London CNN Business  — 

The BBC has warned that it will be forced to slash services and cancel shows after the UK government froze its main source of funding, resulting in a budget shortfall of roughly $388 million.

Tim Davie, director general of the public service broadcaster, told BBC Radio 4 on Tuesday that “everything’s on the agenda” after Prime Minister Boris Johnson’s government announced it would freeze the license fee for two years as the cost of living soars.

The £159 ($216) license fee is the tax all British viewers pay to raise billions every year to fund the BBC’s sprawling news, documentary, scientific and entertainment programming.

“Inevitably, if you don’t have £285 million ($388 million), you will get less services, and less programs,” said Davie. “I still think the BBC can offer extraordinary value for the £13 ($18) a month and we absolutely think we can do that.”

Davie estimated the BBC would generate about £4.2 billion ($6 billion) from license fees by the end of 2027. But that won’t be enough to support its current slate of shows.

Culture Secretary Nadine Dorries announced on Sunday that the license fee would stay at £159 until April 2024, before rising in line with inflation for the next four years.

Dorries told parliament on Monday that she “could not justify putting extra pressure” on people’s wallets as rocketing inflation — which hit 5.1% in December — squeezes household budgets. The BBC had pushed to increase the fee to £180 ($245), she said.

Britons will come under more financial pressure over the coming months, when tax hikes come into effect and a cap on consumer energy prices is lifted.

Dorries said that it was time to examine alternative models to fund the BBC that would help it compete with against streaming giants such as Netflix (NFLX), which has just hiked its prices in the United States and Canada. The BBC’s Royal Charter — the contract with the government that determines how it is funded and run — is up for renewal in 2027.

The BBC gets roughly 75% of its budget from the license fee. The rest comes from licensing deals and commercial sales outside of the United Kingdom.

Davie rejected the idea that consumer subscriptions should replace its public funding.

“Once you’re trying to serve a subscription base, and a commercial agenda — and, believe me, I’ve run commercial businesses — it is a completely different situation,” he told Radio 4. “Because suddenly you are there to make profit and make a return to a specific audience.”

Still, Davie said he was pleased to have certainty on the BBC’s funding level.

“I would say having certainty of income for six years — as you know the media market moving so fast — is very material to us,” he told Radio 4.