Restricting TV licences for over-75s ‘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 said the move to only give the relief to over-75s on pension credits may increase the benefits bill as part of “unintended consequences”.

It may nudge those who are entitled to the credit but who do not claim it to make applications, according to the OBR’s fiscal risks report published on Thursday.

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 means-testing.

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

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.

The broadcaster has far greater scope to advertise the credit than the Department for Work and Pensions had when undertaking the task between 2003 and 2008.

It has spoken of its aim to encourage pension credit take-up: “We have started a public information campaign which includes using our airwaves and writing to all 4.6 million households setting out the new scheme.”

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

The BBC said it cannot afford to take on the financial burden from the Government, but the move has proved controversial, with campaigners, politicians and public figures urging a reversal.