It was designed so that the BBC essentially had independence from the government, and as such, they could more easily be politically neutral (if they were funded directly by the government, there would be more pressure for them to cover the government favourably in news programs etc.).
Problem is that these days the licence fee is outdated with lots of people just watching Netflix/Amazon etc.
A lot of the "right wing" here also think the BBC has a left wing bias, which I think is a bit ridiculous really, as a lot of the "left wing" also think it has a right wing bias. But the consequence of this is that a lot in the current government want to decriminalise non-payment of the licence fee. This would basically mean that there is no consequence to not paying the licence fee, and assuming the government didn't come up with an alternative way of funding it, it would amount to death by a thousand cuts for the BBC (which a lot of right wingers are actually quite open about wanting).
It's quite a tough problem in my opinion. Direct funding from the government would solve a lot of problems, but also make political impartiality a lot more difficult to achieve. A direct subscription like for Netflix would likely result in a significant drop in revenue.
Hard to see a good solution here.