Commercial radio urges cut in BBC licence fee

The commercial radio industry is to tell a government inquiry into the BBC's finances that the corporation licence fee must be cut in order to curb its "insatiable appetite" for launching new services.

The Commercial Radio Companies Association will also call for the National Audit Office to scrutinise the BBC's expenditure plans before agreeing any settlement.

The inquiry into the size of the BBC's licence fee is being led by Lord Burns, the former Treasury mandarin, for the Department of Culture, Media and Sport. The Burns study is running in parallel with the Government's process for renewing the BBC's royal charter.

The CRCA will next week say in a submission to a public hearing called by Lord Burns that the BBC's bid for an increase in the licence fee, of 2.3 per cent above inflation, must be rejected.

The radio industry body will argue that the BBC licence fee should be capped at the current level and any efficiency savings identified should then be used to reduce the licence fee.

A spokeswoman for the CRCA said: "Enough is enough. We cannot continue to heap increasing amounts of public money on the BBC to spend on distorting the market."

She said the BBC should not try to "provide everything to everyone" but concentrate on areas not covered by commercial operators.

The radio industry has been particularly incensed by the BBC's declaration, earlier this week, that it will target a younger audience - the segment of the population specially targeted by commercial radio. The BBC has also laid out ambitious plans to further exploit digital media.

The radio industry body's view chimes with other sectors within the commercial media industry, including television, internet and software companies.

The CRCA submission coincides with a report, released yesterday, that was commissioned by the Government into the future funding needs of the BBC, from accountants PKF.

Under the BBC's proposals for a licence fee settlement, it says it costs would hit £3.7bn by the 2013-14 financial year, from £2.5bn in 1999-2000.

The PKF study questioned whether the BBC needs this much cash and it said that the corporation could make greater cost savings.

"We suggest renewal of the Charter offers an opportunity to consider the scope for more fundamental change across BBC divisions so as to deliver transformational change, especially with regard to the content divisions, where in many instances the level of efficiency savings proposed is low and this may provide scope for a reduced settlement," the PKF study said.

Aspokeswoman for ITV said: "The PKF work supports ITV's firm view that the BBC's licence fee pitch systematically overstates the corporation's funding needs over the coming years."