Jeremy Paxman takes 20% pay cut to stay at Newsnight - but still gets £3m over four years

Jeremy Paxman has agreed to take a 20 per cent salary cut to stay on as Newsnight host, quashing speculation he was poised to quit.

The new deal, still worth £3.2 million over four years, is part of a BBC drive to cut costs after a pledge to slash stars' salaries when contracts come up for renewal.

Paxman, 60, returned to the BBC2 flagship news programme this month following a six-week absence and ranted to viewers that the show's daily email bulletin was being axed for being "crap" and "an exercise in fatuousness".

Questions have been asked about his recent performances after he stumbled over the word "cuts" and accidentally used a four-letter expletive.

He had taken a break to film a history-themed documentary for the BBC and producers had urged viewers to "make him feel wanted" via Twitter on his return.

Since 1989, Paxman has tortured many ministers on Newsnight, most notably Tory Michael Howard who faced a barrage of repeated questions, leaving him appearing dazed.

Paxman is not the first to have been hit by budget cuts at the BBC. The presenter of DIY SOS Nick Knowles recently confirmed that he had volunteered to take a salary reduction. He said: "I took a cut, a third on my contract. I offered to do this. Everybody has to make a sacrifice."

Knowles, 48, whose new National Lottery show Secret Fortune is on BBC1 on Saturday nights, added: "I was offered double to go elsewhere but I stayed. I am happy at the BBC."

Other presenters who could see their pay packets shrink include Bruce Forsyth, Graham Norton and Gary Lineker.

Last month the BBC announced it will cut about 360 jobs as it looks to slash its online budget £34 million.