Telecommunications Infrastructure (Relief from Non-Domestic Rates) Bill

2nd reading (Hansard): House of Lords
Monday 9th October 2017 Lords Chamber

Second Reading

15:18

Moved by

[Lord Ashton of Hyde]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)]

My Lords, I am very pleased to be able to assist my noble friend Lord Bourne in moving the Second Reading of this short but vital Bill.

In our modern world, businesses and individuals depend on being connected, and the ways in which this happens are becoming more and more diverse. We are fast moving beyond mere mobile phones to increasingly digital communications, and in the future this will include ultrafast broadband technology and 5G—the next generation of mobile connectivity. Fibre is crucial to both of these. The Bill will support that progression for both fixed and mobile or wireless networks by delivering a vital part of the Government’s package on fibre investment. The Bill will provide the framework to implement the Chancellor’s promise in the Autumn Statement 2016 to allow 100% business rate relief for new fibre up to 2022.

Many noble Lords have raised the problems of slow internet or poor mobile phone services. These matters are important to people. They affect the enjoyment of their lives and the success of their businesses. By delivering world-class connectivity we can transform our public services, bringing efficiencies to business and improving the lives of individuals. Central to this challenge is providing the digital infrastructure that can support these demands. All these connections rely on more fibre-optic cable. Fibre is the gold standard, and we are committed to delivering it, but we have heard concerns from operators that business rates acts as a barrier to that investment.

The commitment given at the Autumn Statement in 2016 will mean that new fibre investment made after April 2017 will not be subject to business rates until 2022. Telecom operators will continue to pay rates on their existing network, alongside all other ratepayers who pay business rates on their business properties, but by providing a temporary relief for new fibre we will give this sector the boost it needs to meet demand. The sector has been calling for this and telling us it will make a difference in the delivery of new fibre. We have made great progress in the last few years to improve connectivity across the UK. Superfast broadband is already available to 93% of homes and businesses; we are on track to reach 95% by the end of the year. We want to go further and providing rate relief on new fibre will help achieve this goal.

We will have the opportunity to discuss the Bill in more detail in Committee but I will briefly outline what it does. This short Bill contains six clauses and, essentially, gives us the powers we need to deliver the relief through regulations. The first three clauses contain the powers for those regulations covering occupied and unoccupied properties on local rating lists, and those on the central rating list held by the Secretary of State. The remaining three clauses deal with consequential and financial matters, allowing the relief to be backdated to 1 April 2017.

In order to calculate how much relief should be awarded on telecom networks, the regulations made under these powers will require the valuation officer to issue a certificate of the rateable value attributable to the new fibre. This will then be used by the local authority to calculate the amount of relief which should be awarded, ensuring that we will give relief only on the new fibre and not on any existing networks. We have already published draft regulations, in August, explaining how this will work and started discussions with the sector on its implementation. Consultation on the draft regulations will run for 12 weeks. The Valuation Office Agency will also hold discussions with the sector on how the relief will operate in practice. So I hope noble Lords will appreciate that we have already explained how the powers will work, thereby ensuring that the scheme operates smoothly.

More widely, the Bill is just one of several measures we are taking to boost Britain’s connectivity, including our ambition for more fibre. Over the summer we announced more details of the universal service obligation, so that every household will be able to get acceptable broadband by 2020. This will provide a vital safety net to ensure that no one is left behind. In the Digital Economy Act we reformed the Electronic Communications Code, which regulates agreements between site providers and communications operators, to make it easier to deploy, maintain and upgrade electronic communications infrastructure. We are also forming a dedicated team to look at how government can remove barriers to deployment, which will work with other departments and industry.

We will see a more competitive market as a result of the agreement between BT and Ofcom to separate out Openreach. A legally separate Openreach will serve not just all its customers but the whole of the United Kingdom. We are supporting fibre rollout through a £400 million Digital Infrastructure Investment Fund. This will help accelerate the rollout of fibre by providing better access to commercial finance for alternative developers of full-fibre infrastructure. In turn, that will help smaller operators compete with larger players. The Government’s investment will be at least matched, on the same terms, by private sector investors. As a result, we expect to see private sector investment into full-fibre broadband reach around £1 billion overall. We are also investing £200 million in our local full-fibre programme, supporting local bodies to stimulate new fibre development.

In total, our efforts are worth £1.1 billion to support the sector, and once this Bill receives Royal Assent the Department for Communities and Local Government and the Valuation Office Agency will move quickly to implement the rate relief for new fibre retrospectively to 1 April 2017. We want to see a country where people are better connected, where everyone can get online and reach their full potential and where no one is left behind. This Bill provides a step on that journey. I beg to move.

15:25

[The Earl of Erroll (CB)]

My Lords, I want to say a few words on this Bill. It is extremely welcome as the rateable value of fibre connections has long been a problem in the rollout of new systems and new local solutions. BT has for some time used it to block other providers with alternative solutions. It has been quite a problem. Several companies have gone bust over it, and there is litigation on it in the EU at the moment. One problem is that when a new company tries to put in a new solution and has to light some fibre, it is rated very highly, as if it suddenly had as many connections as that fibre could take, not the 10 or 20 subscribers the company may have to start off. Every time BT connects something new to fibre or puts new fibre down, it reduces its rate bill because of the deal that was done when it was set up by statute. Nothing has been done about this. It is inherently unfair and anticompetitive, and something needs to be done about it.

The sad thing about the Bill is that we are talking about new fibre only. What about making the old stuff competitive too, so that we can have alternative solutions? There should be an opportunity to look at that, but I suspect that good lobbying behind the scenes has made sure it will not happen.

The language of the Bill is so obscure that I find it quite difficult. The Explanatory Notes told me something about it. I am not sure whether it applies to newly laid fibre only or to dark fibre that has not been used and is about to be lit. I hope it applies to both because if fibre is already in the ground but has not been used, what is the point of forcing people to lay a new fibre cable to get it working? I cannot see why the Bill cannot be extended to make it more economic for people to attach to existing fibre to provide new local solutions where necessary. There is fibre there, but for one reason or another it is not economic for BT to do the last bit of the connection. I do not get the argument for it having to be totally new fibre.

The trouble is that BT is a publicly owned company not a UK plc asset. We have no control over BT. It has lots of problems to face. It inherited an enormous pension deficit. I have huge sympathy for its commercial problems operating in a global market. However, that does not mean that the British taxpayer, the British broadband user and people who are trying to get businesses going or to reduce the cost of government by getting broadband into areas that do not have it, such as parts of London, communities on the edges of cities and towns and certain rural areas, although some rural areas are better than others—we should not snap at little bits of the problem. We should take a bigger view. What annoys me is that if we put the amount of money we are putting into smart meters into rolling out broadband, we would have no problems and we could have smart meters everywhere. There is a lack of logical thinking at the beginning, but I am almost diverging.

I cannot work out how much power is in the hands of the Valuation Office Agency. It worries me that it tends to favour the incumbent as opposed to new development, quite aggressively in some circumstances, and, despite appeals, is not interested in increasing the rollout of broadband. It is more interested in sticking to what it sees as its rules and rating stuff like a Victorian water pipe.

I have had quite a few briefings on these issues over the years, and they give rise to concern. I hope things are going to change. This is a move in the right direction. I am still worried that Openreach is a wholly owned subsidiary of BT. When you look at how investments run and how things work up the corporate pipeline, you can influence things an amazing amount, even though you are not meant to, by where you put your investment, how you repatriate the profits, jiggle the money around et cetera. The separation may not be as great as we think.

The important thing is to get universal fast broadband out there everywhere, even in areas that do not have people living in them, because when the internet of things comes along, it will not work unless we have broadband everywhere. We need to worry about this to a greater extent than people think. It is not just a matter of cabling up every house, but that will be a start, so let us get there as quickly as possible and reduce the rates bill and the blocks to getting it out there, most of which are commercial.

15:30

[Baroness Harding of Winscombe (Con)]

My Lords, I begin by declaring my interests. I only recently, four months ago, stepped down as chief executive of TalkTalk, the internet service provider.

In my brief time in the House, I have heard many speeches lamenting poor broadband speeds, and it is quite cheering to speak today in a debate about a potential, although admittedly only partial, solution. Connectivity, as my noble friend said, is essential to modern life, and becoming more and more essential. Unfortunately, the copper wires that we all—98% of households—depend on for broadband today are not fit for propose. It is nothing short of a miracle that they deliver even poor broadband at all, because they were certainly never designed to when they were laid decades ago. Full fibre, on the other hand, is designed for that.

I draw the analogy with the electricity market. Imagine if we all had apps on our phone to check the power wattage into our homes and we started conversations of an evening by saying, “I’m terribly sorry, we live quite a long way from the electricity substation here, and therefore the lights don’t work all the time”. That is exactly what happens with copper-based broadband today, and it is not good enough for now, let alone for the world that we will be inhabiting in the next 10 or 20 years. I worked for a business that was starting to trial full fibre right the way to the home. Families using it do not say, “I have fantastic ultra-fast broadband”; they just say, “My broadband works; it does what it says on the tin”. That is why pushing to have full fibre, and fibre-optic cable laid right the way to everybody’s home or business premises, is so important. It is modern technology that will not just be fit for today—all you have to do is pump more power down it and it will be fit for a very long time ahead.

It is extremely good to support the Bill today, because although I am hugely hopeful about the role Britain can play in the digital revolution, and how we can emerge stronger and more competitive as a result of it, we do not do very well on full-fibre take-up today. As I have said, 98% of households use a copper-related product, so although availability is a bit more than that, there is a 2% take-up in the UK. That compares to 40% in Sweden, 26% in Portugal, 11% in France and an EU average of just under 9%. These are figures from the FTTH, the Fibre to the Home Council Europe, from this time last year. We are a long way behind today and I am pleased to support a Bill that will incentivise all providers to start investing more firmly in full fibre. The danger is that the large incumbents attempt to eke out a return from their legacy copper assets, while the new businesses are daunted by the sheer scale of the challenge ahead in investing in full fibre. So it is great to see the Government coming up with a proposal that will genuinely incentivise everybody to invest.

I will just make three brief comments on the Bill. First, it is very important that the scheme cannot be gamed. I am reliably informed by people in the industry that, according to the business case based on full rates relief, ripping out existing fibre and replacing it with a new one that would be eligible for rates relief would pay back in just a couple of years. It would be a real shame if an intent to do the right thing translated into a subsidy for the old networks we already have. I assume that this will be in secondary legislation, and it would be very good to hear from my noble friend how the Government intend to ensure that this cannot be gamed and will genuinely incentivise the building of new fibre to premises across the UK.

Secondly, this is a good Bill but it is only a relatively small contribution. I believe the Treasury estimate is £60 million over five years—would that all our broadband problems could be solved with £60 million over five years—so this is good but it is only a start. The Minister has set out quite an impressive list of other initiatives that the Government are putting towards nudging, cajoling and encouraging the industry to build out more fibre, and it is hugely important that we complete on all those actions. It is not the words that will drive this but the actions and there is a lot more to do, particularly making it easier for all providers to access existing poles and ducts; ensuring that the commitment to the universal service obligation is not an excuse to rely more on copper and less on investing in fibre; and ensuring, as the noble Earl, Lord Erroll, has just said, that Openreach separation is just that and genuinely drives the investment that the country needs.

I bow to the experts here, of which I am definitely not one, on the rating regime. While temporary short-term relief in a specific sector is good, I very much doubt that it is the long-term answer to enable businesses to understand how the rating regime works and invest in the things that the country needs for the long-term future. That all said, it is important that we do not let the perfect become the enemy of the good. This is a good Bill and I am pleased to support it.

15:35

[Baroness Pinnock (LD)]

My Lords, I draw Members’ attention to my entry in the register of interests as a councillor and a vice-president of the Local Government Association. I have to say that I agree with much that has been said by people who know much more about this subject than I do, the noble Earl, Lord Erroll, and the noble Baroness, Lady Harding.

I speak from my understanding of what is being proposed. As the Minister said, this is part of a package of inducements to the telecommunications industry to ensure wider accessibility of superfast broadband. However, that seems to raise the question of why telecoms companies are not obliged by law to ensure that there is full superfast broadband access. In a situation where public bodies such as the Government and local authorities are digital by design, households as well as business premises need access to broadband to access public services. That is my first query. I accept that steps have been taken in that direction, but when I think that other utilities such as water and electricity companies are required by law to ensure that there is access to their services, it seems to me that connectivity should be on an equal footing. I look forward to hearing how the Minister might respond to that comment.

The financial inducements in the Bill to put in full-fibre broadband will not be necessary in West Yorkshire, where European Union funding is currently enabling that to happen. What a shame, therefore, that we are on the route to leave the EU because it might have been able to fund it out of EU funds rather than out of public funding from the Government.

Much-improved connectivity is of course welcome, so the purpose of the Bill will clearly be welcome. As the noble Baroness, Lady Harding, has pointed out, though, all it does is provide full-fibre connectivity to the nearest roadside cabinet, and the further you are from that cabinet the worse your connectivity will become. That will put a limit on connectivity. I was interested to hear that there had been only 2% take-up of full fibre to the house. Have the Government considered inducements to the telecoms companies and providers of broadband to ensure that there is full-fibre connectivity to the premises rather than to the nearest roadside cabinet? That is how we will get access to superfast broadband across the country.

The other major question which the Bill raises, and to which I have seen no answer, is that, as well as broadband connectivity, we need improvements to mobile connectivity. For many families, mobile connectivity is far more important than broadband connectivity. Poorer families can often afford to access only mobile technology and do not use full broadband. That is true everywhere, but is particularly the case for improved mobile connectivity in rural parts of the country, where it may be the only way that many people can access public services—through their mobile phones.

To expand on that point for a minute, experts in this House may be able to throw some light on this, but I understand that 5G will be more advantageous than having superfast broadband to many people—not to businesses, I accept, but to many individuals and their families. Should there not be inducements to companies wanting to extend the reach of mobile connectivity, as we are doing here with broadband?

I think the Minister has answered the other point I wanted to make, but I was concerned about how local authorities will access reimbursement for the loss of business rates. It sounded as though it will be the responsibility of individual local authorities to claim reimbursement through the Valuation Office. If regulations have been laid, perhaps the Minister can expand on them when he responds.

Finally, I urge the Government and perhaps their Bill drafters to amend the Bill to include information about the meaning of the formulae that have been included, which make for interesting reading. For example, the Bill states:

“Where subsection (4F) below applies, the chargeable amount for a chargeable day shall be calculated in accordance with the formula—


            ”.


Nowhere in the Bill is there any indication what A, B, F or C is, and further on in the Bill, we have a “T” as well. I know that the Bill relies on amendment of previous legislation but, for the sake of transparency and the understanding of those who will be affected by the Bill, it would be enormously helpful if Bill drafters included notes about what the formulae mean.

With those remarks, I welcome the move to extend both the speed and reach of broadband through the Bill and hope it can be extended to mobile connectivity.

15:43

[Lord Kennedy of Southwark (Lab)]

My Lords, I refer the House to my entry in the register of interests as a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association.

On behalf of the Opposition, I welcome the Bill as far as it goes. It is a positive step in boosting investment in fibre broadband infrastructure and the development of 5G. The Bill will encourage new fibre rollout, and that will boost connectivity for both residential and business users. That will have knock-on effects for improved economic growth. It has been estimated that 5G infrastructure will outstrip the economic benefits of fibre broadband by 2026, when that technology will have become outdated. It is important to ensure that we have the right infrastructure and connectivity speeds to deliver improved economic growth, boost businesses and create the new jobs of the future that we will all need.

There have been suggestions that the boost to economic growth with the new 5G network will be worth billions of pounds to the UK economy, so it is imperative that we place ourselves at the top in delivering the speed and connectivity for business and residential users, so that we have the tools to compete with anyone in the world. However, we were expecting a much larger Bill, dealing with a wider variety of local government finance issues, and it is disappointing that the Government have decided to come forward with only this one small part. Lack of parliamentary time really is not a good enough excuse for this and, if that is what the noble Lord, Lord Bourne of Aberystwyth, is going to tell the House shortly, it would be useful if he could update us on when we can expect the wider issues to come back to Parliament that were contained in the Local Government Finance Bill lost due to the Prime Minister calling the general election.

Local authorities need certainty and stability in these very challenging times, as does business. The lack of clarity on business rates, the shambles of the business rate revaluations and the hastily pulled together packages go nowhere near enough, while our high streets are in crisis. It is no way for the Government to behave. We have been exceedingly quiet in respect of legislation since the general election; we have just come back from another break, and we are away again next month—the lack of parliamentary time argument is difficult to accept. There may be a lack of will on behalf of the Government or, dare I suggest it, something of a crisis in the Government at the moment.

In subsections (4) and (5) of Clause 4, the Government appear to be taking Henry VIII powers. I have not seen a report from the Delegated Powers Committee, but I have seen the note issued by the department. It would be helpful if the Minister could reassure the House as to the limited nature of these powers, because Clause 4(4)(b) appears to contain a very wide power indeed.

The omission from the Bill of anything meaningful in respect of improving the rural broadband offering is most disappointing. Many noble Lords on all sides of the House speak up for rural areas and the threat to both their viability and sustainability across a wide variety of issues. I can recall debates about housing provision for working families, rural bus services, train services, shops, pubs and many other issues. Delivering proper broadband services, let alone anything close to 5G, is vital to ensure that our rural areas prosper. Without firm action from the Government on this matter, we risk leaving numbers of our fellow citizens further behind, which is not acceptable for them or the communities in which they live, which seek to remain sustainable. I shall table an amendment on that issue for debate in Committee.

Another issue that I want to explore further in Committee is the definition of “new fibre”, which the noble Earl, Lord Erroll, referred to in his remarks. The regulations propose that this is to be fibre that was,

“not laid, flown, affixed or attached before 1st April 2017”,

with those operators which light dark fibre already in the ground not eligible for relief. I want to explore the potential that that has for distortion and the risk to companies that have already invested in fibre networks, which may be at a competitive disadvantage to another company that comes along and lays new fibre that is exactly the same as the fibre already in the ground but not yet lit. The noble Baroness, Lady Harding of Winscombe, made reference to that issue, which we need to discuss much further in Committee.

In Committee in the other place, my honourable friend Mr Jim McMahon tabled an amendment to require the Secretary of State to provide an assessment to Parliament on how the business rates relief system was working. I would, again, like to bring that back for consideration by your Lordships.

In conclusion, we give a cautious welcome to the Bill as it stands, although there is disappointment that some of the wider issues that I have outlined have not been brought forward. I have a couple of issues that I intend to raise as amendments to this Bill in Committee, and I have posed a couple of questions to which I hope the Minister can respond.

15:49

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank my noble friend Lord Ashton for introducing this Second Reading debate and all noble Lords who have participated in it. I am grateful for their contributions and for the welcome—so far as it went. This was, predictably, a wholehearted welcome but with regret for some things which the legislation did not contain. I can understand that, and I will deal with it shortly.

I will focus first on what the Bill does contain. The noble Lord, Lord Kennedy, is absolutely right: it is an important facet of the legislation that it helps the residential sector as well as business and provides assistance for the 5G mobile connectivity element, as referred to by the noble Baroness. The objective of this measure is to support and reward companies which invest in the telecoms network. As such, it is important to appreciate that this is actually buying something. This dates from April 2017 so we therefore do not propose to compensate any fibre which was already in the ground in February 2017. This is for new fibre put down for a five-year, fixed-term period. This brings me to the gaming aspect: I too was keen to know whether this was likely to be gamed. On consultation and inquiry it looks unlikely but we are watching this like hawks. If noble Lords think there is some means by which it could be gamed I invite them to let us know because we are, obviously, seeking to make sure it is not. I am pretty convinced that it could not be, because the financial incentive would be zero.

As we have heard in the debate, this is a technical area in respect of both telecommunications networks and how they are treated in business rates. We will, no doubt, return to the detail in Committee, but I reassure the House that we intend to develop the proposals for this measure in collaboration with the sector and only after consultation. The draft regulations are out for consultation at the moment and that will go on until 21 November. There is still an opportunity for everybody to participate in that and I encourage experts and politicians—do not take that the wrong way—to do so, particularly those who understand it in detail and politicians who represent those who do. My noble friend Lady Harding clearly understands this area very well, as does the noble Earl, Lord Erroll. I am very grateful for their participation and for giving the House the benefit of their expertise.

Broadband speeds and connectivity impact on the everyday lives not just of businesses but of households. Investment in new fibre will make a real change to people’s lives and is part of a package worth over £1 billion to the sector, as my noble friend Lord Ashton outlined. Providing rate relief for new fibre will give a welcome boost to investment. My noble friend Lady Harding asked about access to BT lines. They are consulting on that at the moment and we regard it as important. In terms of the rates relief offered, there will be a level playing field for participants in the system. No fear or favour is given to any provider: they are all treated in the same way.

It is important and fair to all ratepayers that telecoms operators pay business rates in the normal way, outside this five-year period where there is relief. We will not therefore seek to provide relief in relation to dark fibre, which would clearly be wrong. However, we have heard concerns about business rates deterring investment in new fibre, and providing this temporary relief from business rates just for new fibre investment would send a clear message to operators. If you invest in new fibre after 1 April 2017 you will not pay rates on it until 2022. For that new investment, you can remove business rates from the spreadsheet. As my noble friend Lady Harding indicated, that is important for getting investment going in this area where we lag behind. This legislation has some important provisions.

The noble Lord, Lord Kennedy, raised the issue of the Henry VIII clause. As he will know, consistent with my approach to legislation I am very keen to bear down on this, so I have looked at it to make sure that it is as confined as it can be. I well remember the noble and learned Lord, Lord Judge, participating in our proceedings and rightly being tough on Henry VIII clauses. This has not yet gone to the Delegated Powers and Regulatory Reform Committee but it will do so. As I say, we seek to confine it as much as is sensibly possible and, of course, it will be subject to affirmative resolution. I hope that both those points reassure the noble Lord.

Such is the technical and fast-moving nature of the sector that I do not think it would be prudent to try to put on the face of the Bill the detailed arrangements of the scheme. These will be done in the detailed regulation through consultation and discussion. I know that noble Lords will understand that. However, we want to ensure that the House is fully aware of how we intend to operate this measure. As I have said, we have published draft regulations and are continuing discussions with the sector, and the Committee stage will give us the opportunity to consider these matters in more depth.

The noble Lord, Lord Kennedy, sought, somewhat mischievously, as is his wont, to try to open this issue of rate relief on a much broader front all over the place. I have indicated previously that we remain very much wedded to the retention of business rates. I have also indicated that we will want to look at the broader issue of the high street versus the internet in the context of the G8—I think I am right in saying that—in which we participate, and take a lead on that. I think that is due next spring, so I can give the noble Lord that reassurance.

As I said, draft regulations will come forward. I reassure those who have a close connection with local government—the noble Baroness, Lady Pinnock, raised this issue—that local authorities will not be financially disadvantaged as a result of the relief. We will, through grant payments, compensate local authorities for the loss of the rates income that they suffer through the rates retention scheme as a result of this relief. This is a commitment that I am happy to restate and it is also given in the consultation document.

I thank all Members who have participated for the support that they have shown, at least in terms of the central core of this legislation. The commitment to provide rate relief on new fibre was given by the Chancellor in the Autumn Statement 2016. To maximise the benefit of this policy, telecoms operators need to be confident that the relief will be applied retrospectively to April 2017. I confirm that that will be the case. That is why we have brought forward the Bill as quickly as we have, with the support of the Opposition Benches, certainly in the other place and here too, to send a clear signal to the sector that this relief is on its way. With that, I commend this legislation to the House.

Bill read a second time and committed to a Grand Committee.