Andy Burnham announced an £850m cut to VAT on energy bills on his second day as prime minister, making VAT on energy bills the centrepiece of his first significant policy move. He said the cut would put more money in people’s pockets and begin from October.
The change is expected to reduce average electricity bills by about £45 a year. Burnham said: "I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as prime minister. We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope."
John Healey and the budget
John Healey said the cut would "bring down inflation while supporting households in every postcode." Downing Street said the move would be partly funded by scrapping Keir Starmer’s digital ID scheme, which it said would have cost an estimated £1.8bn over three years.
Darren Jones pushed back on that account in an X post, saying: "Good news that VAT will be cut on electricity bills. It’s a simple way for families to save a few quid, and to mechanically help to keep inflation that little bit lower. But the DigitalID program was unfunded. The government will have to set out how it will pay for its new policies at the budget."
Northern Ireland support
The VAT cut will not apply in Northern Ireland because EU VAT rates apply there after Brexit. The Stormont executive will be given funding to provide an equivalent level of support there, so households in Northern Ireland are set to receive the help through a separate route.
Burnham was due to chair his first Cabinet meeting at 12.30pm, after removing several Starmer loyalists from the cabinet the day before. Ed Davey criticised the policy for not going far enough, leaving the budget as the point where the funding argument has to be settled.
