Can the BBC still afford free licences for over-75s?

The consultation just announced by the BBC, into whether the BBC should carry on paying for the licence-fees of over-75s, is a curious beast.

The BBC cannot be seen to take a position on the outcome, and says it will be governed by the principle of fairness - but it's clear from everything its leadership is saying that this financial burden is becoming unbearable.

The current arrangement ends after 2020. Lord Hall, the Director-General, has said repeatedly in recent months that services and programmes are under strain because of the new, global, hyper-inflationary world in which the BBC is operating.

That financial pressure is driving this consultation. Whatever one thinks of the viability of the licence-fee in today's world, it is a matter of fact that the BBC is suddenly competing with vastly richer, mostly American makers of television who are largely unencumbered by regulation and can focus on making programmes that drive large audiences. Competing in this world is getting much, much harder for the BBC; doing so with what would amount to a near 20 per cent cut in its budget makes it very significantly harder still.

Getting involved in the potential means-testing of benefits is unnatural, even uncomfortable, terrain for a public service broadcaster. It was remarkable that Ed Vaizey, a former culture minister, should have recently admitted in the Evening Standard (a paper edited by George Osborne, who negotiated this policy for the government when Chancellor) that the policy is a politically-motivated "wheeze".

There is a particular and acute problem concerning young people, too. At the moment, this policy in effect involves younger licence-fee payers subsidising older ones. And yet all the evidence suggests that younger viewers are less devoted to the BBC than older ones, who grew up in a world where the BBC was - relatively speaking - a bigger beast than it is today.

Asking younger audiences to fund the consumption of older audiences, when the latter consume more of the BBC, is not likely to increase goodwill among the licence-fee payers of the future.

Naturally, critics of the BBC will say that a compulsory licence-fee - with potential fines and worse for those who don't cough up - is intolerable, especially in the 21st century. These critics argue the licence fee is an analogue instrument in a digital age.

Earlier today, I discussed the options and the consultation with Lord Hall.

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