Matt Ridley from the UK: Broadband will drive a rural revival

Compared with most countries, Britain has a fairly healthy rural economy. Barns have been converted into homes or offices rather than left to tumble down, as in parts of France. Remote areas have job vacancies in picturesque villages, rather than drug problems amid piles of dead cars, as in parts of America. The demand for second homes in St Ives and the lack of affordable housing in villages (both in the news these past few weeks) are the result of too much demand for rural assets, not too little.

Yet there is now a golden opportunity to make the rural economy work even better, to make the countryside an engine of growth rather than a theme park and retirement community — and without spoiling it. That opportunity’s name is broadband. The government’s sudden decision to stop rolling fast broadband out for the last 5 per cent of people is madness.

What is the countryside for? Throughout most of our history it provided the bulk of employment and economic activity: it was necessary for 80-90 per cent of people to work in the fields and woods to ensure that everybody had just enough food, fibre and fuel to get through the winter.

The industrial revolution turned that upside down: the cities generated wealth, some of which was sunk back into investments in the countryside, while farming and forestry steadily shrank as a source of both wealth and employment.

We have not fully taken this in. Go to any conference about the rural economy and the chances are the agenda will still be dominated by the farming, forestry and energy industries. All three are heavily dependent on public subsidies. I was driving across rural Durham at the weekend and the landscape was dominated by sheep, sitka spruce trees and wind farms, all there because of government support. Yet even in “predominantly rural areas” just two per cent of the gross value added comes from agriculture, forestry and fishing, according to government statistics. Twice as much gross value added — in predominantly rural areas — comes from finance and insurance. So 98 per cent of the rural economy is not farming or forestry.

I declare an interest in both farming and forestry, but the future of the rural economy does not lie in finding more ways of doling out cash to grow trees, sheep or windmills, let alone doing so in retro, artisanal and organic ways. I have nothing against wood craft and home-made chutney, but it’s not going to be the main source of income for the British countryside. That’s going to come from entrepreneurs, sitting in converted barns, selling services on the internet to the world. Suddenly, for the first time since about 1800, you can do business just as well from St Ives or Wensleydale as you can from Manchester.

As Owen Paterson, MP, has put it in a recent letter to John Whittingdale, the culture secretary, objecting to the government’s argument that the final 5 per cent of rural people don’t want broadband: “For the first time, we have a technology which can truly bridge the gap between urban and rural; it overcomes the innate disadvantages of living in a remote place . . . All the activity that takes place in the country reduces the pressure on our towns and cities.”

If my own experience is anything to go by, the statistics on the roll-out of rural broadband are not to be trusted. I live ten miles from the middle of a big city, only just in the countryside at all. Yet the signs that have been pinned to telephone poles near here, proudly announcing the arrival of superfast broadband, and the “available now” colour on the map on the website, are infuriating local businesses, who get only excuses when they ask for it. BT seems to want to claim to have provided it while being unable to connect you if you ask for it.

According to the Oxford economist Dieter Helm, government has made a policy mistake in not separating the utility — yes, broadband is an essential utility — from the service provider. We made the same mistake last century with gas, with the result that British Gas made money not from connecting more people, but from selling more gas to big customers. Government tried regulating so as to insist on Chinese walls between British Gas’s responsibility for extending the pipeline network and its gas supply business, but it worked poorly, with the company reluctant to let competitors use the pipes, and eventually the government had to split it in two.

The same is happening with broadband. BT has an incentive to maximise revenue from its older copper network and to worry about competitors using its fibre. TalkTalk accuses it of using “national infrastructure as a cash cow for its other corporate activities, whilst the experience customers receive gets worse and worse”. So it drags its feet with broadband roll-out, mystifying its customers with contradictory claims about whether they can or cannot have fast connections, while claiming to the regulator to have connected an area.

With water, electricity or roads, the firms that built the network were paid to connect people, and were separate from those trying to monopolise the supply of water, electricity or transport. Professor Helm thinks it’s vital that Openreach, which owns the pipes and cables, now be separated from BT.

Meanwhile, that other vital rural utility, the mobile phone network, is rapidly falling apart. I cannot remember when I last had an uninterrupted mobile call in a rural area, even when not on the move, and I don’t live in a “not-spot”. The problem presumably is congestion. More and more people are sending bigger and bigger data packages over mobiles, but the oligopoly of mobile companies, crippled by the cost of Gordon Brown’s 3G auction, has not built nearly enough phone masts and doesn’t have an incentive to put it right.

People who live in rural areas do not deserve special treatment, of course, and they do not get it. At the moment, they heavily subsidise urban areas through their council tax, which is redistributed from the countryside to cities. But if we provide rural areas with decent infrastructure — road, rail, broadband and mobile — then second homes can become first homes and the rural economy will help to drive the urban one for the first time in 200 years.

Matt Ridley, a member of the British House of Lords, is an acclaimed author who blogs at www.rationaloptimist.com.