From June 2020 any household with someone aged over 75 who receives Pension Credit will be eligible for a free TV licence funded by the BBC. Around 1.5 million households could be eligible.
The BBC Board believes this is the fairest option to help the poorest pensioners. It is also the fairest option for all licence fee payers, as this means everyone will continue to receive the best programmes and services that the BBC can provide. The BBC will not be making judgements about poverty as that measure is set and controlled by Government.
The new scheme will cost the BBC around £250 million by 2021/22 depending on the take-up of the new scheme. The cost of this new scheme will require the BBC to divert some spending on programmes and services, alongside continuing to find new savings while expanding its commercial revenue to cope. The decision does, however, prevent unprecedented closures of services which would have been required had we copied the Government’s scheme.
The BBC conducted a consultation to help inform its decision. The BBC asked for views on a range of options, including copying the current concession, removing it entirely so as to restore the universal licence fee, discounting the fee, raising the age threshold from 75 to 80, or taking our lead from what the UK Government already does on pensioner poverty by giving a free TV licence to any household where someone is over 75 and receives Pension Credit. The BBC received over 190,000 responses.
BBC Chairman Sir David Clementi says: “The BBC has conducted the biggest and most wide-ranging consultation in its history. It has proved invaluable in helping the Board make its decision. While many supported copying the Government’s concession – so that all over 75s received a free TV licence – there was also strong support for reform. There was least support for abolishing the concession entirely.
“Ultimately, the Board did not think it right to abolish all free TV licences. While research suggests pensioners are now better off than they were when the concession was first introduced nearly 20 years ago, the simple fact is that many are still in poverty – and many want the companionship the BBC can provide. This was a point made by many and we listened and ruled abolition out.
“Copying the current scheme was ultimately untenable. It would have cost £745 million a year by 2021/22 – and risen to over one billion by the end of the next decade. £745 million a year is equivalent to around a fifth of the BBC’s spending on services. The scale of the current concession and its quickly rising cost would have meant profoundly damaging closures of major services that we know audiences – and older audiences in particular – love, use, and value every day.
“Many stakeholder responses to our consultation questioned the BBC’s ability to fund such a concession and continue to offer high quality services. Indeed, a significant number thought the Government should continue to fund it – an option not open to the BBC. The Government could of course choose to step in and close the gap from their own resources.
“Linking a free licence for over 75s to Pension Credit was the leading reform option. It protects the poorest over 75s, while protecting the services that they, and all audiences, love. It is the fairest and best outcome. It is one we can implement and endorse. This is an outcome that is the fairest possible in difficult circumstances.”
BBC Director-General Tony Hall says: “This has not been an easy decision. Whilst we know that pensioner incomes have improved since 2000, we also know that for some the TV Licence is a lot of money. I believe we have reached the fairest judgement after weighing up all the different arguments. It would not be right simply to abolish all free licences. Equally it would not be right to maintain it in perpetuity given the very profound impact that would have on many BBC services.
“This decision is fairest for the poorest pensioners. Around 1.5 million households could get free TV licences if someone is over 75 and receives Pension Credit. It protects those most in need. And importantly, it is not the BBC making that judgement about poverty. It is the Government who sets and controls that measure.
“It is fairest for all audiences – of all generations, old and young – who we know value the BBC and the programmes and services we provide. It means these services can continue.
“We also need to look at how the level of the licence fee is set in the future. The last two settlements have been made in the dark and without proper consultation. It is vital that future decisions are evidence-based and made after proper consultation and scrutiny. We need to find a better way.”
A new simple and fair system
The BBC wants to make claiming the free TV licence, paid for by the BBC, simple and straightforward. We will therefore work with older people’s groups and other support organisations to make it as easy as possible.
We will operate a self-verification system where individuals aged 75 or over need to demonstrate their receipt of Pension Credit in order to qualify. This method is used widely by the public and private sectors.
We will also introduce a new payment plan for pensioners aged 75 or over who are eligible to pay the licence fee. This will make it easier for people to pay for their TV licence going forward. We will also provide telephone and personal support. The BBC will set out the full details shortly.
What it means for the BBC
The funding available today for the BBC’s UK public services is already 24 percent lower than if the licence fee had gone up with inflation from 2010. The new scheme will cost the BBC around £250 million a year – a significant sum.
While the decision protects services from damaging closures, the BBC Board is clear that diverting £250m a year of the BBC’s spend on programmes and services risks weakening the delivery of the BBC’s mission and purposes – particularly in a much more competitive global market.
The decision does mean that the BBC’s income will now rise with general inflation from 2017/18 to 2021/22, so while it is tough, the decision will provide a measure of protection for its services in an increasingly challenging media market where costs in key areas are rising at a rate faster than general inflation.
A better process for the future
Many stakeholders raised concerns about how the 2015 licence fee funding settlement was conducted. Many were highly critical of the Government for making the BBC take on this responsibility in the first place.
There has also been a lack of transparency and consultation in the way that the licence fee has been set for the public over the last decade. The BBC Board agrees that the process should not be repeated. The Voice Of The Listener And Viewer – who promote the interests of consumers – has suggested a statutory Commission be established to set the level of the licence fee in the future. This, amongst other options, deserves serious consideration and discussion. It is vital that the BBC and our audiences never again face a Government-imposed process with no consultation and public debate. It is vital politicians ensure that future licence fee decisions are evidence-based and made after proper consultation.
The BBC Board believes the acute financial pressures on the BBC – in a very competitive, global marketplace where costs are rising much faster than general inflation – is going to be a significant factor in judgements about the level of the licence fee when it next comes up for review in 2021/22.