Super-fast broadband slows down again

Figures comparing growth in UK productivity consistently show us falling behind our major competitors. As Geoff highlighted in this recent blog, there are many underlying factors on the supply-side of the economy and one of them is infrastructure bottlenecks caused by, among other things, slow broadband speeds.

In order to combat this, a tax was proposed in the Budget last month which would have been ring-fenced to provide super-fast broadband in areas where it is not provided by the private sector.

Provision as a public service would be aimed at the final third of the country where experts say it would be too expensive for commercial players such as BT and Virgin Media to roll out fibre services. Money would have been raised for this via a 50p-a-month broadband tax applied to all households with a landline telephone. It is estimated that it would have raised about £170m a year to help fund the broadband roll-out.

However the plans fell foul of a principle of taxation - the cross-party Business Innovation and Skills committee of MPs labelled the tax unfair, because most of those who would pay it would not benefit from it.

There are alternative suggestions, which may perhaps provide a better solution – you can find them in this BBC News article. The item has been dropped from the Finance Bill (along with the proposed increase in duty on cider and tax relief on holiday homes, which also proved too controversial to be pushed through before the dissolution of parliament). The decision on how to move our productive potential outwards, and shift LRAS to the right to allow a catch-up with our competitors, will have to wait till after the election, and meanwhile we will have to watch while the UK falls further behind.