BBC chief says he is pleased with licence fee deal as TV rivals face ad downturn

<span>Tim Davie told MPs he ‘welcomes’ the six-year licence fee deal.</span><span>Photograph: House of Lords/PA</span>
Tim Davie told MPs he ‘welcomes’ the six-year licence fee deal.Photograph: House of Lords/PA

The director general of the BBC has told MPs he is pleased with the new licence fee settlement, in which the government reneged on an agreement and cut the planned annual rise by a third.

Tim Davie has said he “welcomes” the six-year deal as it insulates the corporation from the ongoing volatility in the market and guarantees four years of budget increases, as rivals tackle a severe downturn in the TV industry.

“In the context of the broader market it is something we welcome because it allows us some certainty despite very significant challenges … in terms of making the budget meet,” he said, speaking to the Commons public accounts committee on Monday. “There is not a media organisation in the world, certainly a traditional so-called broadcast organisation, that doesn’t need to fundamentally look at its model and make sure [it is] in the right place.”

Two years ago the government and the BBC agreed a six-year deal, which froze the licence fee for two years with annual increases set to follow inflation from 2024 until March 2028.

However, in December the government altered the deal amid soaring inflation, opting to use September’s 6.7% rate, rather than the usual annual average that at the time was 9%, which meant the £159 annual fee would rise by £10 instead of £15.

At the time, the BBC condemned the U-turn warning of the “significant impact” and “consequences” of the decision.

Since then, Channel 4 has announced it is to shed more than 200 roles in the biggest round of job cuts in more than 15 years, and the Channel 5 parent company, Paramount Global, has said it is to cut 800 employees, as the impact of the worst advertising downturn since 2008 leaves commercial broadcasters reeling.

The corporation is looking to find £500m in annual savings, but it will still be the beneficiary of an increase to the licence fee to £169.50 from April. “We can talk about the joys of quite high inflation in year two [of the deal] and the additional pressures that we’ve got at the BBC,” Davie said. “Like many organisations and businesses, to be fair, but this does put enormous challenges [on the BBC].”

Cost-cutting measures at the corporation have included moving a number of World Service TV and radio broadcast services online, merging the domestic and global news channels, and making cuts to its news service, including the flagship Newsnight programme.

In January, the BBC announced the sale of its famous Elstree Studios complex, which includes the set of EastEnders, to the French insurance company Axa in a 25-year leaseback agreement.