Labour Drops 50p Broadband Tax

In the run-up to the general election, Labour has dropped plans for a levy on phone lines, which was designed to help pay for improving the nation’s broadband services.

The 50p-a-month “phone tax” or “broadband tax” was originally proposed in the Digital Britain report in June 2009, to create a fund which could be used to subsidise faster broadband in areas where it isn’t economic. Following criticism from many quarters, the measure was delayed in November’s Queen’s Speech. Yesterday it was among a group of proposals which Labour dropped in negotiations with the Conservatives to fast-track the Finance Act and enact this year’s budget before the General Election.

Could tax victory hurt Tories?

The Conservatives have opposed the tax for some time, but dropping it could actually hurt the Conservatives’ electoral chances, according to some, as the rural areas which would be helped by the fund have a higher proportion of Conservative voters. Despite this, the shadow chief secretary to the Treasury Philip Hammond said: “If Labour is re-elected all three taxes will come back. Only a Conservative government will stop Labour’s tax increases.”

Both Labour and the Conservatives seem to be making faster Internet connection an election issue, with Labour promising “fast broadband for all” by 2020, and the Conservatives promising it to “a majority of homes” by 2017. It is estimated that the tax would raise around £100 million a year, which would not be enough to meet either of these targets by itself.

The separate issue of coverage is also a political one, with the Digital Britain report proposing a minimum speed of 2Mbps to the “final third” of Britain, which does not have broadband. Lord Carter, the original author of the Digital Britain report, compared this to the mimumum wage, and four out of five people believe Internet connection is a human right, according to a BBC poll.

The Digital Economy Bill, which received its second reading in the House of Commons yesterday, seems likely to go through before the election, despite criticism of the level of discussion, and the power it gives to copyright owners to demand illegal file-sharers are cut off from the Internet.

The government also dropped a rise in the duty on strong cider – which had spawned protests on Facebook and elsewhere – and dropped plans to remove tax relief on holiday homes.