Despite a 30% jump in profits, landline rental is going up again ? and the superfast broadband excuse looks thin
Is BT desperate to lose customers? I'm one of its many millions of landline users and have been pretty peeved every time I see how much the line rental is costing. And now it's going up again. The annual bill for just having a BT line ? before you've made a single call ? is now �166.80. Three years ago it was �132 a year. So line inflation has been 26% when over the same period the CPI index has gone up 8%.
What is BT doing at its exchanges to justify such an increase? The obvious answer is that it's upgrading everything for superfast broadband. But surely the cost of broadband should be borne by broadband users, not by the still significant numbers of people, many of them pensioners, who are not on the internet and only use BT for landline phone calls.
BT's last reported profits, for the quarter to 31 December 2010, were up 30% to �531m. The free cash flow was up 69%, while its net debt ? the money borrowed to invest in the likes of broadband and 3G ? is falling fast. Chief executive Ian Livingstone enjoys a fat pay packet of �2m-plus while presiding over steep cost-cutting; the last annual report said wages and salaries were down 7% at BT Group in 2009-2010, "largely due to the impact of labour resource reductions". I think that means jobs cuts to you and me, but bonuses all round for the board.
The stock market loves it; BT shares have gone from 115p to 180p over the last year or so. Yet the company still feels the need to put up line rental costs not once but twice in the space of just six months. And it has thrown in some above-inflation rises in call connections costs too.
It also looks as if competition is failing in this market. There is now a well-established pattern in which BT's rivals benchmark their landline costs against BT. Within weeks or even days, they match BT's landline price rises. So maybe BT is not so desperate to lose customers. It knows that if you go elsewhere you'll pay much the same.
? So the truth is out. The basic rate of tax in Britain is 32% not 20%. After years pretending that national insurance (soon to be 12%) is there to pay for the NHS and pensions, the government has admitted it all goes into the same pot of general taxation. For years taxpayers have been treated almost contemptuously by politicians who pledge never to raise the basic rate of tax, then push up NI, imagining us too stupid (mostly correctly) to spot it's a rise in basic rate tax.
But Osborne's honesty in recommending a potential merger between income tax and NI betrays another agenda. Income tax rates at 20% or 40% seem reasonable and compare well internationally. Specify them as 32%, 42% and 52%, and you're able to say we are way out of line internationally (we're not) and need to be cut. Cue more massive public spending cuts. A tax simplification agenda turns into an agenda of tax cuts for the well-off. Osborne has already signalled that the 50% rate will not last the end of this term, and gave a cast-iron guarantee to non-doms that they are safe from further tax changes. So over the next few years, he will scour the accounts to find tax cuts for the rich, but insist on austerity for the rest of us. Enjoy the march today.
Source: http://www.guardian.co.uk/money/blog/2011/mar/26/bt-landline-rising-costs
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