Licence fee to be frozen until 2013

The BBC Trust has proposed to the government that the licence fee should be frozen until 2013, in a move that could cost the corporation more than £140 million.

Today, the BBC's governing body announced that the licence fee should be held at its current level of £145.50 for the remaining years of the settlement, through to March 2013.

Under the current multi-year settlement, the BBC is entitled to an up to 2% increase in the licence fee over the next two financial years.

However, the Trust believes that the "exceptionally tough financial climate" facing licence fee payers effectively rules out an increase.

The Trust's move would mean taking an estimated £144m out of the already-planned BBC budgets for 2011/12 and 2012/13.

BBC management has already made it clear that the loss of funds would require some "on-air changes, particularly at a time of continuing capital spend on infrastructure projects and digital switchover".

However, the Trust has said that the "exceptional pressures" on licence fee payers requires the corporation to make the necessary savings, "while keeping any on-air impact within acceptable limits".

Sir Michael Lyons, the outgoing BBC Trust chairman, said: "The Trust remains committed to the principle of ring-fenced multi-year licence fee settlements. It is a key part of the BBC's independence that the government grants such settlements and does not re-open them before they come to an end.

"However, we also recognise that the British public is facing an exceptionally tough financial climate. In June, as part of the Trust's role in ensuring value for money at the BBC, we asked the Executive to see if they could make further savings on top of the existing 3% year-on-year efficiencies, so that the BBC does not ask licence fee payers to pay any more than they need to for BBC services.

"A freeze in income will not be pain-free, and this decision was not taken lightly. But 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."

The Trust also confirmed that a pan-BBC review is currently underway on what long-term efficiencies can be made after 2013.

The organisation said that it has asked the National Audit Office for assistance in the review, as it prepares for talks with the government in 2011 on the next licence fee settlement.