The BBC licence fee will increase in line with inflation, the Government has announced.

The household payment, which funds much of the BBC’s operations, will be increased each year in line with the annual consumer price index (CPI) inflation rate.

The annual fee faced years of scrutiny under the previous Conservative government, with it being frozen for two years at £159 (later increased to £169.50).

In April, the licence fee will rise to £174.50. An increase of £5 or an extra 42p a month after the last £10.50 rise brought the charge to £169.50 in April.

In a written statement to Parliament, Culture Secretary Lisa Nandy said: “The BBC provides much-needed programming for households across the country, including children’s education, world-class entertainment and trusted news for all people in all parts of the UK. I want to see it thrive for decades to come.

“Through the Charter Review, we will have an honest national conversation about the broadcaster’s long-term future, ensuring the BBC has a sustainable public funding model that supports its vital work but is also fair and responsive to those who pay for it.

“In the short-term, we are providing the BBC with funding certainty while supporting thousands more households facing financial hardship to spread the cost of a TV licence.”

The Government will use a review of the BBC’s Royal Charter, which will include a public consultation, to consider funding options to support the broadcaster’s long-term future.

To help households struggling with financial pressures, the Government set up the Simple Payment Plan (SPP), which it will be expanding.

It says the expansion will allow an estimated additional 9,000 unlicensed households experiencing financial difficulty per month to split up the annual payment into more manageable fortnightly and monthly instalments.

The BBC has been under increasing financial pressure and last month revealed a raft of planned changes, including the axing of in-depth interview show Hardtalk, as it looks at reducing more than 100 news roles.

A BBC spokesperson said: “We welcome confirmation that the licence fee will increase in line with inflation next year.

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“We want everyone to get value from the licence fee and we are committed to delivering trusted news, the best homegrown storytelling and those special moments that bring us together.

“We also look forward to the debate about the future and working with the Government to ensure sustainable, long-term public funding.

“As part of these discussions we will run our biggest ever public engagement exercise in 2025 so that audiences are at the heart of shaping our future.”