BBC wins battle for higher licence fee

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A pounds 100 television licence fee within two years seemed increasingly likely last night after government-appointed consultants yesterday said it was deserved by BBC .

If the recommendations of the accountants for a 5-6 per cent annual increase are accepted by ministers, the first rise from the current pounds 89.50 fee would be effective from next April. However, sources warned the increase might not be agreed before the next election.

The extra money would help plug what John Birt, BBC Director-General, has called a "funding gap" in its budget for digital television. It would also safeguard the BBC's future in an age of multi-channel television.

According to Whitehall sources, the BBC was yesterday given a broadly positive report card by accountants Braxton, which had been appointed to determine whether the corporation had met all its efficiency targets and whether it deserved a higher licence fee to help fund the launch of digital television services over the next five years.

The Department of National Heritage confirmed that the Braxton report had been received yesterday. A spokesman said: "We are now considering, in light of the report, what licence fee is appropriate for the BBC. We have no intention of making a comment until we have had a chance to digest the contents of the report."

The licence fee, which now raises about pounds 1.7bn a year, would not be enough to meet the additional annual cost of about pounds 130m a year over five years to launch digital services. The BBC has identified three additional sources of revenue, including a one-off windfall of pounds 200m-250m from the sale of BBC transmission sites, likely to be completed by the end of the year. In addition, profits from the corporation's commercial activities, which include pay-television, magazine publishing and other ventures, will contribute as much as 15 per cent of revenues within five years, BBC planners anticipate.

The Director-General has also promised another pounds 100m in savings from cost-cutting and enhanced efficiency, in what he calls the "next step" in the corporation's efficiency drive.

Mr Birt launched his campaign for a higher licence fee at the recent Edinburgh International Television Festival, calling for a "modest, single- digit" annual increase.

His request, which provoked controversy among politicians, was dependent on the corporation's receiving a clean bill of health from government consultants.

Since the campaign was launched, the BBC has confirmed it intends to launch between six and eight pay-TV channels, to be broadcast on satellite, cable and terrestrial distribution systems, in partnership with Flextech, the US-controlled media company. But the corporation has insisted its commercial activities would not be funded by the licence fee.

In its blueprint for a digital future, the BBC has promised widescreen television, a 24-hour news channel and CD quality sound. In addition, the quality and range of existing programming will be safeguarded.

The BBC has insisted that its increasing commercial character is not a first step toward eventual privatisation, despite plans to spin the resources directorate into a separate commercial subsidiary and the well- advanced effort to find a buyer for BBC Transmission.