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The BBC could start charging for the iPlayer online catchup service as George Osborne announces a £650 million raid on the licence fee.

The Chancellor warned the broadcaster must make a "contribution" to dealing with the deficit, and would have to pick up the bill for free TV licences for the over-75s.

Free TV licences are currently funded by the treasury - but the BBC are reportedly negotiating a change in the law to allow them to charge for some of their online services, including iPlayer, to cover some of the £650m cost.

Speaking to the BBC's Andrew Marr, the Chancellor made clear he has the broadcaster - which is facing negotiations for the renewal of its royal charter - in his sights.

"The BBC is also a publicly funded institution and so it does need to make savings and contribute to what we need to do as a country to get our house in order. So we are in discussion with the BBC," he said.

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He played down suggestions that cuts on the scale involved in taking on the cost of free licences for the elderly would mean axing one of the BBC's major channels.

"I remember five years ago doing a deal with the BBC where actually the BBC... took on £500 million worth of responsibilities including things like the BBC World Service," he said.

"I was told at the time by people 'They're going to shut down BBC2, they're going to close Radio 4'. They always seem to pick the juiciest fruits on the tree."

He hinted, however, that the BBC's website is one area where significant savings could be found.

"If you've got a website that's got features and cooking recipes - effectively the BBC website becomes the national newspaper as well as the national broadcaster. There are those sorts of issues we need to look at very carefully," he said.

"You wouldn't want the BBC to completely crowd out national newspapers. If you look at the BBC website it is a good product but it is becoming a bit more imperial in its ambitions."

The Sunday Times reports that the BBC may be given the opportunity to recoup some of its lost revenues by charging for the use of iPlayer and other online catch-up services.

Mr Osborne said: "There are massive technological changes that if we don't address will mean the licence fee income will slowly disappear. I think therefore that's the basis of a deal we can do."