In a written statement to the House, Jowell said: "The television licence fee settlement is designed to enable the BBC to provide a strong and distinctive schedule of high-quality programmes and remain at the forefront of broadcasting technology."
The settlement includes a requirement for the corporation to raise over £1bn through efficiency savings and increased income over the same period.
The increase will be the penultimate increase under the five-year deal between the BBC and government, as agreed in 2000.
From 2006, when the new BBC 10-year Royal Charter comes into existence, a new licence fee funding formula will be agreed.
The 2006 fee is likely to be less than than the existing one because the BBC required extra funds to pay for its new digital services including BBC Three, BBC Four and its digital radio stations such as 1Xtra.
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