HMT first phase business rates response

1. UKCTA is a trade association promoting the interests of fixed-line telecommunications companies competing against BT, as well as each other, in the residential and business markets. We advocate regulatory outcomes designed to serve consumer interests, particularly through competition, to Ofcom and the Government. Details of membership of UKCTA can be found at www.ukcta.org.uk.

2. We welcome this opportunity to contribute to this call for evidence and welcome this long overdue review of the business rates system.

3. Our members build and provide communications services over critical national infrastructure which, as the COVID pandemic has demonstrated, is more vital than ever. The Government has set very challenging policy objectives in terms of nationwide gigabit-capable broadband delivery while also operating a taxation system which diverts investment out of infrastructure

4. Our industry is one which involves significant capital infrastructure investment and investment cycles which are far longer than the duration of the current fibre rate relief granted in England and Wales. The current relief, while welcome, is due to expire in 2022 at which point there is likely to be a significant degree of bill shock in relation to infrastructure built since the relief was introduced in 2017. This may to an extent be mitigated by transitional reliefs, but the substantive issue is that the system has provided a very short-term relief which is out of step with the type of investment cycle on which fibre investment decisions are made.

5. Any assistance is of course welcome but at a time when we are under pressure from the Government to transform the UK’s telecoms infrastructure by 2025, the looming prospect of a significant tax hike is likely to have a deterrent effect or at least to divert funds from investing in gigabit-capable networks to making provision for tax liabilities.

6. The UK has fallen behind many of its competitors in terms of fibre and gigabit-capable networks, but the introduction of the fibre rate relief on newly installed and lit fibre has begun to make up some of that lost ground. Companies have freedom to choose where to invest and the withdrawal of a relief in England just at the point where we are seeing an upswing in the level of investment would be premature.

7. The Scottish Government took a longer term view. Although they initially planned to mirror the relief in England, the Minister there noted that a 10 year relief would fit better with industry’s investment cycle and adjusted the relief accordingly, recognising that incentivising investment now would increase the amount of network which could be assessed for rates in 10 years’ time. Given that there is a more favourable tax regime in Scotland, it might be that this diverts investment away from England to some extent.

8. We believe that HM Treasury ought to consider extending the existing relief scheme for a further 5 years to avoid stunting the current growth in investment.

9. We also believe the Treasury should expand the relief to include all infrastructures and technology used to deliver gigabit- capable networks. The current relief system only applies to Fibre to the Premises (FTTP) technology despite the fact that both the Government and Ofcom otherwise take a technology-neutral approach to policy and regulation. This lack of alignment between central government policy and the business rates system was raised in the Treasury Select Committee report on business rates. The tax system should be technology neutral in order to avoid unnecessary distortion of the market.

10. UKCTA will submit comments on the wider reform of the rates system by the 31st October deadline.