BBC Granted Below Inflation Licence Fee Rise

The BBC will be granted a below inflation licence fee increase, rising by 3% annually until 2008 and by 2% for the following three years, according to reports.

The deal, which is understood to have been made between Tessa Jowell and Chancellor Gordon Brown, has not yet received approval from Prime Minister Tony Blair, but could mean that the broadcaster loses out on an estimated £550 million of funding over the next 10 years.

If the agreement goes ahead, it will put an end to the Corporation’s ambitions to secure its proposed inflation plus 1.8% rise over the next seven years from April 2007, which would have made the annual TV licence fee cost around £180 by 2013.

Prior to former BBC chairman Michael Grade’s departure to ITV (see BBC Chairman Jumps Ship To ITV Top Job), the BBC was confident its terms could be met, but his departure was viewed as a blow within the industry because of his close ties with key cabinet members, including Jowell.

According to BBC reports, the Department of Culture, Media and Sport said the Treasury had initially held out for a 1.5% below inflation settlement.

Earlier in the week, Jowell told the House of Commons that the government was putting aside around £600 million, which will be raised through the TV licence fee, to ensure the most vulnerable in society are assisted in the digital switchover process (see Switchover Support For Vulnerable To Cost £600 Million).

Should the government’s proposed 3% licence fee rise be finalised, next year’s TV licence fee will cost £135.45.

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