Free licence fees for the over 75s have been a welcome perk for the elderly – and a bone of contention for the BBC.
Introduced by the Labour Chancellor Gordon Brown in 2001, the cost of the concession was initially borne by the government.
That changed in 2015 during BBC charter negotiations: when the deal was reached in January 2017, the BBC was required to pay a share of the roughly £725 million bill.
The cost of the concession to more than 4.46 million homes for the £150.50 per year charge is currently split with the government, with the BBC paying an increased share every year.
Understandably the BBC is uncomfortable with this burden. On Wednesday 17th October 2018 the preliminary findings of an independent report into the concession was produced, paving the way for the free licence fees to end by June 2020…
How does the current licence fee system work for the over 75s?
Currently all over 75s in the UK – amounting to more than 4.46 million licence fee-paying homes – are exempt from the £150.50 charge. This has been the case since 2001.
How much does does the over 75 licence fee exemption cost the BBC?
Currently the bill for the licence fee exemption is estimated at around £725 million – and each year the BBC is set to pay a growing proportion of it.
In this financial year the government (through the Department of Work and Pensions) pays £468m, with the BBC paying around £257m. In the 2019/2020 financial year the government’s contribution drops to £267m. This is known as a “yearly stagger down”.
By 2020 the BBC will bear the full cost of the exemption – an estimated £745m. By 2030 this is expected to rise to around £1bn a year as the population ages. BBC director general Tony Hall has already said that this is not sustainable given the amount of savings the BBC already has to make under the current terms of its charter.
What has the BBC done about the licence fee exemption?
The BBC commissioned independent consultancy Frontier Economics to look into the licence fee exemption for over 75s.
On Wednesday 17th October 2018, Frontier published its preliminary findings, which indicate that the exemption should be scrapped.
It notes that that “profound economic changes” since 2001 have made pensioners “much less likely to be living in poverty”, adding that the young have borne a higher share of costs arising from the financial crisis and austerity.
Frontier is due to publish to completed report within weeks, assessing the full financial and social impact of various options for reform.
What will happen next?
The BBC will consult on the exemption for over 75s with a view to deciding what to do. Under the terms of the BBC charter, it will be able to make a decision on whether to keep or retain the free licence fees for over 75s in June 2020. The BBC board will make this decision next year in order to give sufficient time before the June 2020 deadline. It is likely to want to scrap the free licence fees, but could face opposition….
Who is likely to resist scrapping the free licence fee for over 75?
MPs are likely to oppose it, depending on how much lobbying they get from the over 75s. The reform was introduced by Gordon Brown in a bid to attract older voters. Elderly charities may also raise objections.
What other options are available?
They could raise the eligibility, keeping free licence fees for the over 80s or over 85s. Or it could scrap free licence fees for people over 75 who live with a younger person. Alternatively the BBC could introduce means testing, making wealthier pensioners pay the fee but keeping the licence fee exemption for others. According to BBC sources this is seen as a very likely option.
Will the over 75s lose free TV licence fees?
The Frontier report and the BBC’s own investigation into the exemption is seen as ‘softening up’ exercises to pave the way for a final decision next year. It is highly likely that some, if not all, over 75s will have to start paying for their TV licence in full from June 2020.