Prime Minister Andy Burnham has unveiled his first major policy announcement since taking office, cutting VAT on domestic electricity bills from October. The move, confirmed by Chancellor John Healey, is designed to provide households with much-needed financial relief amid ongoing cost-of-living pressures.
The reduction in VAT on electricity bills will be funded by cancelling the controversial Digital ID programme, a scheme championed by former Prime Minister Keir Starmer. Chancellor John Healey stated that the decision to scrap the programme would free up resources to support families struggling with high energy costs.
Speaking about the announcement, Mr Burnham said the measure would give households «breathing space» as they continue to face economic challenges. The policy is expected to benefit millions of households across the UK, with the VAT cut applying to domestic electricity bills from October.
The announcement comes shortly after Mr Burnham took office on Monday afternoon, following a period of political transition. The new Prime Minister has signalled a focus on addressing the cost-of-living crisis and delivering tangible support to voters.
However, the policy has already sparked internal tensions within the Labour Party. Darren Jones, a prominent ally of Keir Starmer, publicly ridiculed the announcement, questioning the effectiveness of the VAT cut and the decision to cancel the Digital ID programme. This has led to reports of a growing rift between the Burnham and Starmer factions within the party.
The Digital ID programme, which was a flagship initiative under Starmer’s leadership, had been criticised for its cost and privacy implications. Its cancellation marks a significant shift in policy direction under the new administration.
Energy bills have been a major concern for UK households, with prices remaining high despite recent government interventions. The VAT cut is expected to reduce the average household electricity bill by a modest amount, though critics argue that more comprehensive measures are needed to address the underlying issues in the energy market.
Chancellor John Healey defended the policy, stating that it was a targeted and responsible approach to supporting families while maintaining fiscal discipline. He emphasised that the cancellation of the Digital ID programme would ensure the tax cut was fully funded without adding to the national debt.
The announcement has been met with mixed reactions from industry experts and consumer groups. Some have welcomed the immediate relief for households, while others have called for a broader strategy to tackle energy affordability and sustainability.
Mr Burnham is expected to outline further policy initiatives in the coming weeks, as his government seeks to establish its agenda and address key challenges facing the country. The VAT cut on electricity bills is seen as an early test of the new Prime Minister’s ability to deliver on his promises and unite a divided party.
