The government has been urged to stop criminalising people for not paying their TV licences.
The licence fee is the BBC's main funding mechanism
Commons culture committee chairman Sir Gerald Kaufman said most of those prosecuted were on low incomes or were single mothers.
Shadow Culture Secretary John Whittingdale said the licence fee was like a poll tax and pricey to collect.
Lib Dem culture spokesman Don Foster said Britain needed a "strong, independent and securely funded BBC".
The debate follows the publication last week of details in a Green Paper of a planned government shake-up of the corporation.
Culture Secretary Tessa Jowell said the licence fee would remain for the next 10 years but pledged to replace the board of governors with a BBC Trust and an executive board.
The government would decide on the right level for the fee after 2007 and look at the possibility of sharing part of the licence fee with other public broadcasters after 2016.
Sir Gerald called for non-payment of the licence fee to be made a civil offence with a fixed penalty notice - and not a criminal one.
For the Tories, Mr Whittingdale accused Ms Jowell of "complete surrender" and condemned the plans as a "lost opportunity".
"The government had stuck its head in the sand and shied away from significant change."
The only justification for a state-owned or state-financed broadcaster was if it provided programmes other channels were not delivering, he said.
He claimed programme quality had declined and "copy-cat programming".
This view was reflected by Sir Gerald who said the BBC was deteriorating in "several respects" but praised it for its contribution to "national and international life".
But he also urged Ms Jowell not to let the licence fee be used as a "kitty" for other broadcasters.