Tessa Jowell's statement on the licence fee

Media secretary Tessa Jowell's statement to the House of Commons over the licence fee settlement

With permission, Mr Speaker, I should like to make a statement on the BBC licence fee.

Over the last three years, the public, industry and Parliament have all had many opportunities to put forward views about its future shape and funding- unprecented public involvement.

As have the BBC themselves.

I am now in a position to announce what the funding settlement will be over the first part of the new ten year Charter period.

The settlement will be for six years, with annual increases in the licence fee of 3% for the first two years and 2% in years three, four and five.

There will be an increase in the sixth year (2012-13) of up to 2%, depending on a further review nearer the time.

I have written to the BBC Trust today setting this out.

These are cash increases. The price of a colour TV licence will rise from its current level of £131.50 to £135.50 from 1 April this year, reaching £151.50 in 2012.

Based on the Treasury forecast of the Consumer Price Index - the Bank of England's inflation measure - this will be either above or in line with inflation for each year of the settlement.

It will enable the BBC to deliver its new public purposes set out in the new Charter.

And as digital technology transforms the media world, it will enable the BBC to take a leading role in making the most of it.

Investment in high quality content, the driver of creative industry and what audiences value most of all, can remain high.

This settlement will enable the BBC to do all that.

And it will allow the BBC to move key departments - including Children's, Sport, New Media and Formal Learning - to the North West of England.

I welcome the Trust's confirmation, due later today, that this will happen.

This is a vital opportunity for the BBC to widen its geographical spread and make better use of the creativity and talent that exists across the UK, with huge benefits for the regional economy - estimated at £1.5 billion and 15,500 jobs.

Through greater efficiency this settlement will allow the BBC to maintain all of its current services and provide up to £1.2bn for investment in new activities.

Mr Speaker, The UK spends more public money on the BBC than any other country in the world spends on public service broadcasting, bar Germany.

The new BBC Trust must ensure that licence fee payers get the best possible value for that investment.

So we will expect the Trust to bear down hard on efficiency.

We welcome the efforts that have been made in this area over the last two years, but we believe there is scope to do more in future years.

Based on independent evidence from our consultants PKF and others, we believe that the BBC can realise up to 3% cash-releasing savings annually from 2008.

A separate report - published today - by the National Audit Office confirms that we have an adequate evidence base on which to make a judgement.

It will be the Trust's responsibility to set specific targets and hold the management responsible for meeting them.

The BBC has been given a leading role in the delivery of switchover to digital television.

In particular the licence fee settlement will fund the £600m scheme we are putting in place to help the elderly and disabled make the switch and ensure that no-one is left behind.

The government's expectation remains that the BBC will lead the delivery of the scheme, but that the government will retain responsibility for the policy, including helping with procurement and deciding how eligibility is determined.

The BBC will also pay for the £200m public communications campaign being run by Digital UK to ensure people are prepared for switchover

These sums will be ringfenced within the settlement and will not form part of the BBC's baseline at the end of this settlement, and that this responsibility will not impact on the BBC's core budgets and services.

We are giving the BBC a 12.5% increase in its borrowing capacity to help deliver this commitment.

We will ensure the BBC's services are protected from any cost increases in the help scheme, above our existing estimates.

Mr Speaker, In last year's White Paper on the BBC, we also noted that Channel 4 was likely to face major financial challenges in the future.

We said we would consider potential forms of help, including asking the BBC to help towards meeting its capital switchover costs, and possible access for Channel 4 to some of the BBC's digital TV capacity.

Ofcom's review of the Channel is looking in detail at its financial prospects and is expected to report towards the summer.

I am therefore keeping open, within the licence fee settlement, the possibility that we may require the BBC to contribute to the first six years of Channel 4's switchover costs - this will be no more that £14 million in total.

I also welcome the BBC's conclusion that, in principle, it can make available some spare digital terrestrial capacity - amounting to a TV slot in England and 3 radio slots - at switchover.

Under the BBC agreement, I can direct the BBC to make capacity available to another Public Service Broadcaster, where it is in the interests of public service broadcasting in the UK.

I shall decide whether and how to use that power in the light of Ofcom's review.

Mr Speaker, The settlement I have set out for the BBC provides stability and certainty over the crucial period of digital switchover.

The sixth year will, in effect, also form the first year of the following settlement.

This will allow us to undertake a further review of the licence fee level in the run-up to the mid-Charter point, taking account of the wider review of public service broadcasting - consistent with our commitment in the White Paper

A strong, independent BBC.

Valued by the public.

And providing the highest public value.

That has been our fundamental goal throughout this long process.

It is now complete, and the BBC along with all the other broadcasters can now plan and prepare for digital switchover, the next great revolution in UK television.

I commend this settlement to the House.