OK - Ombusdman service says it's a commercial decision and they can do nothing. Looks like I'm stuck with their underhand tactics and downright lies. Just out of interest try googling the mobile T&C's - I just have again and there is no mention of tethering restrictions in the ones readily avaiolable online.
http://www.productsandservices.bt.com/consumer/terms/mobile-service.html
25 (b)
Well, when I joined BT mobile, I could tether, now I can't.What's the point of a 20GB data allowance if I can't tether?
I will be leaving at the end of my 12 month contract and taking my landline and broadband contracts with me.
Hopefully BT,mobile may see the light and allow tethering by by the time your contract comes to an end
The problem is so many people myself included just tick the box agreeing the T&C because they cannot be bothered to check and then when like tethering it is clearly stated it is not permitted then get annoyed at BT whereas the problem was yours (mine) for not taking the time to read the T&C in the first place