The BBC will have to cut budgets by 20 per cent over the next five years, its director general said today, warning that some services may have to shut.

“The BBC faces a very tough financial challenge... We will inevitably have to either close or reduce some services,” Tony Hall said in a speech in London.

The corporation is being forced to adapt to a growing online audience and government reform plans ahead of the renewal of its royal charter due next year.

The BBC announced 1,000 job cuts in July and said it would pay for free television licences for over-65s which have previously been funded by the government.

The public broadcaster is currently funded through an annual licence fee of 145.50 pounds which all British households with a television have to pay.

This raises over 3.7 billion pounds per year. “Having already saved 40 per cent of the BBC’s revenues in this charter period, we must save close to another 20 per cent over the next five years,” Hall said on Monday.

The BBC is also planning new radio programming for Eritrea, Ethiopia and North Korea as well as a possible satellite television channel in Russian.

Hall stressed the importance of the BBC World Service, saying, “My own strong views is that this is one area where this country’s voice could be much stronger.”

The BBC is also planning a British local news service that would be made available to other media outlets, following criticism of unfair competition from its freely-available website.

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