Culture Secretary Nadine Dorries is reportedly in “ongoing” discussions with the broadcaster over the £159 annual charge.
The row has raised doubts about the BBC’s long-term financial future and editorial independence.
But education secretary Nadhim Zahawi insisted the BBC is “something we need to make sure we continue to support and protect”.
Speaking to Radio 4’s Today programme, he said it is “absolutely right to celebrate what the BBC does globally”.
“The work that the BBC does on education is incredibly valuable,” he added.
“But we also have to recognise that, actually, the way people consume media today is very different to the way they did five years ago, and part of that is a proper grown-up conversation as to how the BBC is funded beyond this settlement.”
The corporation has faced funding cuts and repeated attempts to decriminalise non-payment of the licence fee in recent years.
Shadow culture secretary Lucy Powell accused the Government of using the licence fee row to distract from criticism of the prime minister over several Downing Street lockdown parties.
She described the fee as “incredibly cheap” and criticised Ms Dorries for making an announcement on Twitter.
Ms Powell told Times Radio: “Let’s not get away from the fact that this so-called announcement, which was on Twitter yesterday, which is effectively the end of the BBC as we know it, a huge policy announcement, is nothing more than a really obvious, pathetic distraction from a Prime Minister and a Government who has run out of road and whose leadership is hanging by a thread.”
In an email to staff, BBC director general Tim Davie and chairman Richard Sharp laid out reports about the licence fee freeze.
“At the moment the discussions about the future level of the licence fee the rest of this charter period are still ongoing,” they said.
“Although we do expect them to conclude very soon, we will continue to make a strong case to the government for investing in the BBC.
“There are very good reasons for investing in what the BBC can do for the British public, UK creative industries, and the place of the UK in the world.
“This is the case that we’ll continue to make to the government right until the last moment.
“We all recognise however that it is for the government to set out the licence fee at the level that they believe is appropriate.”