The BBC has defended the amount of money it spends on digital services, as well as bonuses given to its senior executives.

BBC director general Greg Dyke, speaking to MPs on the day the corporation's annual report is published, admitted it was a "problem" that some people were paying a licence fee for services they could not receive.

The corporation also defended the level of bonuses given to 21 senior managers in the last 12 months.

One politician pointed out that some executives had received bonuses greater than MPs' salaries and that some managers earned more than the prime minister.

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But chairman Gavyn Davies told the House of Commons culture committee that BBC managers earned less in comparison with similar companies in the public and private sector.

"Interestingly, although some other media companies have had a hard time in terms of revenues they have not had a hard time in terms of what they pay their executives," he said.

Greg Dyke received a bonus of �97,000 on top of his annual salary of �357,000, the annual report showed.

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Seventeen executives at the corporation have also received bonuses totalling �895,000.

Last year 19 managers received bonuses worth �798,000.

The total payout for BBC executives rose from just over �4m in 2001 to 18 managers, to just over �5m this year, for 20 managers.

Mr Davies added: "The people who run the BBC are outstanding individuals who have very ready access to jobs in the media industry.

"We pay median amounts of money to outstanding people who would be enormously better off if they moved to the private sector."

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Mr Dyke defended the fact the BBC spends about 8% of its annual budget of �2,591m on digital services, including recently launched channels BBC Four and CBeebies.

But ratings for BBC digital programmes remain low.

BBC Choice and BBC Four have a share of viewing in digital homes of about 1.5% and 0.1%, and a share in all homes of about 0.7% and 0.1%.

But Mr Dyke said: "I don't think ratings in the digital world are what it is about - it is about how many people come in and use those services at some stage during the week."

Dyke: Working on boosting digital signal

In digital homes more than 15% of people watch BBC Choice for at least 15 minutes once a week.

Twenty percent of homes are also not able to receive digital terrestrial television (DTT) because of geographical problems.

Mr Dyke said the BBC, now that it has won the licence for DTT, would be working at boosting the signal.

The director general also assured the MPs that:

There would be no "dumbing down" of political programmes

Spending on digital services would not increase significantly over the course of the current charter, which ends in 2006

All children's programming would have an educational input and merchandising would not be too excessive

Gavyn Davies told MPs that unifiying the nation remained at the heart of what the BBC does.

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"It has been a year of remarkable events - 11 September, the war on terror, the funeral of the Queen Mother, and more recently the Golden Jubilee and the World Cup," he said.

"I believe the BBC has faced enormous challenges in covering these great events but has done it magnificently."

The BBC governors in their appraisal of the past year have criticised some elements of the corporation's news and current affairs programmes.

The report warns programme makers to "check material thoroughly" and adds that there were "some high-profile difficulties" with the programme MacIntyre Undercover.

BBC governors: News material needs to be "checked thorougly"

The corporation is currently involved in legal action with diamond company Oryx over a report broadcast on the Ten O'Clock News.

Question Time is also criticised, for its programme broadcast two days after 11 September attacks in the US which had "errors of tone and timing".

The governors also said The Joy of Text - a text message-themed evening on BBC One - and entertainment show Celebrity Sleepovers were "disappointing".