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Osborne to cut BBC budget by £650m

Published 05/07/2015

Chancellor George Osborne will announce a summer Budget this week
Chancellor George Osborne will announce a summer Budget this week

George Osborne has signalled a £650 million raid on the BBC finances and a tighter-than-expected squeeze on welfare payments as he prepares to deliver his first all-Conservative Budget.

The Chancellor - who will set out his plans in the Commons on Wednesday - said he had now "found" the £12 billion of welfare savings promised by the Conservatives as part of their plan to eliminate the deficit in the public finances.

Ministers will go further in capping welfare payments than the proposed £23,000-a-year household limit set out in the party's election manifesto, while at the same time curbing the cost of tax credits.

Mr Osborne also indicated that he was looking to transfer the £650 million-a-year bill for providing free television licences for the over 75s from the Exchequer to the BBC as he delivered a stinging side-swipe at the broadcaster's "imperial" ambitions.

However there was disappointment for Conservatives pressing for a reduction in the 45p top rate of tax as he made clear that his priority was to reduce taxes for middle and low income earners.

Nevertheless, many Tory MPs will welcome the move by the Chancellor to require the BBC to shoulder the burden of free licences for the elderly - a change that would cost the corporation around a fifth of its annual £3.7 billion licence fee revenues.

Appearing on BBC1's The Andrew Marr Show, Mr Osborne said: "The BBC is also a publicly funded institution and so it does need to make savings and contribute to what we need to do as a country to get our house in order. So we are in discussion with the BBC."

Reports suggested that the BBC would be able to recoup up to £150 million of lost revenue through charging for the use of its iPlayer and other online catch-up services.

Mr Osborne brushed aside claims that cuts on the scale suggested could put popular services such as Radio 2 at risk - pointing to the savings of £500 million achieved in the last parliament without recourse to such measures.

"I was told at the time by people 'They're going to shut down BBC2, they're going to close Radio 4'. They always seem to pick the juiciest fruits on the tree," he said.

He hinted, however, that the website could be scaled back saying that the BBC had effectively become "the national newspaper as well as the national broadcaster".

"You wouldn't want the BBC to completely crowd out national newspapers. If you look at the BBC website it is a good product but it is becoming a bit more imperial in its ambitions," he said.

The move was condemned by former BBC chairman Sir Christopher Bland, who accused the Chancellor of "shoddy" accounting practices.

"It is the worst form of dodgy Whitehall accounting. It is transferring social policy on to the licence fee," he told BBC Radio 4's The World this Weekend.

However Labour indicated it could support the plan. Shadow chancellor Chris Leslie told Sky News's Murnaghan programme: "We have always said sensible savings at this time are really important and I don't think the BBC can be excluded from that."

On welfare, Mr Osborne said that he would be going further than previously planned in cutting the benefits cap - currently set at £26,000-a-year - in order to ensure the system was fair to working people.

"It is not fair that people out of work can earn more than people in work so we are going to cut the benefit cap, as we said in our manifesto, to £23,000 in London - it will be lower in the rest of the country," he said.

He made clear that he would also be looking to make significant savings to the system of tax credits brought in under the previous Labour government to top up the incomes of low paid working families.

"It has become a very, very expensive system. When it was introduced, we were told by Gordon Brown it was going to cost a couple of billion pounds," he said.

"It now costs £30 billion. That is a huge sum of money. That's three times the Home Office budget, so we have to make savings."

Further savings of £250 million, he said, would be achieved by ending "taxpayer-funded subsidies" for 340,000 higher earners living in social housing.

Local authority and housing association tenants on incomes of £40,000 or more in London and £30,000 in the rest of England will be told that from 2017/18 they will have to pay a market, or near market, rent.

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