The BBC television licence fee will rise to £151.50 sterling by 2012 from the current £131.50 to provide new programming and digital services, the government said.
Under the six-year deal announced by British Culture Secretary Tessa Jowell today, the licence fee will rise 3 per cent over each of the next two years and then 2 per cent for the next three years. In the sixth year it will rise up to 2 per cent.
The corporation had originally asked for an extra £1.6 billion, or an above-inflation rise, to pay for new programming, the switchover to digital TV and the move of several departments to northern England.
Ms Jowell said the reduced deal would still enable the BBC to move several key departments to Manchester - which it has said will result in a less London-centred corporation.
BBC director general Mark Thompson said the settlement was a "real disappointment" and would result in a licence fee increase below retail price inflation.
He welcomed the "financial security" that the six-year deal would give but said the settlement would result in a gap of around £2 billion.