George Osborne has sounded a warning to the BBC that it must make a "contribution" to dealing with the deficit in the nation's finances amid reports the broadcaster will be ordered to pick up the £650 million bill for free television licences for the over-75s.
The Chancellor - who will deliver his first all-Conservative Budget on Wednesday - confirmed that the Government remains committed to cutting £12 billion from the welfare bill.
Interviewed on BBC1's The Andrew Marr Show, he said the benefit cap would be cut to £23,000 in London - and lower in the rest of the country - and he signalled he would be looking to make savings from tax credits.
However he also made clear he has the BBC - 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.
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."