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Last Updated: Thursday, 18 January 2007, 14:56 GMT
Jowell reveals 3% TV licence rise
Mark Thompson
The BBC's director-general said it was a 'disappointment'

The TV licence fee will rise by 3% over each of the next two years, Culture Secretary Tessa Jowell has announced.

Ms Jowell told the Commons the deal will see the fee rise from 131.50 to 135.50 on 1 April, then rise gradually to a maximum 151.50 in 2012.

Ms Jowell said it will allow the planned move of 1,500 jobs from London to Salford, Greater Manchester.

BBC director-general Mark Thompson called the deal "disappointing", but added that quality would not suffer.

The BBC had wanted a higher, above-inflation rise to cover increased costs and the digital TV switchover.

"It's a disappointing settlement. It doesn't mean we can't carry on with our exciting plans for the future, but it means we face some quite tough choices," Mr Thompson said.

Ms Jowell outlined what the licence fee settlement will allow the BBC to do:

  • Maintain all of its current services and provide up to 1.2bn for investment in new activities.

  • Allow the planned move of key departments to Salford.

    BB graphic

    Ms Jowell also said the corporation would receive a 12.5% increase in its borrowing capacity to help deliver digital switchover, including 600m to help the elderly and disabled move to digital TV.

    She said the settlement would provide "stability and certainty over the crucial period of digital switchover".

    "This is a vital opportunity for the BBC to widen its geographical spread and make better use of the creativity and talent that exists across the UK with huge knock-on benefits for the regional economy," she said.

    But Ms Jowell warned that it was up to the BBC Trust to deliver the best possible value for the investment.

    She urged the BBC to boost efficiency savings by up to 3% from 2008.

    The BBC Trust has said it believes that the Salford move would be affordable and had "approved the continuation of contractual negotiations to deliver the project".

    'Challenge'

    BBC Sport, Radio Five Live and the BBC's children's channels are all set to relocate to the Salford Quays site known as mediacity:uk.

    Mr Thompson said the move to Salford would be beneficial to the BBC and the north of England alike.

    He also reassured the public that the settlement would not adversely affect the quality of existing BBC output.

    "The BBC will receive over 20bn over the next six years. The challenge is how do we maintain and improve the quality of existing services but also plan for the future," he said.

    "The case the BBC made clearly fell on deaf ears. The economic background is very different from when we made the bid, but without question we have not got what we asked for."

    Mr Thompson said it was important for audiences that the BBC pushes forward with plans for the digital age, such as on demand TV.

    HAVE YOUR SAY
    We pay enough for the BBC as it stands right now with the current fee
    Carl Thomson, Stoke on Trent

    Under the details of the settlement, after the first two 3% rises the increases will slow before reaching the maximum agreed 2012 figure.

    In an earlier e-mail to staff, Mr Thompson said the corporation would face "some very difficult choices" if forced to accept a below-inflation increase.

    He was referring to the Retail Price Index (RPI) measure of inflation - or the "headline" rate - which currently stands 4.4%.

    A 3% licence fee rise in the first two years of the deal is at the rate of inflation if it is measured by the Consumer Price Index (CPI).

    Further cuts

    The BBC, some MPs, and the campaign group Voice of the Listener & Viewer, had wanted to preserve the existing link with the RPI.

    Liberal Democrat shadow Culture, Media and Sport secretary, Don Foster, said the settlement had put the BBC "at risk".

    "Throughout its history, the BBC has had a proud tradition of setting the gold standard for television and radio. That reputation is now at risk.

    "Licence fee payers, viewer organisations and unions all agree that they're prepared to pay more for a higher quality service. Instead they're going to pay less and get less."

    BBC graphic

    Unions have warned that a 3% deal would seriously hit programmes.

    Gerry Morrissey, assistant general secretary of Bectu, which represents technical and other broadcasting staff, said: "We are not prepared to pick up the tab for the BBC's inability to negotiate a decent licence fee.

    "We have already suffered 3,000 job losses and there is no more room for further cuts.

    "We will take strike action to oppose privatisation, outsourcing and redundancies."

    National Union of Journalists broadcasting officer Paul McLaughlin said it was a "sad day" for broadcasting.

    He added: "The BBC is the cornerstone of a media system that remains the envy of the world. The simple fact is that quality costs and the licence fee represents tremendous value.

    "Today's settlement could lead to an emasculated BBC. Those of us who care about the democratic function of strong, independent broadcasting will do all we can to prevent this from happening."

    Shadow culture secretary Hugo Swire said the settlement represented "as much a defeat for the Secretary of State as it is for the director-general of the BBC".

    But he said the final settlement was "realistic" and added the BBC should be required to live within the financial constraints of the current broadcasting climate.

    COST OF THE BBC LICENCE FEE
    DATE RADIO ONLY BLACK/WHITE TV COLOUR TV
    June 1946 1 2 N/A
    August 1957 1 4 N/A
    August 1968 1 5s 5 10
    Nov 1978 N/A 10 25
    April 1988 N/A 21 62.50
    April 1998 N/A 32.50 97.50
    April 2006 N/A 44 131.50




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