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Chancellor Calls on UK Utility Firms to Pass Cost Savings on to Consumers

Friday, Jun 23rd, 2023 (7:59 am) - Score 1,200
money for broadband in uk homes

The Government’s Chancellor, Jeremy Hunt, will next week meet with the heads from all of the UK’s major regulators as part of a drive to help bring down inflation by encouraging utility providers (i.e. energy, water, broadband and mobile) to ensure they’re passing on any wholesale costs savings to consumers.

The issue, at least so far as the government sees it, is that utility providers are often quick to hike their prices when costs are high, but not so quick to lower them when their underlying costs fall. This is seen as being a particular problem for consumers who might find themselves being locked into a long-term contract that was signed during a period of peak costs.

NOTE: Senior figures from the Competition and Markets Authority (CMA), Ofcom, Ofwat and Ofgem are expected to attend the meeting.

According to the Daily Telegraph (paywall), the Treasury wants to hear directly from regulators about what is happening with input costs in each sector and how the link to consumer pricing could be made more efficient, which might theoretically help with their drive to bring down inflation.

All this is needed to help support the UK Prime Minister, Rishi Sunak, and his pledge to “halve inflation” by the end of 2023 (i.e. pushing it down to around 5%), which currently isn’t going in quite the direction he might have wanted.

Jeremy Hunt, UK Chancellor, said:

“Next week, I will meet with regulators to discuss how we can make sure falls in input costs are passed onto consumers. I will discuss what action regulators are taking, and how we go further to reduce inflation and ease the impacts of the cost of living.”

However, the approach being taken here appears to have more relevance for energy providers than it does to the much more complicated nature of broadband, phone, and mobile provision, where many different and diverse factors can impact the price we all pay. Equally, wholesale pricing generally follows a much more predictable and gradual upward curve for telecoms, which is partly linked to the impacts of inflation itself and the capabilities of the service being sold.

On top of that, mobile operators and broadband ISPs also have to deal with rising supplier and lease costs, as well hikes in energy prices and the ever-rising levels of consumer demand for data. Not to mention the cost of adding new services, upgrading networks (FTTP) and implementing costly new Ofcom rules or Government legislation.

For example, the Government and Ofcom have recently been pressing more and more ISPs to introduce cheaper and faster Social Tariffs for those on state benefits (A Quick Guide to UK Social Tariffs – Getting Broadband for £15). On the one hand this is welcome, but on the other hand it adds to their costs and that has to be recouped from somewhere (e.g. rises in customer bills for non-social tariff users).

Suffice to say that communication providers are already facing a squeeze and if the government really wanted to help then it could perhaps consider reducing the rate of Value Added Tax (VAT) on broadband and mobile packages from 20% to 5% (even if only for social tariffs). But so far, the idea of providing such help to the sector has generally been ignored. Banning mid-contract price hikes might be nice too.

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Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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Comments
14 Responses
  1. Avatar photo Kris says:

    Or he could just ban in contract price rises which would be far more effective than moaning at private companies.

    1. Avatar photo Richard Branston says:

      I’m not sure the government needs to step in and run industries. The main complaint seems to be from consumers who accepted contract terms then changed their minds.

      If people don’t want a mid contract rise then either select a contract that doesn’t have this or choose a shorter contract and switch every 12 months.

      For telecoms there is plenty of choice in the market – the likes of Lebara and Smarty who have fixed prices for the contract terms or 3 – my 3 contract has gone up by 4.5% this year which was as expected based on the contract Ts and Cs.

    2. Avatar photo Just a thought says:

      Consumers obviously want the cheaper deals whose headline rates are better for 24month contracts. Depending when you sign up for these contracts you could be subject to 2 unknown increases. If it was simply ”£25 for year 1 and £28 year 2 and £37 out of contract” I think fewer people would have an issue. The fact that it’s “3.5% plus some unknown inflation” is what makes it unfair as that’s not really fixed at the point if contract signing, as it contains a variable.

  2. Avatar photo John says:

    The hypocrisy on this guy. Gov making record bank out of taxes yet no signs of reducing this outrageous amount of theft, complains about companies providing actual services not reducing their prices

    Cut the global business tax and VAT at the very least and then you may have a case for speaking out. The public is the one paying them

  3. Avatar photo ComicBookKiller says:

    LOL the government appealing to the same energy companies that where crying telling OFGEM that they need to be able to review there price every three months inorder to pass on benefits to the customers. OfGEM is obviously lives in a world with rose tinted glasses, faries, rainbows and unicorns that poo gold. Anyone seen these benefits in this world that normal people live in!? This is just like He-Man trusting Skelletor!

    Scientists consider Vantablack as the darkest pigment know to the world, Nope that would be these guys souls! How about actually regular them properly! Gas price rise like a rocket go down like a feather while these guys bank all the additional profit

    1. Avatar photo Andrew G says:

      Well, the government energy price cap was the direct cause of the bankruptcy of around 30 energy suppliers, leaving all of us to pick up the £5-6bn costs of those bankruptcies. That was a notably stupid Labour idea from 2013, which shiney-faced Etonian twit David Cameron then stole – took a few years to move into law, and here we are. At the time, the issue about rising energy prices was the impact of the Westminster net zero obsession, but as they pressed on with that dream, they made the entire energy system dependent upon imported gas – both in volume terms, and as the price-setting fuel.

      Not unusal that – government want everything to be delivered by markets. But then they also want outcomes that will never be delivered by markets. So they interfere to force their desired outcomes to happen either through limitations on what markets are permitted to deliver, through obligations to serve up something that is not what everybody’s asked for, through direct subsidy from taxpayers, or through cross-subsidy from other customers. That then causes all manner of unintended consequences, rarely good ones.

      What the Jeremy *unt is doing here is merely the usual obfuscation, trying to shift the blame onto companies for the abject failures of over a decade of government by this shower. Sadly I doubt that things would be different under the alternative shower.

    2. Avatar photo Sam says:

      The consequences were already starting to show back then but rather than putting a stop or at the very least pulling the breaks, they’ve doubled down

      It is not the alternative shower, it is the same shower. Until people wake up and vote for actual alternatives rather than the controlled opposition, nothing will change

    3. Avatar photo Winston Smith says:

      The energy cap *combined* with the fact that those companies didn’t hedge (and weren’t obliged to) by buying future energy contracts. They gambled on the spot wholesale energy price always being lower. They lost.

      One of the bankrupt companies, run by a father and son with no previous experience, was just useless (Avro I think). They weren’t even billing some of their customers.

  4. Avatar photo Bob says:

    They need to target the reducing of price of FTTP that in turn will help to drive down costs further

    1. Mark-Jackson Mark Jackson says:

      This isn’t really a problem area, since it’s already happening. Competition between FTTP providers has resulted in low prices, and Openreach’s new discounts reinforce that.

  5. Avatar photo Phil says:

    J.Hunt should reducing the rate of Value Added Tax (VAT) on broadband and mobile packages from 20% to 5% in next spring budget! That’s the only way!

    1. Avatar photo Phil says:

      Sorry I mean Autumn budget

  6. Avatar photo Howard says:

    So while the government are attempting to keep prices down, Cityfibre’s CEO Greg Mesch has been trying to keep prices higher, doing everything possible to prevent BT Openreach from cutting prices.

  7. Avatar photo Brad Jones says:

    @Richard Branston

    This shows you are out of touch with normal people 99% have no choice my area for example all the providers only offer 24 month excluding one which is 18 month and all of them are not fixed price.

    so what choice

    Mobile wise again only 02 has signal the others require walking down to road to get 3g so again what choice.

    Next the prices are terrible looking at around £30 for 150mb connection this doesn’t even include landline. (yes some people still want this older generation def do)

    We need regulations these providers need to offer multi contract lengths and also stop this cpi + this was never a thing in the past why has it become something this last decade (its misleading anyway they dont charge cpi they put cpi plus own increase no matter what even if wholesale price has decreased)

Comments are closed

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