I am grateful for the opportunity to speak in this debate. As the Minister pointed out, I was the Secretary of State at the time when the licence fee settlement was agreed with the BBC, so I would like to set out some of the reasons why those decisions were reached.
As the Opposition spokesman said, the concessionary TV licence for over-75s is not a fundamental pillar of the welfare state—it was actually introduced by the previous Labour Government. It was introduced to address an anomaly that elderly people living in sheltered housing did not have to pay the full licence fee whereas others did. However, the Labour Government did not introduce free TV licences for all pensioners, on the basis that it was far too expensive to do so—they restricted it to those aged over 75 at a cost, at that time, of £365 million. It is important to realise that that money was not removed from the BBC—it was given to the BBC by the Department for Work and Pensions. It has always been the case, since then, that the cost of exemption from the TV licence is met out of the Government’s budget. The cost to the Government of doing so has risen steadily, so that by last year it had already reached £660 million.
I had the task of negotiating both the new BBC charter and the licence fee settlement. Personally, I would have much preferred that the licence fee had been included within the charter negotiations, since the licence fee settlement, to some extent, pre-empted decisions that we took as a result of the charter review process. However, as the Minister rightly pointed out, we were in very difficult financial circumstances thanks to the profligacy of the previous Labour Government, and we had to take a lot of very difficult decisions. The then Chancellor was clear that we should seek to achieve savings from the BBC, as a publicly owned institution funded by the Government, in the same way that all other public institutions were being asked to find savings. So we agreed with the BBC that it would take over the cost of funding the licence fee concession. However, we were also clear that we had given a pledge that the concession would be maintained until 2020, and therefore the agreement with the BBC was that it would take it over in 2020.
I have to say to the House that the negotiations with the BBC over that were indeed robust. I remember sitting down with the then Prime Minister, David Cameron, with George Osborne and with Lord Hall, the director-general of the BBC, and we had some good discussions in which Lord Hall argued forcibly that this would have a detrimental impact on the BBC. Therefore, in recognition of that, we also included, as part of the licence fee settlement, agreement to address some of the things the BBC raised as its principal concerns. One was the freeze in the licence fee. The licence fee had not gone up at all for a number of years, and therefore the BBC was looking at a real-terms reduction every year. We agreed that the licence fee should be unfrozen. Secondly, a growing number of people were avoiding paying the licence fee by watching the BBC on catch-up, through the iPlayer. Under the law as it then stood, if someone watched the BBC a mere two minutes after the live transmission, they did not have to pay the licence fee. The licence fee was therefore extended to close what was called the iPlayer loophole.