Connected Research

Union policy research in the 21st century

The ‘Final Third’ levy: public or private asset?

with 3 comments

Gavin Hayes, General Secretary of Compass, argued this week that a private company should not need the assistance of a levy to raise investment funds for next generation access and, furthermore, that in the context of broadband being seen as essential as electricity, gas and water, we need to get back to a discussion around the notion of public utilities being run for people not profit.

The latter comment is an interesting one, since it raises the question not just about the original privatisation of BT exactly 25 years ago but about the demands we place on private/privatised companies to fulfil public policy goals. As a nation, we gave up the right to ask a private telephone company like BT to supply universal broadband access, and at increasing speeds, on a scale and to a timetable made as a result of public policy rather than the commercial of the operator(s) concerned, when we decided that its future was better off in the private sector. If we now want it to fulfil those public policy goals, then either we have to find some way of returning it to state-owned hands – in a model which is otherwise reserved currently only for failed/failing banks – or else stump up the cash. Its woes in Global Services apart, BT is far from a failing company, even though years of being in private hands has delivered more of a concern for (and a return to) shareholders, as well as a plethora of dodgy executive decisions, than for ordinary citizens and the need to raise significant amounts of investment finance. Well (to paraphrase), that’s neo-liberal life as we know it, Jim.

If returning BT to state-owned hands is, for whatever reason, beyond us – and the whole point of Hayes’s argument is that it should not necessarily be, since state ownership ought not to be just a rescue point for failing banks – then stumping up the cash is the only alternative. We could do that as taxpayers – though that would be likely to raise an almighty row with the European Commission, which has quite strong and quite well-monitored rules on state aid to industry, or we have a levy: we raise the money more or less by old-fashioned public subscription – everyone pays, and pays the same amount too. There is a strong egalitarian, and therefore attractive, argument to that, albeit that you could also argue, as Nigel Stanley at the TUC did on Wednesday, that it is a very regressive tax.

That the funds have been raised in this way, however – or, rather, that some of them have, it being likely to take more, and probably a lot more, than just the contents of the Fund to deliver high-speed broadband to every home in the country – does raise interesting questions about the ownership of the assets bought with the Fund. There is a clear argument that ownership of assets ought to bring appropriate rewards, and I don’t just mean via the cheaper bills appropriate to us as consumers; the rewards appropriate to an owner ought to be additional. How those are to be determined is critical, not only as a matter of principle, but also in terms of justifying to ordinary people why they should pay the levy and, indeed, what benefits it will bring them.

Of course, the failure to provide investment funds to the desired public timetable is also a failure of a regulatory model based solely on increasing competition in the sector from the singular, short-termist perspective of driving prices down. From a more long-term perspective, such a policy has left regulated network operators with insufficient investment funds to make the necessary investment in high-speed broadband, not least of all without a clear picture of when, and how much, the return from that investment would be. So, it is the failure of regulation which has also contributed to this situation.

In this respect, one of the lesser-noticed actions being taken under Digital Britain is that Ofcom is to be charged with a new remit of looking also at the impact on investment of its decisions. This overturns a 20-year commitment to looking solely at competition in regulatory decision-making. This is a welcome step forwards in starting to correct the regulatory failures that have left us where we are.


Written by Calvin

19/06/2009 at 5:57 pm

3 Responses

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  1. You are right to stress some of the complexities here, and I’m not sure Gavin at Compass was being entirely serious. It’s not practical politics to call for the nationalisation of BT, nor is very much of what it does outside the local loop any kind of natural monopoly.

    But a big challenge for progressive politics is how to deal with those parts of the economy that are neither obviously best done by the state – such as health and education – and those best done in the market such as consumer goods.

    In addition you have the extra problem of limited resources when dealing with at least some aspects of telecoms because of the finite nature of bandwidth available, even if technological change constantly both makes more of it available and allows more efficient use of what is there.

    The answer can only be that you need a mix of policy tools.

    Subsidies can certainly be part of that tool-kit. Indeed tax-breaks for desirable activities such as R&D are relatively uncontroversial, but are a kind of hand-out.

    What is disappointing in this country is how little the government has used the regulation of the former state owned companies to impose social objectives on companies. In the USA where traditions of public ownership are much weaker, there is a strong history in liberal states of regulation being used to insist on target levels of phone penetration or energy conservation. Of course there has been some of that here, but it’s never been turned into popular politics.

    So I have no problem with a subsidy to to extend broadband to the nation’s hamlets. My point is that a poll tax on phone ownership is not the best way to do it.

    Nigel Stanley

    19/06/2009 at 6:22 pm

  2. […] The ‘Final Third’ levy: public or private asset? Calvin has more to say on paying for universal broadband and Nigel has commented in reply. Related posts (automatically generated):Digital Britain: modernising the UK’s fixed-line communications infrastructureA telephone poll tax? […]

  3. I can’t believe Nigel that you can say “It’s not practical politics to call for the nationalisation of BT” when the govt has effectively taken over the banking sector. The impractical politics of the “telephone tax” are clear enough and BT’s sale was an absolute scandal.


    21/06/2009 at 2:39 am

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