‘TV licence move could cost more than it saves’

THE BBC’s restriction of free TV licences for over-75s could cost public finances more than it saves, the Office for Budgetary Responsibility has warned.

The spending watchdog estimated it could add an extra £105m to the benefits bill by encouraging more to claim pension credits.

Over-75s who are eligible but who do not claim could be nudged into making applications as part of the “unintended consequences” of the move.

The OBR gives a rough estimate in its fiscal risks report published on Thursday that it could cause an extra 250,000 claimants at a cost to the Department of Work and Pensions of £850m.

This significantly outweighs the £745m savings that has been estimated would be made by the department by transferring the burden to the BBC.

The report said: “The BBC’s decision to means-test free TV licences via a link to pension credit receipt may well raise welfare spending by more than it reduces BBC spending, particularly once the BBC spends the money it saves by meanstesting.

“The net effect on the public finances would be to push the budget deficit up, not down.”

While warning there is “considerable uncertainty” around the estimate, OBR chairman Robert Chote said it could also “trigger more claims for attendance allowance and housing benefit”, further increasing the benefits bill.

In the four weeks after the BBC’s announcement, new claims rose to 9,300 compared with 7,600 in the previous month, according to the report.

“The BBC’s announcement appears already to have had an effect,” the OBR says.

Over-75s who do not claim pension credit will have to pay the licence fee from June 2020.