Culture Secretary Tessa Jowell has announced in the House of Commons that the TV licence fee is to go up by only 3% over the next two years, a figure the BBC feels is insufficient to meet its spending aims.

In monetary terms, the current fee of £131.50 will go up to 135.50 on 1st April this year and to £151 by 2012.

The BBC’s borrowing limits will be severely constrained, despite the broadcaster wanting an above-inflation deal to help fund digital services as part of its UK investment in new technology.

It had argued that it needed an extra £5.5bn over the coming seven years to pay for more original programmes, new digital and local services and higher costs in its ongoing UK investment.

BBC director-general Mark Thompson said: “Given our vision of the future, a vision broadly endorsed by the Government in its White Paper; given the Government’s own requirements and ambitions, especially those around switchover (to digital)… we’d argued for a licence fee that would grow modestly in real terms.

“Instead the Government has opted for a settlement which means… the price of a licence fee will sit somewhere below retail price inflation.” 

In an earlier email to staff, Thompson had said the corporation would have to face “some very difficult choices” if it had to accept a below-inflation increase in its funding. The unions have also warned that such a deal would adversely hit programmes.

John Whittingale, chairman of the Culture, Media and Sport committee, told the BBC he thought the deal was fair. “The amount of money the BBC gets is determined not just by the level of the licence fee, but also by the number of people paying for it.”