Raymond Snoddy: Grade's choice: Cut jobs or lose funding

Since Michael Grade was appointed chairman of the BBC seven months ago, it has been clear radical change was on the way, and thousands of jobs could go at the corporation. After all, it was the personal manifesto he put to the Government to get the job.

Since Michael Grade was appointed chairman of the BBC seven months ago, it has been clear radical change was on the way, and thousands of jobs could go at the corporation. After all, it was the personal manifesto he put to the Government to get the job.

Grade's agenda is simple. As a "believer" in the BBC and a former controller of BBC1, his main aim is to ensure the corporation, still funded by a licence fee, survives, flourishes and wins a 10-year royal charter when the present one runs out at the end of 2006.

For that, the BBC must be as efficient as it can be with the £2.8bn a year the corporation receives from the licence fee.

The BBC chairman has made it clear that after internal reviews are complete, if the case is made for deep cuts "there will be no hesitation".

The likelihood of painful job losses became even more likely when Mark Thompson, the former chief executive of Channel 4, was appointed director general of the BBC. When he left Channel 4 there were 30 per cent fewer staff than when he arrived.

Thompson said recently: "To me, the urgency and the need for change [at the BBC] is every bit as great today as it was when I arrived at Channel 4 getting on for three years ago."

The certainty of heavy financial cuts and job losses is underlined by the liking of Tessa Jowell, the Secretary of State for Culture, for the Grade/ Thompson approach, with their emphasis on maximum cost-effectiveness.

The outlines of a deal under which the BBC will get its royal charter and licence fee in return for a reduced head count can already be seen.

But will 6,000 of the 28,000 staff go? The BBC insists there are no precise numbers yet, not least because the reviews into such areas as "value for money" are not complete. Even then, recommendations will have to go to the governors.

One problem is that staff numbers have increased largely because of the launch of new digital services in radio and television. The cost-effectiveness of BBC3, in particular, has been criticised.

The Government encouraged the BBC to launch digital services to help drive its own vision of a digital Britain. It would be illogical if the Government did not provide the finance for such channels to continue.

The worst cuts are likely in such backroom activities as human resources, where there are believed to be nearly 1,000 people in legal services and marketing. But production jobs could, in effect, be out-sourced by increasing the proportion of programmes independent producers provide from the present 25 per cent to about 40 per cent. Efforts will also be made to reduce duplication in the 3,000-strong news division.

As rumours multiply, the battle could centre on trying to rein in Grade and Thompson and prevent them offering too great a sacrifice to the Government for the royal charter. It would be a strange victory if the BBC's production capacity was irreparably damaged as a result.