'Terrible' inflation-busting mobile and broadband price hikes to be probed by Chancellor after Martin Lewis grills him on it
"Terrible" inflation-busting mobile and broadband price hikes are to be probed by the Chancellor after Martin Lewis grilled him on the issue. In an interview with the MoneySavingExpert.com founder, Jeremy Hunt said he would write to the competition and markets watchdog and "get to the bottom of it".
The interview was broadcast during the latest episode of ITV's The Martin Lewis Money Show Live on Tuesday 9 January. You can watch it in full on ITVX (the relevant section starts at 11 minutes and 21 seconds).
What the Chancellor said about mobile and broadband price hikes in his interview with Martin Lewis
Martin has repeatedly called for above-inflation, mid-contract hikes to be banned. During his interview with the Chancellor, Martin reiterated his argument that above-inflation price rises are "terrible" for consumers and for the economy, due to their inflationary effect. Martin asked Mr Hunt: "Why don’t we just ban them [mobile and broadband firms] from doing that?"
In response, Mr Hunt said some of the costs providers face, such as staff costs "have to feed through" to customer bills. But he acknowledged that this is not the case for all costs. For example, the cost of a telecoms network doesn't go up "at all" once it's in place.
As a result, the Chancellor said that he would write to the Competition and Markets Authority (CMA), the body which looks into these things "independently of politicians", in order to "get to the bottom of it".
After his interview with the Chancellor, Martin said: "While an Ofcom proposal is looking to stop firms implementing inflation-linked price rises – so they must pre-announce their rises in pounds and pence – that still allows them to make mid-contract rises above inflation. This seems wrong to me. At the very least these rises should be capped at inflation or the rises should be banned altogether."
What Martin Lewis and Jeremy Hunt said – the full transcript...
Martin: "Let's move on to inflation. You mentioned before, thankfully, the rate of inflation is down to 3.9%. We need to be clear that means prices are still rising, and they're still rising on top of the already substantial rises that we had last year.
"Something I don't understand, forgive me taking this opportunity, broadband and mobile firms – in the middle of people's contracts – write in, bake in, above-inflation rises. 3% to 4% above inflation, which meant, last year, rises of 17%.
"My guess, you don't have to say whether or not [this is the case], is this year it will be 7%, coming in this April. Baking in above-inflation rises is both terrible for consumers, terrible for you, because it's inflationary (because it's above inflation). Why don't we just ban them from doing that? Can you not stop that please, Chancellor?"
Jeremy Hunt: "Well, I've heard you talking about this before, Martin. And, you know, when you're a broadband provider, you obviously do have staff whose costs go up and some of those costs you have to feed through your bills. But a lot of your costs are actually the cost of a network – which, once it's in place, doesn't go up at all.
"If you write to me with the evidence that you've got of that, evidence from your viewers, let me write to the Competition and Markets Authority, which is the body that looks into these things independently of politicians. Let's get to the bottom of it."
Martin: "So please get your questions in for the Chancellor in cases on that. And I'll also be talking to [consumer organisation] Which? which has been doing a lot of campaigning and we will get you a joint submission to you within the next week, I hope. In time for the Budget."
Mr Hunt: "I look forward to it."
The problem with mid-contract, inflation-linked hikes
Currently, it's common practice for providers to hike prices midway through a contract by the rate of inflation, plus an extra percentage on top. However, inflation remains an unknown until it's formally announced, so it's always unclear how much your contract will increase by.
Last year, we saw contracts rise by as much as 17.3%. For a family with home broadband, pay TV and several mobile subscriptions, these increases could amount to hundreds of pounds a year. Plus, when a price hike happens, you usually can't leave penalty free as most contracts state that these price rises can take place.
In December 2023, telecoms regulator Ofcom unveiled plans to force providers to set out any rises in pounds and pence. However, this would still allow firms to increase prices mid-contract by substantially above inflation – something Martin has urged the regulator to change.
In addition, any changes are still a while off. Ofcom will first consult on its proposals – the deadline to do so is 13 February 2024. It then plans to publish a final decision in spring 2024, with any changes set to take force four months later.