is merely a BBC brand name. It is not an “authority” in any sense, and individual staff members lack any significant legal powers. At the same time, the BBC is very selective in the way that it describes itself and its “TVL” brand name, such that the only conclusion can be that it intends to create a false impression.

I could go on…

I agree with all of the points which Cornucopia has raised except the first: I understand the point made about all taxes being due in full at the start of the tax year, but it doesn’t seem to me that this holds true for a great many other taxes and payment regimes so I don’t see why TV Licences should be any different.

I also agree with John Ward’s points (below) and although I understand and accept Cornucopia’s earlier point (which I have verified) about TVL being part of the BBC, there is no question (and it’s a regular feature of hot debate and dispute) that the Government controls the fee and also controls how much of it the BBC gets. Publicly audited accounts and numerous parliamentary debates over decades past indicate that the BBC doesn’t receive anything like all the licence fee. This would be irrelevant to this convo if it was not for the fact that the Government (treasury) “looks after” the balance, which is, as the intro indicates, swelled at the expense of licence fee payers.

If TVL really is truly part of the BBC then it should be branded as BBC and the BBC should receive every penny paid by Licensees and then pay TVL wages and expenses out of the revenue. This would, however, not alter the basic fact that whoever TVL is and whoever holds the revenue, members of the public should not be used as a loan provider without their consent.

The government decides how much the BBC will get from licence payers each year [it can make as much as it likes from commercial activities although regard is had to the potential for this in the government settlement]. If TV Licensing is more productive in its revenue gathering it doesn’t seem to add to the BBC’s income although the contractors who administer and process the licensing system are – presumably – on some sort of incentive to meet targets. Whereas TV Licensing cannot raise the fee for a licence any higher than that determined by Parliament, it can obviously tinker with the payment regime to compensate itself for any deficiency in collection performance. I hope TV Licensing [meaning the entire system including the contractors] is not a comfortable bureaucracy living the good life on a fat margin between what they collect through their weasel ways and what they are committed to handing over to the BBC. I am also perplexed by Martin’s revelation that the revenue sits in the Exchequer’s Consolidated Fund. Every time money gets washed a button comes off and ends up in somebody else’s pocket. I think the British economic management system is awash with these little anomalies and it’s time the wrinkles were ironed out.

Susanne says:
22 August 2012

I must have been paying my licence fee by direct debit for around 40 years. If the Govt owes me money I want it back. They certainly make sure they get my uncome tax on time.

Archie says:
23 August 2012

I don’t understand what the fuss is about. I pay for my licence annually by direct debit which means that when I pay I have paid for 12 months in advance! As the year progresses, the advance payment reduces so that over a 12 month period I will, on average, have paid for approximately 6 months in advance. This will happen every year so those who pay monthly are no worse off than those who pay annually. In any event, a small extra charge to cover the additional administration would be reasonable.

“In any event, a small extra charge to cover the additional administration would be reasonable.”.

I **WOULD** agree with this *IF* it was not for the fact that TVL, along with endless other businesses and authorities, keep telling us that DD is cheaper to administer than other payment methods. This being the case the “small extra charge” should come out of the *savings* that TVL make on the DD transactions, NOT form the end-users paying extra.

Tim Alton says:
24 August 2012

Not only do they hold my money but I cannot get it back.
I bought a license for my Granddaughter as a student, when she finished University, I could only stop paying She has to claim the money back by proving she has left University with a copy of her contract as a tenant. I who paid cannot claim. What a farce!!

It must be time to get rid of the BBC TV Tax. They are becoming a political broadcaster which is not right in a democratic country. Homeowners are paying for them to broadcast political doctrine. It is time for them to fund themselves.

I didn’t have a problem when I rang TV Licensing. Coincidentally my licence is due for renewal in August so I told them I wanted this money back and would pay by annual direct debit in future so I now don’t pay anything for the next 6 months as I am in credit for £72.72. I will then pay the licence in full next March and every March after that.

john says:
24 August 2012

All these outraged comments are rather illogical, and I suspect largely come from people who did not bother to read the small print and assumed they were simply paying monthly. In fact the BBC DD scheme puts us all on the same footing: If you pay by direct debit you end up, after the first 6 months, always 6 months in credit. If you pay annually you are, on average, always six months in credit. Seems fair to me.

The £1 billion is tiny, against the £120 billion the Chancellor is borrowing and spending EACH year over and above what he collects in taxes. Let’s not get too worked up about it. Worry more about WHO and WHEN will pay back each £120 billion. Our kids, their kids, or who?

john burns says:
24 August 2012

Yet another scam I was not aware of. Nearly a year ago we stopped the direct debit after an elderly relative came to live with us. presumably we should be able to claim the 6 months payments back? How do we do that.

Are you sure it’s in the Governments hands or in the contractors’ who collect our licence fees?

If you say you aren’t paying because you have an elderly relative with you I think you are scamming the rest of you. I can’t believe this would allow you a free licence.

If it does then that is wrong.

This is an interesting point. What is the legality of paying when you have an aged relative present? As i have said elsewhere, I don’t understand the logic behind free licences for the aged who can be millionaires or wealthy house owners. Unlikely in this instance but as a general point, the BBC should cut the crap. EVERYONE of every age should pay a lower licence fee, there should be a new iplayer licence chargeable separately with online password access and monthly direct debit collection should be normalised to 1/12th of the fee so that nobody need whinge

Nigel says:
24 August 2012

On a slightly different note, I rarely watch any ITV programmes. Their running costs and profits are incorporated into the price of the goods and services that I purchase on the ‘High Street” – B&Q , Sainsburys etc. I have no way of recovering that money for services that I do not receive. The BBC Licence fee is very good value for money compared the cost of ITV and particularly Sky at over £800 per year including adverts.

W L Scales says:
24 August 2012

It should never be more than one month paid in advance.

I wonder what would happen if you asked to pay by monthly direct debit and then cancelled it after 6 months – by which time you will have paid for that year’s licence fee, so you should just get a reminder at the end of the 12 months. Then next year you choose monthly direct debit and then cancel it after 6 months and repeat the process annually.
Actually, I currently pay annually on receipt of a reminder. I hadn’t previously thought of doing what I’ve suggested above!