Channel 4's plea to have £14 million of state aid approved by the European Commisson was abandoned on Wednesday after months of delay arising from a series of Commission objections.

Ministers are instead expected to submit a larger bailout proposal next year, to help to meet a growing financial deficit in the Big Brother broadcaster, which is estimated to hit £100 million in 2012.

Andy Burnham, the Culture Secretary, told MPs in a written statement that “the debate on public service broadcasting in the UK has moved on significantly”, and that the collapse in advertising had made the need for greater help more urgent.

Early next year, ministers are to publish the Digital Britain report, examining every area of broadcasting policy, including how to safeguard Channel 4 and other areas of “public service broadcasting”, such as regional news bulletins on ITV.

Mr Burnham said: “The emerging proposals are likely to be more wide-ranging than a proposition relating specifically to Channel 4's [digital television] switchover costs”. He said that it would be logical for the Government to withdraw its existing application to the European Commission in favour of the new scheme.

Channel 4 had been offered the £14 million over five years to help it to meet costs of the switchover to digital television, with the cash coming direct from the BBC licence fee. That offer had to be approved by the EU, but became bogged down as Commission officials made a series of objections.

The plan was proposed in June 2007, and was sent to Neelie Kroes, the Competition Comssioner, in October of last year, but it did not impress Brussels.

In a letter, Ms Kroes told David Milliband, the Foreign Secretary, that she believed that Channel 4, with £170 million in the bank, had enough cash in reserve to meet the switchover bill. Had the Commission formally rejected the £14 million proposal, it would have set a difficult precedent for any future bailouts.

A Channel 4 spokesman said that it welcomed Mr Burnham's tactical retreat, adding: “It makes sense to seek any necessary approvals from the Commission for a single, all-encompassing solution to support the UK's public service broadcasting system, rather than a series of small-scale proposals.”

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