How The Coalition Could Pay For A Complete Fibre-To-The-Premises NBN

The Coalition proposal for a fibre-to-the-node National Broadband Network (NBN) is projected to cost $30 billion — a figure that’s lower than the currently active Labor version because it doesn’t require a connection to every home. It’s an approach that’s cheaper but develops a less-comprehensive infrastructure that might require expensive upgrading later. The irony is that there’s a fairly straightforward way within its existing policies that the Coalition could come up with the extra funds.

picture from Shutterstock

This thought struck me the other day when I was watching TV news and saw a clip of Tony Abbott repeating one of the central planks of current Coalition policy: that while it is committed to removing the current emissions trading scheme (“carbon tax” in the popular but inaccurate parlance), it is not going to remove the compensation which is being paid to lower-income households, largely via changes to the tax system, to compensate for higher costs arising from that scheme.

Logically, this makes no sense. If consumers are as badly off as those opposed to the ETS have argued, they should see immediate reductions in their expenditures if the scheme is repealed, and hence shouldn’t need the extra compensation. As such, a government committed to improving infrastructure might look to deploy those funds in other areas. One way to do it would be to spend more on the NBN, using those funds to continue with a fibre-to-the-premises approach instead.

From a financial point of view, the key question here is obviously: would that change provide enough money to make a difference? The numbers would suggest yes.

As this year’s budget papers explain, the compensation for ETS-driven price increases came from a number of sources:

From 1 July 2012, all taxpayers with income up to $80,000 received an income tax cut, with most receiving at least $300 a year, and up to 1 million people no longer needing to lodge a tax return. Overall, nine out of ten households will receive assistance through a combination of tax cuts and increased payments. Importantly, this assistance will remain in place.

How much did that assistance cost? I couldn’t find a single figure, but we can get a glimpse elsewhere in the budget papers, which offer this note about the tax cuts for 2012-2013:

All taxpayers with incomes up to $80,000 received a tax cut in 2012-13, with around 60 per cent of taxpayers getting a tax cut of at least $300.

In 2010-2011 (the last year for which ATO official numbers are available), there were 12,380,320 taxpayers in Australia. If we assume 60 per cent of them received a $300 tax cut in that year, that gives us $2.2 billion which would be available if compensation wasn’t being pursued. And that’s very much a lowball figure — it doesn’t account for people with higher levels of return, or for other forms of compensation being paid.

Even that conservative figure would give us an extra $6.5 billion to spend on the NBN in the three years to when the Coalition NBN is said to be completed (2016). That takes the potential spend almost exactly to the $37 billion budget for the current NBN. (The Coalition consistently claims the actual cost of the current NBN will be higher, but its own cost figures aren’t tested either, so I’m sticking with the budgeted figures for both.)

So there you have it: an easy way to bridge the gap between one NBN plan and the other. Do I think this will happen? Not for a minute. Supporters of the scheme might well argue that the speed of delivery matters as much of the cost, and that sticking to FTTN is the right way to strike the balance between. Or they might suggest that the funds should be kept for improving education or building roads or for health funding rather than broadband.

But there’s a simpler impediment anyway. Removing tax concessions is not a vote-winning exercise, and both sides of politics are far more concerned with being re-elected right now than with anything else. That’s why the inconsistency is in place, and I expect it to remain. However, it’s a reminder that there is always more than one way to spend money in your budget, and that some decisions save money in the short term but may cost more in the long run.