Mobile phone bills for stolen handsets to be capped and users allowed to leave contracts

Mobile phone bills for stolen handsets are to be capped in a bid to protect users from "shock bills" under a deal which will also allow users to break off contracts if their tariffs increase.

A maximum value will be imposed on bills from stolen phones under the terms of the agreement between the Government and four major mobile phone companies.

Virgin Media, EE, Three and Vodafone have signed up to the scheme, which means phone users will also gain a right to be informed if price rises mid-contract, and to break off the contract without being hit with financial penalties if they do not wish to pay the higher fees.

The four companies are joined by communications providers BT, Sky and Talk Talk in backing the Government's plans to eliminate roaming charges within the EU by 2016.

The agreement is the latest move by ministers to help households struggling to pay their bills, as Mr Cameron attempts to neutralise Labour campaigning on what Ed Miliband has branded a "cost of living crisis".

The aim is for a new liability cap on mobiles that are lost or stolen will be in place from spring next year

No decision has yet been taken on the level of the cap, but aides indicated that it might be at a similar level to the £50 liability cap for stolen credit and debit cards.

The Government published proposals to help consumers with phone bills in the summer and in September announced the intention to develop a Telecoms Consumer Action Plan. Culture Secretary called in the phone companies last month for talks on how to protect customers.

Announcing the new measures as she accompanied David Cameron on his visit to China, Culture Secretary Maria Miller said: "We are ensuring hard-working families are not hit with shock bills through no fault of their own.

"Families can be left struggling if carefully planned budgets are be blown away by unexpected bills from a stolen mobile or a mid-contract price rise.