Hike On BBC Licence Fee Is 6% Over Two Years

The television licence fee will rise by 3% in each of the next two years, reaching £151 by 2012, it has been announced by the BBC.

Culture Secretary Tessa Jowell will outline the licence fee terms in full in the House of Commons.

The BBC had pressed the Government for an above-inflation increase on the current £131.50 over the next six years to fund digital channels.

BBC Director General Mark Thompson described the figures as "a real disappointment," and warned the corporation would face "some very difficult choices," if forced to accept the below inflation increase.

The corporation had made a case for an extra £5.5 billion over the next seven years to pay for more original programmes, new digital and local services and increased costs.

The BBC also sought to justify the increased funding by stating that the money was need to provide free digital set top boxes for the elderly and infirm.

In a further blow to BBC investment plans, borrowing limits will also be tighter than requested. The BBC had asked to be able to borrow up to £400 million but this will be increased to between £220 million and £230 million.

Unions have warned that the deal would lead to heavy job losses and would seriously hit programme production. Bectu and NU are already strongly opposing compulsory cuts that are part of the BBC's current operations saving plan that aims to trim costs by £355 million a year.

The Government has announced that a £600 million portion of the settlement will be ring-fenced and set aside to pay for the digital switchover.

However, the deal will ensure that the £400 million move of some departments to Salford will receive the go ahead.

John Whittingdale, Conservative MP and chairman of the Culture, Media and Sport committee, told BBC News that he thought the deal was a fair one.

"I think you do need to bear in mind that even thought the BBC is not going to get a licence fee increase the size that it asked for, the amount of money the BBC gets is determined not just by the level of the licence fee, but also by the number of people paying it."

The latest news marks the continuation of a difficult period for the corporation which has already experienced a turbulent time with the defection of Michael Grade as Chairman during efforts to negotiate a better funding package.

The BBC is currently seeking a new chairman following the departure of Michael Grade.

(DS/SP)