/ 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.


It was fascinating to discover through this article and the resulting comments that there are something like 25 million TV licences in force – that must be one of the highest collectibility ratios in the country. Local authorities struggle to exceed 93% collectibility on the Council Tax despite levying on an unmoveable property [albeit some of the losses here are due to false claims of single occupation]. With a telephone line rental or a cable or satellite TV subscription the supplier can easily switch the customer off in the event of payment default. TV Licensing cannot do this without extensive and costly enforcement activity – hence the need in their eyes for a premium or returnable deposit. I still feel though that the overall regime could be made a bit easier for people paying in stages by DD, such as a three-twelfths payment up-front and then no more until the start of month three from which point a monthly amount of one-twelfth is paid. It is perfectly possible to structure DD payments in this way. The idea that a six-months deposit is held by the government for years or decades – or even for life in some cases – does not seem equitable to me, the more so when I saw that the BBC does not even benefit from this. Personally I don’t have a problem with a degree of cross-subsidisation between licence payers; even though, by paying the full licence fee annually in advance, I am notionally disadvantaged financially I do it for the sake of convenience because it falls due in one of the months when I am not paying Council tax [which has a ten-month payment regime and no penalty for paying by instalments]. Some people we know are constantly moaning that they have to have a second licence to cover their second home as they can only watch one television set at a time! They should be so lucky!

John – you are not disadvantaged paying in advance – it is EXACTLY the same net effect as the monthly direct debit scheme. No one is disadvantaged and to that extent it is a very fair system.

Martyn then argues about the 6 months payment in advance. If this was not the case, then the licence fee would have to go up (1) to cover the loss of interest on the almost £2billion the government holds (25 million payers x £72) – this is a rise every year, and (2) to cover the loss of that £2billion itself!

So, the more I think about it, the more it should be left as it is. It is fair to all payers, and removing the upfront payment portion would cost us addtional money anyway.

You also say that the council tax has no penalty for paying by installments – but there is an effective penalty as if everyone paid upfront the council tax would be cheaper.

Thank you Buchanan . . . When I said “notionally disadvantaged financially” I was only considering the loss of access to the money for a period. I am in favour of instalment regimes that are structured equitably even if they are deemed to impose a notional penalty on everybody. The no-surcharge direct debit instalment scheme for Council Tax recognises that the problems of default and the costs of collection would escalate enormously without it so there is no point in inhibiting its uptake. I just think TV Licensing should approach the licence fee in a similar way and be more amenable to payment by monthly instalments without a large and indefinite retention.

Nigel says:
29 August 2012

This “Conversation” is totally misleading. In fact I’m not sure how it was ever put on to the site.
Like in so many situations if the writer is at fault, why was it not picked by his line manager.

Totally disregard the original Blog.

Refer to the true explanation of how the system works, in the reply to Donna Edmunds on 20 August at 3.49pm. from TV Licensing, and Trevors post on 26 August at 11.47pm, it is all abundantly clear.

For the Poor or Rich, most Licences, Subscriptions or Fees are payable in advance. If they are paid in instalments there is usually a cost of some description.
There is no Rip-Off

Look at the first line of the blog and Which article:

“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?”

This sums it all up. The author got the wrong end of the stick. I pay in advance. I too am giving the government an interest free loan,for an average of £72 for an average of 6 months. But the author has only just now, in his recent comment, realised this, so has changed direction on his argument.

Presumably the author in his original article wanted an effective discount for paying the fee in monthly installments with no upfront loading that an annual payment in advance would entail. Is this really what Which stands for? Getting a discount at the expense of others?

This shouldn’t have got past his bosses and into print.

To those who still aren’t convinced this is a problem, there are three points I’d like to make.

One: Are people who pay by monthly direct debit aware that they’re paying double in the first 6 months? In my own case, my ex-flatmates left that money on the account. Most people expect that if you pay on a monthly basis, the 12 month payment is equally split across the year. TV Licensing may have to try harder to make this absolutely clear to new customers.

Two: There is a difference between cost and cash-flow. Though you’re right in saying that paying upfront and paying monthly has the same average cost, those who choose to pay the full amount upfront have decided they are able to take that hit on their cash-flow. Those who choose to pay monthly are trying to reduce the hit on their monthly cash-flow. Moreover, even though you’re right that both ways of paying are the same overall, that doesn’t necessarily make it right.

Three: And this I feel is the key argument that Martyn has made – those who choose to pay monthly are paying more in the first year than those that pay upfront. If you pay monthly, in the first year you will pay £218. If you pay for the year upfront you will pay £145 in the first year. That is, the person who pays monthly doesn’t just pay the first year’s contract in 6 months and then have a 6 month break, they actually immediately start paying for their next year’s licence.

So the person who is least able to take the financial burden and has chosen to pay on a monthly basis is paying more in one year than the person who feels they can take the burden of paying upfront. Surely that’s backwards from what someone would reasonably expect?

Finally, although we are very open to criticism here on Which? Conversation, please try and engage in the points made and not make personal remarks against authors, or indeed other commenters. Read our commenting guidelines for more: https://conversation.which.co.uk/commenting-guidelines

The only logical conclusion to your’s and Martyn’s argument is that there should be a discount up front for an annual payment, or a charge for monthly DD if you want to keep cash flow down. Otherwise few will pay up front. This is the only valid argument I think Which can make. NOT Martyn’s crusade only for monthly DD payers!

And of course where your argument leads is to higher TV licences anyway, as the interest lost to the government has to be replaced AND the £2billion lost. I think there is more than a smidgeon of naiveity here – the consequences have not been thought through.

Martyn, responding to your comments in turn:

“One: Are people who pay by monthly direct debit aware that they’re paying double in the first 6 months?” : It is made perfectly clear on the TV Licensing web-site. I imagine that TV Licensing inform the person paying the direct debit what payments will be taken and when. The person can see from their bank account how much is being taken.
The issue between you and your ex-flatmate is to do with communication between yourselves and absolutely NOTHING to do with TV Licensing.
“Most people expect that if you pay on a monthly basis, the 12 month payment is equally split across the year.” : Not necessarily, because people often realise there is an extra cost for paying over a period of time rather than directly upfront, e.g. insurance premiums.
“TV Licensing may have to try harder to make this absolutely clear to new customers.” : What else can they do? If people do not read the information provided, that is their problem, not TV Licensing’s problem.

“Two: There is a difference between cost and cash-flow. … Those who choose to pay monthly are trying to reduce the hit on their monthly cash-flow.” : Agreed. No-one has disputed that. But that is NOT the argument Martyn put forward.
“Moreover, even though you’re right that both ways of paying are the same overall, that doesn’t necessarily make it right.” : Right for whom? This isn’t a question of right and wrong: what’s right for one person isn’t right for another. It’s a question of trying to provide a variety of payment methods to suit people’s differing circumstances while being reasonably fair to all. You may disagree with the choices available, but that doesn’t make them WRONG!
You have also overlooked that there is a quarterly ‘pay-as-you-go’ method with a small surcharge for those who do not want to start by paying 12m fee over 6m.

“Three: And this I feel is the key argument that Martyn has made – those who choose to pay monthly are paying more in the first year than those that pay upfront.”
I didn’t read that as Martyn’s key argument. He specifically claimed that “Those who pay for TV licence by [monthly] direct debit should not be penalised”, and seemed to me to suggesting that they are subsidising those who pay by other methods, something that I think he has now conceded is not true.
“If you pay monthly, in the first year you will pay £218. If you pay for the year upfront you will pay £145 in the first year. That is, the person who pays monthly doesn’t just pay the first year’s contract in 6 months and then have a 6 month break, they actually immediately start paying for their next year’s licence.” No-one has disputed that. As I’ve said previously, TVL specifically state that it is NOT a ‘pay-as-you-go’ method.
As I’ve also suggested previously, you could see what happens if you stop paying after 6m, and then re-apply for monthly direct debit when the next licence fee is due.

“So the person who is least able to take the financial burden and has chosen to pay on a monthly basis is paying more in one year than the person who feels they can take the burden of paying upfront.” : That applies to most monthly direct debits, usually in the form of an interest rate or ‘surcharge’ which is then gone forever.. At least this way their money is not permanently ‘lost’: the ‘credit’ is recognised and returned when appropriate.
“Surely that’s backwards from what someone would reasonably expect?” : I disagree: people DO expect to pay more by spreading payments.

Arguably, the person who pays up-front is losing interest on their money, and there would be no incentive to pay up-front if the monthly payments did not have some kind of ‘disincentive’.
Currently, there is always the choice of paying £145 up-front using a loan or overdraft, but I think most would regard that as a worse choice.

Finally, there may be an issue here that it was worth drawing to people’s attention (i.e. the way that the monthly payments work), but not in the sensationalist way that has been done with suggestions that this is a massive new relevation and suggestions that penalises monthly payers compared with other. I’ve known of it for years – from reading it on the TVL website(!) – which is why I choose to pay annually, an option which I accept not everyone has.

There is no ‘right’ or ‘wrong’ here – just different choices. We ALL have to make difficult – but different – financial choices at times: It’s called ‘life’.

There is, of course, always another choice: listen to the radio instead of watching TV!

Nigel says:
29 August 2012

To Martyn Saville & Patric Steen
It quite clearly states on the TV Licencing website:

“Monthly Direct Debit is our most popular option, giving you the control of smaller monthly instalments with the convenience of automatic payment and renewal. You’ll usually pay for your first year’s TV Licence within the first six months, at around £24 a month. You’ll then pay for your next licence in twelve monthly instalments of just over £12.”

This would achieve your stated aim of improving you cash flow. Rather than have to pay the full amount in one, the First Years Licence is paid in six instalments, then the Second Year paid partly in advance, like Lump sum people pay for 12 months, and then from renewal date of the Second Licence in arrears.

But it all boils down to as Which? so often tells us, read the T & Cs

PS Phone & Utility Bills usually come two parts, Line Rental & Infrastructure Charges in Advance and Call Charges & Usage in arrears.
PPS I did actually read your T & Cs and edited my previous submission accordingly.

Here is TV Licensing’s response to our Conversation and your comments, which I thought you might like to see:

‘As not everyone can pay for their full licence fee up front, TV Licensing offers the monthly direct debit scheme to enable people to pay by instalments. On this scheme, customers pay for their first licence over six months and thereafter pay half the fee for their licence in advance and half in arrears, spreading the payment across 12 months. The total amount a person pays for their licence always adds up to the licence fee in force at the time of issue.

‘TV Licensing wants to make it as easy as possible for people to pay for a TV Licence and there are a number of ways people can pay, including annual Direct Debit, Direct Debit instalments, weekly or monthly cash payments.’

Thanks Patrick for eliciting that comment. However, they can dress it up how they like and serve it on a silver salver with watercress all round it, it doesn’t alter the fact you made in Point 3 of your contribution yesterday: those who really need the ability to spread the payment should not have to pay 50% extra in year one even if it all balances out neatly in the long run. I cannot think of any other annual payment where the customer starts paying six months in advance for the following year. If it’s not an inequity it’s certainly an iniquity in my opinion.

Then John, pay quarterly and pay a small fee for doing so. The % they charge is small compared with some schemes for spreading payments.

I can’t see how the licencing people can be faulted for offering all these ways to pay. The only argument is whether a licence (like car tax, etc) should be charged for a year in advance, or whether like council tax, sky, bt etc it should be paid monthly.

What people fail to realise that the cost of the advance versus monthly methods are already built in to the costs. i.e. sky is a little bit even more expensive as it is charged monthly than if everyone had to pay for it a year in advance. So too council tax – if we all paid up front in advance then council tax could be cheaper as the council would have money in the back to earn interest on…. BT offer a (substantial) discount for paying the rental a year in advance. The costs of the various subscriptions already reflect the payment model. I find it strange (and disturbing) that Which don’t seem to have a basic understanding of business and economics – or just plain common sense.

SO – the TV licence is a bit cheaper than it would be otherwise as TV licencing can earn interest on the money it has. Do you want the current system of payment in advance, or a more expensive TV licence? Those are the choices, not the something for nothing that Martyn wishes.

donkeydonk says:
30 August 2012

i have a tv card i have paid £5.a week for a number of weeks then stop paying for a number of weeks for the last 3 years this last few months i forgot to pay i then got a text message from the goverment to say i was behind with payments although my licence runs for another 6 months i then phoned the number on the card only to find i now pay 6 months in advance needless to say i have canceled this kind of payment and will pay in full when the present licence runs out as i will be no better off paying by D/D thank you david

Robin Wilkinson says:
30 August 2012

I fear that your article concerning the direct debit scheme for the payment of the TV Licence fee is rather unfair. No mention is made of the large amount of money paid in advance by those who pay upfront.
If we assume that it is reasonable to pay one month in advance then those paying at the begining of the year are paying an additional 11 months of fees in advance for the whole of January, 10 months of fees in advance for the whole of February and so on. On average TV Licensing will hold advance fees for five and a half months of viewing, equivalent to £66.69.
For those paying monthly, assuming that the first direct debit payment in the first year is made at the beginning of the first month of the licence’s term, the advance payments for the first year will amount to an extra £12.12 for 1 month, £24.24 for 1 month, £36.36 for 1 month, £48.48 for 1 month, £60.60 for I month and £72.75 for 7 months. On average TV Licensing will hold advance fees equivalent to £57.57 over the first year. In subsequent years the advance fees will be £72.75.
It can be seen that those paying by direct debit are benefitting in the first year from an average reduction in advance fees of £9.12, but paying £6.06 additional advance fees in subsequent years. The figures suggest that TV Licensing has done rather well in its attempts to be fair to all. The slight differences involved hardly merit further worry!
This is a modification of a letter I sent on 10/2/03 in response to a similar article in Which?

A number of us with some maths ability have pointed this out to Which. I think they’ve not properly thought this through (fair enough if the whole point was to complain about anyone paying in effect at the start of the year in advance, but not to just say DD is unfair). But even then, lots of things are paid for up front. And they haven’t thought through the consequences of everyone only paying month by month for that month – for example. lost interest on the £2billion in the bank would mean an increase in licence fee.

I use a simpler piece of maths to yours – annual payers on average 6 months in credit (£72.75). Monthly direct debit payers after the first 6 months are also exactly, funnily enough, 6 months in credit.

In fact overall monthly DD payers are actually marginally better off as they are less in credit for the first 6 months.

I think it is actually quite an elegant and fair solution the current DD system – it does not penalise monthly DD payers by charging interest over an annual payer, nor does it give an annual payer a discount. Both of these methods are widely used when the option of monthly or annual payments is offered, so, in summary:

What is the problem?!!

Yes this is so perfect – mathematically speaking – that it would be helpful if the government would introduce such a payment process for state pensions and other benefits on the basis that they can have back any leftovers when we die.

what I find strange is that someone like Robin just pointing out the maths behind the system gets thumbs down from people…

Is it too complicated, or just what people don’t want to hear?

Getting a bit pointless as there seem to be some who can’t see that the two main systems are exactly the same in terms of average credit

If you don’t like the upfront double payments on the DD system it’s quite simple. Use the quarterly system. It’s something like 7.5% APR which is lower than most systems where you pay extra to pay in installments

Or is there something wrong with that as well as it doesn’t give you something for nothing?

It’s not “average credit” that causes the difficulty. People want to pay as they go and not have to deposit £72 with the Exchequer. Since the licence starts from the first of the month in which it is bought [if my memory serves me correctly] there should usually be enough “float” to satisfy the licensing organisation [who, after all, is submitting a direct debit mandate with a bank account behind it] or for a little extra reassurance they could have a two-month payment upfront and then the regular DD payments kick in in month three. I might have more tolerance for the current arrangements if the BBC got some programme-making benefit from this dodge. The argument about loss of interest would impact on taxes or even the licence fee itself is not appealing – money left in the consumer’s pocket can do much more good in the economy than the same amount [it’s not a lot in the overall scheme of things] sploshing around in the government’s laundry room.

In my haste I left out the words ” about the applicant” after “licensing organisation”.


You appear to be confusing two separate – but related – issues.

The current payment schemes are all based on the ‘philosopy’ of an ANNUAL licence (probably for historic reasons). The original article seemed to suggest that – under the present scheme – monthly payers are “penalised” compared with those paying by other methods. The discussion of “average credit” IS relevant to that issue. Many of us feel that, as long as the system continues to be based on an ANNUAL licence, then the various payment methods are reasonably mutually equitable.

A separate issue is whether the whole system should be changed to a ‘pay-as-you-go’ licence (which is my understanding of what you are suggesting). But that is NOT what the original article was about, and I’m not aware that anyone commenting here has seriously objected to that proposal (altho’ some of us have indicated POSSIBLE difficulties – but not necessarily insurmountable obstructions – that might be raised as arguments against a changeover).

Personally, on the bases that (1) close to 100% of households need a TV Licence and (2) the goverment effectively conctrols the amount of the licence fee, I don’t see why the BBC is just funded directly from general taxation, and then we could dispense with all the administration costs currently incurred by TVL in issuing and enforcement.

Ralph says:
3 September 2012

This has always annoyed me. I pay for 10 TV licences as I have rental properties, and I strongly object to having to pay on average 6 months in advance either way. The TV licence is to allow a household to watch television while it is in force, and if administration costs were removed I would think that paying daily should be an option if someone wanted. Clearly that’s going to be too much admin, but surely monthly should be an option? Really monthly, not pseudo monthly whereby you pay a year’s licence over 6 months and then stay 6 months in credit the whole time. To point out that you are just as badly treated if you pay annually is missing the point for me – insisting on customers being 6 months in credit is wrong either way. If any other utility tried that I would ditch them, but the TV licence is effectively a tax, protected in its monopoly by criminal law, so those who administer it have a responsibility not to abuse that power. They are currently failing adequately to discharge that responsibility in my opinion.

Ok, so we should also pay for road tax daily?

Possibly in an ideal world yes, but there seems to be a lack of reality by the complainants here. Many things we pay for in advance, and if we pay monthly there is either a charge made, or the cost is built in to the overall cost.

e.g. if sky was paid annually in advance then the company could charge a lower amount.

(p.s. I don’t have a lot of sympathy for someone with 10 rental properties – I am sure you build in the cost of the upfront annual TV licence payment in to your overall rent – even if you don’t specifically)

If you don’t want to be in 6 months credit, pay quarterly then.

Do you ask your tenants for any payments in advance?
Or do they just “pay-as-you-go” weekly / monthly?

Melanie says:
26 November 2012

I called the helpline number when I realised I was paying double for the first six months to be told that they were helping me to budget which I found extremely condescending.

I think you are missing my point , why should I be paying for a licence when I turned 75 in August 2012 shouldn’t the t/v licence be free when you turn 75

Mary, I don’t know what “point” you’re referring to being missed since there doesn’t appear to be a previous message from you on here. But if you go to this page on the TV Licensing website http://www.tvlicensing.co.uk/check-if-you-need-one/for-your-home/aged-74-and-over-aud3/ it tells you what to do about getting a free licence.

Gratiela says:
29 November 2012

I am so pleased that somebody else found this out and actually sat and reasoned about it. I am currently going through the same. I am trying to exit the direct debit scheme but they would not refund the money to me. There’s absolutely nothing in the terms and conditions of the direct debit, as far as I can tell. I asked them in writing to point out to me if there is anywhere on the website a stipulation concerning the fact that there is no refund. Because, on the other hand, they say quite explicitly that you can give up the direct debit arrangement. You can only get a refund, they say, if you cancel the TV licence. On the other hand, I read somewhere (will get back to post the link if I can find it again) that those who paid a one year in advance sum found out that they were paying for only 11 instead of 12 months.
The excuse of those in charge (must find the link) was, unbelievably, that it would be too expensive to change the system settings, or something to that effect. In other words, ‘you are being cheated, maybe, but believe me, it would be more expensive not to’. It is this that I find quite unbelievable. How can people muster the guts to come up with such absurdities?

But then some of the people who commented above are quite happy, it seems, so there must be some consensus about it. I cannot help remarking, though, that some other people, more and more these days, are happy to have an extra £72 in their pocket rather that in the TV licensing company bank account. Also, other service providers (utilities) actually recommend their services by pointing out that they can save their customers £72 annually. Why would it be otherwise with the BBC? Are they a service provider, or rather, a heritage issue?

I think that their current direct debit arrangements can be challenged, and I mean legally challenged (just a matter of finding out the way the direct debit may be regulated). If this has not happened so far, it is because the issue has been overlooked, not because there is no point in bringing it up.

When my daughter moved into her new home I told her to get in touch and pay her licence by DD.I divided the amount by 12 and told her how much it should be. She rang up and was told it was double this amount.I told her it must be from a debt from previous tenant and told her to ring back. She rang back and no indeed it was not someone elses debt. I could not understand what she was explaining so I rang up myself and yes indeed they want double payments for 6 months then monthly payments after that!!!! I couldn’t believe it.I was very surprised a campaign had not been brought up before.I have read some of the comments agreeing with this practise and am very surprised. It defys logic.I would have thought anyone with common sense would see how wrong this practice is.Anything I pay by instalments is divided into 12 then maybe a little added for the privelige but not this system.Can’t believe they have got away with it.Shame on the government and BBC.

derek coutts says:
25 December 2012

Why are tvs not made with a tuning device whereby you do not need to have BBC ,as its only the bbc that gets the licence money,they also broadcast worldwide,do the other countries contribute to any fees,,total rip off for films etc that have been watched year after year,value for money,huh,RIP OFF MERCHANTS.

[Hi derek, we’ve made a slight edit to make your comment follow our guidelines. Thanks, Mods]

tony lamb says:
21 November 2013

All I want is for the direct debit to be an EQUAL 1/12th of the annual amount. Change it once a year by all means, but it drives me & my accounting mental piddling about with different numbers of pennies every month – surely paying 6 months in advance entitles me to this?

iAN says:
24 April 2014

Give them nothing it is time the whole tv licence thing was scrapped!

Dan says:
24 April 2014

Why on earth does anyone pay this truly criminal company money? I am utterly shocked there is even a debate on how to pay? They are the scum of the earth and do not deserve a penny. I will never pay for a TV licence and they can knock my door as much as they like. I will just wave through the window. Do your research and see how this dreadfully sick company treats people. Backed by the Government, now there’s a surprise!

jane says:
24 April 2014

What needs to be said is ‘why are people still paying the tvl?? Stop now.