Broadband tax would be ‘regressive’ say MPs
Plans to introduce a broadband tax of 50 pence a month on all fixed-line phones have been criticised by a House of Commons committee.
The Business, Innovation and Skills select committee described the levy as “regressive” and “poorly targeted”.
Money raised by the tax, which would apply to all fixed phone lines, would be used to fund the introduction of much faster broadband connections.
But the committee argued that the tax would be charged to those least likely to benefit from faster broadband services.
The revenue generated by the tax, estimated at £175 million annually, would ensure that every home and business will have access to broadband connections of a minimum speed of 2 megabits per second by 2012.
The government also wishes to deliver ultra-fast broadband links, known as Next Generation Access, to the whole country by 2017.
In its report, the committee said: “We believe that a 50p levy placed on fixed telecommunication lines is an ill-directed charge. It will place a disproportionate cost on a majority who will not, or are unable to, reap the benefits of that charge.”
Government ambition should be limited, the committee continued, to ensuring the socially inclusive delivery of a minimum of 2Mbps “under normal circumstances, to all users at all times”.
The report also expressed concerns that government intervention on too large a scale could distort the telecommunications market.
The MPs 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.
“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. 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.”
The report concluded: “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.”
In response, the Department for Business defended the levy as both fair and modest. It also claimed that, without government intervention, almost a third of the UK would be denied access to superfast broadband.
A spokeswoman commented: “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.
“Our analysis shows that without intervention, the market will only reach up to 70 per cent of the country so it’s vital we act now to ensure no area is left behind. The 50p duty we have proposed is modest, fair and affordable and is the best way to drive further investment in our networks.”