With No Broadband Tax, How Will We Wire Up Britain?


Blocking the broadband tax might give the Conservatives a late political goal, but now there is no mechanism to pay for rural coverage, says Peter Judge

The broadband tax might stage a comeback if Labour wins the election, but at the moment it’s been axed in the pre-election horse-trading required to get the Labour budget through before Parliament shuts down.

But let’s have a look at this tax. Is it really a big enough deal to justify its role as a political football for shadow Chancellor George Osborne to boot into the net, and bag a last-minute goal in extra time?

Fast broadband has become an election issue

It’s Conservative policy to oppose the tax, so they demanded Labour drop it. If Labour had fought for it, and the Conservatives had stood their ground, it might (just conceivably) have jeopardised the Finance Bill, which enacts the budget. And that would have meant the shocking prospect of no taxes at all.

Fast broadband has become an election issue, with both the Conservatives and Labour making extravagant promises to hook people up to the Internet at “super-fast” speeds.

However, neither have come up with details of how to fund it. Labour’s broadband tax (unpopular though it was) was a nod in that direction, proposing to impose a levy of 50p per month on every phone line, to raise money for a “next generation fund”, designed to deliver better broadband to the country. In fact, it was set so low it could not have delivered this by itself. The tax could raise between £100 million and £200 million a year. Even if you add this up over the next five years, it’s not enough to get fast broadband to many of the places where BT and Virgin can’t afford to take it.

In fact, of course, the Next Generation Fund was never designed for faster broadband. It was supposed to address the equally intractable problem of coverage: getting broadband connection to the “final third” of the country that doesn’t have broadband, let alone super-fast links. It wasn’t going to be enough to meet this problem either – only increasing coverage by about 20 percent over what the free market will provide –  but that is another story.

2Mbps broadband is the “minimum wage”

During the course of last year, the Labour government promised a 2Mbps universal service obligation, so anyone in the country can have that level of broadband, as well as a phone service.

While the rival parties offer vague but shiny promises for faster broadband in the future, then, a real issue, which has been sliding into political limbo, looks like being completely forgotten about, because it’s not exciting enough to bring up in an election.

Two megabits per second is poor quality broadband, but it’s enough to get involved in the digital economy, boosting business activity. It’s also enough to watch non-HD shows on BBC iPlayer, which is what most people will want to do. Lord Stephen Carter’s comparison with the minimum wage last year was very apposite. Two mebgabits per second is not enough, but if it is all you can get, you will be very grateful to any regulation that makes sure your provider can’t fob you off with even less.

The tax was slammed as “unfair”, since it hit the poor as hard as the rich, but it was set at a level where it was affordable by anyone with a phone line. By blocking the tax, the Conservatives have kicked away the only mechanism anyone has put forward to gather money specifically for the broadband roll-out that Britain needs.

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