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New Report Calls for VAT Cut and Broadband to Aid UK Economy

Monday, June 22nd, 2020 (3:34 pm) - Score 5,590
reams of fibre optic cables on the surface uk

The Policy Exchange, which is an educational charity that also claims to be the UK’s leading think tank, has published a new report that calls on the UK Government to help the post-COVID19 recovery by, among other things, investing more into “gigabit broadband” and reducing VAT from 20% to 15%.. again.

The report – ‘Why the Government should spend more on capital‘ (PDF) – is written by several people including the former Chancellor, Alistair Darling (Labour Lord), and Gerard Lyons, who was once an economic adviser to Boris Johnson. Darling held the role of Chancellor during the last economic crisis in 2008.

NOTE: At present gigabit broadband services cover around 20% of UK premises, mostly thanks to commercial FTTP deployments and Virgin Media’s DOCSIS 3.1 upgrade.

At present the Government has already invested hundreds of millions in “full fibre” broadband and mobile connectivity through its various voucher schemes, as well as the wider Local Full Fibre Networks (LFFN) programme and the Shared Rural Network. Not to mention the business rates holiday on new fibre and various regulator or policy changes to help foster deployments.

On top of that they recently proposed to invest £5bn to ensure that every home can access a “gigabit-capable broadband” service by the end of 2025 (focused on the final 20% of hardest to reach premises). Despite this the new report notes that more people in the post COVID-19 world will be working from home and thus “increased subsidies for ultra-fast broadband in hard-to-reach areas should also be fast-tracked.”

Report Statement

Rolling out gigabit-capable broadband should be supported further given likely future changing patterns of working. To expedite this rollout, the generosity of the voucher schemes for the hardest to reach areas could be increased, while at the same time tackling administrative barriers to deployment such as difficulties in getting the appropriate permissions, simplifying the distribution of administrative responsibility by having central government work directly with local authorities.

The public health crisis will have increased the attraction of space, roomier homes and lessened the attraction of being based in, or travelling to, a metropolitan centre. Technology has moreover demonstrated that distance working is more practicable than ever before. Households and businesses will reassess the costs and benefits of different locations.

Public investment that increases the broadband infrastructure and the transport and other infrastructure will contribute to making previously neglected communities that possess obvious advantages in terms of cost base more attractive. An ambitious public investment programme in this context has the potential to work with the grain of business and household choice about location rather than against it.

The report suggests that such changes could form part of a new UK Modernisation spending programme in the next Comprehensive Spending Review, which would replace current UK Government and European Union (EU) regional growth funds that are due to end in the next few years.

As well as pushing additional funding toward gigabit-capable broadband, the new proposals also suggest promoting an “effective and competitive UK-wide market in wholesale full-fibre networks” by working directly with local authorities. All of this is fleshed out a little more below.

Policy Exchange Recommendations

Policy Exchange has previously recommended a set of measures to enable and speed up the rollout in its 2019 Modernising the UK report. These were:

1. Tackling administrative barriers to deployment – through granting ‘right to entry’ in line with rules in the energy and water sectors, placing local authorities under duty to facilitate deployment, and ensuring all new build homes are automatically connected, either by mandatory rules or incentive structures.

2. Review the level of Increasing funding for voucher-schemes in hard to reach areas to determine what level of subsidy increase might be needed – to amplify and accelerate the roll-out, community groups such as parish councils and local chambers of commerce should be supported to make residents and local business aware of the opportunities. They should be offered logistical support where needed by local authorities and should coordinate with infrastructure providers etc.

3. UK government should work directly with local authorities – where close government involvement in the rollout of full-fibre broadband is needed (for example, in the context of providing subsidies for hard to reach areas) the UK government should work directly with local authorities.

4. 5G coverage should be integrated into the full-fibre strategy – the goal of making access to ‘ultrafast’ internet speeds should include not just the rollout of full-fibre infrastructure, but also be coordinated with the rollout of 5G coverage, which is at least just as important for connectivity as broadband (and in the future, even more so) and in harder to reach areas, mobile broadband may in the long run prove more economically viable.

To push this further, the UK central Government should also look to adopt best practice from local authorities and devolved Governments if there is sufficient evidence base behind them. One example might be re-purposing existing publicly-owned cable ducts by granting companies concession to use and commercialise them, which reduces upfront cost of capital in building the network, in turn speeding up the rollout.

Bristol City Council first experimented with this when it granted a 20 year concession to Bristol Network to build a fibre-optic network for both public sector and private sector using the council’s existing cable ducts. In February of 2020, the Welsh Government signed a similar agreement with Net Support UK – NSUK will now be able to use Welsh Government-owned cable ducts in trunk roads around South Wales. If this approach is shown to increase private sector willingness to build out the network more swiftly, it should be adopted elsewhere.

A massive boost in fibre capacity and digital skills is needed, and the government’s ambitious pre Covid-19 plans in this area should be pursued. Before the Covid-19 crisis, the UK had an ambitious digital strategy, planning for the roll-out of improved broadband, and a move towards a digitally enhanced economy by 2025. Given that, and the importance of this area for the economy, it is important not to dilute such plans.

Crowding-in private sector investment is possible through overcoming regulatory barriers and avoiding delays to government spending priorities post Covid-19. There are a number of areas for the government to focus its attention on, remaining committed to full fibre infrastructure and gigabit-capable connectivity across cities. Improved access to vouchers, enhanced access to digital skills and changes to planning to improve access and ensure it is possible to achieve better deals with landlords.

Physical constraints, too, can be addressed, such as best practice from Wales, as noted in the report, on the laying of fibre along roads. Within this there is a need to ensure that there is no trade-off between those areas now seen as in greater need of better connectivity versus improvements needed in commercially viable areas.

On the one hand more funding for gigabit broadband will always be welcome, but on the other hand it may be difficult to “fast-track” related subsidies given that the Government ‘s current 2025 target for completion is already regarded by many as being overly optimistic. The rollout seems most likely to continue for several years past 2025 (some gaps will most likely remain unfilled).

However it’s perilously difficult to assess such things before the Government has even had a chance to set out the framework for how its investment of £5bn is actually going to be spent, which seems likely to surface during the second half of 2020. Nevertheless we’d expect bigger rural vouchers and a programme similar to the original Broadband Delivery UK scheme could be the outcome, albeit with a greater acceptance of alternative networks.

Leave a Comment
11 Responses
  1. Avatar lord kekenstein

    >smashed economy
    >reduce VAT

    hahahahahaha

  2. Avatar Gary

    While there may be interesting points I’m again drawn to the linking in point 4, of greater 5G rollout and rural connectivity. What am I missing here, With what I understand a major limitation of fast 5G coverage is it’s range yet time after time it’s offered up as the saviour of rural connectivity, areas where the very problem is the low density of the properties.

    Small hamlets or villages that are rural sure, but running power out from those centres to new masts to cover ‘rural’ isnt a cheap or easy proposition, it does have the benefit of giving a mobile signal to everyone else passing through. Lets be honest If you’re in a rural area just how much mobile speed/bandwidth do you really need if its not your home or business connection. Chances are you’re driving or walking Not working from home.

  3. Avatar Andy Hodchild

    I get the feeling that all the subsidies to openreach and others just go out as profit while they do diddly squat. I will be pushing up daisy’s before we get anything like good connectivity out here. Openreach was given a public monopoly and as a private operator it has milked it to death.

    • Avatar Buggerlugz

      Absolutely agree Andy. Its not about the provisioning of gigabit bandwidth to homes its more about the actual affordability of it to those customers.

      Something both the government and the telco’s are happy to ignore and continue to milk customers for every penny.

      Its 2020 for gods sake!

  4. Avatar Michael Gidman

    Can you leave your broadband provider before
    Your contact is up I ask this because I
    With Talk Talk and I’m sick of broadband going
    Down all the time they are a crap company to
    Be with

    • Avatar Buggerlugz

      If they are not providing the service you signed up for, in theory sure you can. In practice it proves totally different though.

      Write to their head office saying why you want to leave, mention OFCOM and a “deadlock” letter in your correspondence, and hope they let you leave.

  5. Avatar Michael Gidman

    It may be better if I go to virgin Media

  6. Avatar Love Broadband

    In Australia the “VAT” is permanently 10%, but is called GST (Goods Services Tax)

    It seems to work OK for them.

    20% to 15% is small change.

    We really need 10%, especially after Covid

  7. Avatar Peter

    VAT receipts are around £ 132 billion in normal times
    so you want to half that… by saying you want the VAT rate cut in half
    So HMG looses 66 billion
    now purchasing is much less so the ‘new normal’ VAT receipts wont be £132bn – but we are in the right ball park and after all whats a few £bn here and there
    Anyway
    Can you tell us which services you want cut now that there is a shortfall of £66bn.
    That’s the entire UK education budget for the year…….

    • Avatar Love Broadband

      In short, less VAT = more sales.

      However to make up for the shortfall as you describe, every business in this country would be required to charge VAT on their goods or services.

      10% VAT would only work if everyone works together.

      Unfortunately the system we have now encourages mass defrauding of HMRC. The usual culprits of dodging taxes are window cleaners, taxi drivers, fast food vans, gardeners, builders with 2 sets of books and many more.

      This mass defrauding of taxes needs to stop if this country is to get any better.

      Please don’t insult everyone by suggesting it does not happen. It most certainly does and you are fully aware of it.

      Many people in this world own assets “far beyond their earning capabilities” (even taking into account of inheritance etc)

      I would love to get a job with HMRC data analytics – It would be pretty easy to work out a tax baseline for each profession and work out who contributes “virtually nothing”.

      The only people who “complain” about this kind of clampdown happening are the ones who are AT IT !!

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