BBC shares in the pain as axe looms

State-funded broadcaster faces real-terms cuts of 16 per cent as licence fee frozen for six years

Defence budget is cut by eight per cent and replacement for Trident is delayed until 2016

George Osborne prepares to unveil toughest spending cuts in Britain’s peacetime history

THE BBC is being forced to share the pain of public sector cuts, after the government imposed a six-year licence fee freeze, effectively slashing the corporation’s budget by 16 per cent.

From 2015, the state-funded broadcaster will also be forced to foot the £293m-a-year bill for the World Service, which is currently paid for by the Foreign Office, as well as Welsh broadcaster S4C and the BBC Monitoring news aggregation service, which have a combined budget of £127m.

In total, the BBC, led by director-general Mark Thompson, will be forced to spend at least £340m of licence fee cash a year on these three services, which were all previously funded by the government.

By freezing the licence fee at £145.50 for the next six years, the government is in effect cutting 16 per cent from the BBC’s £3.6bn budget when rising prices are taken into account.

The cuts are equal to the total annual budgets of Radio 1, 2, 3, 4 and 5 Live combined.

Chancellor George Osborne decided it was impossible for the BBC’s funding to increase while defence and public spending faced swingeing cuts.

An aide to the chancellor told City A.M.: “Effectively licence fee payers were facing a tax rise over the next six years. We’ve just given them a tax cut.”

Meanwhile, the BBC will be forced to freeze the budget for its website, in a move that will please commercial rivals who claim the huge amount invested in has prevented them from making a decent return online. It is also forbidden from rolling out any more local news services on the web.

And it will have to spend £150m-a-year, previously allocated for the conversion from analogue to digital TV, to aid the roll out of super-fast broadband. A further £25m-a-year must be spent on local television, with £5m of that going to commercial producers.

A BBC insider yesterday said the cuts were “tough but fair”, telling City A.M. the broadcaster accepted that “tough times call for tough measures”.

“This secures the future funding of the BBC. It will be tough but we accept cuts need to be made,” the person added.

The BBC will be relieved that it managed to thwart plans to make it shoulder the cost of giving free TV licences to the over 75s. This would have cost £556m a year, and risen exponentially as the population ages.

The plans, which represent an unprecedented scaling back of the BBC, emerged shortly after the Prime Minister announced an eight per cent cut in real terms to the defence budget by 2014-15.

Unveiling a sweeping review of the armed forces, David Cameron said the £39.6bn worth of cuts meant the military would have to cope with fewer people, fewer ships, fewer aircraft and fewer nuclear warheads.

The decision on when to renew Britain’s Trident submarine-based nuclear deterrent was pushed back until 2016, after the next general election, and the system will be scaled back, saving £3bn over 10 years.

The Army escaped with the best settlement, and will likely have to cut 7,000 jobs between now and 2015, while the Navy will see cuts to headcount as well as a reduction in ships from 23 to 19. However the Navy’s two aircraft carriers will be built.

It is the Royal Air Force that will face the biggest cuts. The Harrier force is being scrapped, leaving the RAF with just two remaining jets.

Analysts said the plans implied some 42,000 job losses by 2020, meaning Britain would be unable to take part in Afghanistan or Iraq-size wars in the future.

Today, the chancellor will unveil the biggest cuts to public spending in a generation, with some departments facing cuts in real terms of up to 35 per cent.

The government expects 490,000 public sector jobs to be lost as a result of the cuts, according to a draft copy of the spending review caught on camera by a photographer.