Means testing over-75s’ TV licences could cost Treasury £100m a year

THE controversial decision to stop funding free TV licences for all over-75s could backfire by costing the Government £105 million more than it saves, official figures suggest. Former chancellor George Osborne put the financial burden of paying for the benefit – which costs around £745million a year – on the BBC from 2020.

But his plan may end up backfiring, the UK’s economic forecaster, the Office for Budget Responsibility (OBR), warned yesterday.

The BBC has decided to continue giving free TV licences only to over-75s who receive pension credit.

But many pensioners who would be eligible for the means-tested benefit currently do not claim it – often because they do not know about it, or due to fear of excessive paperwork.

The OBR is worried that thousands more pensioners will take up their right to claim pension credit, costing the public purse millions of pounds.

The BBC has predicted 250,000 extra people will now start claiming the beneft so they can still get a free TV licence. Depending on how much they are eligible for, this could cost the taxpayer around £850million annually.

This means the Government could lose out to the tune of £105 million a year from a policy that meant to save it money.

Robert Chote, the OBR’s chairman, said the potential unforeseen consequences showed the dangers of attempting to invent ‘clever ways to save money’. He added: ‘It is unusual for a government to delegate parameters of welfare policy to a broadcasting company to save money.’

There are currently 470,000 people aged 75 or over who are entitled to pension credit but do not claim it, according to the Department for Work and Pensions. This is almost 40 per cent of the entire number eligible for the benefit, and they could each be claiming an average of £65 per week. Altogether, this leaves around £1.6billion unclaimed by this age group.

As a result, if just half of the people who have never claimed the credit do so in order to get a free TV licence, the Government will spend more than it would have saved if it had not delegated responsibility for the exemption to the BBC.

Former pensions minister Baroness Altmann said last night: ‘It is shameful that so many of our poorest elderly citizens are left living on less than about £8,000 a year because they do not claim their entitlements. If the BBC’s decision to only offer free TV licences to over 75s claiming this benefit actually increases the take-up, then that is good news. However, I still believe that passing the responsibility for pensioner benefits to the BBC is inappropriate and that the Government should find better ways of managing state pension income.’

The OBR has emphasised that the amount of any likely increase in pension credit claims is ‘highly uncertain’.

But the BBC’s announcement of the end of free licences for all over-75s already seems to have set the ball rolling. The broadcaster has written to all 4.6million households which stand to lose out on the free licence, and is working with charities and older people’s groups to establish how it can help raise the profile of pension credit. New claims for pension credit rose from 7,600 in the four weeks to June 7, immediately prior to the announcement of the new licence fee rules, to 9,300 in the four weeks to July 4.

Meanwhile BBC director of policy Clare Sumner told MPs at a Commons digital, culture, media and sport committee committee meeting on Tuesday that a non-payment rate of eight per cent was expected among over- 75s – compared to a national average of 6.5 per cent.