Government plans for a 50p-a-month tax on households to pay for a broadband network across the whole of country have been criticised by the Commons Business Committee. 

The Committee said that the tax is regressive, and means that poor people would end up paying for a service used mainly by the better off.

The committee also asked why ministers wanted to spend so much on broadband services when public finances are under such pressure.

The criticisms were made in a report into proposals to improve the UK’s internet network, which were released by ministers last July as part of the Digital Britain White Paper.

Under the plans, an extra 50p levy would be made on every fixed phone line, with the estimated revenue of £175 million being used to ensure that every home would have access to broadband with a minimum speed of 2Mbps by 2012.

The committee stated that while the Government’s ambitions were laudable, it was “unwise” to interfere with the market at the moment.

The scheme would have a much greater impact on the less well off who would be forced to pay for a service which only a few of them will benefit from:

 The Commons Business Committee concluded:

“Early government intervention runs a significant risk of distorting the market and will not allow time for technological solutions to extend the market’s reach across the country,” the committee insisted.

“Furthermore there is little evidence to suggest a pent up demand for this enhanced service, with customers currently unwilling to pay the premium for such services.”

 ”We disagree with the Government over its proposal to fund its intervention in the Next Generation Access Market with the proceeds of a 50p levy on fixed telecommunications lines.

“Such a levy would be both regressive and poorly targeted. It would have a much greater impact on the less well off who will pay for an enhanced service which only a minority will enjoy.

“If public funds are required for next generation access, they should be raised through general taxation, in the same way as for any other national infrastructure programme.”

The MPs suggested that reducing the tax on fibre optic cable and improving competition among suppliers would be a better use of public money.

the report said:

“In times of great stringency in public expenditure digital inclusion, not next generation access, should be the priority for expenditure,”

“The market can be helped to deliver greater levels of high speed access without significant increases in public expenditure.”