George Osborne has been forced into a humiliating climb-down over a £150 million ultrafast broadband scheme that was meant to support growth outside London. During his Spending Review statement the Chancellor hardly touched on broadband, despite the top billing given to infrastructure investment.
The news came after the Department for Business (BIS) announced that plans for brand new fibre optic cables in 22 UK cities had been dropped in favour of a voucher scheme aimed at small businesses. Mr Osborne announced a major development of the plans only six months ago in his autumn statement.
The government had intended to fund Birmingham, Manchester, Edinburgh and other councils to commission new infrastructure, offering businesses internet access several times faster than currently available.
Businesses will now have to apply for a total of up to £90 million in vouchers which will pay for installation of faster broadband. Only those with less than 250 employees will qualify for the vouchers.
The scheme was radically downgraded after Virgin Media and BT joined forces to lodge legal objections claiming that rival companies like Talk Talk and Sky would have benefitted from the government cash.
As a result, the government didn’t apply to Brussels for permission to spend the cash it had promised to spend.
The telecoms giants welcomed the Government climb-down.
A spokesman for Virgin Media said: “Where companies are already investing in world class connections, government has recognised public money should not be used to build more networks.”
The remainder of the £50 million funding pot will still go towards funding large public Wi-Fi networks in urban areas.
The “Super-Connected Cities” initiative is separate to a £530 million funding pot targeting broadband infrastructure in rural regions where Virgin Media and BT say there is no commercial case to invest.
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