Calls for cut in VAT on ‘essential’ telecoms as millions struggle to pay bills

Almost six million households are struggling to afford essential communications services such as mobile phones, broadband and landlines as the cost of living crisis worsens, a consumer group has warned.

Which? has called on the government to cut VAT on household telecommunications bills on the back of Ofcom data showing that an estimated 5.7 million households experienced problems such as having to cut spending on other essentials, cancel or change their service or miss payments in the month of April.

The number of households experiencing multiple affordability issues – such as struggling to afford more than one telecom service or making more than one financial adjustment to afford telecom – increased by 56% from February to April, the figures show.

An estimated 3.5 million households reduced their spending on other essentials, such as food and clothing, to afford connectivity services in April, up from an estimated 2.2 million in February – an increase of 59%.

One in five lower-income households (22%) reduced spending elsewhere to afford connection services in April. This figure was one in eight (13%) for middle income households – almost double from 7% in February.

Which? said the fact that so many households had chosen to prioritize their telecoms services during the cost of living crisis “further demonstrates how important these services are to modern life”.

However, this is not reflected in how these services are taxed, the watchdog said, urging the next prime minister to reduce the amount of VAT paid on telecoms from 20% to 5% in line with other essentials such as gas and electricity.

It noted that even the most financially vulnerable consumers were charged 20% VAT for social tariffs.

It estimated that reducing the VAT rate on telecoms to 5% would save the average household £120 a year.

Which? has also called on suppliers to support all customers who are struggling to afford their bills and to make them aware of any discounts they may be eligible for.

Which? Director of Policy and Advocacy Rocio Concha said: “The fact that millions of households have made sacrifices to prioritize their broadband and mobile connections during the cost of living crisis shows how important these services are to everyday modern life.

“To help cut bill costs, the next Prime Minister should reduce the VAT paid on telecoms in line with other essential services. Businesses need to support anyone struggling to afford their bills and ensure consumers are aware of and can access the best deals.”

A government spokesman said: “We understand that people are struggling with rising prices, which is why we have acted to protect the eight million most vulnerable British families through at least £1,200 in direct payments this year with extra support for pensioners and those who claim disability benefits. .

“Through our £37 billion support package, we are also saving the typical employee over £330 a year through a tax cut in July, allowing people on Universal Credit to keep £1,000 more of their earnings and cut fuel tax by 5p, saving a typical family £100.

“We’ve also secured strong commitments from broadband and mobile companies to help those worried about their bills at this difficult time, such as allowing them to move to cheaper packages without charge or penalty, or agreeing manageable payment plans.”

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