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BBC licence fee frozen for six years

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BBC sign at Television Centre

© Rex Features

The BBC has agreed to freeze the television licence fee for the next six years and pick up the bill for World Service and Welsh-language channel S4C, it has emerged.

Last night, reports surfaced about a last-minute deal struck between the government and the BBC Executive, including the current £145.50 licence fee being held until 2017.

The BBC will also take over the £272m cost of finding the World Service, currently paid for by the Foreign Office, as well as fund the struggling Welsh-language broadcaster S4C.

However, the corporation is understood to have avoided a contentious proposal to make it bear the £556m annual cost of providing free TV licences for the over-75s.

A formal announcement of the deal agreed with the Coalition will be made this afternoon during the chancellor George Osborne's Spending Review.

The freeze to the licence fee represents a 16% cut in real terms to the BBC's funding, which currently delivers around £3.6 billion a year.

The BBC Trust had initially called for a licence fee freeze until just 2013, but the government has now pushed it through until the renewal of the BBC's Royal Charter in 2017.

Also in the deal, the corporation will have to meet the cost of rolling out broadband to rural areas, along with local TV and online services. It will further pay for BBC Monitoring, which analyses, translates and monitors media coverage from around the world.

By 2015, the extra financial obligations will place an additional £340m burden every year on the BBC's outlay, which is almost equivalent to the total cost of its main digital TV channels - BBC Three, BBC Four and the BBC News Channel.

The Department for Culture, Media and Sport currently provides the £100m annual budget for S4C, but much of the channel's programming is already provided by the BBC.

The BBC is understood to view the deal as a necessary compromise, but it is glad to avoid the massive cost of providing the free TV licences, which it views as a welfare benefit.

It is also thought that the £130m annual surplus from the digital television switchover will be allocated to the BBC to help fund its extra commitments after the switchover completes in 2012.

Over the past few weeks, the corporation has slimmed down its executive board - including the departure of deputy director general Mark Byford - as it seeks to cut costs in the face of increasing government pressure.

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