BBC loses license fee battle


LONDON -- In what amounts to a major blow to the credibility of BBC director general Mark Thompson, the government has reportedly decided to go ahead with a far lower license fee settlement than called for by the BBC.

According to sources close to the settlement, Treasury Secretary Gordon Brown has settled on a 3% increase in the BBC's £3.3 billion ($6.5 billion) a year license fee in 2007, followed by an increase of 2% a year over the following three years.

The figures fall far short of the BBC's call for a 5.7% increase each year through 2012, a figure it said would take account the rate of inflation, currently running at 3.9%.

The news was broke by Channel 4 News and widely picked up by news organizations here.

When the BBC made its original license fee bid at the start of the year, it had called for a license fee hike amounting to 6.4% a year for seven years. This was later revised downward to 5.7% after the government's independent auditors rejected the BBC's own financial analysis and cost projections.

On Friday, the BBC claimed that the license fee settlement had still not been concluded and that talks were continuing, but political sources -- thought to be from the Treasury -- are understood to have been briefed that a deal has been concluded.

"Discussions on the license fee settlement are continuing and we await a decision and announcement in the New Year," a spokeswoman for the pubcaster said. "Nothing will be formally announced until parliament has returned from the Christmas break."

Reps for the Treasury and Culture deparments did not return calls, but a Treasury spokesman quoted on the BBC said: "Pensioners couldn't pay any more than the (yearly) license fee of £131.50 ($257.25). The BBC must stand on its own two feet."

If correct, the deal will be a hammer blow to morale at a pubcaster already destabilized by the sensational defection of BBC chairman Michael Grade to rival ITV earlier this month.

Grade's departure followed 12 months of painful job cuts and organizational upheaval at the BBC under a strategic plan put together by Grade and Thompson to position the BBC as the leading British cross-platform broadcaster. Some 4,000 jobs -- one in five of the entire BBC workforce -- have already been cut under the "creative futures" scheme.

News of a modest license-fee hike is expected to result in more redundancies, more repeats and cuts in program and channel budgets, according to BBC insiders, and leaves the plans for broadband expansion in question.

With such a comprehensive jobs-cutting program already concluded, it is unclear where new cost-savings can be made.

BBC director general Thompson had threatened that without the license fee income it needed, two major planks of its expansion plans -- moving its sport and radio divisions to the Northern city of Manchester and providing a £600 million ($1.17 billion) support program to convert elderly and disabled households to digital television -- would not survive.

But earlier this week, Culture Secretary Tessa Jowell told Parliament that the two proposals -- with an estimated cost of £1 billion ($1.98 billion) -- will be protected within the settlement, leaving the BBC no option but to follow through despite having substantially lower income.

Gerry Morrissey, assistant general secretary of broadcasting workers union Bectu, fears that savings will be made through job losses and said he was seeking "urgent talks" with the BBC.