Tuesday 6 October 2020 5:53 am

Internet is an essential — so why is it still taxed as a luxury?

Alexander Fitzgerald is chief executive of Cuckoo Internet and a former Treasury official
and Jonathan Gullis
Jonathan Gullis is MP for Stoke-on-Trent North

One in nine people, the equivalent of six million across the UK, have reported falling behind on household bills because of coronavirus.

While the chancellor has worked hard to protect jobs and offer targeted support, there can be no doubt that those already suffering financial hardship have faced disproportionate new challenges over the past six months, struggling to afford essentials.

Now, as the Treasury examines the economic outlook ahead of a difficult winter, the focus is shifting: Rishi Sunak talked yesterday of the need to “protect the public finances” and “balance the books”.

Read more: Boris Johnson’s gigabit broadband target will be ‘missed by years’, warns BT boss

There is no question that action is needed to support the economy, but the chancellor’s self-proclaimed “pragmatic” response must also prioritise measures that will provide relief for households and businesses which are most under pressure up and down the country. 

That’s why we — along with Conservative MPs Tom Tugendhat, Tracey Crouch and Dehenna Davison — have written to the chancellor asking him to take urgent action to reduce the rate of VAT on broadband. 

If the government cuts the broadband tax, it would reduce bills, save UK households nearly £2bn a year, and help make the internet more affordable for people who are struggling at a time when connectivity has become a vital lifeline.

Right now, households and businesses pay 20 per cent VAT for connectivity — the same as for “luxury” goods and services. The chancellor should fix this outdated tax and reduce broadband VAT to five per cent, bringing it in line with other essential domestic utilities like electricity and gas. It is wrong that people are taxed four times as much for a service that is fundamental for everyday work and life. 

The broadband tax hits the country’s lowest income households, with hard pressed families spending three times as much of their disposable income on broadband compared to richer families in London. It also exacerbates the regional disparity which the Conservatives promised to address in their manifesto last year: the poorest households in the north spend 3.6 per cent of disposable income on broadband, three times that of the average London household, at 1.2 per cent. 

Fixing this injustice should have been a priority before Covid-19 struck. Now, it is an imperative. The pandemic has accelerated the UK’s shift to a digital-first economy. Workplaces, healthcare services, businesses, and families have never been so reliant on the internet for everyday essential services, not to mention receiving the vast amount of health information and guidance from the government. 

With connectivity playing a central role in both individuals’ livelihoods and the nation’s economic recovery, it’s crucial we address the barriers to digital inclusion. That means reducing the broadband tax and tackling digital poverty now. Access to the internet should be considered a necessity, not a luxury. We cannot live in any meaningful sense without it.

Read more: Tired of working from home? Antigua offers ‘digital nomad’ visa

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Share: