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Mobile phone and broadband firms, including O2 and EE, ‘used 2014 loopholes to drive up contract prices’

Mobile phone and broadband firms including O2 and EE ‘used 2014 loophole to accelerate contract prices’ to nearly double the rate of inflation as millions of Britons face cost of living

  • Mobile phone and broadband providers use differences in rules to raise bills
  • Customers can leave the contract without penalty if they suffer ‘material loss’
  • The phrase was widely understood to refer to any kind of price increase.
  • An explicit oversight meant it was never properly defined in the revised rules

Mobile phone and broadband firms have been accused of using a loophole to push up prices to nearly double the rate of inflation.

An investigation by The Mail on Sunday found that providers used a gap in the rules to inflate bills.

The measures, which went into effect in 2014, were intended to allow customers to leave the contract without penalty if they were described as having ‘material loss’.

The phrase was widely understood to refer to any kind of price increase, but an explicit oversight meant that it was never properly defined in the revised rules.

Documents searched by the MoS show that several suppliers made submissions to industry regulator Ofcom that ‘material loss’ should not apply if customers were told at the time of signing the contract that the price could go up. Unless they are given this concession, he insisted, they will have to charge a higher initial fee.

An investigation conducted by The Mail on Sunday found that providers used differences in rules to inflate bills

It was expected that the loophole would be used rarely and some companies, including Vodafone, resolved not to use it at all. However, the floodgates opened when O2 and EE started raising prices on contract customers.

An analysis by this newspaper and cost-of-living champion Nous.co shows that almost all major mobile phone and broadband providers have increased the rate of inflation by 3.9 percent.

O2 and Virgin Mobile add 3.9 percent to the high retail price index (RPI), while broadband providers BT, Plusnet and TalkTalk, along with EE, Vodafone and BT Mobile, topped it in the low consumer price index (CPI) measure Is.

The increase is usually effected in April and is based on inflation rates in January or February of each year. It is estimated that more than 20 million households are trapped as a result of rising exit fees and inflationary prices.

The current RPI rate is 9.8 percent and the CPI is 6.2 percent. The practice means, for example, that with O2 increasing its fee by 11.7 percent this year, a £35-per-month call, text and data package will increase by about £50 a year. To avoid additional costs, a customer must pay for the rest of his contract.

IDS: Cut tax now or risk a 10-year crisis

By Anna Mikhailova, Deputy Political Editor of the Mail on Sunday

A former Tory leader has warned that if the government does not cut taxes now, the crisis of livelihood will last for a decade.

Sir Ian Duncan Smith warned that a delay in tax cuts would push Britain into a recession, which would take ten years to recover.

Sir Ian is one of several senior Conservative MPs who urged Boris Johnson and Rishi Sunak to do more to stimulate growth.

Chingford and Woodford Green MPs told The Mail on Sunday that failing to raise interest rates and cut taxes without stimulating growth would put the UK in recession ‘we will struggle for a decade to get out of it’ ‘.

Sir Ian said: ‘If we get it wrong, and we end up in recession and high inflation, it’s going to destroy a lot of businesses. We can’t afford it. We have to keep growing, and the only way to do that is by reducing taxes.

Mr. Sunak went ahead with an unpopular national insurance tax hike as households felt the full impact of rising inflation and energy bills.

Treasury sources have said new tax and spending measures are unlikely until the autumn to ease the cost of living crisis.

Sir Ian said last night: ‘The government has to do it now, not wait until November.’

Retired teachers June and Richard Nunn, both 70, canceled their definitive deal with Sky TV when prices rose.

‘What’s the point of a contract when the provider can change it without you having to sign up for something new?’ said Mrs Nunn, from Wandsworth in south-west London.

Greg Marsh, chief executive of Nous.co, said: ‘This loophole sounds like police telling them it’s legal to break into someone’s house if you give them a pre-warning.’

A Virgin Media O2 spokesperson said: ‘This price increase will encourage further investment in our network and services.’ Vodafone said: ‘We have clearly set our pricing at the point of sale, in line with the latest Ofcom guidance.’

BT Mobile, EE, BT and Plusnet, all part of BT Group, and TalkTalk said they have complied with Ofcom regulations.

A spokesperson for Sky, which is still the owner, said: ‘We aim to keep prices as low as possible while providing the content customers love.’

An Ofcom spokesperson said: ‘We are tightening our rules so that from next month customers will have a simple example of how monthly prices will increase during the contract before signing up.’

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