The Tories’ free TV licence betrayal of over-75s could add another £1.6billion to the welfare bill, experts warned today.
Crafty George Osborne, who was Chancellor 2015 when a deal was stitched up, believed forcing the BBC to fund the lifeline would save the Government £745million a year from 2020.
But the Treasury’s own watchdog yesterday revealed the move could backfire - ultimately costing more than it saves.
The Office for Budget Responsibility confirmed spending on Pension Credit was set to rise because of the move to restrict free licences to only those who receive the benefit.
Many who are eligible but do not currently take up the benefit are now likely to do so amid a planned advertising blitz by the BBC to raise awareness of entitlement, the OBR said.
The Department for Work and Pensions should be braced for a surge in demand for Pension Credit, it suggests.
OBR chairman Robert Chote said it “illustrates the dangers of unintended consequences when governments come up with clever ways to save money”.
Its fiscal risks report says: “DWP estimates there were around 470,000 people aged 75 or over who were entitled to the guarantee element of pension credit in 2016-17 but who did not receive it, almost 40 per cent of the total number entitled.
“These had an average entitlement of £65 a week, resulting in around £1.6billion of unclaimed benefit among this age group. So around half of that group would need to start claiming to wipe out the expected savings from transferring responsibility to the BBC and the BBC cutting its domestic spending by a corresponding amount.”
While “very large increases in take-up are unlikely”, the Corporation’s plan to publicise the availability of Pension Credit will lead to more people taking it up.
It adds: “It is relatively unusual for a government to delegate parameters of welfare policy to a broadcasting company in an attempt to save money, and it is perhaps not surprising that this may have unintended consequences.
“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 ... The net effect on the public finances would therefore be to push the budget deficit up not down.”
Stressing the move posed a fresh risk to public coffers, the OBR goes on: “The likely cost of the BBC’s recent decision to means-test free TV licences for the over-75s by linking it to pension credit – thereby potentially prompting a material number of those currently not taking it up to do so – poses a fiscal risk that we had not previously envisaged.
The Corporation announced this Spring that only over-75s receiving Pension Credit will be eligible for free licences.
Just 1.5 million OAPs are likely to be continue receiving free licences, while an estimated 3.7 million will lose out.
The Mirror is campaigning to save the benefit, with more than 18,000 readers backing the fight by completing coupons in the paper.
More than 600,000 people have signed Age UK’s Switched Off petition calling for free licences to be preserved and the Government to take back responsibility.
Setting up a system to means-test eligibility will cost the BBC £38million, with £13million annual running costs, MPs heard.
The Corporation expects 8% of those who should pay to dodge the cost, compared with a current evasion rate of 6.5%.
