Free TV licence for over-75s

Media: BBC jubilant and rivals 'alarmed'

Chancellor's pre-budget speech: special report

Chancellor Gordon Brown swept away the burden of the BBC licence fee for the over-75s yesterday in a move that delighted the broadcaster but left the rest of the television industry alarmed that the move might presage a rise in the licence fee for others.

Mr Brown announced that pensioners aged 75 or over would receive their television licence free of charge from next autumn.

With 3m households likely to benefit, the cost will be £300m to the government, which will reimburse the BBC for the lost income.

The BBC welcomed "this imaginative and innovative approach to a long-standing issue", adding that it would begin work on the logistics of the measure today.

A colour licence fee costs £101, and a black and white licence £33.50. People who are blind or living in sheltered or residential accommodation already benefit from concessions and are unaffected.

The BBC said pensioners over 75 would still have to hold a licence, even though it would be supplied free - thus preserving the principle that a licence had to be held by each household with a television.

One TV industry executive said the move made it easier for the government to raise the licence fee in the new year when the culture, media and sport secretary, Chris Smith, is due to announce his decision on future funding of the BBC.

The executive suggested there would be "less political flak" to a rise in the fee if pensioners were protected in this way, and added that the TV industry had only just given Mr Smith's department its views on the licence fee as part of a consultation exercise which was not yet complete.

He said: "The culture, media and sports department has been outflanked by the treasury. It doesn't smack of joined-up government to me."

Another TV executive said the decision established a principle which could be extended later to other pensioners. A spokesman for Mr Smith's department denied the announcement was linked to his inquiry into BBC funding.