Plea ahead of this Wednesday’s Autumn Statement by Chancellor of the Exchequer, Jeremy Hunt
BT Group’s outgoing Chair and CEO, Philip Jansen, has asked the UK’s Chancellor of the Exchequer to renew and make permanent tax incentives for deploying FTTB.
The Chancellor, Jeremy Hunt, is the country’s finance minister. He is due to present his Autumn Statement on Wednesday, which updates the House of Commons on the state of the economy and often announces tax and spending decisions.
Temporary measures
During the pandemic, in April 2021, the government introduced a ‘super deduction’ tax break for infrastructure investors. It was put in place to run over winter 2022-2023. According to Jansen it “allowed BT Group to increase and accelerate our fibre rollout targets – from 20m to 25m homes”.
When the super-deduction measures expired, they were replaced by a new policy of full expensing, which Jansen claims, “allowed us to accelerate our capital investment by some £300m per year, to stick to the 25m target and to simultaneously increase the pace at which we were connecting new customers to the new fibre network (itself a capital-intensive process)”.
However, the full expensing policy is only in place for 2.5 years, hence Jansen is urging the Chancellor to offer permanent tax concessions in support of building out fibre infrastructure.
We’re special
This is partly on the grounds that telecoms is a special case: “The nature of our business is that most of our investments take at least five years to generate a return; but in the case of fibre that period will stretch to at least a decade”.
Supports government policy
Then he brings the government’s own targets into play: “The investment demands and needs of the industry and the country won’t stop there, though. There is a £20bn investment gap to close, for example, if government ambitions for 5G mobile services are to be met, and an ever-increasing need to make our networks more energy efficient, secure and resilient against future risks and threats.”
For the common good
Finally, an appeal to make the UK great again: “The real game-changer would be to put these tax incentives on a permanent basis. That would give businesses like BT Group genuine long-term certainty to plan and shift the investment environment in Britain from good to great.”
Jansen’s pleas might fall on deaf ears. In March the UK’s Office for Budget Responsibility predicted the tax burden is set to rise to a post-World War II high (although Brits pay less tax than many Europeans). This does not sit well with the Tory party, one of whose tenets is low taxation and Hunt is under pressure to provide some relief.
Wrongheaded strategy
It could also be argued that BT’s declining fortunes are the result of its own poor strategy and management over many years. It chose to spend hundreds of millions of pounds on broadcast rights to Premier [Football] League matches (starting with a ‘down payment’ of more £1+ billion in 2012) and BT Sport, which it never recouped.
Presumably had a considerable bearing on its policy of squeezing every last drop out of its copper local loop instead of investing in full-fibre broadband sooner, which is why it’s playing catch-up now.
Poor management
A series of accounting scandals in BT’s international ITC business damaged the company’s reputation and BT’s share price has never recovered from the last one became public in 2016. Then there’s the gaping hole in BT’s pension fund, which is now ‘only’ £3.7 billion (down from £7.98 billion in 2020), helped by higher interest rates.
Passing the tab
To add insult to injury, last spring BT raised its prices by 14.4%, which was well above the inflation rate of 10.5%. This and similar actions by other network operators led Ofcom to launch a review of in-contract price rises, felt particularly during the cost of living crisis.
Jansen will leave his past at BT in the New Year, replaced by Allison Kirkby.