FORMER BBC head Greg Dyke says he has always believed the licence fee is a “deeply unfair” tax.

The ex-director general, who led the broadcaster for four years from 2000, said he did not think the funding arrangement was satisfactory because it costs the same for “the rich and the poor”.

He told the House of Lords Communications and Digital Committee the  reason it survives is because no-one knows what to replace it with.

Dyke was giving evidence to an inquiry which is considering how the BBC should be funded in the future.

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He cautioned against “rushing into” decisions saying it is not yet clear if streaming services competing with the BBC will be as profitable as expected.

“When it comes to the licence fee, I have always been of the view the licence fee was an unsatisfactory tax, largely because it cost the same for the poor or the rich,” he said.

“That always seemed to me to be deeply unfair - and I felt that in the period I was at the BBC.”

Dyke said that “no-one would invent the licence fee today”.

“The idea I would come in here and say I’ve got this great idea, we are going to charge people £150 a year so they can receive radio and television, we would be laughed out the room,” he said.

“But if you are going to get rid of it, you have to have something better to fund the BBC.

"It could be there is a method which says part of it is a licence and part of it is that the BBC could make more money.”

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Broadcaster Andrew Neil, who also gave evidence to the committee, said the licence fee was both a “wonderful asset” which gave a guaranteed income and a “straitjacket”, which prevented the BBC from raising further income.

But he said the BBC had usually “closed down” debates about any alternatives.

“[It is a] funding mechanism invented when Lenin was rolling out his new economic programme in Russia, Warren Harding had just won a landslide in America…and Lloyd George was handing over to Bonar Law as Prime Minister in this country,” he said.

“Is it seriously still the funding mechanism for the 2020s or more pertinently, the 2030s?”

Asked if he believed the BBC was biased, Neil said he did not believe there was any “intentional” bias but that it reflected the metropolitan, left-wing world in which it was based - and it did not matter if staff were moved out to places like Manchester or Glasgow.

“I have never found, with some exceptions as it is a massive organisation and has a massive output, that there is any intentional bias, that people set out to do biased news or biased broadcasting,” he said.

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“It is by the very nature of its being as a metropolitan institution biased – in the sense that it makes it reflects the biases of the metropolitan world.”

Dyke said he was not concerned about a left or right bias, but about a “south of England bias”.

He said: “I do think the BBC had a big south of England bias.

“The famous joke – whether it actually happened – of the weather forecaster who said there are enormous storms across the south of England but the good news is they are moving north.

“There is a degree of truth in that, which is why it was important to move more north and it is important now to move more out of London for that reason.”