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BT and PlusNet have become the first internet service providers to cut the price of their broadband deals following the recently announced VAT reduction, prompting speculation that other companies could follow suit.

The announcements come after the Chancellor of the Exchequer Alistair Darling confirmed that VAT is to be cut from 17.5 per cent to 15 per cent. The move is on a temporary basis and is intended to stimulate consumer spending and shore up the flagging economy.

Both companies have responded to the news by cutting the cost of their broadband packages for existing and new customers. As of Monday (December 1st), BT’s Option 1 will be cut in price from £7.95 to £7.78 for the first three months and from £15.99 to £15.65 thereafter. This package offers a free wireless home hub and UK calls and a monthly usage limit of up to 10GB. There is also the option to sign up for the BT Vision on-demand digital TV service.

The Option 2 deal will fall from £13.99 to £13.69 for the first three months and from £20.99 to £20.54 for the remainder of the contract. Customers get a free wireless home hub, free off-peak UK calls, a 15GB usage limit and optional BT Vision and TV recorder.

Finally, Option 3 will be available for £18.59 – down from £18.99 - for the initial three months and will be down from £24.99 to £24.46 thereafter. Included in this offer is a free wireless Home Hub, a Hub Phone, free mobile and UK calls, unlimited downloads and optional BT Vision and TV recorder.

The company has also applied the reduction to its mobile broadband offering. The Broadband Anywhere package will be priced at £23.99 for the first three months and £29.35 after this point. Features of this deal include unlimited usage, a free Home Hub, Hub Phone and a BT ToGo handset.

All three of the deals promise broadband speeds of up to 8Mb and are available with a £20 discount when ordered online.

PlusNet has also cut the cost of its broadband packages by the full 2.5 per cent, as the company looks to expand its subscriber base from its present level of around 200,000. The move brings it’s the monthly cost of its Option 1, 2 and 3 deals down to £9.75, £14.65 and £19.55 respectively. The Essential offering, meanwhile, will have a new price of £6.65 per month.

A statement from the ISP read: “Plusnet will pass on the benefit of this reduction to all our customers from 1st December including subscription contracts signed from today.

“It is Plusnet’s intention that all customers will benefit from the change to VAT, even where those customers have been billed or paid in advance for services to be consumed from 1st of December, and we will be adjusting customer’s bills as appropriate.”

The announcements have prompted calls for other broadband providers to emulate the cuts. However, industry experts have posited that some companies may opt instead to use the cut to increase download limits or simply use the cut to mitigate the impact of cost increases that have affected them.

Given the pressure on household finances, it might be assumed that consumers would welcome a cut. Yet opinion on messageboards is divided as to whether the surplus income would be better directed at improving customer service and invested in delivering faster broadband speeds.

Jessica McArdle, web editor at Top 10 Broadband, said that the savings delivered to customers were a great “show of faith” on behalf of both companies at a time when consumers are struggling with soaring household bills and higher loan repayments.

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