The BBC is set to close its consultation on the free TV licence for over 75s and decide whether or not to keep the perk, ditch it or something in between.
Ahead of the consultation's close on Tuesday, the think tank the Institute for Fiscal Studies (IFS) has looked into average incomes of those receiving the perk and those who pay for the licence. Its findings suggest that maintaining the free licences may not be justifiable on purely cost grounds.
Until now, the government has funded the free licences, which cost £750 million a year. However, from 2020 the cost of funding them will be transferred to the BBC, which must then decide how to absorb the cost or cut it back.
Should it keep it unchanged, the BBC has warned it may have to cut back on some of its services. However, the charity Age UK has warned 50,000 pensioners would be pushed below the poverty line if the BBC halts the free scheme.
The IFS has looked at relative incomes for over 75s and households where all members were under 75 years of age.
The research note, from IFS director Paul Johnson and senior research economist Jonathan Cribb, also looked at relative poverty rates between these groups.
It found that while the real median net household income for over 75s is slightly lower than younger households, the gap between the two has shrunk from 20% in the year 2000, when the free TV licence was introduced, to just 8%. This is demonstrated in the graph below (Figure 1).
It also found that over 75s now have a higher average income than both working age families with children, and households where the oldest person is under the age of 34.
In the year 2000 these two groups had incomes 9% and 10% higher than over 75s. By the year 2016, this had reversed, where over 75s had higher incomes by 8% and 7% respectively.
The IFS also looked at relative poverty rates. This is defined as a household with an income less than 60% of the average income.
By this measure it found that as of 2016 18% of households eligible for a free TV licence were in relative poverty. This has declined from 28% in the year 2000.
Meanwhile, 23% of households where no one was aged 75+ were in relative poverty. See the graph below.
The IFS says that overall the stats demonstrate that households that receive a free TV licence have lower average incomes, but “significantly” lower poverty rates compared to the rest of the population.
It says that incomes and relatively poverty rates among over 75s have reduced “substantially” since 2000, when the free TV licence was introduced.
The IFS says: “Looking at measures of household income in isolation, it is hard to believe that if one were starting from scratch one would prioritise spending such a sum on providing this benefit for the over 75s as a whole group.”