BBC forced to accept lower licence fee increase

The BBC will be forced to accept an increase in the licence fee that is less than the rate of inflation for the next six years.

Tessa Jowell, the Culture Secretary, will tell Cabinet colleagues in the New Year she has reached a deal with Chancellor, Gordon Brown, to add 3 per cent to the £131.50 fee for a colour television for the next two years, with an additional 2 per cent from 2008 to 2011, and 0-2 per cent from 2011-2012.

It is far less than the BBC wanted, and could lead to a squeeze on staff levels and savings on the £3bn corporation budget. However, Ms Jowell's allies said it would deliver £1bn more than the Treasury originally wanted.

It will raise the fee for a colour set to £135.45 a year for the next two years, followed by a rise to £138 and possibly up to £140 in six years - a total rise of £9.50 for most households in the country. The BBC had wanted it to rise to £180 by 2013.