BT’s CEO Makes Case for Full Expensing to Fuel UK FTTP Rollout
The outgoing CEO of telecoms and broadband giant BT Group, Philip Jansen, has this afternoon called on the Chancellor of the UK government, Jeremy Hunt, to use his forthcoming Spending Review to help support investment in the roll-out of full fibre (FTTP) broadband by making “Full Expensing” a permanent change.
Just to recap. BT and other network operators were, until recently, able to take advantage of the temporary “Super Deduction” introduced by the government (i.e. giving a 25% tax break to businesses that invested in new plant and machinery assets). The operator previously claimed that this measure is part of what enabled Openreach to raise their Fibre-to-the-Premises (FTTP) roll-out plan from 20 million to 25m premises (growing competition and softer regulation from Ofcom are other factors).
The good news is that, while the Super Deduction did come to an end this year, the Chancellor’s 2023 Spring UK Budget managed to mitigate the impact of that somewhat by announcing a new policy of “Full Expensing” (the first European country to do so). This essentially offers 100% first-year relief to companies on qualifying new main rate plant and machinery investments from 1st April 2023 until 31st March 2026 (i.e. for every £1 invested in IT equipment, plant or machinery, their taxes are cut by up to 25p).
At the time the Chancellor suggested that the government would aim to make this a permanent change, which would help to avoid the potential risk of a “cliff edge” scenario for those harnessing the new measure. But so far there’s been no confirmation of that happening, hence Philip Jansen’s latest remarks.
Philip Jansen, BT Group CEO, said:
“The BT Board, in deciding to make enormous long-term commitments on full fibre worth some £15bn, had to do so in the knowledge that the investment would all be made up front with the returns some way off. The nature of our business is that most of our investments take at least five years to generate a return; but in the case of fibre that period will stretch to at least a decade.
We took that tough decision to commit to fibre, nonetheless, in part because policymakers and regulators understood this point and acted on it. That’s where decisions on tax have been so important.
…
Full expensing was also critical: it allowed us to accelerate our capital investment by some £300m per year, to stick to the 25m target and to simultaneously increase the pace at which we were connecting new customers to the new fibre network (itself a capital-intensive process).
I think politicians on all sides have now understood the important role that tax incentives can play in promoting investment. In our industry, the results are very clear from the record-breaking pace at which Openreach is now rolling out the new network.
However, like the super deduction before it, full expensing is only a short-term intervention. It is due to expire in two and a half years. The investment demands and needs of the industry and the country won’t stop there, though. There is a £20bn investment gap to close, for example, if government ambitions for 5G mobile services are to be met, and an ever-increasing need to make our networks more energy efficient, secure and resilient against future risks and threats.
The real game-changer would be to put these tax incentives on a permanent basis. That would give businesses like BT Group genuine long-term certainty to plan and shift the investment environment in Britain from good to great.
I know the Chancellor is considering this as one option for next week’s Autumn statement. He has said he would like to take this step when the economic conditions allow. With billions of pounds of potential investment at stake, it’s also important to ask whether, as a country, we can afford not to.”
Admittedly, one catch here for smaller network builders (e.g. AltNets) is that most of them will already be running at a loss due to the high cost of network build (as BT says, reaching payback is often a 10-15 year slog). As such, Full Expensing may not benefit them as much as it might benefit more immediately profitable network operators and ISPs. But over the long term we’d hope that everybody can benefit, assuming the government opts to make it permanent.
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 X (Twitter), Mastodon, Facebook and Linkedin.
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The rich get richer. Why not just simply cut taxes? That would make it fair for everyone
Cutting corporation tax doesn’t incentivise capital investment in the same way that capital allowances do.
Profoundly simplistic and inaccurate take on a complex issue but, hey, when you don’t understand the issues at hand parroting the key talking points is usually how it goes.
Notice how I did not specify corporate tax. That would just benefit BT and VM that are actually making a profit.
I meant ALL taxes
How would that help John? Our public services and benefits for the needy are amongst the poorest in Europe, because we pay lower taxes than the rest of Europe. Cutting the funding of those services further will help only the rich.
“The rich get richer. Why not just simply cut taxes? “
Probably because depending **where** tax is cut the impact on the country’s prosperity.
As in this example – cutting tax via full expensing will increase job creation (network expansion) whilst also cutting costs for consumers as a result of increased competition.
The public is poor because of record high taxation and inflation which is another kind of tax. Comparing the UK, for many years top 3 economy in the world, to many economies that don’t even make top20 is not a good bar. You might be thinking about income tax, but completely disregarding that the UK has a double income tax system exactly designed to mislead you.
The fall of Rome started with having far too many state servants that actually produce NOTHING. Rome had about 30000 of them to manage that greatest empire at the time. Today that’s less civil servants than Boston. The UK is in a very similar position, to the point that civil servants are looking for new ways to tyrannize the population. My altnet had a delay with a local council because they said “they were too busy dealing with refugees”. It is unacceptable to spend taxpayer money against the interest of their own voters. Putting money in your own pocket IS EMPOWERING the individual, not the other way around
There needs to be someone who does to the state what Elon Musk has done to Twitter. Cut 70% of the bureaucrats and laziest and it will run better than ever
Vivek Ramaswamy is the one finally bringing that discussion to the table and this common sense is gaining traction. People will see common sense
https://youtu.be/Qf70kEnMRuw?si=ZaQlgDzgh0P_2_dv
Javier Milei is proposing the same thing in Argentina, a country destroyed by socialism and too many lazies in state jobs. He’s the favorite to win
@John. You raise a good point that our civil service is often not very efficient and can be a blocker to growth. I don’t agree with your cause and solution though.
If you get rid of the civil service to save taxes, you will end up with some sort of primordial anarchy where the richest and most brutal members of society win. If you like that sort of thing, I hear Afganistan and Somalia are leaders in this type of social structure.
As we descend into tribal chaos, we could also look forward to any old company installing random bits of fibre wherever they want; a cabinet here blocking a footpath, a low slung cable there, a noisy, dangerous cabinet right where the council had planned to build a new road.
Perhaps what we need to solve your problems are MORE civil servants and MORE money to help them adopt more efficient ways of doing their jobs. I think you may be seeing the results of years of chronic underspending (austerity) in local councils (i.e; the places where we actually live, so it affects us all) and confusing it with incompetence.
@ John
You just immediately lost the argument as soon as you brought Elon/Twitter into it. Cut most of the business and it’s ability to stand by its legal obligations? see how long this lasts…
“My altnet had a delay with a local council because they said “they were too busy dealing with refugees”.”
My altnet had a delay with a local council because they said “they were too busy dealing with refugees”
Citation needed.
Actually the UK is amongst the highest tax nation in Europe
‘Actually the UK is amongst the highest tax nation in Europe’
Nope. Work in progress but not the case, especially if comparing with peer nations in Western/Northern Europe rather than periphery / Eastern Europe.
https://ifs.org.uk/taxlab/taxlab-key-questions/how-do-uk-tax-revenues-compare-internationally
Less bureaucrats means less tax, less red tape, less bureaucracy, less wasteful spending, less pointless projects such as which road to turn into LTN or which area to make money out of drivers. It makes everyone richer because there are less zero productivity leechers. Conflating police and council workers is just misleading and disingenuous. It is also nonsense to say poor people don’t benefit from tax cuts
X is far better now than Twitter ever was unless you are in favor of Clinton and Biden DIRECTLY communicating with Twitter employees to censor anything they dont like, or cases when the verification was done by paying $10000 to a twitter employee
Vivek won’t win the nomination but he has a lot of ideas to bring to the table that many leaders should adopt ASAP
Patrick: “Less bureaucrats means less tax, less red tape, less bureaucracy, less wasteful spending, less pointless projects such as which road to turn into LTN or which area to make money out of drivers”
Your point about bureaucrats suggests that you think bureaucrats make decisions. You need to stop reading the Daily Mail, and learn how democracy works in this country. Elected officials make all decisions and spending choices, bureaucrats only administer them. As somebody you’d class as a bureaucrat, I can assure you that my job isn’t deciding anything that affects you, or making spending decisions it is to implement the will of government. And regardless of what I may think on a matter, that’s what I do.
Now, the UK public sector currently employs 17.9% of the workforce, and government spending is 40-46% of GDP depending on your choice of year. So it would seem that if anybody is inefficient, it’s not the public sector, and as somebody said earlier, we need more public sector employees doing a better job. In the meanwhile, it’s probably the party you voted for that decided we needed to spend £13 billion a year on foreign aid, £100bn on the HS2 white elephant, has put up taxes to the highest level in living memory, and permitted net migration of over 600,000 last year, overwhelmingly by legal routes.
16% is a lie. The UK gov website says 32%!!!
Elected officials are not supreme rulers. There is a reason why the term “the establishment” is so prevalent. Unelected civil servants who don’t do their jobs or present themselves as obstacles exist. Most of them need to go
Agreed on the last point that under the Tories we have record spending, open borders with record immigration, and record high taxes. Pretty much socialists in power. Yet labour only promises even more spending and more taxes and open borders even more open
Let them have 100% working for the state. These people like Stalin
Patrick, here’s the numbers:
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/publicsectorpersonnel/timeseries/db36/pse
Regarding “supreme rulers”, where do you get this drivel from? I’ve worked in the private sector for over 30 years, I’m now a civil servant, I’m very well placed to make comparisons. You seem to think “Yes, Minister” is a documentary. The reality is that a minister states what policy is to be, civil servants present them with a set of options – including quite often that there’s existing barriers to achieving the initial policy aims – like international treaties signed by the politicians, international agreements signed by politicians, existing laws passed by politicians. Look at the Rwanda fiasco – that’s not civil servants being difficult, it is that the plan is counter to various rules and agreements that the executive branch of government has made. What would you expect the civil servants to do, ignore the rule of law? Make decisions? As I said earlier that’s not how government works. Clearly you’ll go back to Facts From Facebook and still believe in the “the blob”, but even if that were a fact, why have the current government done nothing about it? They’ve whined “not our fault, not our fault” for 14 years, yet done nothing useful.
Yeah Fibrebubble: I guess the local authority is so bloated the highways guys got bored and decided to try their hand at housing and social care.
Javier Milei just won in Argentina, worlds first libertarian leader
Looking forward with glee to have him sack the vast amounts of useless state bureaucrats that do nothing except leech from the people so that people around the world can see how much better a country can become without them
The main issue with the appalling UK productivity is the cost of investment in plant and machinery.
Leaving aside the labour pool and skills issues.
Local Councils have no direct involvement with asylum seekers they will have responsibilities for refuges. The planning department though have no involvement in that
Then the joys of the bureaucracy around building any structures around it, and installing the plant and machinery where it needs to be.