Economy

The European Central Bank has raised interest rates by 0.75 percentage points to their highest level since 2009, continuing to push up borrowing costs to tackle record eurozone inflation despite a looming recession in the region.The move, announced after the ECB governing council met in Frankfurt on Thursday, was in line with market expectations and showed rate-setters were not yet ready to slow the pace of monetary tightening despite mounting political criticism.Italy’s new prime minister Giorgia Meloni said this week that tighter monetary policy was “considered by many to be a rash choice”. Meloni’s remarks came a week after France’s president Emmanuel Macron warned he worried about central banks “smashing demand” to tackle inflation, now at a record high of 9.9 per cent. The ECB said in a statement that its third “major policy rate increase in a row” meant it had made “substantial progress in withdrawing monetary policy accommodation”. But it added that it still expected to raise rates further because inflation remained “far too high”.The euro fell slightly following the announcement, extending earlier declines. The currency traded lower against the dollar at $1.0001. Eurozone bonds rallied. Germany’s 10-year yield fell by 0.1 percentage points, trading at 2.09 per cent.The central bank said its benchmark deposit rate would rise from 0.75 per cent to 1.5 per cent — the first time it has made two consecutive rate increases of that size. Its main refinancing operations rate would rise by a similar amount to 2 per cent and its marginal lending facility rate would rise to 2.25 per cent. The council also decided to make a €2.1tn scheme of ultra-cheap loans less attractive to encourage commercial banks to repay them early. The move is the first step towards shrinking the ECB’s €8.8tn balance sheet and is expected to be followed by a reduction in the amount of maturing bonds it replaces in part of its €5tn asset portfolio from next year.It said the terms of the loans — known as targeted longer-term refinancing operations (TLtros) — would be changed from November 23 to raise the interest rate banks pay on them. The new rates would “be indexed to the average applicable key ECB interest rates over this period”. It added that banks would be offered extra opportunities to repay the loans early now they have been made less attractive.Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said the move to change the terms retroactively was “a risky decision” and that it would “likely” incentivise banks to repay the funds borrowed earlier. Some banks have warned retroactive changes will damage the credibility of the ECB’s refinancing operations and constrain its ability to use them in future.In a separate change, the central bank announced that it would lower the interest rate it pays on minimum reserves deposited by credit institutions by 0.5 percentage points. The rate on these would shift down from its main refinancing rate to its deposit rate to align it “more closely with money market conditions”.The US Federal Reserve is also expected to increase rates by 0.75 percentage points when it meets next week. Investors are looking for any signs from major central banks that they plan to slow the pace of tightening, following smaller than expected rate rises by Canada’s central bank on Wednesday and by the Reserve Bank of Australia earlier this month.Eurozone inflation is expected to climb further when October price data are released on Monday. However, European wholesale energy prices have fallen sharply in recent weeks, which may start to ease price pressures in the coming months. While the eurozone economy is expected to have grown 0.7 per cent in the third quarter, many economists expect it to shrink for the next three quarters due to the impact of high energy and food prices on consumer spending and industrial output.Additional reporting by Tommy Stubbington More

Unilever increased its prices by 12.5 per cent in the third quarter from a year earlier, its highest-ever quarterly rise, becoming the latest consumer goods maker to pass steep cost inflation on to customers.The maker of Magnum ice cream, Cif cleaning products and Dove soap also warned of falling sales volumes as squeezed consumers economise on household essentials.The company said on Thursday that sales volumes had declined 1.6 per cent during the quarter and warned they were also likely to shrink in the final three months of the year.Other consumer goods groups have also pushed up prices and reported falling sales volumes as households, particularly in Europe, grapple with the rise in costs.Pointing to a “mixed” outlook for the global economy, Unilever chief executive Alan Jope said: “We expect the challenges of high inflation to persist in 2023.”Graeme Pitkethly, the company’s chief financial officer, said consumers in Europe were particularly affected by inflation in basic goods and energy because of the war in Ukraine. “Consumer sentiment in Europe is at an all-time low,” he added.Dutch brewer Heineken said on Wednesday that European consumers were cutting their spending on alcohol, warning of “early signs of demand slowdown” in the region.Jope said some households were switching to supermarket own brands for ice cream, cleaning products and some food, but that “in aggregate there is no significant switch to private label in our sectors”.“The consumer is going to be under pressure for sure. The northern hemisphere winter is coming and energy bills will certainly be higher,” he said, adding that the downturn was so far mitigated by high levels of employment.Unilever achieved higher price growth than analysts had expected, with a smaller volume decline, enabling it to raise its full-year forecast for underlying sales growth to more than 8 per cent. The strong dollar helped the group record its highest turnover to date at €15.8bn for the quarter.However, Pitkethly said the group had not passed on all the inflation it faced in input costs, which meant it expected its full-year margin to decline 2.4 percentage points to 16 per cent.He added that Unilever expected another €2bn of net materials inflation in the first half of 2023, following €4.5bn of additional costs in 2022.Analysts said the latest numbers suggested a management reorganisation dividing Unilever into five business groups was proving effective.Alicia Forry, an analyst at Investec, said: “Importantly, underlying volume growth improved in four of the five business groups . . . despite more pricing being taken, which suggests the strength of the businesses is improving following the reorganisation of the operations, which completed over the summer.”Unilever has had a turbulent year following investor discontent over a failed bid for the consumer health division of GSK, with Jope announcing that he would retire at the end of 2023 and activist investor Nelson Peltz joining its board.Jope has also faced pressure over the group’s Russian operations. Since Russia invaded Ukraine, Unilever has ceased to invest in its operations or import products there but still sells a range of brands, including ice cream.“Our position on Russia has not changed. We’ve drawn an economic ring around it,” he said on Thursday.Rival foodmaker Nestlé reported price increases of 7.5 per cent in the first three quarters of 2022, its biggest rise in decades, while its real internal growth — a measure of sales volumes and consumer product choices — slid 0.2 per cent in the third quarter.Household products maker Reckitt Benckiser said this week it had increased prices by almost 10 per cent in the quarter, but its sales volumes have fallen 4.6 per cent. More

UK Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt are taking no tax options off the table as they consider how to plug the hole in the UK’s budget, the premier’s spokesman, Max Blain, told reporters on Thursday.Hunt is preparing to give an Autumn Statement on Nov. 17 after delaying it from Oct. 31, and has pledged to get the public finances back onto a sustainable footing, a task that in his words will involve “decisions of eye-watering difficulty” on tax and spending. Asked about potential expansion of a windfall tax on energy companies, and the possible imposition of a similar levy on banks, Blain declined to comment on specific measures, saying announcements on tax are for a fiscal event, such as the Autumn Statement. More

BRUSSELS (Reuters) – The European Union auditors on Thursday criticised the bloc’s specialised agencies for failing to prevent “revolving doors”, a practice that sees officials taking up lucrative private-sector jobs at the risk of conflicts of interest.The EU has more than 40 agencies operating in areas such as banking, border security and medicine, including the European Centre for Disease Prevention and Control and the European Medicines Agency that played key roles in the COVID-19 pandemic. Last year, EU agencies had a joint budget of more than 4 billion euros ($4 billion), employed some 14,500 people – 17% of all EU staff – spending European funds worth more than 13 billion euros, according to the European Court of Auditors (ECA).”EU rules set out very few obligations for EU bodies to monitor compliance of current and former staff with the ‘revolving door’ requirements,” the ECA said in a report.”On the other hand, EU agencies – especially those with regulatory powers and links to industry – are particularly prone to the risk.”With lobbying firms and sectoral businesses keen to hire former officials with inside knowledge and contacts, at stake is the integrity of EU policies and spending.While the bloc’s executive and main regulator, the Brussels-based European Commission, has some safeguards against such practices, there were no unified rules for the agencies, meaning they relied on scarce and patchy self-regulation at best. For the agencies’ board members, there are no coherent and binding limits on revolving doors whatsoever, which the ECA said created a legal vacuum and meant only a tiny part of such potential conflicts of interests were ever reviewed. The ECA said only nine EU agencies had any internal rules for their board members on revolving doors. Out of about 1,500 such posts, some 650 people left their jobs in 2019-21, but only 25 cases were assessed vis-à-vis such risk.”What we see is probably just the tip of the iceberg,” auditor Rimantas Sadzius said of these numbers.DAMAGEProminent cases of a former head of the powerful European Commission, Jose Manuel Barroso, joining Goldman Sachs (NYSE:GS), or of the bloc’s ex-digital chief, Neelie Kroes accused of unfair lobbying for Uber (NYSE:UBER) have drawn public anger in recent years.”Every time that happens, the EU is damaged,” said the bloc’s ombudswoman, Emily O’Reilly (NASDAQ:ORLY). She said eurosceptics in Britain seized on the case of Barroso in the 2016 Brexit referendum, while now companies seeing their business affected were out to water down the bloc’s policies meant to mitigate climate change.Barroso has denied lobbying former EU colleagues for his new employer. A 2017 report by Transparency International (TI) said a half of former EU Commissioners and a third of the bloc’s ex-lawmakers moved to work in EU lobbying entities. TI’s Vitor Teixeira said there were too few firm rules on avoiding revolving doors, insufficient monitoring and even less enforcement, with the situation particularly bad in EU agencies. “The current system of self-regulation, self-monitoring, and self-enforcement doesn’t work and we need a new one,” he said.($1 = 0.9941 euros) More

Investing.com — Facebook owner Meta sheds another $65 billion in value after another expensive quarter. It’s now up to Apple and Amazon to rescue Big Tech’s earnings season. The U.S. will report third quarter GDP figures which are almost certain to be highly misleading, while jobless claims and durable goods orders are also due. Stocks are set to open mixed, with more bumper earnings from the oil and gas sector overnight supporting value over growth. The European Central Bank is set to raise its key rate by 75 basis points again. And oil prices rise amid reports that the G7 is close to giving up on its plans to cap the price of Russian oil. Here’s what you need to know in financial markets on Thursday, 27th October.1. Reality check for MetaActual reality, rather than the virtual sort, caught up with Meta Platforms (NASDAQ:META) after the Facebook owner reported another quarter of falling revenue, without any sign that its big bets on the so-called Metaverse are close to paying off. Revenue will also fall nearly 10% short of consensus forecasts in the current quarter, at around $30 billion by Meta’s estimates.Meta stock fell over 20% in premarket trading after the company said it expects its costs to rise by over 14% as it continues to plow money into what it hopes will be online meeting place of the future. The challenges posed by a weakening ad market, competition from TikTok, Apple’s (NASDAQ:AAPL) data policies, and broader regulatory issues suggest that margin compression is likely to extend into next year. Founder and CEO Mark Zuckerberg asked investors for ‘patience’.2. Beware the Q3 GDP reportThe U.S. will report first estimates for third quarter gross domestic product, a release that may send some confusing signals.Reported GDP is set to return to positive territory with annualized growth of 2.4% in the third quarter, although analysts argue that this is largely a statistical quirk: big inventory effects in the first two quarters generated negative GDP prints, at a time when employment was growing strongly. In the third quarter, by contrast, employment growth has slowed sharply over the summer, as have real economy indicators such as retail sales.As such, market reaction will depend on deciphering what lies below the headline numbers.Other, more real-time data due at the same time may be easier to interpret: weekly jobless claims are expected to have ticked up from last week, while durable goods orders are expected to extend a trend of underwhelming growth.3. Stocks set to open mixed; strong consumer, energy earnings overnight offset tech weaknessU.S. stock markets are set to open mixed, with tech underperforming after Meta delivered more evidence that the patience sought by Zuckerberg is in short supply with investors these days. By 6:20 ET (10:20 GMT), Dow Jones futures were up 93 points or 0.3%, while S&P 500 futures were flat, and Nasdaq 100 futures, where most big tech names are concentrated, were down 0.5%, dragged down by the Meta effect.Disappointing reports and guidance from Big Tech so far this week have raised the stakes for Apple and Amazon (NASDAQ:AMZN), both of which report after the closing bell. Amazon’s Cloud hosting business – which has been its cash cow over most of the last decade – will be under the spotlight after Microsoft (NASDAQ:MSFT) forecast a slowdown in growth for its comparable unit, Azure.Mastercard (NYSE:MA), McDonald’s (NYSE:MCD), Merck (NYSE:MRK), and Comcast (NASDAQ:CMCSA) all report early, along with Caterpillar (NYSE:CAT). Intel (NASDAQ:INTC) will try to avoid joining a series of downbeat reports from chipmakers later. Overnight news was mixed, with STMicroelectronics NV (EPA:STM) posting weak numbers, but oil and gas giants Shell (LON:RDSa) and TotalEnergies (EPA:TTEF) reporting another quarter of extremely strong cash flow. Unilever (NYSE:UL), Carlsberg (CSE:CARLb), and AB InBev (EBR:ABI) also succeeded in pushing price increases on to their global customer bases.4. ECB set to hike into oncoming recession; Egypt devalues sharplyThe European Central Bank is expected to raise interest rates by 75 basis points for a second straight meeting, despite the evident slowdown in the Eurozone economy.The ECB’s decision is due at 08:15 ET, with ECB President Christine Lagarde’s press conference due half an hour later.The meeting comes amid rising confidence that advanced economy central banks are starting to approach the end of their policy tightening cycles, even though official rates are still well below current inflation. The Bank of Canada raised its key rate by only 50 basis points on Wednesday rather than the 75 basis points expected.In emerging markets, the pressure from higher U.S. interest rates continued to take its toll: the Egyptian pound fell sharply as the central bank was forced to abandon its defense of the currency.5. Oil rises amid signs of G7 price cap plan collapsingCrude oil prices rose amid reports that the price cap on Russian oil that had been proposed by G7 countries is on the verge of being effectively abandoned.The practical difficulties of enforcing such a mechanism had always been evident, given the refusal of major importers such as India and China to go along with it. The U.S. appears also to have underestimated the strength of feeling its proposals created among OPEC producers, who saw the move as the thin end of a wedge that would one day hurt their own oil revenues.By 06:35 ET, U.S. crude futures were up 0.4% at $88.25 a barrel, while Brent was up 0.4% at $94.12 a barrel. An IEA report forecasting a peak in global demand for fossil fuels within a decade had little impact on sentiment. More

Judgment day has been postponed for UK public finances. The government’s fiscal plan will not now be delivered on Halloween, which would have given new prime minister Rishi Sunak all of six days to prepare his best chance of ending the market pandemonium his predecessor had unleashed.Sunak’s mere arrival has largely returned gilt yields to where they were before September’s tax-cutting “mini” Budget. (Or in the words of one FT story, a “dullness dividend” beats a “moron premium”.) It clearly pays to present as a grown-up rather than a rebel. It also means Sunak can afford to take a bit more time to devise a new approach. Indeed, he will be paid to do so, in the sense that the new date of November 17 means the Office for Budget Responsibility will no longer have to base its public finance forecasts on the rising government borrowing costs from a few weeks ago. Already, Bloomberg reports that the annual deficit reduction needed to put the ratio of public debt to national output on a downward path is £35bn.According to the same report, the Treasury has prepared a list of 104 spending cuts for the government to choose from. That always seemed to be on the cards, after interest rates soared when the previous government planned huge tax cuts without any proposals for making up the lost revenue elsewhere. In the shift from one Conservative government to the next, we have gone from the tax cuts without the spending cuts, to the spending cuts without the tax cuts.Neither tax cuts nor spending cuts, however, are going to do much good for economic growth. As my colleague Sarah O’Connor explained so well in a column last week, spending less on public services in the UK will only make them “less efficient and therefore more expensive in the long run”.But what else is there? I’m glad you asked. Here are four other ideas Sunak and his chancellor Jeremy Hunt could consider.First, sustainable and credible public finances don’t require your plans to ensure public debt will be falling as a share of the national economy. The more modest goal of a constant debt-to-gross domestic product ratio will do just fine. Wanting the debt burden to go towards zero for its own sake is irrational — a fetish. Accepting a stable debt ratio reduces the gap to be filled between revenues and expenditures. (Incidentally, what that stable ratio is, and when it should be reached, could also be adjusted so as to time the deficit reduction for when the economy is best placed for it.)Second, the Nike approach to deficits: just pay it. In other words, just raise taxes rather than cut spending further. If £35bn is what it takes to put debt-to-GDP on a downward path, that’s just over 1.5 per cent of GDP. Settling for a stable rather than falling debt ratio would require less, perhaps 1 per cent. Raising tax revenue by that much would simply lift the UK to the OECD average, leaving it still well below almost all other European countries. Politically difficult, perhaps, but economically completely do-able. My personal preference would be a net wealth tax, which should both encourage more productive uses of capital and bring in significant revenue. A 1 per cent annual tax on net wealth above the level needed to get into the top 10 per cent richest in the UK, for example, would raise enough to cover what the government is reportedly trying to find. (Try out the Wealth Tax Commission’s excellent tax simulator yourself.)Third, rescue the Liz Truss baby from the bathwater that can still be heard sloshing down the drain. If you can find measures to boost the growth rate, that is, of course, the best way to make the public sector finance maths add up. And the fact that her tax cuts would not boost growth doesn’t mean there are no tax cuts that would. In particular, allowing full expensing of investment spending by business (immediately deducting the full cost of investment from taxable profits) should make it more attractive for businesses to invest in productive capital, other things being equal. The UK’s temporary “superdeduction”, where businesses can immediately deduct more than 100 per cent of investment expenditure, should have made it more attractive still (certainly businesses say so, but then they would). It is hard to measure the effect, since it has been combined with a future rise in corporate tax, but there are signs it prevented a decline in investment. And who better to make the superdeduction permanent than the man who, as chancellor, implemented it in the first place?Since if tax cuts lead to sustained higher growth rates, they do so by increasing investment, it is a small step to this (not so) radical thought: why be obsessed with the intermediary step of tax cuts, and not focus more directly on the investment itself? Some tax cuts, such as the superdeduction, plausibly boost investment, but there are other things — in particular, increases in spending — that could also increase investment, and do so much more reliably than generalised tax cuts.So here is the fourth idea: try to raise the growth rate by spending more on smart things. Things such as public investment, for example. There is no shortage of productivity-enhancing investments such as renewable energy generation or thermal efficiency retrofits in buildings. There are also expenditures that are not accounted for as investments but have the same economic function of permanently raising productivity. Health spending is the most important example — devoting more resources to shrink the population being prevented from working by untreated illness would clearly boost output. So would spending more on the right education and training.None of this sits easily with traditional Conservative sensibilities. But what the Truss market debacle showed was that those making investment decisions have long since moved on from 1980’s-style small-state ideology. The Tory party should do the same if it doesn’t want to expose itself as the true anti-growth coalition.Other readablesI detect rising unease among political leaders over central banks’ determination to slow down economic growth — and warn about a political backlash if we don’t openly discuss whether this is the best response to Russian president Vladimir Putin’s energy war.The fallout from US restrictions on semiconductor exports to China is massive.Why more common EU spending could be just the cure for stagflation.Ikea does ketchup-bottle economics, and so do natural gas prices. Numbers newsChina’s official number crunchers could not avoid coming up with a weak growth figure. My colleague John Burn-Murdoch shows how the embarrassing delay in publishing the figure forms part of a pattern of growing statistical obscurantism. Ruchir Sharma spells out how dramatically weak Chinese growth can crush any illusion that the country could overtake the US any time soon.As the European Central Bank meets today, it faces a panoply of challenges: banks are restricting credit to the economy, financial institutions are warning of liquidity problems in key markets, and higher policy rates make for politically awkward profits paid to banks that are keeping ECB loans on deposit. More

Visiting Syracuse, N.Y., which has benefited from recent legislation, the president will point to his administration’s efforts to lower costs for families.WASHINGTON — President Biden will travel to Syracuse, N.Y., on Thursday to highlight investments in semiconductor manufacturing and make a last-ditch attempt to win over voters on inflation, the economic issue that is dragging on Democrats ahead of the midterm elections.At a time when polls show that voters disapprove of the president’s handling of rising prices and trust Republicans more on the issue, Mr. Biden will seek to frame the elections as a choice between his administration’s ongoing efforts to lower costs for families and Republican aspirations to cut taxes for corporations and the wealthy — which could fuel even higher inflation — and other plans that Mr. Biden says would raise health care and electricity costs.Senior administration officials told reporters on Wednesday afternoon that Mr. Biden would use his trip to celebrate the chip maker Micron’s announcement this month that it would spend up to $100 billion to build a manufacturing complex in the Syracuse region over the next 20 years, creating up to 50,000 jobs in the process. Company officials said that investment was enabled by a bipartisan advanced manufacturing bill that Mr. Biden championed and signed into law earlier this year.The administration officials said the area exemplified a community benefiting from Mr. Biden’s economic policies, which have also included a bipartisan infrastructure bill approved in 2021 and the Inflation Reduction Act, signed late this summer, which raises taxes on corporations, seeks to reduce prescription drug costs for seniors and invests hundreds of billions of dollars into new energy technologies to reduce the fossil fuel emissions driving climate change.They also said it was the right backdrop for Mr. Biden to amplify the contrast he has sought to draw with Republicans on inflation. Republican candidates have campaigned on rolling back some of the tax increases Mr. Biden imposed to fund his agenda, extending business and individual tax cuts passed by Republicans in 2017 that are set to expire in the coming years, reducing federal regulations on energy development and other business and repealing the Inflation Reduction Act.The State of the 2022 Midterm ElectionsElection Day is Tuesday, Nov. 8.Bracing for a Red Wave: Republicans were already favored to flip the House. Now they are looking to run up the score by vying for seats in deep-blue states.Pennsylvania Senate Race: Lt. Gov. John Fetterman and Mehmet Oz clashed in one of the most closely watched debates of the midterm campaign. Here are five takeaways.Polling Analysis: If these poll results keep up, everything from a Democratic hold in the Senate and a narrow House majority to a total G.O.P. rout becomes imaginable, writes Nate Cohn, The Times’s chief political analyst.Strategy Change: In the final stretch before the elections, some Democrats are pushing for a new message that acknowledges the economic uncertainty troubling the electorate.In a memo released by the White House on Thursday morning, officials sought to frame those Republican proposals as potential fuel for further inflation, posing a risk to families struggling with high prices. “Their economic plan will raise costs and make inflation worse,” administration officials wrote.The memo suggests that among his other attacks in Syracuse, Mr. Biden will hit Republicans for what he says is an effort to raise costs for student borrowers. Several Republican-led states have sued to stop his plan to forgive up to $20,000 in student loan debt for qualifying individuals.Mr. Biden has struggled in recent weeks to persuade voters to view inflation as an issue that shows the contrasts between him and Republicans, rather than a referendum on his presidency and policies.Polls suggest the economy and rapid price growth, which touched a 40-year high this year, are top of mind for voters as they determine control of the House and Senate. Nearly half of all registered voters in a New York Times/Siena College poll this month named economic issues or inflation as the most important issue facing the country, dwarfing other issues in the survey, like abortion. Other polls have shown voters trust Republicans more than Mr. Biden and his party to handle inflation.Through the start of this month, Republican candidates had spent nearly $150 million on inflation-themed television ads across the country this election cycle, according to data from AdImpact. Those ads blame Democratic policies under Mr. Biden, including the $1.9 trillion economic relief package he signed in 2021, for inflation; economists generally agree that the spending helped fuel some price growth but disagree on how much.Mr. Biden previewed his renewed attacks on Republicans on Wednesday evening, in a trio of virtual fund-raisers for Democratic members of Congress. In each one, Mr. Biden focused almost exclusively on economic issues, championing the laws he has signed and warning that Republicans would seek to roll them back.The president criticized Republicans for promoting what he called “mega-MAGA trickle-down economics,” and he said the tax cuts Republicans support risk creating turmoil in financial markets. He drew a direct parallel between the Republican proposals and the tax cuts for high earners in Britain pushed by former Prime Minister Liz Truss, which prompted a harsh backlash in financial markets that led Ms. Truss to resign after a brief tenure.“You read about what happened in England recently, and the last prime minister, she wanted to cut taxes for the superwealthy — it caused economic chaos in the country,” Mr. Biden said. “Well, that’s what they did last time, and they want to do it again.” More

Clare Lees was shocked this summer when she saw her monthly broadband bill had jumped to almost £40. The 61-year-old contacted EE, her longstanding provider, to ask if it was offering a cheaper package for people receiving benefits. But the BT-owned company said it had no “social tariff” and warned her she would be penalised for trying to switch providers while in contract.“If I didn’t have a lodger I’d be in a real mess,” said Lees.As the cost of living crisis intensifies, telecoms companies are facing increased scrutiny from regulators and politicians over the extent of their support for struggling customers. Several this year boosted underlying revenue after raising their prices by 3.9 per cent above inflation and are poised to push ahead with similar increases next year. While a number of broadband providers offer social tariffs to households on benefits, EE is one of many that has yet to do so. Others include Shell, Plusnet, O2, Three and TalkTalk.Labour this month urged the government to prevent operators from pushing ahead with above-inflation price rises and to “take action against” mid-contract increases and early termination costs for customers looking to move to social tariffs.In its latest affordability report, published last month, Ofcom said almost a third of British people, or 8mn households, were struggling to pay their telecoms bills. The watchdog found only 3.2 per cent of the 4.2mn households receiving universal credit were on a social tariff, while 70 per cent of benefits claimants did not know such products existed. And with inflation forecast by the Bank of England to remain above 10 per by the end of the year, when most 2023 prices will be decided, telecoms pricing could rise by as much as 15 per cent early next year compared with current prices.“We want telecoms companies to think very carefully about what they’re doing at this exceptional time,” said Fergal Farragher, Ofcom’s director of telecoms consumer protection. “At a minimum we’re saying you should put [a social tariff] in place. If you don’t, you shouldn’t penalise your customer for changing provider.”Telecoms groups have been criticised for securing “windfall profits” as households are squeezed, but industry insiders and observers said the rises were needed to cover rising costs as well as investment in new infrastructure. “The price increase has merely compensated for other drags . . . as their energy hedges expire and wage demands increase,” said James Barford, analyst at the media consultancy Enders Analysis. He pointed to BT’s modest target for 2022 of 4 per cent growth in earnings before interest, tax, depreciation and amortisation.Philip Jansen, BT’s chief executive, said in July that “we need to pass increased costs on to consumers” across mobile and broadband. He described “low prices” as not “always the best answer”, adding that they had contributed to the slow rollout by operators of full fibre and 5G. Ahmed Essam, chief executive of Vodafone UK, said that although providers had a duty to help customers in difficulty, “government can play a bigger role” by, for example, cutting or removing the value added tax on social tariffs.

Providers offering social tariffsProvider and TariffPriceSpeedUniversal creditPension CreditAir Broadband Air Support£20100Mbit/sYesYesBT Home Essentials£1536Mbit/sYesYesBT Home Essentials 2£2067Mbit/sYesYesCountry Connect Social£1550Mbit/sYesYesG. Network Essential Fibre£1550Mbit/sYesYesHyperoptic Fair Fibre 150£25150Mbit/sYesYesHyperoptic Fair Fibre 50£1550Mbit/sYesYesKCOM Full Fibre Flex£14.9930Mbit/sYesYesNOW Broadband Basics£2036Mbit/sYesYesSky Broadband Basics£2036Mbit/sYesYesVirgin Media Essentials£12.5015Mbit/sYesNoVirgin Essential Broadband Plus£2050Mbit/sYesNoVodafone VOXI for Now£10n/aYesNoVodafone Essentials Broadband£1238Mbit/sYesYesSource: Ofcom and FT research

Even among companies that provide social tariffs, there is a discrepancy in how easy they are to find via company websites and search engines. And according to critics, major telecoms groups have not given customers reasonable opportunity to switch providers because they have not clearly signposted in-contract price rises. Research in January by Hyperoptic, a broadband provider, found 60 per cent of people were unaware of forthcoming price rises.The Committee of Advertising Practice, responsible for producing and upholding advertising codes, is consulting on new guidance that would compel operators to make price rises much more prominent in advertisements “to avoid misleading customers”.The Department for Digital, Culture, Media & Sport said it was “committed to helping households through the cost of living crisis” and had negotiated with telecoms companies to provide social tariffs. It added that all taxes were kept under review. BT said it would “like to apologise to Mrs Lees” and that it would introduce a new social tariff for EE and Plusnet broadband customers soon. But Lees called on operators to be “more flexible” by allowing customers to cut their data packages or switch providers. “If they are supportive and help people through these crises, they’ll ultimately create more loyalty to their brand.” More