Ministers have backed down from a fight with the BBC after they called for the corporation to hand over part of the licence fee to pay for regional news on other channels.

In June the Digital Britain report had suggested that a portion of the £3.6 billion that has been reserved for the switchover to digital be used to pay for regional news from commercial broadcasters, who have been hit by a downturn in advertising.

Yesterday the Department for Culture, Media and Sport admitted that a final decision on the plan to reassign the £130 million slice of the licence fee, which has been strongly opposed by the BBC and the Conservatives, would not be made until 2012, meaning that it is likely to be junked by a Tory government.

Ben Bradshaw, the Culture Secretary, had described the BBC’s opposition to the plan as “self-defeating” and “wrong-headed”.

Department sources insisted yesterday that the Digital Economy Bill, to be announced in tomorrow’s Queen’s Speech, would contain the measures needed for the redistribution of the funds, but it will be a matter for whichever party is in power in 2012 to bring these in to force.

The Conservatives, who have proposed that the current system of regional news broadcasting be replaced by “hyper-local” television stations based on cities rather than regions, said that the Government had avoided taking a decision.

Jeremy Hunt, the Shadow Culture Secretary, said: “The Government says local news requires public funding but it won’t categorically say where this money should come from. This consultation, and the Government’s response, was meant to answer that question — but instead they seem to have kicked the issue into the long grass.

“This response poses more questions than it answers and is simply the latest sorry step in Labour’s history of digital dithering on the key issues.”

In its evaluation of the response to a public consultation on the proposals, the Department for Culture, Media and Sport admitted that 46 per cent of those it asked were opposed, while 43 per cent were in favour of the plans to use the so-called “contained contestable element” of the licence fee, equivalent to roughly £5 of the £142.50 annual charge.

It concluded: “The Government’s preference remains the contained contestable element, but a final decision will be made before the licence fee settlement process in 2012 ... If better options than the Government’s preferred one emerge in the meantime, the Government will consider them.”

Sources at the BBC, whose relationship with the Government has deteriorated over the corporation’s opposition to the plans, claimed that they had succeeded in killing the measures, pointing to the assumption that the Conservatives were likely to be in power in 2012.

The BBC Trust “welcomes the Government’s announcement that it is prepared to consider alternative options for supporting regional news”, a spokesman for the corporation’s governing body said.

Research carried out for the department found that 65 per cent of the public were in favour of the plans. But the survey was heavily criticised by polling experts. Steven Barnett, Professor of Communications at the University of Westminster, described it as a “blatantly one-sided questionnaire designed to achieve the answer the Government wanted to hear”. The survey cost taxpayers more than £70,000.

The BBC’s victory over the licence fee comes days after a government report recommended that the list of “crown jewels” sporting fixtures reserved for free-to-air channels such as the BBC be extended to include events such as the home Ashes series.