The BBC wants to increase the licence fee by 2.3% above inflation to boost its programmes and digital services.

The corporation is to present its bid for the next licence fee settlement to a House of Commons select committee.

If the government accepts the BBC's proposal, the fee would rise by 3.14 per year until 2013, not including inflation. The current fee is 126.50.

BBC director general Mark Thompson said the rise would fund the switch-over to digital TV and BBC on-demand services.

The BBC says it needs an extra 5.5bn over the next seven years to pay for more original programmes, new digital and local services and increased costs.

The corporation says it can fund 3.9bn of that through cost-cutting measures and commercial profits. But the proposed licence fee increase would fund the remaining 1.6bn.

"We know that licence fee payers find the licence fee a burden in their household costs," Mr Thompson said.

"But on the other hand, we also know that they are overwhelmingly in favour of the BBC spearheading these new digital services.

"It is a bigger licence fee, but the BBC gives out of it bigger digital TV and digital radio services. It is a big step towards digital Britain."

The corporation's valuation kicks off negotiations that will eventually see the government set the new annual fee.

The current deal ends in April 2007 and the next will last for seven years. The licence fee currently generates 2.94bn a year for the corporation.

Digital switchover

Under the current deal, set in 2000, the licence fee goes up by 1.5% above inflation per year. It will increase to 128.50 next year, not allowing for inflation.

Culture Secretary Tessa Jowell has said the corporation will get some extra money to spearhead the UK's switch to digital TV by 2012.

The corporation aims to make its TV programmes available on the internet, to make its archive more accessible and invest more in local TV and radio services.

The BBC has also pledged to show fewer repeats and move some of its operations out of London - although a planned move for some of its departments, including sport, children's productions and Radio Five Live, to Manchester may depend on the licence fee settlement.

'Fairest way'

Ms Jowell has said the licence fee is "not perfect" but is still the fairest way to fund the BBC. She has also said the BBC must become more accountable to the licence fee payer.

Mr Thompson and BBC chairman Michael Grade have already made a series of shake-ups, including almost 3,800 job cuts and internal value-for-money drives.

Mr Grade said: "This bid has been thoroughly and independently scrutinised by the governors.

"We commend it to government as an efficient business plan designed to meet licence payers' expectations at the lowest cost."

The negotiations come as the government prepares to set out the corporation's role, function and structure in its next 10-year royal charter, which will also come into force in 2007.