BBC warns Government over free licence fee funding

The BBC Trust warned the Government today it would fight any move to force it to meet the cost of free television licences for the over-75s.

Switching the £550 million-plus burden from the Department for Work and Pensions onto the Corporation is believed to be under investigation as part of the Comprehensive Spending Review.

Prime Minister David Cameron has repeatedly said he still hopes to meet a general election promise to protect pensioners' benefits despite the squeeze.

BBC2's Newsnight said the proposal was for the bill - which is rising rapidly as the population ages - to be transferred from the time of the next licence fee settlement, due in 2012.

Increases in the licence fee were unlikely to cover the cost, it said, which were the equivalent of a 26% real-terms cut in the BBC's present budget.

Chancellor George Osborne will reveal where the axe will fall tomorrow when he sets out the results of his review to MPs.

A BBC Trust spokesman said: "Anything at this stage is speculation as we have yet to see the detail of the Comprehensive Spending Review.

"That said it would be unacceptable for licence fee payers to pick up the bill for what is a DWP universal benefit."

A DWP spokesman said: "This is pure speculation, we need to wait for the comprehensive spending review due this week."

Support for the Government's deficit-reduction strategy was boosted yesterday by a letter to the Daily Telegraph signed by 35 corporate bosses backing his bid to eliminate the £109 billion structural deficit in four years.

The letter, which had the bosses of Marks & Spencer, BT and Asda among its signatories, said there is "no reason to believe" the strategy would undermine the UK's economic recovery.

But as clear battle lines were drawn ahead of tomorrow's statement, shadow chancellor Alan Johnson insisted it is the coalition that is taking a "huge gamble with growth and jobs".

In a speech yesterday setting out the opposition's rival approach, Mr Johnson warned the UK is "going down the same road as Ireland" which has slid back into recession despite making deep spending cuts.

Mr Osborne and Prime Minister David Cameron finalised the package in a series of meetings with Deputy Prime Minister Nick Clegg and Treasury Chief Secretary Danny Alexander at Chequers over the weekend, after completing lengthy and sometimes tortured negotiations with Cabinet colleagues.

The CSR is expected to see deeply controversial reductions in areas of public spending such as the police and prisons.

The Chancellor has declined opportunities to deny that police numbers could fall by thousands and child benefit be withdrawn from 16 to 19-year-olds.

Reports suggested the Ministry of Justice could lose a third of its £9 billion budget, forcing Justice Secretary Kenneth Clarke to close prisons and slash more than £2 billion from legal aid.

There was speculation that the £8 billion social housing budget could be all but obliterated.

Health spending - along with international aid - has been protected from the axe but managers warned that even that would not be enough to meet a "potent cocktail of financial pressures".

The health service is still expected to make efficiency savings of around £20 billion by 2014.