Just what will happen to broadband prices with the VAT reduction announced today is hard to predict. If the rise had been from 17.5% to 20% then we can be sure we would have seen price rises, but it is likely broadband providers will simply take their cues from other areas in the retail market when trying to decide whether to pass on the reduction.
The reduction in VAT is temporary and will only last for 13 months before rising again from 15% to 17.5%. The temporary cut is worth around 50p per month on a £20 broadband subscription, which just about buys a packet of crisps.
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% reduction in VAT and either use it to offset other rises in costs, or maybe increase usage allowances slightly.