As it stands, the licence fee will go up by less than the rate of inflation over the next five years, reportedly leading to a reduction in funding for the media company. The Government decision is thought to have been by ministers’ fears of hitting households with an increase in line with inflation. Ministers are in the process of wrapping up the negotiations with the BBC about the fee, which currently stands at £159 a year.
A Government source told The Times: “The BBC is a hugely important national institution. But equally, these are hard times.
“Nobody wants to punish the BBC but it’s got to be subject to the same efficiency savings as everyone else.”
The BBC has asked for the fee to rise in line with inflation to allow the broadcaster to compete with streaming companies such as Netflix.
And the corporation has now warned it will have to cut programmes and services if it does not receive an increase that keeps pace with inflation over the next five years.
The Government, however, cited higher energy bills and a mooted tax rise to cover the costs of social care that is set to hit households, as a reason for the rejection.
A second source told The Times that refusing to raise the cost of the licence fee, which brings in £3.2bn a year for the BBC, in line with inflation could lead to significant cuts to “quality” programming.
In March, the corporation said that the licence fee “is the best way of funding a universal BBC”.
Instead, the Government is considering a deal that would see a below-inflation licence fee rise for the next two years, rising to an above-inflation increase for the remainder of the five-year period.
Before 1 August 2020, all over-75s were entitled to a free licence, but the BBC changed the rules last year in a cost-cutting measure designed to save up to £1bn.
The move affected more than three million households, with the charity Age UK describing it as “a kick in the teeth”.
Care home residents and blind and severely sight-impaired people are also entitled to a reduced licence fee.
The maximum penalty for watching and recording BBC programmes without a licence is a £1,000 fine plus any legal costs and compensation.
In March this year, Glyn Isherwood, interim chief operating officer at the BBC, revealed that of more than 27 million households across the UK, 1.7 million people in 2020 chose “not to have a licence and do not enjoy the BBC services”.
This is an increase from 1.5 million in previous years, Metro reported.
On top of that, media minister John Whittingdale has warned that the licence fee is in terminal decline because increasing numbers of people will refuse to pay it.
There are currently 24.8 million licences in force, according to figures by the BBC.
Two years ago, the figure was 25.8 million.
Greg Dyke, former director-general of the BBC, added the corporation needed to be “properly funded” to compete with tech giants.
But Lord Grade of Yarmouth, a former chairman of the BBC, said a below-inflation rise in the licence fee would be acceptable.
He said: “These are hard times. The BBC is not immune from what’s going on in the rest of the country.”
Negotiations between the BBC and ministers are set to conclude in the next few weeks.