´óÏó´«Ã½

Under the terms of the current multi-year settlement, the ´óÏó´«Ã½ is entitled to a two per cent increase in 2011/12, with the amount for 2012/13 to be determined within the range of zero to two per cent.

But the ´óÏó´«Ã½ Agreement also requires the Trust to keep the financial needs of the ´óÏó´«Ã½ under review to ensure that the Executive Board is not authorised to spend more public money than is needed to appropriately fulfil the ´óÏó´«Ã½'s responsibilities.

Given the exceptional pressures that the current economic climate is placing on licence fee payers, the Trust asked the Executive in June to scrutinise its budgets and assess whether short-term savings could be made.

The aim was to work out whether the ´óÏó´«Ã½ would be able to forego any increase in the licence fee for the next two years, while also planning prudently to meet its commitment to return to a zero borrowing position by the end of the current licence fee period and to maintain the broad pattern of current services.

The Executive presented its findings to the Trust earlier this month. They made clear that the loss of £144m will require some on-air changes, particularly at a time of continuing capital spend on infrastructure projects and digital switchover. Nevertheless, the Trust concluded that there are ways of making the necessary savings while keeping any on-air impact within acceptable limits. Detailed work continues on how to implement those savings.

The proposal to freeze the licence fee was made in a letter to the Secretary of State.

´óÏó´«Ã½ Trust chairman, Sir Michael Lyons, said:

"The Trust remains committed to the principle of ring-fenced multi-year licence fee settlements. It is a key part of the ´óÏó´«Ã½'s independence that the Government grants such settlements and does not re-open them before they come to an end.

"However, we also recognise that the British public is facing an exceptionally tough financial climate. In June, as part of the Trust's role in ensuring value for money at the ´óÏó´«Ã½, we asked the Executive to see if they could make further savings on top of the existing three per cent year-on-year efficiencies, so that the ´óÏó´«Ã½ does not ask licence fee payers to pay any more than they need to for ´óÏó´«Ã½ services.

"A freeze in income will not be pain-free, and this decision was not taken lightly. But the Trust is satisfied that the ´óÏó´«Ã½ can manage the impact while continuing to deliver the range of programmes and services that the public loves."

In addition, there is a pan-´óÏó´«Ã½ review under way to establish what level of long-term efficiencies can be found after 2013 – including whether new structures and working cultures could help to reduce the ´óÏó´«Ã½'s cost base.

The Trust will be assessing and interrogating this work in the coming months, in the run-up to discussions about the next licence fee settlement, and it has asked the NAO for any assistance it can give.

Ends.

Notes to editors

The ´óÏó´«Ã½ Agreement, paragraph 77

"Duty of the Trust to keep the ´óÏó´«Ã½'s financial needs under review: As an aspect of the Trust's general duty under article 23(d) of the Charter to exercise rigorous stewardship of public money, the Trust must keep under review the financial needs of the ´óÏó´«Ã½ for the purpose of ensuring, through the exercise of the Trust's own functions, that the Executive Board are not authorised to spend, overall, more public money than is needed for the appropriate discharge of the Board's functions."

Charter and Agreement

Current licence fee settlement

In June 2007, the then Secretary of State, Tessa Jowell, wrote to Sir Michael Lyons to confirm the detail of the licence fee settlement. It stated: "The settlement will run for six years, from April 2007 to 31 March 2013. It will involve annual increases in the television licence of three per cent for the first two years and two per cent in years three, four and five. There will be an increase in the sixth year of between zero per cent and two per cent inclusive, but a firm decision on that will be taken as part of the next funding settlement."

Strategic review: Trust request to Executive, June 2010 (page 17)

"[The ´óÏó´«Ã½] needs to scrutinise its budgets with as much rigour as the rest of the public sector to see what scope there may be for saving money. The Trust is asking the Director-General to conduct a rapid exercise of this sort and to report back immediately after the summer, so that we can assure ourselves that we are doing everything possible to remove slack in the organisation."

´óÏó´«Ã½ strategy review - initial conclusions