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Last Updated: Thursday, 18 January 2007, 12:05 GMT
BBC licence fee 'to rise by 3%'
Mark Thompson
The BBC's director general has argued for an above-inflation hike
Culture Secretary Tessa Jowell is expected to announce the TV licence fee will rise by 3% over each of the next two years, the BBC has learned.

The deal, to be outlined in full in the Commons, will see the current fee of 131.50 rise to a maximum 151 by 2012.

Borrowing limits will also be tighter than requested. The BBC had wanted an above-inflation hike in the licence to boost programmes and digital services.

Unions have warned that such a deal would lead to "heavy job losses".

The corporation had argued it needed an extra 5.5bn over the next seven years to pay for more original programmes, new digital and local services and increased costs.

It also said the money was needed to provide free digital set top boxes for the elderly and infirm, and meet the 400m cost of relocating 1,500 posts from London to Salford.

BBC director general Mark Thompson
The BBC's director general has argued for an above-inflation hike

Speaking at The Future Of Creative Content Conference, BBC director-general Mark Thompson said while a six year settlement was to be "welcomed" the details of the deal were a "real disappointment".

"Given our vision of the future, a vision broadly endorsed by the Government in its White Paper; given the Government's own requirements and ambitions, especially those around switchover; and not wanting our existing services to the public to be squeezed or diminished as we invested in the future; we'd argued for a licence-fee that would grow modestly in real terms," he said.

"Independent research commissioned by DCMS suggested that the British public were willing to pay for such a settlement.

"Instead the Government has opted for a settlement which means... the price of a licence-fee will sit somewhere below retail price inflation."

He suggested the corporation would look to crossing out proposed investments, boost commercial revenues, clamp down on TV licence dodgers, driver further efficiency, and juggle resources as a result.

'Difficult choices'

The BBC's business editor, Robert Peston, said the corporation wanted to be able to borrow up to 400m - double what it is currently allowed to do.

But the borrowing limit will be increased to between 220m and 230m.

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%.

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

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).

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

The RPI takes into account some housing costs, and is the rate often cited by unions as a benchmark for agreeing pay settlements.

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

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

He said: "I think you do need to bear in mind that even though 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.

"And the number of households has been rising steadily and is likely to go on doing so. So in actual fact, I think the settlement will continue to deliver a real terms increase in the amount of money available to the BBC."

The government has already announced that a 600m portion of the settlement will be "ring-fenced" to help pay for the digital switchover.

Ms Jowell is said to have argued the BBC's case over tense negotiations during the past 24 hours, but the Treasury described the bid as "far too much".

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

Licence fee settlement to disappoint BBC


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