Gordon Brown calls surprise inquiry into BBC funding

LONDON - Chanceller of the Exchequer Gordon Brown is understood to have ordered an unexpected inquiry into the way the BBC is funded, which could see the licence fee scrapped.

The Treasury is understood to have been looking at a number of options for the £2.5bn in funding the BBC receives from the licence fee, in conjunction with external consultants at how the BBC is funded.

Possibilities thought to be under consideration include Channel 4, which is also state funded, competing for some of the money raised from the TV licence.

The investigation is expected to come as a surprise to Tessa Jowell, secretary of state for culture, media and sport. Jowell who has been working closely with broadcasters in drawing up the communications bill, to achieve the government's aim to create an industry that thrives on competition.

In June, Jowell said that changes to the licence fee were "somewhere between improbable and impossible".

A review into the licence fee is thought to be high on the list of priorities at the Treasury, because if it does not use the review of the BBC's Royal Charter, which is up for renewal in 2006, to look at the BBC's funding, it will not get another chance to change it until its next charter review in 2016.

The BBC has come under intense scrutiny recently following an investigation into its 24-hour news channel News 24, which was been criticised for not being distinctive enough. A report by former Financial Times editor Richard Lambert, largely supported by Jowell, said the channel should concentrate on breaking news to justify having licence fee money spent on it.

Jowell is also thought to have ordered a report into the BBC's online operations BBCi, sparked by complaints from commercial rivals.

ITN is understood to have complained to Jowell about a deal the BBC made with mobile network O2 to provide free news. ITN complained that it wanted to provide a similar service in collaboration with Orange and wanted to charge for it.

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