This is taken from the Financial Times:

Brown rejects call on BBC licence fee
By Jean Eaglesham, Emiko Terazono and James Wilson
Last updated: November 3 2006 02:00

Gordon Brown has rebuffed a personal appeal from Mark Thompson, BBC director-general, for an above-inflation licence fee increase, amid signs the broadcaster's combative public stance on the issue has backfired by hardening opinion in government.

The chancellor agreed to meet Mr Thompson on Tuesday, allowing the BBC head personally to make the case for his organisation's revised bid for an annual licence fee increase of inflation plus 1.8 per cent over at least seven years.

But the meeting has not swayed Mr Brown, according to insiders. The Treasury and Downing Street remain united in wanting an increase of less than inflation over less than seven years. However, Tessa Jowell, culture secretary, is understood to be arguing for an increase above inflation.

No deal has yet been finalised. Ms Jowell is committed to agreeing a settlement by the end of the year but no date for this has been put into the "grid" of government announcements.

The tough Treasury and Number 10 position suggests Mr Thompson's hints that the corporation's planned move to Salford, near Manchester, could be threatened if its licence fee bid was rejected may have backfired.

The BBC director-general warned in a speech last month that he would not recommend the relocation "in the event of a low settlement". Ms Jowell wants the move, which will help the government deliver on its regeneration targets, agreed as an integral part of the settlement. But the prime minister and chancellor are understood to be reluctant to allow the BBC to use Manchester as a bargaining chip.

Ministers also appear sceptical about Mr Thompson's warning that the government's plan to switch the country to digital television could fail if the broadcaster receives a licence fee settlement of less than inflation. Officials and the BBC's commercial rivals believe some elements of the bid could be delivered for less than the costs estimated by the public service broadcaster.

Media executives have also been surprised at the BBC's stance. "I think it was a colossal misjudgment to go for the political jugular," said one. Another said that Mr Thompson's comments could have "lost the BBC 1 per cent on the licence fee".

Mr Thompson is likely to face tough questions from local officials and press during his visit today to Salford. He is due to present an update on the BBC's proposals for moving key departments and channels from London.

Despite his comments, preparations for the proposed brownfield development at Salford Quays are progressing, with the appointment of architects and the Salford councilgiving initial planning permission.