Telecommunications Infrastructure (Relief from Non-Domestic Rates) Bill

Kit Malthouse Excerpts

2nd reading: House of Commons
Monday 10th July 2017 Commons Chamber

[Matt Hancock]

The universal service obligation is in law to ensure that everybody can access the service by 2020, but that is an end date, a deadline. As I said earlier, we have now reached 93% of premises. Crucially, that is 93% of premises having access to broadband—they still have to take it up. In fact, everybody who takes up the service in a subsidised area puts more money into the pot so that we can give more people access to superfast broadband.

Just 42% of the country had superfast broadband in 2010, when my right hon. Friend the Member for Wantage took up the reins of delivering it, but now 93% have access to it. We are on track to get to 95% at the end of the year, and then 100% of premises will have access to high-speed broadband by 2020. As my hon. Friend the Member for Taunton Deane (Rebecca Pow) can see, we are rolling that out. Crucially, that is delivering today’s technology—it delivers the needs of an average household today—but we also need to make sure we are ahead of the curve on the next generation of technology.

The idea of the digital investment fund is that it supports the commercial finance of alternative developers so we get more players into the market, rather than just having BT and Virgin, the two big players. The Government’s investment will be at least matched on the same terms by private sector investments so we expect it to capitalise more private investment and bring more than £1 billion of investment overall into full-fibre broadband, getting the really high speeds that some people need and want now, but many, many more will need and want in the future as these demands increase.

[Kit Malthouse (North West Hampshire) (Con)]

I want to refer back to the Minister’s remarks on the universal service obligation, which of course he is right to hail as a revolution in provision. The USO will be subject to a cost cap, so I wonder whether he will tell us when our constituents are likely to know what that cap is going to be and therefore whether he will be burnishing his credentials as a hero of rural Britain or not.

[Matt Hancock]

I know when to take a compliment as a threat. The truth is that this all depends on the technology. It may cost an awful lot to dig a trench and get a piece of fibre all the way to some places a long way from the existing network. However, new technologies are coming on stream, especially fixed wireless technologies, where a signal is beamed from one place to another. As a last resort, there are satellite technologies, which are good but not as reliable, that mean everyone can get connected. The aim is to get decent broadband speeds to every premises that wants them, making sure that as much of that as is feasibly possible is covered by a fixed network, but using technologies to get to the hardest to reach.

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[Andrew Gwynne]

Absolutely. Labour would have increased corporation tax to pay for better public services, but our rates would still have been among the lowest in the G20. It is a question of priorities. We can put money where people want it—in a better NHS, in better local government and in better education—or we can have poorly funded public services and tax giveaways to those at the very top. For all its rhetoric about ending austerity, it seems quite clear that the Conservative party has not changed one iota. There was a further omission to this Bill—

[Kit Malthouse]

Does the hon. Gentleman recognise that the reductions in corporation tax in the past few years have resulted in a massive increase in the cash collected by the Treasury?

[Andrew Gwynne]

As I said in answer to the hon. Member for Faversham and Mid Kent (Helen Whately), it is a question of priorities. We can give tax cuts to big business, or we can invest in public services. The point is that we made a very clear choice—[Interruption.] We have differences of opinion on this. The hon. Gentleman feels that having the lowest corporation tax is a good thing, but I think that having a corporation tax that is among the lowest in the world with a better funded public—[Interruption.] It is not an anti-business rant. I am talking about being both pro-business and pro-public services. That is the choice, because our public services are on their knees. If this is the cross-party co-operation that the Prime Minister wants, I am afraid it will be a long time coming.

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[Andrew Gwynne]

I am grateful to the hon. Lady for that intervention, because, of course, it was not just the Government who did that. I do not know whether she was a remainer or a leaver, but it would be remiss of the House, whatever our views on Brexit, not to acknowledge the involvement of the European Commission in funding some of the roll-out of this infrastructure and technology. It has come not just from the Government but from others, and we can see the European flag stickers on boxes, cabinets and infrastructure up and down the country.

[Kit Malthouse]

rose—

[Andrew Gwynne]

I am afraid that I have upset the hon. Gentleman by mentioning the word “Europe”.

[Kit Malthouse]

The hon. Gentleman has to recognise that there is also a downside to EU involvement. I know that my right hon. Friend the Member for Wantage (Mr Vaizey) struggled for a long time with EU state aid rules and the roll-out of broadband and, certainly for small businesses, had to come up with a slightly Heath Robinson-esque scheme of vouchers to get around the rules. If anything, they hampered roll-out rather than assisting.

[Andrew Gwynne]

The hon. Gentleman is absolutely right. I am not saying that everything was perfect with that scheme, or with the European Community and European Union. I was merely pointing out in response to the intervention from the hon. Member for Faversham and Mid Kent (Helen Whately) that it would be remiss of us to suggest that all the funding came from central Government when it came from a variety of sources, including the European Commission, to which all those stickers are a testament.

As I have said and as the Minister has acknowledged, our rural areas need a long-term investment strategy, not just short-term subsidy, helpful though that is. I look forward to holding the Minister to account while he is in this post to ensure that he makes good on his word. The short-term subsidy will help, but we need to ensure that investment continues apace beyond the five-year deadline of this business rate relief and we need continually to update our internet connections with the latest technology.

The Opposition’s focus is to encourage investment in all communities by excluding new investment in plant and machinery from future business rates valuation, which will free up medium and large businesses to invest in any area of the country. The country needs fresh ideas to meet the emerging challenges of the new century, yet what we have seen today, in a stripped-down Bill, is the lack of a comprehensive and compelling legislative framework that supports all businesses and local authorities on business rates.

I desperately plead for the co-operation the Prime Minister has asked for. I hope that it is genuine and heartfelt, and that she looks for ideas from the Opposition, which we are more than happy to provide to the Government—ideas to improve our infrastructure in cities and in rural areas, to update our connectivity, not just physically but through the cloud and other technologies, and to use emerging technologies to benefit British business, which will be crucial if we are to keep a competitive advantage in the uncertain years ahead. As we remove ourselves from the EU and strike a new set of trade deals across the world, we must keep that competitive edge. I agree with the Minister that new and emerging technology and infrastructure is part of the mechanism to drive Britain’s economy in the face of the new challenges that lie ahead.

We will not divide the House tonight. We will look to strengthen the Bill in Committee and we will continue to challenge the Government on their wider local government finance policy until we get the answers and certainty that local government so desperately needs. Technology and infrastructure are vital to building Britain’s capacity to grow and develop in a changing world in which we look to new and emerging markets. It is incumbent on whichever party is in government in future to work constructively with others to ensure that Britain’s infrastructure is kept as up-to-date and as state-of-the-art as possible.

In that respect, we cautiously welcome the Bill. We will seek to strengthen it in Committee, but let us work together on some measures for future local government finance because, as the local government Minister knows, local government needs that certainty.

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[Kit Malthouse (North West Hampshire) (Con)]

It is a pleasure and an honour to follow my comrade and hon. Friend the Member for North Dorset (Simon Hoare).

On my first day in this House, I was told by an older Member that if I wanted to keep something secret I should make a speech about it in the House of Commons. And so it was that on 13 September last year I gave a speech on the subject of this Bill and called for 100% rate relief of new fibre networks. I even went so far as to draft an amendment to the Digital Economy Bill, not to give that rate relief but to require the valuation office to produce an annual report on the impact of the rating system on competition in the telecoms sector. Various players in the industry had presented me with the ridiculous conundrum that it was cheaper for them to rent fibre from BT than to pay the rates bill on putting in new fibre themselves. In their view, that entrenched the near monopoly of BT and gave it an enormous structural advantage, which was basically choking off competition.

I spoke on Second Reading of the Digital Economy Bill, drafted an amendment and had a fruitful conversation with my right hon. Friend the Minister for Digital, who is no longer in his place, who persuaded me that, given some of the other amendments I had tabled, I should leave my proposal to the Government to mull over for some months and that they would give it some serious thought. Imagine my pleasure and surprise, first when it appeared in last year’s autumn statement, and now, even more so, that it has appeared in this Bill. It will provide an enormous boost to competition in the sector. There is no doubt that the asymmetric deal on business rates between BT and new entrants is choking off new investment in large parts of the country. Smaller companies have very little incentive to compete directly with BT; they have to look for areas of the country that are currently unserved or un-commercial in order to try to make their networks pay. As a result, innovation is hard to come by.

BT has been helpful to me and my constituents, as I know it has been to several other Members, and I hope it will take the Bill in the spirit in which it is intended. Those of us who believe in a market economy think that competition is good. We think that it will be better not only for the consumer, but for BT, because it will drive the company to greater innovation, efficiency and, we hope, profit.

The Bill represents a welcome move towards seeing broadband and telecommunications as utilities. Over the past few months, steps have been taken in legislation towards that position. The building regulations have been changed to make the provision of broadband compulsory in new developments. Broadband will, I hope, be provided as a universal service over the next few years, and now non-domestic rates are being lifted on parts of the network. Broadband is increasingly being treated—as water, gas and electricity are—as a vital utility, which is what it is becoming. I am pleased about that development, and I hope that broadband will continue to be viewed increasingly as a utility.

In a constituency such as mine, broadband is incredibly important for a successful, vibrant countryside. If the countryside is to compete with its urban neighbours, it needs to be connected to the world. These days, that social and economic connection takes the form not of roads, dual carriageways or motorways, but of superfast broadband. My constituency, like that of my hon. Friend the Member for North Dorset (Simon Hoare), is peppered with enterprises that do most of their business online. Hon. Members will be pleased to know that on Saturday I attended the Amport fête and came across a brand new and very pleasing business called Test Valley Gin, a new brand of gin that is taking the market by storm. Kate Griffin, the inventor of this gin, is having some success. The 36 bottles she produces each week are selling like hot cakes, many of them online on a website called theginstall.co.uk.

[Andrew Gwynne]

My ears pricked up when the hon. Gentleman mentioned gin. Perhaps, in the interests of cross-party co-operation, he could share some around?

[Kit Malthouse]

I have to confess that I was so taken with the small sample that I tried—I was driving—that I bought a bottle. Perhaps I will bring one in. I did wonder whether the House of Commons authorities might start serving Test Valley Gin in the bars. It is an excellent drink, infused with a secret recipe of local herbs and spices, and I can recommend it.

[Michael Tomlinson]

I had the great pleasure of being in my hon. Friend’s constituency yesterday, although I beg his forgiveness for not seeking his permission. Hon. Members will be pleased to know that I went purely for a cricket match, and I did not think that I was obligated to seek his permission to play cricket in his wonderful constituency. He is making an important point. Broadband is increasingly important in all our constituencies, and I believe it is as important as road and rail. It is a part of our infrastructure that our constituents just cannot do without.

[Kit Malthouse]

My hon. Friend is absolutely right. He is very welcome to visit my constituency at any time. In fact, I am surprised that he has only been once recently, and he should come more often. My door is always open.

Ensuring that villages are connected to the world is becoming vital to maintaining rural life. Rural residents find it increasingly ridiculous that they can see broadcast-quality footage of Tim Peake in the international space station but they cannot go online and post complimentary comments on my Facebook page, as my constituents increasingly seem to do.

[Simon Hoare]

I suggest to my hon. Friend that his constituents might wish to do the former more often than the latter.

[Kit Malthouse]

I think that is rather churlish of my hon. Friend, given how complimentary I have been about him. I hope that one day I will reach the level of popularity and name recognition in my constituency that Commander Peake has reached in the world.

Small business is becoming increasingly important in rural areas. Some 25% of small businesses—nearly half a million—are located in rural areas, where they provide lots of employment and create wealth. The Bill points to a wider issue with which the House will have to grapple over the next few years—the hon. Member for Denton and Reddish (Andrew Gwynne) mentioned it—and that is the appropriateness of the business rate system. We are applying a tax first devised in 1572 to a 21st-century economy, much of which exists somewhere in the cloud. The Bill acknowledges at its core the disproportionate impact of business rates on competition in this sector. Those of us who have rural constituencies—indeed, anybody whose constituency contains a high street—understand the disproportionality of business rates for retail businesses, particularly now that more and more people buy things online, as my hon. Friend the Member for North Dorset said. If we are to keep our high streets vibrant, keep our businesses working and maintain the competitiveness of the rural economy against the huge businesses that these days operate from nowhere, I question whether taxing property—frankly, taxing investment and expansion—remains an appropriate way to gather the revenue that we need.

There will come a point, over the next couple of decades, when we have to consider shifting taxation on corporations away from property and profit, and towards turnover. If we taxed the turnover of the large multinationals —the Googles and the Amazons—we would collect more from them than we currently do, but in a fair way. Small shops on the high streets in North West Hampshire compete with corporations that transact in this country, dispatch goods from a second country and book the profits in a third country. We have to think about the asymmetric nature of the taxation of those organisations if we want to create a level playing field for competition.

I welcome the Bill. I welcome the move towards the designation of broadband as a utility and the recognition of the distortive effect of business rates on commerce. I hope that over the next five years or so, many companies will take advantage of the rate relief window. I suspect that at the end of that period it will be somehow extended, and I hope that any such extension will become permanent. I hope that businesses will take advantage of the window and come to North West Hampshire to plaster my entire constituency with broadband fibre, to the cabinet and to the premises, with my pleasure and approval.

Telecommunications Infrastructure (Relief from Non-Domestic Rates) Bill

Kit Malthouse Excerpts

3rd reading: House of Commons & Committee: 1st sitting: House of Commons & Report stage: House of Commons
Tuesday 5th September 2017 Commons Chamber

[Mr Jones]

I understand the concerns raised by my right hon. Friend, and I have great respect for his considerable knowledge of the matter. I reassure him and the various bodies that hold concerns that the relief is not a measure to support the relighting of fibre that has been turned off. Indeed, it is to support the laying of new fibre in the ground. This technical matter is laid out in the draft regulations and explained in the accompanying consultation document published by my Department last week. Consultation will ensure that the proposal reaches the right audience in the telecoms sector. With business rates experts, we will ensure that the relief will work as planned. The consultation will also allow us to move quickly to implement the relief once the Bill has passed and ensure that support is available for new fibre.

[Kit Malthouse (North West Hampshire) (Con)]

Even if this were a relief that applied to currently dark fibre that is lit, or to fibre that was lit, is unlit and is then lit again, if the premise of the scheme holds true, this is an investment. The idea is that this is meant to spur more economic activity. Therefore, more tax will be gained from corporation tax, pay-as-you-earn and other forms of business rates because people will have premises that become available for use and that are then much more commercial. Rents will rise, values will rise and all the rest of it. The Government do not need to be too chary about where the relief goes, because if the relief is seen as an investment, not just some kind of freebie for the industry, it will benefit everyone, including the Government.

[Mr Jones]

My hon. Friend is right that this is an investment in the infrastructure of the country. Indeed, it is a relief that is time-limited for five years. After that five-year period, that fibre will attract its own income into the business rates pool, whether on the local list or on the central list.

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[Mr Jones]

My right hon. and learned Friend hits the nail on the head. The whole design of this legislation and this tax relief is intended to encourage providers—not just the large ones, but the smaller ones, which these proposals are very good for—to bring that new, direct fibre cable to homes and businesses.

[Kit Malthouse]

Will the Minister give way?

[Mr Jones]

I will just make some progress first, if I may.

The Bill contains six clauses. Clauses 1 to 3 provide the powers for the relief, and clauses 4 to 6 cover consequential and financial matters. Business rates are payable on three classes of properties: first, occupied properties shown on the local rating lists held by local authorities; secondly, unoccupied properties shown on local rating lists; and, thirdly, properties on the central list, which is held by my Department.

The main business rates legislation in the Local Government Finance Act 1988 contains separate provisions for charging rates on those three classes. Clauses 1 to 3 provide powers to allow relief in those three classes. Clause 1 allows for relief for occupied hereditaments shown on local ratings lists. Clause 2 allows for relief for unoccupied hereditaments shown on local ratings lists. Clause 3 allows for relief for hereditaments on the central list.

Clauses 1 to 3 have similar structures and serve the same purpose. First, the powers in the clauses will allow the Secretary of State to set conditions as to when the relief will apply. This is not a wide-ranging power covering all properties. The power can be used only for telecommunication hereditaments. Through these powers we will target the relief on operators of telecoms networks who deploy new fibre on their networks. That will incentivise and reward those operators who invest in the fibre network.

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[Mr Jones]

My right hon. Friend is quite right. Developers who are not necessarily compelled to provide superfast broadband should think to themselves how the installation of superfast broadband could become a selling point for the property. The provision of superfast broadband is becoming more and more important, particularly as more and more people work from home.

[Kit Malthouse]

I acknowledge that the Government made huge progress in changing the building regulations so that this becomes mandatory for developments of over 30 houses. However, does it not strike the Minister as peculiar, in this century, that building regulations require the provision of electricity, water and drainage to every house, no matter the size of the development, but not, now, this vital piece of infrastructure that is becoming mandatory for modern living?

[Mr Jones]

Even in developments of under 30, developers are required to provide a broadband connection for the people who are going to be occupying those properties. It is the developments of over 30 that require fibre broadband to be connected. While my hon. Friend does not seem happy with the premise on which that is based, the rationale behind it is based on the viability of new developments. Quite often, the smaller developments are more difficult for developers to find viable. Therefore, rather than prevent those developments from taking place by overburdening developers with regulations, a balance was struck.