BBC told to spell out where £1bn cuts will be made

Greg Dyke, the BBC's director general, was urged yesterday to spell out detailed proposals on how the corporation would meet the Government's challenge to save £1bn by reducing bureaucracy.

Janet Anderson, Media minister, renewed the Government's firm message that the BBC must make efficiency savings during a Commons debate to introduce an increase in the TV licence fee of 1.5 percentage points above the inflation rate.

Chris Smith, the Secretary of State for Culture, Media and Sport, agreed to raise the licence fee to help the BBC cope with the demands of the digital age. But he decided against a separate digital licence fee amid fierce opposition by satellite channels and claims by the Tories that it would be a "poll tax" on technological innovation. The rise will give the BBC, on average, an extra £200m a year between now and 2006 to help it fund its digital expansion, but in return it must make £1bn in efficiency savings.

Mr Dyke is expected to make a keynote speech next week in which he will outline how the corporation will meet Mr Smith's challenge to raise "for each £1 the licence fee raises for the BBC, almost the same through self-help".

But Sir Christopher Bland, chairman of the BBC boardof governors, has already warned that he could not rule out job losses, and senior BBC insiders claimed programme-making plans would have to be re-examined.

But the 24-hour news service, News 24, has appeared to be safe despite criticisms of high costs and few viewers. Mr Smith has also warned the BBC that they must show fewer repeats in return for the renegotiation of their funding package. He has sought to sweeten his demands by the announcement of free licences for all households with someone aged over 75 and half-price licences for blind people.

Last night's debate on the measures was forced by Tories who argued that ministers had failed to justify the increased funding. The late-night debate on the Wireless Telegraphy (Television Licence Fees) (Amendment) Bill would usually have gone through without debate in the chamber but the Tories tabled a motion to express their reservations about the Government's approach.

Peter Ainsworth, the Conservative spokesman for Culture, Media and Sport, said ministers should not rush into a substantial rise in the licence fee but stressed his party was not opposed in principle. He said: "We do not oppose the rise but the Government has decided to allocate more money before ministers have made clear what the BBC should stand for in a fast-advancing, highly technological age."

Mr Ainsworth said there were a series of technical problems with the free television licences for the over-75s that needed to be solved.

"It looks as if this is going to be more expensive than the Government has said because the start-up costs will add at least another £20m to the £300m which has already been pencilled in."

Mr Ainsworth also questioned whether all pensioners should be entitled to the free licences. "So will Baroness Thatcher and the Duke of Devonshire benefit too? We are casting doubt how practical the policy will be."