The UK Government has announced that the Department for Work and Pensions (DWP) will no longer cover the payment of BBC licence fees for people aged over 75, depriving the BBC of over £600m per year in revenue. The DWP funding will phase out in 2018-19, with the BBC taking full responsibility from 2020 onward. MP John Whittingdale said that the move "delivers our objective to reduce the deficit, whilst at the same time giving the BBC some of the guarantees they need about their future, financing and the system by which the licence fee is raised."

The DWP spent £608m on the payments in 2013 covering 77,000 homes.

With the UK population getting older and living longer, it's likely the number of households exempt from payments will continue to grow, representing an ever increasing loss of revenue for the BBC.

The £608m loss represents over 25% of the BBC's yearly TV budget, and nearly covers the cost of their radio services, which cost £650m per year. Belts will have to be tightened at the broadcaster, but the bad news didn't stop there, as Whittingdale also added that the government would "carefully consider" the "future scale and scope of the BBC," as well as the possibility of decriminalising non-payment of the licence fee.

BBC director general Tony Hall remained upbeat, maintaining that he had "fought hard to get a strong deal for the BBC" and its users.

He argued that "modernising" the licence fee represented a win, as they will be able to start charging users who use their catch-up services such as BBC iPlayer in twelve months time. He also said that ensuring the licence fee was linked to inflation for the first time in seven years was a good deal for BBC.

Any financial gain from these revenue streams will probably have to offset the money lost from the over 75s, as well as a possibility of an increase in non-payment of the fee if decriminalised which could further deplete the BBC's coffers.

BBC News correspondent Nick Higham pointed out that Hall "would not rule out possible cuts to services," following reports in March 2014 that youth channel BBC3 will be axed later this year. At the time Hall was quoted saying the decision had been made for "financial and strategic reasons."

It seems likely there will be more 'financial and strategic decisions' for the broadcaster regarding their services in the coming months.