No licence fee increase in 2011

Sir Michael Lyons explains why the BBC Trust has decided to freeze the licence fee.

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There will be no increase to the TV licence fee in 2011 after the BBC Trust offered to freeze it at £145.50 for the next two years.

Culture secretary Jeremy Hunt said he was "pleased" with the proposal and that the government had decided to implement it next year.

A decision about 2012/13 will be taken at a later date, he added.

If fully implemented, the two-year freeze will create an estimated £144m shortfall in the BBC's budget.

Under the terms of the current multi-year settlement, the BBC is entitled to increase the licence fee in 2011 and 2012 but has offered not to.

In a statement, the Trust cited "the exceptional pressures that the current economic climate is placing on licence fee payers" as the cue for the move.

The Trust asked BBC bosses in June to analyse the corporation's budgets and assess whether short-term savings could be made.

Earlier this month the executive reported back, saying any alterations to the current arrangement would require on-air changes.

Analysis

The government has accepted the BBC Trust's offer to freeze the TV licence fee - but only for one year. Why not longer, when the BBC Trust was offering a two-year freeze? One answer is that it leaves the way open for a possible cut in 2012.

Under the current settlement, made by the Labour government, the licence fee was due to rise by two per cent next April and anything from zero to two per cent the year after. Now it could actually fall in the year 2012/2013 - though some say a cut would be a breach of that agreement.

Jeremy Hunt says that decision will form part of the next licence fee settlement.

Much will depend on whoever the government appoints as the new chairman of the BBC Trust. They will have a big say in how much the BBC asks for in the next licence fee negotiations.

Sir Michael Lyons, chairman of the Trust, accepted that a freeze in income would "not be pain-free" and that the decision "was not taken lightly".

However, he said the Trust was satisfied "the BBC can manage the impact while continuing to deliver the range of programmes and services that the public loves".

Mr Hunt said he had "made it clear that the BBC needs to take proper account of the current economic climate".

"This move, which comes with the Trust's assurances that it will not significantly impact on the quality of services provided to licence fee payers, will be welcomed by the public."

The announcement comes at the end of a turbulent week for the corporation that has seen Sir Michael Lyons announce he will be stepping down and BBC One controller Jay Hunt leave to take a job at Channel 4.

The BBC is also facing strike action from staff over proposed changes to its pension scheme.

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