The Chancellor of the Exchequer, George Osborne MP, is to announce that the BBC will pick up the tab for "free" TV licences for the elderly.
The move, to be phased in from 2017, will force the Corporation to pay for 4.5m TV licences for households where at least one of the occupants is aged 75 years or older. Under current arrangements the Government pays the £145.50 annual fee for every eligible household.
It will cost the BBC around £650m from its budget - about a fifth - to pay for the 4.5m over-75 TV licences currently in force. However, new rules will allow the BBC to recoup about £150m per year by charging for iPlayer content, which is currently free to all.
The Government has grown increasingly frustrated at the top-heavy structure, cronyism and financial mismanagement within the BBC.
Speaking on this morning's The Andrew Marr show, the Chancellor 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."
The Chancellor played-down the scaremongering of various BBC executives - most of whom earn more than the Prime Minister - about the impact of the reforms: "I remember five years ago doing a deal with the BBC where actually the BBC took on £500m worth of responsibilities including things like the BBC World Service.
"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."
Culture Secretary John Whittingdale MP, an outspoken critic of the BBC, is currently considering the future shape of the Corporation when its Royal Charter comes up for renewal on 31st December 2016.
The Government's first Emergency Budget will be delivered on Wednesday.