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Last Updated: Wednesday, 4 October 2006, 09:38 GMT 10:38 UK
Government 'split' on licence fee
Michael Grade and Mark Thompson
The government's decision is expected later this year
The cost of a television licence fee is likely to go up in line with inflation, government sources have revealed.

The BBC has asked the government for a rise of 2.3% above inflation for the next seven years, meaning the licence could rise to 180 by 2013.

The cabinet is split, said BBC Business editor Robert Peston, with Tony Blair and Gordon Brown backing a rise below inflation, but others disagreeing.

But the Department for Culture Media and Sport said it was "speculation".

A DCMS spokesman said that the licence fee had not yet been decided, and added: "As we have said, we will announce the outcome by the end of year."

Mr Peston said there was disagreement, with the prime minister and chancellor being opposed by the culture secretary, and that a compromise was now the most likely option.

The BBC argues the increase in the licence fee - currently 131.50 - is needed for on-demand services and more quality programming.

Uncertain outlook

A financial settlement to cover the whole 10-year period of the BBC's new charter is highly unlikely.

Ministers believe the outlook for the industry is too uncertain to guarantee a whole decade of funding, so the new licence settlement is expected to cover between three and five years.

A decision is expected this autumn, probably next month and will take effect from April of next year.

The government has already said licence fee money will be used to help elderly and disabled people pay for digital TV equipment.

Earlier this year ITV said that the BBC was asking for too much, with then-boss Charles Allen saying the calculations had been done on the "back of a fag packet".


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