The government has reached an agreement with the BBC that will see the broadcaster take on the cost of providing free television licences for over-75s.
The surprise deal, which will cost the BBC £750m by 2020, will be phased in from 2018/19 with the BBC taking on the full costs from 2020/21.
In return for financing what is part of the welfare spending cuts, the government will allow the BBC to increase the £145.50 licence fee in line with inflation, bring forward legislation in the next year to modernise the licence fee to cover iPlayer and end the BBC’s £80m commitment to fund superfast broadband.
“The BBC is a valued national institution that produces some of the finest television and radio in the world,” said Chancellor George Osborne. “But it is also a publicly-funded body, so it is right that it, like other parts of the public sector, should make savings.
“The deal we have agreed with the Corporation means that it will take on the significant cost of TV licences for the over-75s, easing some of the pressure on taxpayers who have to meet the country’s welfare bill, while also ensuring that our promise to maintain pensioner benefits is met in full over the next five years.”
Osborne added that the decisions the BBC and the government have reached together will also secure its long-term future, with a funding model that is “sustainable” and can adapt in an age where technology is rapidly changing.
However, Chris Bryant, the shadow culture secretary, described the agreement as an “utter shambles” and a “shabby little deal”, whilst Lord Birt, who was head of the BBC from 1992 to 2000, described the move as “a deeply shocking announcement.”
“This government and the last government have essentially set a very dangerous precedent,” he said, arguing that it undermined the BBC’s independence.
In a letter sent to Osborne and the secretary of state for Culture Media and Sport, John Whittingdale, BBC Trust chairman Rona Fairhead said the Trust accepts the decision but “cannot endorse the process by which it has been reached.”
Fairhead also said it is the Trust’s presumption that the government will not seek to impose further costs on the BBC during the Charter Period.
