The latest analysis from Which? shows that millions of households are struggling to afford essential telecoms services, including broadband, landlines and mobile phone packages, during the Cost of Living crisis.
We’re calling on the government to cut the amount of VAT paid on mobile, broadband and landline services to make these services more affordable for all. Our research shows that a reduction in VAT could save those on a standard broadband tariff up to £57 a year, and those on a social tariff up to £37.50 a year.
Consumers choosing between food and phone services
Our analysis of Ofcom survey data found an estimated 5.7 million households experienced at least one affordability issue relating to their telecoms services in April 2022. This included people having to reduce spending on other essentials, cancelling their service, switching to more affordable packages or missing payments.
The number of households that had experienced affordability issues in the prior month increased from 16% in February to 20% in April of this year.
The number of households that experienced multiple affordability issues – for example, those who had struggled to afford more than one telecoms service or made more than one financial adjustment to afford their telecoms – also increased by 56% from February to April 2022.
The most common adjustment made by households was to reduce spending on other essentials to afford telecoms services. In April 2022, an estimated 3.5 million households had reduced their spending on items such as food and clothes in the month prior, in order to afford their connectivity services. This was up from an estimated 2.2 million households in February – an increase of 59%.
Those on lower and middle incomes (with an annual income of up to £25,999 and £51,999 per year respectively) were most likely to have cut essential spending to cover the cost of telecoms. In April, one in five lower income households reduced other spending to afford connectivity services. The same was true of one in eight middle income households, though this had almost doubled when compared with February.
Which? calls for a reduction in tax on telecoms
Given that broadband, mobile phone and landline services have become essential, we think they should be taxed accordingly – the amount of VAT paid on telecoms (20%) is much higher than that paid on other essential services such as gas and electricity (5%).
We’re calling on the next Prime Minister to reduce the amount of VAT paid on telecoms to help consumers manage their bills during the cost of living crisis.
Alongside this, all consumers should be made aware of and easily able to access the best value deal – including social or discounted tariffs. Providers should support any customers struggling to afford their bills, and make them aware of any discounts they may be eligible for.
Rocio Concha, Which? Director of Policy and Advocacy, said: ‘The fact that millions of households have made sacrifices to prioritise their broadband and mobile connections during the cost of living crisis demonstrates just how essential these services are for day-to-day modern life.
‘To help cut bill costs, the next Prime Minister should reduce the VAT paid on telecoms to five per cent in line with other essential services. Businesses must support anyone struggling to afford their bills and ensure consumers are aware of and able to access the best deals.’ Which.co