July 6, 2015

‘Shabby deal’ with Government outlined in which BBC will fund £650m cost of TV licences for over-75s

The BBC has agreed to fully fund free TV licences for over-75s from 2020/21, the Culture Secretary has said.

It is part of a deal which would see the BBC also benefit from a reduction in the amount of licence fee income used to pay for broadband roll-out, from £150m to nothing in 2020/2021. There will also be a return to inflation-based licence fee increases and a change in the law to ensure the licence fee covers those who only access catch-up TV.

Last week the BBC said it expected licence fee income to drop by £150m in 2016/2017 and announced that it was cutting 1,000 jobs to save £50m a year.

The cost of free TV licences for those over 75 has been estimated at £650m a year.

Press Gazette has asked both the BBC and the Government what the predicted net reduction in BBC income will be. Neither was able to supply that information.

John Whittingdale said changes announced today will be phased in from 2018/19, adding the Government is pleased the broadcaster has agreed to "play its part in contributing to reductions in spending like much of the rest of the public sector" while further reducing its "reliance on taxpayers".

He also announced legislation will be brought forward in the next year to "modernise the licence fee" to cover public service broadcast catch-up TV – an apparent nod towards allowing charging for people who opt to use the iPlayer.

The BBC licence fee of £145.50 is also expected to rise in line with the consumer price index measure of inflation, Whittingdale said.

The Tory frontbencher added the Government will "consider carefully" the case for decriminalising non-payment of the licence fee.

Labour labelled the "backroom deal" as "shabby".

Ben Bradshaw, Labour's former culture secretary, also accused the Government of attempting to make the BBC a "branch office" of the Department for Work and Pensions.

Replying to an urgent question in the Commons, Whittingdale said: "The commitment made in the Conservative manifesto that all households with an over 75-year-old will be eligible to a free TV licence will be honoured throughout this Parliament.

"As requested by the BBC, they will take responsibility for this policy from thereon."

Outlining the deal, Whittingdale said: "Under this agreement, the BBC will take on the cost of providing free television licences for those households over 75 and this will be phased in from 2018/19, with the BBC taking on the full costs from 2020/21.

"Having inherited a challenging fiscal position the Government is pleased that the BBC has agreed to play its part in contributing to reductions in spending like much of the rest of the public sector, while at the same time further reducing its overall reliance on taxpayers.

"As part of these new arrangements, the Government will ensure that the BBC can adapt to a changing media landscape.

"The Government will therefore bring forward legislation in the next year to modernise the licence fee to cover public service broadcast catch-up TV.

"In addition the Government will reduce the broadband ring-fence to £80 million in 2017/18, £20 million in 2018/19, £10 million in 2019/20 and to zero in 2020/21.

"The Government will consider carefully the case for decriminalisation in the light of the Perry Report and the need for the BBC to be funded appropriately. No decision will be taken in advance of charter renewal.

"The Government anticipates that the licence fee will rise in line with the CPI over the next charter review period, subject to the conclusions of the charter review in relation to the purposes and scope of the BBC and the BBC demonstrating that it is undertaking efficiency savings at least equivalent to those in other parts of the public sector."

BBC Trust chair Rona Fairhead said in a letter to Whittingdale:

Clearly, beyond the current Charter period it is for the Government to determine both its policy on the over-75s concession and how that is funded. We could not, ultimately, obstruct any decision that you made.

We acknowledge that nonetheless, following discussion with the BBC Executive and the Trust, you have agreed a number of significant mitigations: modernising the licence fee to include catch-up TV, phasing this change over four years and simultaneously phasing out the existing cost to the BBC of funding the Government’s broadband programme from the licence fee. Given those mitigations, and in particular with the assurance that the licence fee (of £145.50) will rise in line with CPI over the next Charter Period, we will not oppose the change being made. The BBC Executive Board has confirmed to the Trust that it accepts the decision on this basis.

It is our presumption that the Government will not now seek to impose further costs on the BBC during the Charter Period.

Both the Trust and the Executive are committed to driving further change and efficiencies, in the light of the economic challenges that face us, and to pursue all other possible sources of revenue. However, the Executive are clear that the necessary savings will not be achieved through productive efficiency alone and will inevitably have some impact on the nature of the BBC’s services.

The Trust has a specific duty to represent the interests of licence fee payers. We are disappointed that they have not been given any say in the major decisions about the BBC's future funding. However, we accept that those decisions now set a clear financial framework, subject to the terms set out in your letter, for a Charter Review process that will focus on what the BBC provides in return for its funding. We will want to make sure the public are at the centre of that debate.

BBC director general Tony Hall said:

We have secured the right deal for the BBC in difficult economic circumstances for the country. This agreement secures the long term funding for a strong BBC over the next Charter period. It means a commitment to increase the licence fee in line with inflation, subject to Charter Review, the end of the iPlayer loophole and the end of the broadband ringfence. In the circumstances, the BBC has agreed to take on the costs for free licence fees for over-75s, and after the next parliament, will take on the policy.”

NUJ general secretary Michelle Stanistreet said:

You couldn’t make it up. The last time a shabby deal was done behind closed doors, John Whittingdale condemned the ‘short, private negotiation between the BBC and the government’ as not doing ‘much to inspire confidence in the independence, transparency or accountability of the process’. Yet here we are again. Despite repeated commitments made by Tony Hall to a process with full transparency, we find out through leaks and a forced statement to parliament that the BBC leadership has caved in to government demands that will further weaken the BBC’s ability to survive as a public service broadcaster of worldwide repute.

“That staff and licence fee payers found out about this done-deal in this way is a disgrace. NUJ members trusted that this time round there’d be a fight by the current leadership at the corporation to preserve the BBC’s independence and capacity to continue delivering quality journalism and programming. I’m sure those individuals running the BBC have kidded themselves into believing they’ve got the best deal possible, just like Mark Thompson no doubt did last time round. There will be many more millions of licence fee payers who roundly object to the principle of the BBC allowing itself to be annexed by the Department for Work and Pensions.”