Andy Burnham, in one of his initial actions as Prime Minister, has declared the removal of VAT on electricity bills. The new PM, emphasizing relief on the cost of living, anticipates a reduction of £45 on average bills following this move. This measure, estimated to cost £850 million in 2026-27, will be financed by savings from discontinuing the digital ID program, according to Downing Street.
Expressing his commitment to addressing the financial struggles faced by families, Mr. Burnham stated, “Westminster has not been working for people for too long… I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister.” The immediate tax reduction on energy bills aims to boost disposable income and instill hope among the populace.
Effective from October 1, the Government plans to eliminate VAT from domestic electricity bills, coinciding with the upcoming price cap announcement in late August. Additionally, the £45 reduction builds upon the £150 decrease initiated by the previous administration led by Keir Starmer in the last Budget. Eligible entities such as small businesses, charities, and residential care homes will also benefit from this VAT relief on energy bills.
Newly appointed Chancellor John Healey MP highlighted the significance of the energy tax cut in alleviating financial burdens on families. He mentioned that the measure would be funded by scrapping the Digital ID program and contribute to curbing inflation while supporting households nationwide.
As Mr. Burnham readies to convene the new Cabinet, notable figures from the previous administration, including Rachel Reeves, David Lammy, and Peter Kyle, have been replaced. The reshuffle in ministerial ranks will continue under the new PM’s leadership.
In his pledge to assist financially strained citizens, Mr. Burnham emphasized the urgency in providing relief on the cost of living. He articulated a vision for a paradigm shift in politics and economics to remedy the lasting impacts of past policies.
Further long-term measures to address the cost of living are anticipated in the upcoming autumn budget, as indicated by Downing Street. Stay updated on the latest political developments by following our live blog for continuous updates.
