The Government may cut half a billion pounds from the BBC’s licence fee.

With the Royal Charter up for renewal in 2006, the Government is contemplating cutting 20 per cent of the Beeb’s GBP2.6 billion licence fee income.

The saved monies, it is argued, could be passed on to independent broadcasters to help subsidise public service commitments in areas such as news, education and religion.

In a bid to enliven competition in the broadcasting sector, the Government may be forced to curtail the Corp’s licence fee income given the apparent monopoly and financial advantage it has over commercial rivals..

Lord McIntosh of Haringey, the broadcasting minister, is expected to warn this week that the review of the BBC’s charter will entail a serious overhaul of services.

Michael Grade, previously boss of Channel 4 and on behalf of the commercial channel has reportedly asked for a cut of the BBC’s cash.

“The only remotely deserving cause for a slug of the licence fee is Channel 4, a not-for-profit channel with a statutory public service remit.

“No commercial channel or channels should be allowed to be subsidised by the licence fee,” he said.