The government is to cut the BBC's controversial demand for a £180-a year-licence fee. Media secretary Tessa Jowell said the BBC bid was part of a negotiation. She also said for the first time, that the corporation will not get the settlement it has asked for.

The BBC has astonished politicians by demanding that the licence fee should rise 2.35 per cent above the rate of inflation each year for seven years - taking it to an estimated £180 by 2013.

The BBC has calculated that to meet the requirements set out in the BBC Green Paper - which among other things calls for the BBC to increase its digital presence - the BBC will need an extra £5.5bn over the seven years between next years' Charter renewal and switch off.

Ms Jowell told a House of Lords committee: "This is a negotiation and a negotiation which is just beginning." She described the BBC's opening bid as an "a la carte menu", and said: "We would certainly expect it to come in lower than the BBC's proposition."

The minister also indicated the BBC's readiness to pay high salaries to presenters would come under scrutiny. She said that while it would be "extremely dangerous" for her to take a view on how much the BBC pays individual radio and television presenters, account would be taken of the BBC's ability to "make the market", inflating costs for commercial broadcasters.

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