50p broadband tax dropped, but prices will rise
Today's emergency budget from the Chancellor George Osborne has confirmed that the 50p broadband tax introduced by the labour government has been dropped. The government will instead look to private investment to boost rural broadband coverage with some funding being made available from the underspend on Digital Switchover which is expected to amount to between £250m and £300m. A further estimated £55 million of savings from Digital UK's communications budget was recently announced.
"I am happy to be able to abolish this new duty before it is even introduced. Instead, we will support private broadband investment, including to rural areas, in part with funding from the Digital Switchover under-spend within the TV Licence Fee."George Osborne, UK Chancellor
Unfortunately, broadband prices are set to rise as VAT will increase to 20% from the 4th of January 2011. This will equate to a 25p a month rise for a £10 broadband connection or 50p a month for £20 (£3 or £6 a year respectively). Businesses will be forced to go through the costly process to adjust their prices and marketing again to take in to account the change for the 3rd consecutive year as the Labour government temporarily lowered VAT to 15% in December 2008, rising again in January 2010 back to 17.5%.