The chancellor of the exchequer's decision to cut VAT by 2.5 per cent on Monday (November 24th) may not be to the eventual benefit of broadband customers, according to one expert.

Andrew Ferguson of thinkbroadband has highlighted that fact that the slashing of VAT from 17.5 per cent to 15 per cent will only be equal to 50p off a £20 per month broadband subscription.

He said that broadband providers will most likely scope out other areas of the retail market before deciding whether to cut prices themselves.

Mr Ferguson commented: "A lot may hinge on how a provider prices its products, those which list and do all their budgeting based on a plus VAT basis will most likely simply pass the saving on.

"Those that only market at the consumer sector where VAT is inclusive and hardly warrants a mention in the pricing are likely to retain the 2.5 per cent reduction in VAT and either use it to offset other rises in costs, or maybe increase usage allowances slightly."

Sky recently confirmed that it is putting up broadband subscription rates by £5 from its basic to Max packages.