£6 a year phone tax shelved

The Chancellor hammered the final nail into the coffin of Labour's controversial "telephone tax" and will look to incentivise private companies and use licence fee money to expand Britain's superfast broadband network.

The Labour government had planned the introduction of a £6 a year levy on phone landlines, proposed in the Digital Britain report drawn up last year by Lord Carter.

George Osborne reiterated the Conservatives' opposition to the move, confirming that the landline tax would be abolished "before it is even introduced".

He said: "We need investment in our digital infrastructure, but the previous government's landline duty is an archaic way of achieving this." Mr Osborne pledged broadband speeds of at least 2 megabits per second to everyone in the country, as well as bringing superfast broadband to as many homes as possible. Virgin Media's superfast network covers just over half of UK households, while BT is planning a roll-out to two-thirds of homes. The companies have sought support on reaching the so-called "final third", saying it is not economic to bring broadband to the most rural areas.

Rather than the tax, Mr Osborne pledged to encourage private-sector investment in superfast broadband "by making regulatory changes to reduce the cost of roll-out". The Government will also divert the excess cash from the TV licence fee that went into the digital switchover fund, putting it into three pilots pushing universal broadband.