Licence fee reports threaten 'difficult choices' for BBC

MARK Thompson, the BBC director-general, said the corporation faced "some very difficult choices" after reports that it will receive a below-inflation increase to the licence fee.

In an e-mail to staff, he called the government's reported licence fee deal as "a real disappointment".

"While by no means as bad as some of the leaks and speculation about the settlement in autumn," he said, "it falls short of the funding which we and the board of governors thought was necessary to deliver the government's own vision for the BBC which they laid out in the White Paper earlier this year."

Culture Secretary Tessa Jowell is reported to have struck a deal with the Treasury which would see the licence fee held below the current retail price index inflation rate of 3.9% for the next six years. Such a settlement would be a bitter blow for the BBC, which has been pressing for an above-inflation increase in the current 131.50 fee.

Mr Thompson said the White Paper had called for an improvement in existing services, new digital services, and the BBC to lead the way in digital switchover.

"We argued that for the BBC to do all three, the licence fee needed to grow in real terms - in other words above the rate of inflation.

"If reports are to be believed, the government is minded to opt for a settlement which hovers just under inflation. In practice, that would mean some very difficult choices for the new BBC Trust - indeed for all of us."

The Department for Culture, Media and Sport said last night that the licence fee settlement had still not been finalised.