The BBC will fund a £25m capital investment to get proposals for Local TV and online services off the ground as part of its settlement from the Comprehensive Spending Review.
The Government has asked the BBC to provide the one-off starter payment of Local TV then an annual fund of around £5m per year to meet its running costs.
Culture secretary Jeremy Hunt had initially sought to enable the launch of dozens of local television stations across the UK with funding provided through the private sector.
However, the plans were met with little fanfare by local media businesses and an interim report published in September by the steering group examining the idea suggested that advertising revenue alone wouldn’t be enough to ensure the project’s success.
Under the new proposals thrashed out between the Department for Culture, Media and Sport and the BBC ahead of the Comprehensive Spending Review announcement by Chancellor George Osborne in the Commons yesterday, the corporation will initiate funding for up to 20 local TV stations from 2014/15 – subject to necessary regulatory approvals.
Chancellor George Osborne confirmed yesterday that the BBC had agreed not to make any further encroachment into local media markets as a way of supporting the local newspaper industry.
However, under the terms of the deal between the BBC and DCMS the corporation will take an ‘active role’in supporting new Local TV services and provide the annual £5m running costs ‘to acquire content for use on its own services from these new services”.
Hunt’s vision for Local TV came at the expense of plans proposed by the previous Government to establish a series of Independently Funded News Consortia across the country to replace the ITV local news services on channel three.
The Labour Government proposal would have seen funding for a series of IFNC pilots come from a £130m under-spend in the licence fee which had been set aside for the digital switchover.
The Conservatives saw no benefit in the IFNC plan and replaced it with a proposal to introduce a series of city-based TV stations which would be privately funded with the aid of a proposed a relaxation of cross-media ownership.
The Local TV funding burden comes in addition to the BBC assuming responsibility for the annual funding of the World Service, Welsh language channel S4C, BBC Monitoring and the rollout of broadband in rural areas as part of the spending review.
These measures will push an additional £340m of costs onto the BBC which will also see its income reduced as the licence fee will also be frozen for six years at its current level of £145.50 per household per year.
The BBC’s current licence fee income is £3.6bn. The additional costs will amount to around a 16 per cent budget cut for the corporation in real terms.