Cost of TV licence to be frozen as viewers feel financial squeeze

And the BBC Trust has proposed keeping the cost at its present 145.50 for a further 12 months, until March 2013.

The Government, which agreed yesterday to the freeze for the coming financial year, said it would make no decision on capping the fee for a second year until a later date.

BBC Trust proposals would mean a 144m budget cut, which chairman Sir Michael Lyons warned would not be "pain-free".

Culture Secretary Jeremy Hunt welcomed the first year's freeze yesterday, but said a decision about the second year would be taken in the future "as part of the next funding settlement".

Yesterday's proposal by the trust was in response to the "exceptional pressures" of the economic climate, it said.

The BBC had been entitled to increase the fee by 2 per cent in the next financial year and up to 2 per cent for the following 12 months. But the trust also keeps the BBC's financial needs under review to ensure spending is appropriate.

In June it asked the corporation's executive board to examine budgets in June to look into short-term savings.

The cost-cutting will require "on-air changes", but the trust concluded that savings could be made while minimising impact. Work is now being undertaken to work out the fine-tuning of savings.

Mr Hunt was informed of the proposals yesterday in a letter from Sir Michael, who announced just two days earlier he was stepping down from his position early next year after just one term in office.

Sir Michael warned yesterday that the cuts would not be "pain-free". He said the trust remained committed to the principle of ring-fenced multi-year licence fee settlements.

The trust was satisfied that the BBC could manage the impact while continuing to deliver its range of programmes and services.