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Broadband tax slammed by MPs

Digital Britain's 50p phone levy is "ill-directed" and "regressive", says committee
Written by Natasha Lomas, Contributor

Digital Britain's 50p phone levy is "ill-directed" and "regressive", says committee

A House of Commons committee set up to examine the government's Digital Britain whitepaper has dubbed a proposed next-gen broadband tax as "regressive" and "ill-directed".

The 50p per month tax on telephone lines - aka the Next Generation Levy - was proposed by the government last year as a way to help fund the rollout of next-gen broadband access (NGA) to at least 90 per cent of the UK by 2017. The government argues the nation's future economic prosperity and job creation will depend on having a competitive high tech infrastructure in place.

Speaking to silicon.com last month the minister for Digital Britain, Stephen Timms, said the government settled on telephone lines as the vehicle for the tax as it wanted a levy that is "easy to collect and easy to define".

However the Business, Innovation and Skills committee attacked this choice as "ill-directed", and the tax itself as "regressive".

Writing in a report published today, the committee states: "We believe that a 50 pence 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. The levy is a regressive tax under which a minority of users will receive enhancements to their services paid for by a majority who appear unlikely to access these services."

The committee heard evidence from a variety of industry representatives including Consumer Focus, the Communications Consumer Panel and TalkTalk - a trio that said older people would be hardest hit by the levy as they are more likely to have telephone lines, and less likely to have broadband.

Giving evidence to the committee, Timms defended use of a "separate funding mechanism" for next-gen broadband access, saying it's necessary to avoid funds being absorbed by other public service spending commitments. "The commitment of the current government and indeed the opposition to funding for the health service, together with all the other public services, is going to absorb the resources that are going to be available realistically to governments over the next few years," he said.

Asked why broadband users could not be taxed instead of telephone lines, Timms claimed it would be a "very, very difficult thing to do", noting: "How does one identify who they are?"

However the committee pointed to use of general taxation to pay for a variety of infrastructure projects such as building hospitals and roads as evidence that separate funding is not necessary, noting: "We do not support the 50 pence levy as a means of raising revenue to assist in the roll-out of Next Generation Access. The programme for delivering Next Generation Access is important, but if public funds are required, they should be raised in the same way as for any other national infrastructure programme."

The committee's report was also critical of perceived ambiguity in the government's position on whether the money raised by the 50p tax would be ringfenced exclusively for funding NGA or not. "The government needs to be give clarity on this before it brings proposals before the House to introduce the levy," the report adds.

Nor is there "pent-up pressure" for next-gen broadband, according to the committee. "The evidence we have heard suggests that there is no pent-up pressure for super-fast broadband from consumers, due both to a lack of new applications and an unwillingness to pay higher bills for internet access," it notes, adding that achieving a universal service of 2Mbps "should be the priority".

"We believe that the Universal Service Commitment should deliver a minimum 2Mbps [rather than up to 2Mbps, as set out in Digital Britain] under normal circumstances, to all users. This achievable objective would provide a greater range of services to all areas of the United Kingdom," the report adds.

Responding to the committee's report, a BIS spokesperson said: "The 50p duty we have proposed is modest, fair and affordable and is the best way to drive further investment in our networks. We have always said those on social telephony tariffs will be exempt. The duty will generate some £1bn investment in upgrading our digital infrastructure, which will particularly benefit rural areas."

The spokesperson added: "We're currently consulting on the most effective way to deploy this investment with public and commercial benefits in mind, and will consider the Committee's report in our final response."

The committee's full report can be found here.

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