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DEFRA Demands Claw-back from UK State Aid Broadband Project be Repaid

Thursday, May 7th, 2015 (5:00 pm) - Score 823

In a controversial twist the Government’s Department for Environment, Food & Rural Affairs (DEFRA) has called on a superfast broadband project in Rothbury (Northumberland), which received a slice of state aid, to repay any benefits derived from claw-back (as opposed to reinvesting into better coverage).

As a quick recap, DEFRA’s Rural Community Broadband Fund (RCBF) originally invested £460,000 to help BT deploy a new superfast broadband (FTTC/P) network around the area. The project, which complements Northumberland’s wider Broadband Delivery UK programme, went well and was finally completed at the end of last year (here).

Like most such contracts the agreement contains a claw-back clause. The details of the Rothbury contract aren’t known, although many BDUK schemes adopt a claw-back level of around 20%. In other words, once take-up of the state aid fuelled superfast broadband network reaches above 20% then some of the original investment can start to be returned and used to further improve coverage or with related upgrades.

The mechanism for this is widely understood and it’s one of the reasons why ISPreview.co.uk keeps such a close eye on the take-up of BDUK projects (here). But now it appears as if DEFRA and BDUK have, in at least one example, begun demanding that any benefit from claw-back be returned (Northumberland Gazette). Happily the local council and BT aren’t playing ball.

Steven Bridgett, County Councillor for Rothbury, said:

I understand that the Government and Defra have made a request that any clawback funding from the Rothbury Rural Broadband Project is returned to them and not reinvested into bringing superfast broadband to other communities in Coquetdale.

I am pleased to say that both officers at County Hall and senior management at BT believe that under the terms of the contract, Defra cannot have the clawback funding. We intend to oppose this and move forward with plans to invest the money into delivering superfast broadband to more rural communities in Coquetdale such as Newtown, Hepple, Holystone and Sharperton.

Our rural area should not be penalised for being successful in drawing down the funding and having one of the highest subscription rates in the North East, something which has allowed us to begin clawback of some of the public money invested, so that we can invest it in bringing superfast speeds to more communities.”

The Northumberland County Council are currently hoping to reach some sort of agreement on the matter, although what happens in one area could just as easily occur elsewhere. Most contracts should offer some protection against such moves, although we have seen a few local authorities using more ambiguous language (i.e. failing to clearly specify that claw-back will be used on further broadband upgrades/coverage) and those could be at greater risk.

On the other hand there is an argument that the RCBF scheme for Rothbury is a semi-separate deployment from the wider BDUK project, which in turn may give rise to the suggestion that claw-back might not be usable outside of the area. But this is purely speculation on our part.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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5 Responses
  1. Avatar Steve Jones says:

    That’s astonishing. If you read the BDUK framework guidance explicitly allows for local projects to use claw back money for re-investment at the discretion of the local body. Indeed, one such document positively recommends it.

    This is one quote from (Annex para 3.1) from

    “Local bodies are able to use a mechanism whereby excess subsidy identified during the life of the contract can, at the local body’s discretion, be reinvested in order to extend the supplier network further into the eligible intervention area.”

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/378713/State_aid_-_Guidance_-_Clawback.pdf

    This is from a different BDUK guidance document

    “excess subsidy is ‘clawed back’ from suppliers. BDUK’s recommended approach to this requirement is that any excessive subsidy that local bodies are entitled to claw back should be re-invested in the roll out of additional superfast broadband within the same area.”

    https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCcQFjAB&url=https%3A%2F%2Fwww.gov.uk%2Fgovernment%2Fuploads%2Fsystem%2Fuploads%2Fattachment_data%2Ffile%2F77416%2FBDUKFramework_Delivery_Model_Summary.rtf&ei=EKZLVarYHOqd7gblooCYAg&usg=AFQjCNHLpaf4KUcKP7dvc_DksIUmmtHjMQ&sig2=detxEfy8vdeduafj1VGLlA&bvm=bv.92765956,d.ZGU

  2. Avatar Captain Cretin says:

    Perhaps we should all demand clawback from DEFRA; make them give up their salaries until they have repaid the tens of millions in fines they ran up by messing up the EU Rural payments system a couple of years ago.

  3. Avatar NGA for all says:

    It would useful to determine how much 6 cabinets cost in this instance. The use of state aid to replace telephone poles would be good to examine.
    £460,000 for 6 cabs – £76,000 each where NAO identified average of £24k.
    Let’s hope this did not cost double the cost Northhumberland are paying elsewhere, before BT make a contribution.

    1. Avatar GNewton says:

      As usual, you won’t find any transparency in these murky council deals with BT. They usually hide behind commercial confidentiality clauses.

    2. Avatar NGA for all says:

      GNewton – Northumberland are in the milestones to cash process, so I think NAO/BDUK needed to be saluted for getting the level of granularity being referred too. They have squeezed blood from stone.

      BT promised £2.9m (includes operational costs) here for Phase 1 and it looks like 150 cabinets worth of work, the millions of public subsidy should go much much further.

      However no evidence in the accounts that BT is contributing anything of the funds promised, but hopefully I can be proved wrong.

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