November 15, 2019

Corbyn's fantasy broadband plans would cost hardworking taxpayers billions

You can’t trust anything Labour say until they have a plan for Brexit.

Their fantasy broadband plans are simply another thing they wouldn’t be able to deliver – and would leave everyone paying higher taxes to cover the cost.

Nicky Morgan, Secretary of State for Digital, Culture, Media and Sport said:

“Jeremy Corbyn’s fantasy plan to effectively nationalise broadband would cost hardworking taxpayers tens of billions.

“Corbyn is clearly so desperate to distract from his Party’s divisions on Brexit and immigration that he will promise anything, regardless of the cost to taxpayers and whether it can actually be delivered. What reckless idea will be next?

“Only a vote for Boris Johnson and the Conservatives will get Brexit done, keep our economy strong and deliver on the issues that make a difference in voters lives - investing in our NHS with 40 new hospitals, cutting crime with 20,000 more police, introducing an Australian style points based immigration system, and giving businesses and families the economic certainty they need to plan for the future with confidence.”

What you need to know

Labour’s policy is ill-thought through, and misses several key costs...

Labour have not taken into account the multi-billion pound cost of acquiring Openreach and the other elements of BT.

At the very least, Openreach alone holds assets of £12.5 billion, which a Labour government would need to pay for. Labour haven’t allocated any funds for this (BT, Your guide to Openreach, 2017, link).

Labour have underestimated the cost of completing full fibre rollout across the UK.

Labour claim it can be completed for £15.3 billion, but BT have said that it would cost £40 billion (BBC, News at Ten, 14 November 2019, archived).

Labour commit to covering the salaries of all of Openreach’s employees – but have not set aside a single penny to pay for them.

Openreach’s annual report states that at the financial year end 31 March 2019, it employed 32,454 people, with a salary bill costing £858,605,000 a year. Labour state ‘No workers will be worse off with all current workers in broadband infrastructure and broadband retail services being guaranteed jobs in the new public entity (and being guaranteed the same or better terms and conditions)’. Labour have not set aside any funding for this (Openreach, Annual Report 2018, p. 20, 13 August  2019, link).

Labour have significantly underestimated the wholesale and maintenance costs of providing a full fibre network.

Labour claim it would cost £230 million a year, however, Openreach currently charges broadband suppliers £69.59 per household, per year. Openreach are connected to 31.9 million homes and businesses, meaning an annual cost of more than £2.2 billion a year (Openreach, accessed 14 November 2019, link; ISP Review, 24 July 2018, link).

Labour have allocated a total of £20.5 billion for this policy – when in reality the cost could be more than £83 billion over ten years.

This £83 billion costing includes the one off costs of acquiring Openreach and the completion of the full fibre network, plus annual costs of staff salaries and maintenance costs, all as above.

Labour say Parliament would set the price…

A leading international law firm said that Labour’s plans for renationalisation would break international law.

Labour say they will not pay the market value for the firms they plan to renationalise, but Clifford Chance say ‘that’s not what the UK precedent is and that’s not what international law says’ (The Today Programme, 16 May 2019, archived)

Labour would provoke a ‘flood of claims’ if they nationalise key industries – costing the taxpayers millions to fight in court.

Of the 25 groups slated for renationalisation by Labour, 12 have major shareholders entitled to protection under ‘Bilateral Investment Treaties’, which are designed to protect investors for state interference and unfair expropriation (Financial Times, 14 August 2019, link).

Labour’s plan would hit private pensions and savings…

Economics experts have warned that Labour’s plan would hit the private pensions of millions of savers.

BBC Business Editor Simon Jack said:

‘It is very unlikely Parliament will decide to pay above market value and it could be quite a steep discount and that could mean a hit to millions of savers, millions of whom own BT shares to their pension fund’ (BBC, News at Ten, 14 November 2019, archived).

The CBI have warned that Labour’s renationalisation plans would make millions of people poorer in their old age.

Carolyn Fairbairn said:

‘It’s the opportunities that renationalisation would destroy and the way it would make millions of people poorer in their old age’ (CBI, 28 March 2019, link).

At least 700,000 individual investors have a stake in BT who will be worse off as a result of Labour’s policy.

There are 700,000 small private investors in the firm. Share values will drop on the news that Labour is planning to nationalise BT without compensation, hitting their savings  (This is Money, 28 January 2017, link).

Privatisation resulted in better services and increased investment…

Ofcom’s Director of Strategy said that competition was responsible for driving investment.

Clive Carter, Ofcom’s Director of Strategy, said:

‘In the UK, we want to see multiple, competing networks in the vast majority of the UK. Why do we want that? Why is the idea of nationalisation and a single monopoly bad? I think what has been shown right across Europe is that competition is what drives investment. Its the risk and fear that someone else is going to come along and eat your lunch that pushes you to invest and innovate’ (Telecoms, 30 November 2018, link). 

Privatisation meant an end for long waiting list for telephones.

James Foreman-Peck, Professor at Cardiff Business School said: ‘the privatised telecom industry seemed to deliver; prices came down, waiting lists for telephone vanished in the early 1980s and never reappeared, most faults were cleared quickly, and even public telephones began to work’ (BBC News, 3 December 2004, link).

BT’s privatisation led to billions of pounds worth of benefits to both the taxpayer and consumers.

A World Bank study found that the privatisation of BT led to a benefit to consumers of £4.15 billion and £2.25 billion to the Government (World Bank, Welfare consequences of selling public enterprises, 1994, link)
 

Labour’s record shows they can’t be trusted to deliver…

Labour left millions without good broadband services.

In June 2010, almost 3 million homes and businesses did not have access to basic broadband speeds of at least 2Mbps (DCMS, Policy Paper, 8 May 2015, link).

Under Labour, the UK slipped in terms of internet access and the speed of service available compared to other European countries.

Their plans to provide nationwide internet access at a speed of 2 Mbps were described as ‘unambitious’ (House of Lords Communications Committee, Public Service Content, 8 April 2009, p.92).

Labour left rural businesses with ‘inadequate’ broadband connectivity, and increased the digital divide.

A report by the Commission for Rural Communities found that ‘many rural businesses are already adversely affected by inadequate broadband connectivity and the negative effect of the digital divide is increasing’ (Commission for Rural Communities, Mind the Gap: Digital England – a rural perspective, June 2009, link).

Region Labour's Pension Tax (£) Extra Months to Work
England 11,167 44
East Midlands 6,150 50
Greater London 12,871 45
North East 9,758 38
North West 6,835 47
South East 14,270 40
South West 7,407 45
West Midlands 10,729 41
Northern Ireland 13,718 35
Scotland 10,653 41
Wales 11,691 36
United Kingdom 11,253 43

Commenting, Therese Coffey, Secretary of State for the Department of Work and Pensions, said:

“Corbyn’s Pension Tax will see ten million savers facing a huge bill forcing them to delay their retirement for almost three and a half years.
“This is just one of the ways a Corbyn government would hammer hardworking people on top of his plans to hike up taxes by £2,400 a year, as well as the cost of his plan for unlimited immigration and the chaos of 2020 being dominated by two more referendums – one on Brexit and another on Scottish independence.
“Only Boris Johnson and the Conservative Party can get Brexit done with a deal, get parliament working again and turbocharge our economy to unleash Britain’s potential.”

Read more about how this Pension Tax will impact millions of savers (PDF)