The TV licence fee is to be frozen for two years at its current level, the BBC Trust has said.

It has proposed the freeze - which will mean a £144 million drop in the BBC's budget - to the Government and it is expected to be approved later.

The move is in response to the "exceptional pressures" of the economic climate.

The fee will remain at £145.50 for the remainder of the current settlement period, to March 2013.

The BBC had been entitled to increase the fee by 2 per cent in the next financial year and up to 2 per cent for the following 12 months.

However the BBC Trust is also entitled to keep the BBC's needs under review to make sure that spending is appropriate.

It asked the corporation's executive board to examine budgets in June to look into short-term savings.

The aim was to weigh up savings and prudent planning to "return to a zero borrowing position by the end of the current licence fee period and to maintain the broad pattern of current services", the trust said.

The cost savings will require "on-air changes", at a time of continuing capital spend on infrastructure projects and digital switchover, the executive decided.

But the trust concluded savings could be made while minimising on-air impact.