* Follows 20 percent reduction in budget
* 2,000 jobs to be axed, senior manager roles to be cut
* Labour unions warn programming, journalism will suffer (Adds detail, background)
LONDON, Oct 6 (Reuters) - The BBC is set to axe over 10 percent of staff in its management, programming and news divisions after Britain's cash-strapped government imposed deep spending cuts on the world-renowned, publicly-funded broadcaster.
The corporation set out the changes on Thursday in response to a 20 percent cut to its annual 3.5 billion pound ($5.4 billion) budget imposed by the government a year ago as part of the deepest public spending cuts in decades.
Unions said the changes would damage independent journalism at a time when a phone hacking scandal has revealed embarrassingly close ties between the Prime Minister David Cameron and Rupert Murdoch's right-leaning News Corp , a long standing critic of the BBC.
The BBC budget was imposed by the government with very little negotiation. Around 600 BBC News posts will now go.
"By 2016, the BBC will be significantly smaller than it is today," it said.
With eight national TV channels, 50 radio stations and an extensive website, the BBC's size and resources had already attracted envy and criticism from rivals, led by James Murdoch at the dominant pay-TV group BSkyB .
As the recession gathered steam in 2008, that criticism intensified as advertising-funded groups such as ITV struggled to cope, cutting staff and budgets.
Under the new plans, the corporation will cut 2,000 jobs, reduce the budget for buying sports and other rights, slash the number of senior managers and share more content.
More repeats will be shown on television and property in west London will also be sold. The changes will result in savings of around 670 million pounds a year by 2016/17.
"The realities of what this country looks like in 2011 and what households up and down the country are going through, what other public institutions are going through, (means) it would be a bit odd if the national broadcaster wasn't feeling some of the same pressures," Director General Mark Thompson said.
LAST MINUTE DEAL
Last year, the BBC agreed to freeze the annual licence fee, payable by every TV-owning British household, at 145.50 pounds. It is also taking on extra costs from the government including funding the BBC World Service, which is broadcast overseas.
The agreement was hammered out in a matter of days, stripping out the months of negotiation normally involved in setting a licence fee, as the coalition government scrambled to cut spending after taking power.
The National Union of Journalists condemned the move and called again for the licence fee to be renegotiatied "especially given what has since emerged about the close relationship between the government and Rupert Murdoch at the time the deal was done."
The media and entertainment union BECTU said the cuts were a direct result of the "shocking 11th hour deal" on the licence fee which "will be the cause of regret for years to come".
The BBC towers over Britain's media landscape with a rich offering of drama, comedy and children's programming, a huge newsgathering operation and some of the UK's most popular websites.
In a lecture more than two years ago, News Corp executive and BSkyB Chairman James Murdoch lashed out at the BBC, accusing it of making a land grab for power and calling for a radical overhaul of British television regulation.
The pendulum has since swung back in favour of looser regulation more favourable to commercial rivals and lower public spending, especially since the recession and the installation of a centre-right coalition government in 2010.
Alex DeGroote, media analyst at London brokerage Panmure Gordon, said the slimming down of the BBC would help level the playing field in Britain, where commercial media companies were up against a far stronger public rival than their peers abroad.
"There's always been a BBC discount for commercial media in this country. It got particularly high in 2002-05. That's when you had a massive expansion of the BBC's inventory -- more digital radio, BBC3 and BBC4, lots of Internet sites," he said.
BSkyB should be well placed to benefit. It is increasing the budget it spends on programming and has recently signed a deal to share the broadcasting of Formula One with the BBC. It is also already very aggressive in acquiring sports rights and drama from the United States. (Editing by Will Waterman and David Cowell)
