George Osborne sets out £650m BBC cut and warns corporation not to 'completely crowd out national newspapers' online

George Osborne has warned that the BBC should not "completely crowd out national newspapers" online.

The Chancellor yesterday signaled plans to transfer the £650m-a-year bill for providing free television licences for the over-75s to the BBC from the Exchequer.

This change would cost the corporation around one-fifth of its annual £3.7bn licence fee revenue.

The news comes after an announcement last week that the BBC would be cutting 1,000 jobs to save £50m a year because of an expected £150m annual drop in licence fee revenue.

Osborne will set out his plans for his first all-Conservative Budget in the House of Commons on Wednesday.

Appearing on BBC One's Andrew Marr Show, Osborne said: "The BBC is also a publicly funded institution and so it does need to make savings and contribute to what we need to do as a country to get our house in order. So we are in discussion with the BBC."

Reports suggested that the BBC would be able to recoup up to £150m of lost revenue through charging for the use of its iPlayer and other online catch-up services.

Osborne brushed aside claims that cuts on the scale suggested could put popular services such as Radio 2 at risk – pointing to the savings of £500m achieved in the last parliament without recourse to such measures.

"I was told at the time by people: 'They're going to shut down BBC2, they're going to close Radio 4.' They always seem to pick the juiciest fruits on the tree," he said.

But he did hint that the website could be scaled back, saying the BBC has effectively become "the national newspaper as well as the national broadcaster".

"You wouldn't want the BBC to completely crowd out national newspapers," he said.

"If you look at the BBC website it is a good product but it is becoming a bit more imperial in its ambitions."

The move was condemned by former BBC chairman Sir Christopher Bland, who accused the Chancellor of "shoddy" accounting practices.

"It is the worst form of dodgy Whitehall accounting. It is transferring social policy on to the licence fee," he told BBC Radio 4's The World this Weekend.

Labour's shadow chancellor Chris Leslie told Sky News's Murnaghan programme: "We have always said sensible savings at this time are really important and I don't think the BBC can be excluded from that."

In an editorial today, the Daily Mail highlighted the fact that many newspapers have closed in the UK in the last decade.

As well as putting this decline down to “migration of advertising to the internet, ever-rising costs of newsprint and distribution, and failure of some papers to adapt to the digital age”, the Mail said: “[T]here’s no doubt many were tipped over the edge by the relentless expansion of the BBC website. With its vast resources this behemoth is simply steamrollering papers out of business.

“National newspaper websites too, suffer from what Chancellor George Osborne yesterday rightly called the ‘imperial ambitions’ of the Corporation.

“The BBC is supposed to be a public service broadcaster but it is acting more like a rapacious commercial giant, trying to corner the market in news delivery.

“Why on earth should the taxpayer have to fund this naked empire-building?”

The Sun said in its editorial: "When George Osborne talks about its 'imperial' ambition, he’s spot on.

"Whether it’s the BBC’s local news sites putting local newspapers out of business, or its main website behaving as if it should be a monopoly provider of news, the BBC uses the cushion of the licence fee to protect itself from competition that exists in the real world – and to distort the market for everyone else.

"It’s time there was a level playing field – and the BBC was brought back to reality."

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