BBC encourages over 75s to foot the bill for their free licence fees to help funding shortfall

Heath, the BBC’s director of policy, wrote in a blog post: “We will give those eligible households an opportunity to voluntarily pay for a TV licence and so make a contribution to the cost of the BBC’s services."

Under current rules people aged over 75 have to apply for a free TV licence – now costing £145.50 – and can claim a refund on fees paid after their 75^th birthday.

However Chancellor George Osborne has compelled the BBC to pick up the cost for the cost of the free licences in his charter review negotiations with the Corporation. It is estimated that the cost of the exemption is around £650m and represents around a fifth of the BBC’s £3.17bn licence fee revenue.

The controversial changes are scheduled to be phased in from 2018-19 with the BBC bearing the full cost by 2020-21.

The first impact of taking on the cost of free licence fees for over-75s will be felt by the BBC in 2018/19, when it will amount to £250m. Its financial commitment will nearly double to £450m the following year, and £750m by 2020/21.

In return the Government has promised to bring in proposals on paying to use catch-up services like iPlayer, meaning that the BBC could potentially charge people to use the service.

However the proposals have been criticised in many quarters, with analysts claiming that the move threatens the BBCs independence because free licences is a welfare cost which should be met by central Government.

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BBC agrees to pay for TV licences for over 75s

BBC faces the calamitous loss of a fifth of its income in the Budget - surely channels and radio stations will soon be under threat