This is taken from The Guardian:

Another blow for a vulnerable BBC
Tessa Jowell's announcement that the BBC will have to foot the bill for subsidising vulnerable people to switch to digital TV highlights the corporation's weak position.
by Chris Tryhorn
Wednesday December 20, 2006

Culture secretary Tessa Jowell's announcement that the digital switchover subsidy for the vulnerable would cost £600m and definitely come from the licence fee puts further pressure on the BBC.

When the BBC made its first pitch for an above-inflation annual increase in the licence fee back in October 2005, it did not include the cost of helping the UK's most vulnerable people switch to digital TV.

Ms Jowell's announcement even suggests that the BBC will have to cut its spending plans for the next seven years back even more once the government decides on the level at which the licence fee will be set.

The £600m, the estimated cost of the help scheme between 2008 and 2012, comes on top of the £1.6bn funding gap the BBC identified to warrant its claim for an above-inflation settlement.

If, as is widely believed, the BBC gets no better than an inflation increase, it will have to trim £2.2bn out of the £5.5bn in extra costs it identified between 2007 and 2014.

Put another way, that would be 40% of the money it believes it needs to spend on top of its existing ongoing expenditure.

Of course, it is hard to disentangle the numbers, partly because the duration of the deal is still unknown and the inflation figure to which the fee has been indexed for the past two decades is inherently volatile.

Nevertheless, Ms Jowell's insistence that the BBC must foot the bill for driving the government policy of implementing digital TV switchover is of a piece with the tough line the Labour administration is taking with the corporation.

Her statement to parliament on Tuesday also underlined the government's desire to see the BBC fulfil its promise to move to the north-west.

Ms Jowell said the cost of the Salford move - most recently put at £400m - would be written into the licence fee settlement, without specifying exactly how.

She has effectively called BBC director general Mark Thompson's bluff. In a speech in October he threatened to pull out of the move if there was a low licence fee deal.

Cynics suggested plenty of London-based BBC staff would be more than happy for the move to be scuppered, but there was considerable political will for it to happen, not least from Labour's vociferous contingent of northern MPs. Now it is clear it will go ahead - and it is equally clear who really calls the shots. The government also has an unprecedented additional stake in the licence fee negotiations given that it now pays for the over-75s, who make up 15% of households.

Even the delay in making a decision, which is preventing the BBC from setting budgets for its next financial year, beginning April 1 2007, highlights the corporation's weakness.

The last licence fee settlement, in 2000, was made just five weeks ahead of its implementation, but this time round it was assumed it would happen long before 2006 was out.