BBC will freeze licence fee for two years after Tory pressure

The BBC today bowed to huge pressure from the Conservatives and agreed not to raise its licence fee.

The Corporation proposed that the £145.50 levy be frozen for two years.

The decision follows David Cameron calling for a freeze and Culture Secretary Jeremy Hunt telling the BBC it needs to "live on the same planet as everyone else".

The Government today agreed to the freeze next April with a decision on the following year due be made later in negotiations on the next long-term financial settlement for the BBC.

Mr Hunt said today: "I have made it clear that the BBC needs to take proper account of the current economic climate and 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 BBC, which has been criticised for the bumper salaries paid to presenters and top executives, had been entitled to increase the fee by two per cent next April and up to two per cent for the following 12 months.

Bosses said a two-year freeze will mean a £144 million drop in the BBC's expected budget. BBC sources denied it had caved in to pressure from the Tories to propose the freeze.

Sir Michael Lyons, chairman of the BBC Trust, said the savings needed would not be "pain-free" but believes they can be made while keeping the impact "within acceptable limits".

In a statement, the trust said: "We recognise that the British public is facing an exceptionally tough financial climate. A freeze will not be pain-free, and this decision was not taken lightly. But the Trust is satisfied that the BBC can manage the impact while continuing to deliver the range of programmes and services that the public loves."

BBC director-general Mark Thompson said the budget cut would be "challenging" on top of "tough efficiency targets".

A spokesman added: "The director-general has made it clear that this was a finely balanced decision, and we recognise that for many households at the moment money is extremely tight."

The trust asked the BBC's executive board to find savings in June. While BBC bosses said that they would require "on-air changes" the trust concluded they would have minimal impact.

Separately, Conservative Party chairman Baroness Warsi has asked how the BBC plans to stop a planned walk-out by staff in a row over pensions that will hit coverage of the Tory conference.