Government accepts BBC's offer to freeze licence fee for two years

Former BBC chairman Sir Michael Lyons signed the letter backing Labour (PA)

The Government has left the way open for a cut in the BBC licence fee in 2012 after the Corporation's governing body yesterday offered to freeze the annual charge at £145.50 for the next two years in recognition of the economic difficulties being faced in many British households.

Jeremy Hunt, the Culture Secretary, reacted to the offer by the BBC Trust by saying he was "pleased" at the suggestion, and that the Government would be implementing it next year. But Mr Hunt retained the option of cutting the fee in 2012-2013, a decision that will be made as part of the next long-term licence fee settlement.

The freezing of the licence fee is a blow to the BBC's management, which had been promised a 2 per cent increase next April by the previous Labour government with a smaller increase to come in the following year.

Sir Michael Lyons, the outgoing chairman of the BBC Trust, predicted that the budgets of television and radio programmes would have to be cut. "A freeze in income will not be pain-free, and this decision was not taken lightly," he wrote in a letter to Mr Hunt. BBC management estimates that the loss of the anticipated increase in the licence fee equates to a cut of £144m.

Nonetheless, the Trust chairman, who this week announced that he would not be standing for re-appointment when his four-year contract ends in May, added: "The trust is satisfied that the BBC can manage the impact while continuing to deliver the range of programmes and services that the public loves."

In an interview with the BBC, Sir Michael said: "Our concern about the remainder of this licence fee period has increased because of the difficult circumstances facing the whole country. Households are all facing the prospect of higher taxes, lower benefits and in many cases reduced incomes. The BBC lives in that world, understands the pressures that are on licence fee payers and we have a duty to ask for no more than we need."

In accepting the freezing of the fee for next year, Mr Hunt said: "I have made it clear that the BBC needs to take proper account of the current economic climate and this move, which comes with the Trust's assurances that it will not significantly impact on the quality of services provided to licence fee payers, will be welcomed by the public."

It will now fall to the incoming chairman of the BBC Trust to convince the Government that the licence fee should not take a cut. News of the increased pressure on BBC budgets came as the Corporation is attempting to persuade thousands of staff from taking strike action in protest at planned changes to the Corporation's pension scheme. The BBC director-general Mark Thompson yesterday addressed BBC offices via video-link in order to convince them to accept an alternative proposal to change the scheme, which is facing a shortfall of £1.5bn. BBC members of the Bectu, NUJ and Unite unions are threatening to stage walk outs next month to disrupt coverage of the Conservative Party conference in Birmingham.