Ministers are expected to approve recommendations in a report, to be published on Thursday, on the BBC's future funding by a committee chaired by Gavyn Davies, the millionaire economist.
To allow the BBC to expand into digital television, the Davies panel will propose a top-up to the pounds 101 licence fee for people who buy digital sets. The charge would be phased in and is expected to average pounds 19 a year. When the existing analogue system is switched off, millions of viewers will be forced to buy new digital equipment, and pay the top-up fee.
The Davies panel is expected to proposed that the licence fee be increased each year in line with the retail price index, with a concessionary fee of pounds 50 introduced for the blind.
The BBC submitted research to the Davies panel, showing that a pounds 30 or pounds 35 annual fee would not have a significant impact on the number of people signing up to digital, currently running at some 5,000 new subscribers a day.
But BSkyB, Granada and Channel 4, who strongly oppose an extra charge for licence payers, will react with fury if their fears are realised. "The Government and the BBC are playing with fire," one executive said. "Viewers are very benign about the licence fee - but a digital fee could send the total yearly cost up to about pounds 130, which is bound to make people angry."
Some ministers are nervous about a public backlash against what has been called the "digital poll tax" by commercial television companies, who argue that millions of viewers would be deterred from taking up the new system which will revolutionise the industry. Digital technology could create hundreds of new channels, allowing people to watch "what they want, when they want".
To ensure the success of digital television, the Government is expected to bring forward the date when the existing analogue system is switched off and millions will have to buy new digital sets or set-top boxes just to watch BBC and ITV. The conversion, expected after 2010, may now happen as early as 2006.
Chris Smith, the Secretary of State for Culture, Media and Sport, is sceptical about the BBC's demands for a digital fee of between pounds 30 and pounds 35 a year, but is thought likely to endorse the lower proposal from Mr Davies.
"No decisions will be made until the autumn, but at this stage we are favourably disposed towards the Davies recommendation," a government source said yesterday.
While the BBC will welcome the go-ahead for an additional licence fee, it will almost certainly oppose other proposals in the report. To raise money, the Davies panel wants the corporation to sell BBC Resources, which includes assets such as studios and equipment, and dispose of 49 per cent of BBC Worldwide, which earns pounds 80m a year by selling programmes such as Teletubbies abroad.
The proposed sell-offs have been condemned as "the privatisation of the BBC" by trade unions representing its staff, who have warned that there could be industrial action if the Government backs the idea.
Although the Conservatives may oppose the top-up licence fee, opinion in Labour circles is shifting in favour of it. The former cabinet minister Peter Mandelson said last week: "An extra pounds 35 a year on the digital licence is a drop in the ocean compared to the average pounds 30 a month that digital subscribers pay."
In return, however, Mr Mandelson said the BBC should accept greater external scrutiny and new requirements on it "to ensure fair trading, greater efficiency and greater transparency".
Sir John Birt, the BBC's director-general, wants to raise the organisation's budget from its current level of pounds 2.2bn. He would, say colleagues, like at least pounds 200m a year more. Without growth in licence income, he said recently, "the BBC will gradually, slowly, imperceptibly, incrementally, diminish".
Ministers will argue that a supplementary licence fee is the fairest way to fund the BBC's expansion into digital television. They will say that a bigger annual rise in the pounds 101-a-year licence would force poorer people to subsidise richer viewers who would take up digital services.
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