Funding free licence fees for over-75s cost the government £608m in 2013-14 – about a fifth of the BBC’s budget.
By 2021/22 funding free license fees for the over-75s would cost £745m. Under the new scheme, pensioners receiving pension credit will be eligible for a free license, but the rest of pensioners over 75 will have to pay.
Free tv licenses for over 75-year olds were introduced in 2000 by the Labour government who wished to reduce ‘pensioner poverty’. However, the government no longer wishes to maintain that subsidy. In 2015, the Conservative government announced the BBC would take over the cost of providing free licences for over-75s by 2020 as part of the fee settlement.
But, now the BBC have decided it is not a fair use of tv license payers money. There has been much criticism of the BBC decision but the opportunity cost of maintaining free tv licenses for over-75 year olds would be less spending on services (spending cuts) and higher license fees for the rest of the population.
Some observations
- Poverty is not unique to over-75s but equally shared across the population. Age is an unreliable indicator of poverty. Free tv license for over 75 year olds is a very crude method for trying to tackle poverty.
- The best way to tackle poverty is directly through the tax and benefit system, rather than through subsidising particular goods and services. If the government wished to increase living standards of one particular group, it is more effective to give benefits directly, rather than through benefits in kind. It was a mistake of the Labour government to subsidise free tv licenses to the over-75, it would have been better to use the same money to increase the state pension and leave it up to people to decide how to spend their extra money. The problem is that ‘a free tv license for over-75 year olds’ can be a more eye-catching headline than raising state pension by 3%
- When you buy other services like electricity, gas, water, there is a flat rate; companies are not obliged to give discount rates depending on income or age. Why should the BBC license be different? An organisation or company like the BBC should not be responsible for the redistribution of income within society.
- A free tv license for over-75-year-olds, means young people pay a disproportionate share of the cost. It is effectively a transfer from the under-75s to over-75s. However, young people who cannot afford to buy a home, but face high living costs and low wages could argue they have just a good a case to a free license as those who are over 75.
- A universal benefit in kind is an expensive way to tackle pensioner poverty. At the moment, the very wealthy benefit from a free tv license, but the unemployed or very low-income adults have to pay the full fare. Why should a long-term disabled young person subsidise a wealthy homeowner to have a free tv license?