Government delays broadband tax and limits cider duty hike

Chancellor of the Exchequer Alistair Darling holds Gladstone's old Budget box for the cameras outside 11 Downing Street, before delivering the annual Budget to the House of Commons in central London March 24, 2010.

LONDON (Reuters) - The government has delayed plans for a new tax to fund broadband access following negotiations to pass budget laws before parliament is dissolved ahead of the May election, the Treasury said on Wednesday.

The broadband tax of 50 pence per month on telephone landlines, which would yield 175 million pounds a year from 2011, was intended to enable 90 percent of Britons to access next generation, high-speed broadband by 2017.

An increase in duty rates for cider of 10 percent above inflation, which would raise about 15 million pounds annually, will go ahead until June 30 but would then require further legislation to continue.

A third measure announced by Chancellor Alistair Darling in March's budget to scrap tax relief on letting holiday homes -- raising 25 million pounds in 2011/12 and 15 million pounds in 2012/13 -- will also be shelved until after the May 6 election.

If Labour hold on to power, the broadband tax and holiday home measure will be reintroduced in a second finance bill and the party will look to extend the cider duty increase.

"An agreement has been reached," a Treasury spokesman said.

The government has had to compromise on the measures to allow the finance bill to be passed in the so-called "wash-up" period this week when key legislation is rushed through parliament before its dissolution on Monday.

A Labour source said the timing of the measures had been changed following discussions with opposition parties, but the related policies remained unchanged.

The Conservatives, ahead in opinion polls, say they have alternatives to all three measures and are unlikely to let the cider tax hike run on beyond June 30 as planned.

Public finances are in their worst state on record, with the budget deficit soaring close to 170 billion pounds or about 12 percent of gross domestic product.

(Reporting by Matt Falloon; editing by Stephen Nisbet)