New 'phone tax' will fund broadband

The £6-a-year levy on fixed phone lines - generating up to £175 million a year - would subsidise the cost of installing next-generation broadband networks in areas where they would not otherwise be economically viable.

The proposal was included in the Government's wide-ranging Digital Britain report, which also suggested ring-fencing part of the TV licence fee to pay for ITV local news and other important but less profitable programmes on non-BBC channels.

Every home and business in the UK will have access to at least 2 megabits per second (2Mbps) broadband by 2012 under the plans.

This will be paid for using £200 million in public money, in part from leftover funds in the licence fee-financed scheme to help elderly and disabled people switch to digital TV.

Critics have claimed 2Mbps is an unambitious target, pointing out that the national average broadband access speed is already nearly double this.

The Government responded by announcing plans to ensure that blisteringly-fast fibre broadband networks cover 90% of Britain by 2017. Commercial internet providers, such as BT and Virgin Media, are expected to provide next-generation internet to about two-thirds of the country.

Extending the coverage to the final third will need Government support, which would be paid for by the proposed £6-a-year supplement on all landline telephones.

Communications Minister Lord Carter, who compiled the 238-page report, argued that the move was a "good exercise of judgment". But he added: "How will the public react? We will find out."

Culture Secretary Ben Bradshaw said: "We have concluded that the fairest and most efficient way of ensuring that people and businesses are not left out is to use some of that saving in the form of a small levy on all fixed lines to establish an independent national fund which will be used to ensure maximum next generation broadband coverage."