BBC freezes license fee until 2013

Move set to cost pubcaster $224 million next year

LONDON -- In a significant concession in its increasingly embattled relationship with the British government, the BBC Trust said Thursday it would freeze the level of the £3.6 billion ($5.6 billion) BBC license fee over the next two years -- despite being entitled to an increase of and additional 2% per year under the current terms of its Royal Charter.

The move comes as the pubcaster comes under pressure to slim down by the new Conservative government, which favors boosting the interests of the commercial sector.

The offer to freeze the BBC's income also comes days after BBC Trust chairman Michael Lyons said he would stand down after just one term in office, leaving his successor to make the case for the BBC in the next round of license fee negotiations.

Culture secretary Jeremy Hunt responded rather curtly to the BBC's offer, warning that the pubcaster must ensure that BBC program quality is unaffected by the income cuts.

"I have made it clear that the BBC needs to take proper account of the current economic climate and this move ... comes with the Trust's assurances that it will not significantly impact on the quality of services provided to license fee payers," he said, although he also conceded that the freeze would be "welcomed by the public."

The BBC Trust, the board responsible for the pubcaster's governance, said waiving the fee would cost the BBC approximately £144 million ($224 million) next year and said he decision had been made in view of "the exceptional pressures that the current economic climate is placing on license fee payers."

The move was greeted with dismay by independent producers, whose trade body Pact warned that margins would come under pressure if the BBC cut back on program budgets.