The salaries of entertainment stars at the BBC have been defended by director general Mark Thompson.He told MPs on the Culture Select Committee that it was right for the BBC to get the best deal for “absolutely key talent”.

A BBC that did not have big entertainment stars would not please the public, he added.

The MPs had asked whether a reported £18m three-year contract for Jonathan Ross was justified.

Mr Thompson said he did not “want to apologise” for spending large sums on presenters.

In their annual scrutiny of the BBC, MPs also wanted to know about the BBC’s policy on pay after the corporation’s annual report revealed that its top executives had significant increases last year.

Chairman Michael Grade said salaries set ensured “leadership of the highest quality” at a time when management were introducing “transformational ways of working”.

The chairman said executives were “required to improve the quality of the services that they’re delivering for the licence fee payers.

“That takes leadership - and it takes leadership of the highest quality throughout the BBC. We have to be able to attrract and retain leaders who can carry out this programme,” he added.

People worked for “a considerable discount” at the BBC compared to what they could earn at a commercial company, he said.

More than 1,100 BBC employees have lost their jobs in the past financial year, with a further 2,000 staff expected to leave the BBC in 2006-7.

Unions have said staff will be balloted over possible strike action over pay and pensions.

Mr Grade also said he was “deeply embarrassed” that some viewers could not receive adequate reception of digital terrestrial TV.

He said it was wrong that there were people paying the licence fee who could not access all BBC services on offer.

A quarter of UK homes have no coverage of Freeview because digital transmissions share space on the spectrum with analogue services and there is not enough room left.

Governors were “pushing” managers to speed up the launch of a free-to-air satellite service, Mr Grade said.

Mr Thompson added the BBC had “been working very strenuously on this”.

Mr Grade said the BBC received more complaints on the “lack of availability of digital services” than any other subject.

Licence fee payers were “very angry about that”, he added.

Coverage of digital terrestrial services is predicted to reach 98.5% of UK homes once analogue services are switched off in 2012.

The Border region of southern Scotland and north-west England is to be the first part of the UK where analogue transmissions end, in 2008.