BBC boss calls for Treasury to give his arch rival, ITV, a £300m break

The director general of the BBC warned yesterday that the future of ITV as a public service broadcaster - and programmes such as The South Bank Show - was under threat unless the network was absolved of £300m a year in taxes.

Speaking at the annual Edinburgh International Television Festival, Greg Dyke used his address to launch a plea on behalf of the BBC's traditional rival. The commercial network, which is struggling financially, pays the sum every year to the Treasury for the use of its broadcast spectrum.

However, executives from other media suggested that Mr Dyke's comments were motivated by self-interest. It has been proposed by industry figures, such as Lord Bragg, that some of the £2.7bn that the BBC receives in licence fee revenue a year be re-distributed to other public service broadcasters, that is to ITV, Channel 4 and possibly Five. If ITV is given a £300m tax break, the case for it to receive some portion of the licence fee may be watered down.

Mr Dyke said ITV had got itself into a "devastating" financial position. Over the last two years, the commercial network has seen audiences plummet and advertising revenues collapse and has had to walk away from its ITV Digital venture, taking a £1bn loss.

A weak ITV is not in the BBC's interests, or in the interests of the industry and the public, he said. "A healthy broadcasting market in the UK needs a third gorilla alongside the BBC and Sky, and that third gorilla should be an advertiser-funded, free-to-air television group at its heart. That way, you get a proper balance of influence; that way, no one player can call too many of the shots; that way, no one player is too powerful," Mr Dyke said.

A struggling ITV would be forced to abandon its expensive public service commitments, which include regional programming, children's shows, current affairs and the arts, he warned. Programmes such as The South Bank Show or John Pilger documentaries would vanish from the schedule.

ITV could do this, Mr Dyke said, in a few years' time once 80 per cent of homes can receive digital television, which would mean it could abandon its analogue licences and broadcast as a digital service, with no public service commitments. This made business sense but the "cultural costs to Britain would be high," he said. Ditching public-service broadcasting could save ITV an estimated £400m a year.

"Crucially, what we all have to realise is that the government of the day would not be in a position to stop ITV from doing this," he said.

The outlook for ITV is bleak unless it is helped, Mr Dyke said, arguing that the proposed merger of the two big ITV companies, Carlton and Granada, now before the competition authorities, should be allowed to go ahead "on reasonable terms". The deal would give ITV a unified management for the first time and allow large cost-savings by cutting out duplication.