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Last Updated: Tuesday, 23 May 2006, 23:08 GMT 00:08 UK
BBC wants too much cash, says ITV
Michael Grade and Mark Thompson
The government's decision is expected later this year
The BBC is asking for too much money in its current licence fee bid, says ITV.

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.

But an independent report commissioned by ITV argues the corporation needs a licence fee - currently 131.50 - rising only at the rate of inflation.

The BBC argues the increase is needed to fund digital switchover, on-demand services and more quality programming.

A spokeswoman said the licence fee bid had been subject to independent scrutiny prior to publication.

But ITV boss Charles Allen said: "The BBC's back-of-a-fag-packet figures should come with their own health warning.

"This report represents a thorough economic analysis of the impact of the BBC's proposed licence fee increase and it is damning in its conclusions."

The report, carried out for ITV by Indepen Consulting Ltd, argues that if the current bid was agreed, the licence fee would grow faster than people's incomes, meaning it would become harder to afford as time went on and hit low income households the hardest.

It says that if the BBC's productivity growth takes place at the same rate as the rest of the UK economy, it only needs a licence fee rise at the same level as inflation.

But if the BBC out-performs the economy, it adds, the licence fee could be fixed at the current rate of 131.50.

BBC consultation
The BBC has been consulting the public on its future

BBC chairman Michael Grade told the House of Lords earlier this year that the proposed licence fee increase was the lowest it could be to meet the public's needs.

The current licence fee agreement - which sees the fee rise by 1.5% above inflation every year - will expire in April 2007.

The licence fee will remain until 2016, Culture Secretary Tessa Jowell has confirmed - but she has also said that the final deal for the new settlement will be "lower than the BBC's proposition".

She recently announced plans to ask the public how much they would be willing to pay for the licence fee and whether they considered it value for money.

The Barwise report for BBC governors suggested in April that almost half of viewers were against raising the licence fee to help vulnerable groups switch to digital TV.

The BBC's demands could be massively reduced if the government were prepared to foot the bill for their digital switchover policy
Don Foster, Lib Dem

But it also found most viewers would pay more than they do now if the money was spent on relevant services and output quality was maintained.

Shadow secretary for culture Hugo Swire said on Wednesday: "A proposed licence fee of over 170 would be too much for many low income families.

"The BBC cannot expect the government to write a blank cheque to fund the corporation wish-list."

Lib Dem shadow culture secretary Don Foster said: "This report indicates that the BBC has 'over-egged the pudding' in its demands for an inflation-busting increase to the licence fee.

"The BBC's demands could be massively reduced if the government were prepared to foot the bill for their digital switchover policy."


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