Burnham announces plans to cut VAT on electricity bills as first cost-of-living move
Andy Burnham has unveiled his first cost-of-living measure as prime minister, announcing that VAT will be removed from domestic electricity bills from 1 October. The tax cut, one of his first acts in office, is intended to give struggling households "breathing space" and follows his pledge on entering Downing Street to tackle the cost of living and restore public trust in government.
The change is expected to lower the annual Ofgem price cap by around £45, with energy suppliers anticipated to pass the saving on to customers. Newly appointed chancellor John Healey said the measure would be funded this year by scrapping the Digital ID programme, describing it as a way to offer families "breathing room" and reassurance ahead of winter. The announcement came a day after Burnham's first speech outside No 10, in which he pledged to "bring back hope" to Britain.
In short
- Burnham scraps VAT on electricity bills from 1 October
- Move expected to cut Ofgem price cap by about £45 a year
- Funded by cancelling the Digital ID programme, says chancellor Healey
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The VAT cut provides immediate relief to households struggling with energy bills during winter, addressing a genuine cost-of-living crisis affecting millions of Britons. By prioritising direct support to families over a digital identity scheme, the government demonstrates commitment to its core pledge of tackling costs and restoring public trust through concrete action.
The case against
Whilst addressing a real problem, the £45 annual saving is modest and provides equal benefit to all households rather than targeting those in greatest need; moreover, by scrapping Digital ID to fund this measure, the government forgoes potential gains in identity security and fraud prevention. More targeted, means-tested support might more effectively help vulnerable families whilst allowing the government to pursue other priorities with greater fiscal discipline.
Explained simply
Many UK households have struggled to afford energy bills in recent years as costs have risen sharply. This affordability crisis has become a major political issue affecting millions across the country.
Andy Burnham recently became prime minister after campaigning on addressing the cost of living. A new government's early policy decisions are closely watched as indicators of its priorities and how it intends to deliver on campaign commitments.
Electricity bills include VAT, a sales tax applied to most goods and services in the UK. Supporting household energy costs has long been a focus of government policy, with regular debate about ways to ease this burden on families.