A Government minister has warned the BBC it faces massive cuts unless it rebuilds trust with the public and undergoes a dramatic transformation.
Grant Shapps, Conservative Party chairman attacked the BBC over its political coverage that he believes is hostile to his party.
Shapps told The Sunday Telegraph that the corporation had been damaged by the Jimmy Savile scandal and the level of pay for senior executives and presenters.
He also criticised the level of pay-offs for former executives.
Shapps warned the BBC that the licence fee could be used to fund public service broadcasting outside the corporation.
The BBC’s Royal Charter is due for renewal in 2016 and the conservative party would like to see major concessions from the organisation before it is approved.
He also questioned the size of the £145.50 fee suggesting it could be reduced.
Shapps said: "They have ended up working in this culture which is buried in the last century, which is 'we are the BBC, we do what we like, we don't have to be too accountable'.
"But they are raising £3.6 billion through the licence fee, which is a tax, and, quite rightly, the public wants to have sight of how the money is spent. Things like the pay-offs have really caused concern, as have, obviously, things like Savile and Hall and the culture that goes around that. I think it is one of too much secrecy."
BBC director general Lord Hall should consider opening the corporation's books to full inspection by the National Audit Office, publishing all expenditure over £500 – including stars' salaries – and opening up to freedom of information requests, he said.
"In order for the public to have confidence in the three-and-a-half billion (pounds) plus that is given to the BBC – compulsorily, just because you have a television – and to move beyond Savile and the pay-offs and all the rest of it, the only way they can do that is to really go for a much more transparent, open deliberate policy," said the Tory chairman.
"If they do that they can make sure they win back public trust. If they don't, they are in danger of frittering away Auntie's public trust that has been built over a long time."
Shapps is not a full member of the cabinet but he attends weekly meetings.
"People pay their licence fee in this country because people believe that we should have public service broadcast programming," he said.
"Of course, there are lots of different ways you could do that.
"I would also say that £145.50 is quite a lot to pay for everyone in the country who has a TV. It is too much if we don't see the kind of reforms that all public organisations are used to that the BBC isn't having to engage with as much as it could do."
A BBC spokesman said: "Mr Shapps is right that transparency is key to the future of the BBC. So is its freedom from political pressure.
"The BBC and the BBC Trust actively encourages the public to tell us what it thinks of our services and help us police our own guidelines. On TV and radio they personally hold its executives to account.
"In 2012 the BBC dealt with more than 1,600 freedom of information requests and volunteered information on hundreds more. This year alone we have appeared in front of 16 parliamentary committees, while the NAO already has full access to the BBC's operations except its editorial decisions.
"We are proud of the quality of our news and its commitment to reporting without bias. Where we believe or are shown to have erred we correct and apologise."
However, Deputy Labour leader Harriet Harman condemned Shapps’ criticism and accused him of attacking the BBC for reporting Government failings.
She told the BBC's Andrew Marr Show: "I think it's absolutely wrong. He's the chair of the Conservative Party and this has not come from the Culture Secretary Maria Miller and I'm sure she wouldn't be doing that.
"What he is doing is he's complaining about the BBC, using the fact that we are heading into charter review and licencee fee review in order to put pressure on the BBC because the Conservatives are trying to somehow blame the BBC for the fact that they are having to report that the Government is actually not succeeding in so many ways."
She went on: "I think it's right for the BBC to keep a hawk eye on making sure people don't stray over and trespass on the independence of the BBC and that is what the BBC should be making sure they hold out against.
"But I do think that just in the run-up to the charter review and the licence review for Grant Shapps, who's the chair of the Conservative Party, to start weighing in on this, I think that's completely wrong.
"And apparently he's saying it's with the support of Downing Street – I hope the BBC will resist that. It's easy to say I'll be strong and resist it but it is difficult when you are coming up to negotiations.
"Some of the Tories are against the BBC because it's a public corporation and actually have never liked it and they see any opportunity to give it a good kicking and of course the BBC is given an opportunity for the kicking with the extortionate high salaries and they way they handled Jimmy Savile.
"But actually it is still a massively important organisation and the Government should be supporting it."