Trousering a cheque for £3.6bn-odd might not seem like a problem. Nor does knowing that a sum on that scale will be yours every year, and people will be legally obliged to pay it. The BBC certainly thinks not. It deploys batteries of strategists, lobbyists and PR people whose main focus is to ensure that whenever the licence fee is set, the BBC does OK.

There’s a problem with this cosy set-up. The licence fee – paying a tax for your telly (and radio, and online) – is an archaic relic of the past. These days, people expect choice. The licence fee has to go. Not only is it bad for choice, it is bad for competition: it’s even bad for the BBC itself.

This apparent paradox is relatively easy to explain. Being funded by a near-universal tax means that the BBC has to offer something for everyone: indeed, “serving everyone” is one of the headings in its latest Annual Report.

But serving everyone is not a recipe for producing genuinely distinctive content. Instead, keeping the licence fee drives the BBC to pump out programmes that in many cases are indistinguishable from the commercial sector, as a glance at the schedules of BBC1 or Radio 2 will make abundantly clear.

Nor is the size of the BBC’s income good for the UK creative sector. The BBC makes much of its own investments in this area, and it has some things to be proud of. But having a gorilla the size of the BBC in the creative industries deters others from investment. Only a company with the financial and management commitment of Sky – where I once worked – has really changed the landscape in recent years. A look at the parlous situation of commercial radio and local newspapers, or the struggles of websites like the Guardian shows that these are sickly flowers, starved of the light by an overgrown BBC.

The licence fee has in practice only survived because of the inability of anyone to agree on a sensible replacement. Commercial players are rightly frightened of a BBC that would be funded in whole or part by advertising or subscriptions – as it would eat their lunch – and their dinner too.

Actually the solution is quite obvious. The government should fund the BBC directly.

Now this idea usually elicits one of those Bateman cartoon moments as everyone runs about shrieking “political interference in the BBC”, as if direct funding means that Theresa May will be deciding what story leads World at One.

Bunkum. The licence fee is decided by ministers bargaining with the BBC already. It has been fixed in pretty crude ways in the past, most recently when the BBC was landed with the cost of free licences for the over-75s by former Chancellor George Osborne. Not the first time the licence fee has been gerrymandered in this way for short term political considerations that have jack-all to do with broadcasting priorities. And it won’t be the last either.

The government has funded the Arts Council since it was established, but under a sensible convention does it not get involved in deciding on particular grants. It would be very easy to establish the same sort of arm’s-length rule for the BBC. That would actually be a more transparent and more logical way to go.

The biggest beneficial effect is clear. Without the incubus of a licence fee, the BBC could concentrate on doing less, and doing it better.

Why do we have a state broadcaster offering Radios One and Two? Or BBC1 offering much the same as ITV1? Or funding orchestras? Or continually expanding into every new area the commercial sector can develop? The answer is simple – justifying the licence fee forces the BBC to play endless catch-up.

The BBC Charter review is over, but there is a break point in a few years to see how things are shaping up. In that period ministers and the BBC should be getting ready for a fresh start, one that reflects the way in which people want to consume media now – using their own money, of their own free will.

Good-bye licence fee: hello a better, smaller, and above all genuinely different BBC.

Martin Le Jeune is a fellow of the Centre for Policy studies. His recent CPS publication, Licence to Kill: Funding the BBC, can be accessed here.