MPs criticise government’s proposed broadband tax

The business select committee has criticised the government’s plans for a £6-a-year tax on phone lines to fund its super-fast broadband roll-out.

Speaking today, the committee said the proposed tax on all fixed-line telephones was both “regressive and poorly targeted” and would mean that lower-income households will be paying for a service that “only a minority will enjoy”.

The committee also condemned plans to spend so much upgrading broadband services in the UK when public money is so tight, according to reports.

Last June, Lord Carter delivered his Digital Britain report suggesting that a 50p a month levy should be imposed on every fixed phone line, which would generate around £175 million of extra revenue to support a 2Mbps (megabits per second) broadband service by 2012.

However, the committee said: “Early government intervention runs a significant risk of distorting the market and will not allow time for technological solutions to extend the market’s reach across the country. Furthermore there is little evidence to suggest a pent-up demand for this enhanced service, with customers currently unwilling to pay the premium for such services.

“We disagree with the government over its proposal to fund its intervention in the Next Generation Access Market with the proceeds of a 50p levy on fixed telecommunications lines.

“Such a levy would be both regressive and poorly targeted. It would have a much greater impact on the less well-off who will pay for an enhanced service which only a minority will enjoy.

“If public funds are required for next generation access, they should be raised through general taxation, in the same way as for any other national infrastructure programme.

“In times of great stringency in public expenditure digital inclusion, not next generation access, should be the priority for expenditure. The market can be helped to deliver greater levels of high speed access without significant increases in public expenditure,” the report said.

However, a spokesperson for the Department for Business, Innovation and Skills defended the government’s proposals – “Next generation broadband is vital to the UK’s growth and we want everyone to access the huge social, economic and health benefits it offers.”

The BIS claims that only 70% of the country will gain access to super-fast broadband without public intervention.  “The 50p duty we have proposed is modest, fair and affordable and is the best way to drive further investment in our networks,” the spokesperson added.