'Britain is being ripped off over rural broadband': BT handed £1.2bn ‘subsidy’ from the taxpayer

British Telecom has been handed a taxpayer “subsidy” of almost £1.2bn because the Government “mismanaged” its superfast broadband.

Figures reveal that the company, which was run at the time by the new trade minister Lord Livingston, is only expected to invest £356m rolling-out fast internet access to rural areas. But in return BT will be handed assets paid for by the taxpayer worth £1.2bn.

In a scathing report, Parliament’s Public Accounts Committee (PAC) accused ministers of placing BT in a “quasi-monopolistic position” that the company “exploited”, resulting in consumers getting a “raw deal”.

It pointed out that the project is running two years behind schedule and even when completed will still not provide fast broadband to around 10 per cent of rural areas in England.

“The consumer is failing to get the benefits of healthy competition and BT will end up owning assets created from £1.2bn of public money,” said Margaret Hodge, the committee’s chair. “The taxpayer is getting a raw deal despite the generous public subsidy.”

BT hit back, saying it was “disturbed” by the report which it described as “simply wrong”. A spokesman disputed the committee’s findings and said it was “mystifying” that it was being criticised for accepting “onerous terms in exchange for public subsidy” which drove other companies away.

Under the Government’s original plans, private firms were to bid for the right to install superfast broadband across 44 rural areas by 2015. In its business case the Department for Culture, Media and Sport estimated that suppliers would contribute £563m to the capital costs of the programme, while local authorities and central government would each contribute around £500m. But the PAC said the department had structured the scheme in such a way that “reduced competition”, with BT now the sole company “bidding” for contracts.

The Department now estimates that BT’s capital contribution to the scheme will only be £356m – with the rest of the bill being picked up by the taxpayer and local authorities. However BT’s balance sheet will benefit from the £1.2bn of public funding in infrastructure. “The Department accepted contract terms that were overly generous to BT and do not promote value for money,” the report concludes. “It also failed to negotiate the full access it needed to BT’s cost information to validate that bids from BT were reasonably priced.”

A DCMS spokesman said: “We disagree with the views expressed by the PAC, which are at odds with the findings of the National Audit Office.”