To ask the Secretary of State for Digital, Culture, Media and Sport, with reference to the National Audit Office report, Improving Broadband, published 16 October 2020, what steps his Department taking to clawback the estimated £900 million from its Openreach contracts.
14 December 2020
The estimated £900m clawback from Superfast contracts is made predominantly of take-up clawback. Take-up clawback is paid on contracts where the supplier achieves higher customer take-up than originally expected. Clawback is declared by the supplier at agreed annual or bi-annual take-up review points, starting after the contract build has been completed and continuing for up to 7 years. This means that the full value of this clawback is currently not expected to be returned until around 2028.
Openreach is contractually obliged to return this funding to the public purse, holding all clawback contributions in a designated “Investment Account” which will be returned to Local Bodies no later than the end of the take-up review period. Total take-up clawback to be returned to the Department will be based on the funding contribution split for each contract. That is, the funding investment ratio, which varies under each contract, will determine the amounts of clawback to be retained by the Local Bodies and the amounts they will return to the Department over the next seven to eight financial years.
While the supplier holds the cash, it attracts interest, which also must be repaid. Openreach is now choosing to make cash repayments of take-up clawback realised to date in order to avoid high interest charges.
DCMS will reclaim the Department’s portion of cash amounts repaid by Openreach to the Local Bodies, the remaining portion sits with the public purse under the ownership of the respective Local Body. We are currently in the process of identifying and validating these repayments with the aim to invoice the Local Bodies for the Department’s portion in the new year. Once received, the amounts will be returned to HM Treasury.
The other clawback is implementation clawback (also referred to as underspends). The Local Bodies will return implementation clawback after a decision to discontinue with the furtherance of delivery within their area, or when they decide to withdraw their portion from the programme to be repurposed on other priorities.