Nearly six million households are struggling to afford essential telecoms services according to a new analysis by Which?, as it calls on the government to cut the amount of VAT paid on mobile, broadband and telephone services.
As the cost of living crisis continues to worsen, the consumer champion found that millions of households reported issues affording essential telecoms services – such as mobile phone packages, landline and broadband.
Which?’s analysis of Ofcom survey data found an estimated 5.7 million households experienced at least one affordability issue – for example, having to reduce spending on other essentials, cancelling or changing their service or missing payments – in April 2022.
The number of households that have had any affordability issues in the past month increased by a fifth from 16 per cent in February 2022 to 20 per cent in April 2022.
The number of households that experienced multiple affordability issues – for example, who had struggled to afford more than one telecoms service or made more than one financial adjustment to afford their telecoms – increased by 56 per cent from February to April 2022.
The most common adjustment households made was having to reduce spending on other essentials to afford telecoms services. An estimated 3.5 million households reduced their spending on other essential items, such as food and clothes, in the last month to afford their connectivity services in April 2022, up from an estimated 2.2 million in February (a 59 per cent increase).
Three per cent also said they cancelled services (up from 2% in February 2022).
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. One in five (22%) of lower income households reduced spending elsewhere to afford connectivity services in April 2022. This figure was one in eight (13%) for middle income households – almost doubling from 7 per cent in February 2022.
That so many households have chosen to prioritise their telecoms services during the cost of living crisis further demonstrates just how essential these services are to modern life.
However, this is not reflected in how these services are taxed. Which? believes that to help cut bills during the cost of living crisis, the next Prime Minister should reduce the amount of VAT paid on telecoms from 20 per cent to 5 per cent to be in line with other essentials such as gas and electricity. Even the most financially vulnerable consumers are charged 20 per cent VAT for social tariffs.
Across a household, the consumer champion estimates that reducing the VAT rate on telecoms from 20 per cent to 5 per cent would cut costs by an average of £120 per year.
Which? also believes that during an unrelenting cost of living crisis, consumers should be made aware of and easily able to access the best value deal – including social or discounted tariffs. Providers should also 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 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.”