BBC 'left with £2bn spending shortfall after licence fee settlement'

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The BBC faces up to £2bn cuts to its public broadcast service after the Government rejected the corporation's plea for more money.

Mark Thompson, director general of the BBC, described a 3 per cent increase in the TV licence fee over the next two years as disappointing and warned staff that they all faced difficult choices. Mr Thompson told the Media Summit in London that there was a £2bn gap between its current spending plans and the settlement. It meant the amount available for content and services for audiences would fall each year in real terms, he said.

The increase agreed by the Government will mean the licence fee will rise from £131.50 to £135.50 on 1 April, with further rises to £151.50 by 2012. Tessa Jowell, the Culture Secretary, told the Commons yesterday that the financial settlement allowed the planned move of 1,500 jobs from London to Salford, Greater Manchester.

Don Foster, for the Liberal Democrats, said the settlement put the BBC "at risk". He added: "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."

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

Mr Thompson said that quality would not suffer. The BBC had wanted more money to cover rising costs and the switch to digital television, but Mr Thompson said that while the settlement was disappointing, "it doesn't mean we can't carry on with our exciting plans for the future".