The chairman of the BBC Trust has criticised the process under which the BBC will now fund the free TV Licence given to the over 75s through to the end of this Parliament.

Under the proposals the BBC’s contribution will be phased in from 2018/19 with the BBC taking on the full costs from 2020/21. However, the BBC will benefit from catch-up TV being brought under the fee, closing the loophole that allowed viewers to steam recorded programmes on the iPlayer hours after broadcast. The Licence Fee itself will now increase in line with the Consumer Prices Index; the first rise since 2010, subject to the Charter review.

In a letter to Chancellor George Osbourne and Culture Secretary John Whittingdale, Rona Fairhead said: “We accept this decision is a legitimate one for the Government to take, though we cannot endorse the process by which it has been reached.

“Clearly beyond the current charter period it is for the Government to determine both its policy on the over 75s concession and how that is funded. We could not ultimately obstruct any decision that you made”.

Media and political commentators have been less charitable, suggesting that by asking the corporation to fund what is a benefit of being a pensioner the government has made the BBC a subsidiary of the Department of Work and Pensions.

Secretary of State for Culture, Media and Sport, John Whittingdale MP, said: “The BBC is a world-class broadcaster and a cultural institution producing some of the best television and radio in the world. However as a publicly funded institution, it also needs to make savings and contribute to what we need to do to get our country’s finances in order. I welcome the BBC’s commitment in reaching this funding agreement, which is an important issue for its own future. I look forward to discussing the full range of issues over the course of the Charter Review period, and will be making an announcement about the process for the Review in due course.

Another positive move for the BBC is the removal of the broadband ringfence, originally created from the surplus after digital switchover. The Government will reduce the broadband ringfence to £80m in 2017/18, £20m in 2018/19, £10m in 2019/20 and £0m in 2020/21.