The BBC likes to boast about its network of foreign correspondents, as it showed recently when it ran a series of promotional films listing dozens of cities where it has a presence. When a story breaks, it suggested, the BBC covers it far better than its rivals ‘because we are already there’.

That may not be true for long. Sources at Broadcasting House claim senior managers are lining up cuts that could result in the closure of some foreign bureaux, and a 30 per cent reduction of staff in others. ‘They have been planning cuts for some time and it is directly related to the licence fee settlement’, says a senior correspondent. Such a move would prove hugely controversial.

If there is one thing the corporation does well, it is reporting overseas news to a domestic audience and, increasingly, an international one. Even critics who regularly lambast the BBC for ‘dumbing down’ or spending too much on star presenters concede it is a good use of licence money. Some insiders believe news, and foreign news in particular, should be spared the worst of the cuts.

Plans announced earlier this year to make 10 journalists redundant, including two at the flagship news programme Newsnight, prompted strike action, and the BBC backed down. But, says the BBC correspondent, ‘they did so because they knew there were bigger battles ahead.’

There is speculation that well over 100 news staff could go. But one senior source claims: ‘That is a huge underestimate. Many hundreds of jobs are under threat in news and there are serious questions over whether the quality of programmes like Newsnight and the Ten O’Clock News can be maintained.’

It is believed the news department is planning to cut its budgets by 5 per cent a year for the next five years as part of a wider, five-year BBC business plan being drawn up by director-general Mark Thompson. The plan will be presented to the BBC Trust later this month, and trustees will be invited to comment on the proposal before it is implemented in the autumn. Many within the BBC hope it will veto plans for big cuts in news, and view it as the first big test for new chairman Sir Michael Lyons.

‘There is a huge bunfight going on,’ the source says. ‘Thompson has to decide whether to put the squeeze on across the board or axe some services - like BBC3 or BBC4 or several radio stations - completely.’

There are many within the BBC who would prefer to see other services axed to preserve news output, particularly as it has already had to make significant savings. In the run-up to the licence fee settlement, Thompson tried to demonstrate the BBC had got costs under control by axeing more than 3,000 jobs as part of his Value for Money programme. News was not spared, but departments that demonstrated greater efficiencies were told they would be handed bigger budgets after the settlement was announced.

That was when the BBC was budgeting for an above-inflation licence fee increase. The reality of a 1.5 per cent below-inflation rise is about to bite, and the latest round of cuts and savings will be far deeper. ‘There isn’t a great deal left to cut,’ says a correspondent. ‘There have already been some savings, and the output is expanding. There is more work to do, more podcasts to record, and more writing for the internet. I don’t know anyone who’s having an easy ride.’

Foreign bureaux will be reduced, insist some sources, but no decisions have been taken about which will bear the brunt. One senior source says it is unlikely that any will be shut down completely and concedes: ‘If you were a Sky or an ITN you would be saying “we do the same thing in a far more lean way” and arguing the BBC still has loads of money.’

But the current battle goes to the heart of a dilemma that BBC has wrestled with for generations - whether to chase audiences or concentrate on core services that commercial rivals can’t or won’t provide. ‘Some say we should reinforce the core public services, like news,’ says the senior BBC staffer. ‘But we’re losing young audiences and there’s a review of the licence fee in five years .’

If the nationwide tax on TV loses popular support, the very future of the corporation could be in jeopardy. In the meantime, there are some big battles looming.

There was a reprieve for homeowners today as the Bank of England held interest rates at 5.75% for the second month running, amid continued turmoil in world financial markets.

Homeowners have already been hit by five rate rises since August last year and there are signs that the housing market is finally coming off the boil. There were also fears of the impact another increase could have on the wider economy, particularly in the light of the turbulence on world money markets.

In fact, the Bank of England yesterday made its first intervention in the recent financial turmoil by offering to inject billions into the banking system to make it easier for banks to borrow money.

The case against another hike was boosted by an unexpectedly sharp drop in inflation in July, when the consumer price index (CPI) fell below the Bank’s 2% target for the first time in more than a year. The CPI dropped to 1.9% on the back of big falls in food prices and furniture costs. There have also been signs that the housing market is finally coming off the boil after a succession of rate rises.

House prices increased by just 0.4% in August from the month before. During the three months to August house prices increased by just 1.6%, compared with a gain of 4.5% in the first quarter of the year.

Meanwhile, retailers are arguing for a rate cut. The British Retail Consortium (BRC), said like-for-like retail sales rose by 1.8% in August, ahead of the 1.2% increase seen in July, but well below the 2.5% growth seen in the same month last year.

The BRC director general Kevin Hawkins said this week there was no case for another rise in interest rates, adding that the next move should be down.

For the time being, the Bank’s monetary policy committee (MPC) is under no great pressure to tighten credit as its job to a certain extent has been done by the recent turmoil on global stock markets, which has already pushed up the costs of borrowing.

Normal lending between banks has dried up as a result of the knock-on effects of the mortgage crisis in the US, so tighter credit conditions already exist without the MPC having to push up rates.

Market sentiment has certainly shifted because of the recent market turmoil. Whereas only recently, analysts were predicting that rates would hit 6% this year, many now think borrowing costs have already peaked because of market uncertainty. But that cannot be taken for granted as consumers have yet to significantly rein in spending.

The minutes of last month’s meeting showed that all nine MPC members voted to keep rates unchanged. Moreover, they indicated that the Bank was in no hurry to raise rates any time soon.

“Most members emphasized that they had no firm view on whether interest rates would need to rise further,” the minutes said.

The ongoing problems and uncertainties in credit and financial markets substantially boost the case for the Bank of England to sit tight for the time being,” said Howard Archer of Global Insight. “If these problems prove extended, they are increasingly likely to filter through to negatively impact on the real economy.”

The death toll from Hurricane Felix has risen to at least 38 people, with more than 200 people missing, Nicaraguan authorities said today.

The storm smashed into Nicaragua’s north-eastern Miskito coast early on Tuesday as a category five storm, the highest on the scale.

Victims of the 160mph winds have so far included a baby who was born as the storm hit and a woman killed when a falling tree smashed into her home.

Millions of people across Central America were facing further destruction today, with heavy rain bringing the prospect of flash floods and landslides.

On a visit to the devastated coastal city of Puerto Cabezas, the Nicaraguan president, Daniel Ortega, said: “There are more than 200 people missing. We are talking about really serious damage.”

Honduran officials yesterday rescued 150 Miskito Indians who were adrift on the ocean clinging to buoys, canoes, and slabs of wood.

Nine of those rescued were in serious condition. said a congresswoman, Carolina Echeverria. “We believe there are many others out there floating on the sea,” she added.

A preliminary evaluation of the damage along the Miskito coast found 5,500 homes destroyed, many of which had been little more than wooden huts.

Relatively sturdy buildings also suffered amid the howling winds and flying debris. The roof of one church was ripped off while hundreds of refugees watched from below.

Some 90% of the buildings in Puerto Cabezas reportedly lost their roofs, and many roads were blocked by fallen trees and a mesh of cables.

Yesterday, the Nicaraguan government began airlifting mattresses, drinking water and food into the area.

Mr Ortega also promised to build new and better houses for those left destitute by the hurricane.

Meanwhile, Hurricane Henriette continued to threaten north-western Mexico, having already killed nine people.

The front, which by today had weakened to a tropical depression, passed over the wealthy resorts around Cabo San Lucas on the tip of the Baja California peninsula on Tuesday.

Yesterday it made landfall near the port city of Guaymas with sustained winds of up to 75mph before weakening as it headed inland.

Felix and Henriette were the first hurricanes on record to strike from the Atlantic and the Pacific on the same day.

Felix also set a precedent by hitting land just two weeks after another category five Atlantic storm. Hurricane Dean killed 27 people on its trajectory through the Caribbean and Mexico.

In Mexico, the Nobel prize-winning scientist Mario Molina and the president, Felipe Calderуn, blamed the ferocity of this year’s hurricanes on warmer oceans. An expert from the US national hurricane centre in Miami told the Associated Press that climate change was only a minor factor in overall natural fluctuations.