The Government should end the “damaging speculation” about decriminalising non-payment of the television licence fee, a committee of MPs has said.

A report on the future of public service broadcasting by the Digital, Culture, Media and Sport (DCMS) Committee claimed the Government now has “no options” on reforming licencing rules.

If the Government does not come forward with a “strong alternative” to the licence fee it should support it for at least the next charter period from 2028-2038, the report states.

Delays to full fibre broadband rollout mean the Government cannot move to a “wholly online public service broadcasting system”, the committee said in a statement.

The report said while TV services are “likely” to be delivered via the internet in the future, the existing model must remain in place given current broadband provisions.

A move to a digital system would result in 1.8 million households losing access to public service broadcasting because of a lack of broadband access and digital skills, the report said.

“As a result, the Government must now act quickly to end damaging speculation about decriminalising non-payment of the BBC licence fee with continuing uncertainty likely to boost evasion rates and lead to a further drop in funding,” the committee said.

In January Culture Secretary Oliver Dowden said the Government would not go ahead with plans to decriminalise non-payment of the licence fee but said the issue would remain under “active consideration”.

He added that criminal sanction was “disproportionate and unfair” in the current public service broadcasting landscape.

According to the DCMS Committee, the BBC’s annual reports identify a rise in licence fee evasion from just over 5% some 10 years ago.

The most recently published figures for estimated evasion are now between 6.5% and 7.5%.

According to the report, decriminalisation of non-payment of the licence fee could be “used as a bargaining tool by the Government” during subsequent negotiations about funding.

It added this would “undermine one of the core principles of public service broadcasting: that it should be removed from Government interference”.

DCMS Committee chairman Julian Knight said: “It’s clear that the BBC TV licence fee has a limited shelf life in a digital media landscape.

“However, the Government has missed the boat to reform it.

“Instead of coming up with a workable alternative, it has sealed its own fate through a failure to develop a broadband infrastructure that would allow serious consideration of other means to fund the BBC.”

He added: “Not only that, but the Government is effectively allowing the BBC to haemorrhage funds through non-payment of the licence fee as a result of the continued speculation over decriminalisation of licence fee evasion, a situation it must bring to an end.”

The report also calls for public service broadcasters to collaborate more to better enable them to compete in the digital marketplace, citing the success of the BritBox streaming service joint venture by the BBC and ITV.

A BBC spokesperson said the broadcaster welcomes the “thorough and detailed report”.

They added: “It is an endorsement of the crucial role played by public service broadcasters and the BBC as well as a clear call to build a strong future.

“We welcome the conclusion that the licence fee is the best way of funding a universal BBC.

“We’re also pleased to see the committee call for updated legislation to ensure the BBC is prominent on digital platforms so audiences can easily find public service programmes and agree that changes should be made to the BBC’s regulation to ensure we can respond quickly to audience expectations online.”

A spokeswoman for the Department for Digital, Culture, Media and Sport said: “Decriminalisation of the licence fee remains on the table.

“The Government continues to believe that criminal sanctions for non payment is increasingly disproportionate, but we need to be careful that any alternative enforcement mechanism does not result in heavier penalties.

“We have said we will keep the licence fee until 2027 but, ahead of that point, will review how the BBC is funded.

“Future reform will be helped by the fact that we are delivering the fastest rollout of gigabit broadband of any comparable countries, and the vast majority of British homes will have access to it by 2025.”