Government scraps broadband tax, game developer relief

 

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Posted on 22 Jun 2010 at 15:15

Chancellor George Osborne has scrapped the previous government’s 50 pence broadband tax in today’s budget, referring to it as “an archaic way” of investing in the country’s digital infrastructure.

He said it would hit 30 million homes which already have a telephone line. Instead, Osborne has pledged support for private broadband investment, including to rural areas, “in part with funding from the Digital Switchover under-spend within the TV licence fee.”

The planned £1 billion tax relief for the UK’s game developer community will also be scrapped, with the Chancellor calling it a “poorly targeted” tax break. Instead, the government announced tax relief for businesses, with small companies’ tax rates dropping to 20 per cent and corporation tax dropping to 24 per cent over the next four years.

The coalition will slash public spending by a quarter as it attempts to get government borrowing under control, but healthcare and international aid budgets will not be affected. They will be expected to get more for less, however.

Large government IT projects will undoubtedly take a hit as the Chancellor promised to clamp down on them. "With huge budget cuts across the board, public sector organisations need to utilise cloud based services to cut costs and deliver efficiencies to the bottom line," said Dave Baldwin, Managing Director of UK-based ICT specialists Getronics. "By switching to a hosted desktop environment, department heads can make much needed savings through leaner and more flexible services, instead of relying on rigid and costly on-site IT."

Despite these severe cuts, the headline will no doubt be the increase in VAT to 20 per cent. Those who live off benefits are likely to be severely affected as well, as the government has outlined its plans to reduce benefits fraud.

“From the point of view of public spending, the cuts are pretty severe and it looks as though the Chancellor has not so much taken an axe to benefits programmes but a chainsaw through them,” Philip Shaw, chief economist at Investec, told Reuters.

Author: Tim Smalley