Within hours of becoming prime minister, Andy Burnham announced a VAT cut on household electricity and a 20% business rates reduction for pubs and music venues — but critics are already questioning how he'll pay for it, and the US has warned of tariff retaliation. These early moves, alongside a pledge to collaborate with social media influencers, give the clearest picture yet of how the new Labour leader intends to govern.
Burnham, who took office on 20 July 2026 after winning a by-election in Makerfield, has promised to give people “more breathing space” on living costs. His first major policy was cutting VAT on domestic electricity from 5% to zero, effective 1 October. The government says a typical household will save about £45 a year. The cut also applies to small businesses, charities and residential care homes that qualify for domestic energy VAT relief. The move is funded by scrapping the digital ID programme, which was due to cost £1.8bn over three years; the VAT cut itself will cost £850m this financial year, according to ministers.
“Andy Burnham's first policies explained: VAT and business rates cuts, funding challenges and US tariff warnings.”
On 23 July, Burnham unveiled a separate package for England: a 20% cut in business rates for pubs, clubs and live music venues from April 2027. Almost 32,000 premises will benefit, with a typical pub saving around £1,100 a year. The largest live music venues are excluded. The prime minister said the cut would be funded by reviewing business rates relief for shops deemed not to make a “positive contribution” — such as vape shops — and by increasing rates on large fulfilment warehouses used by companies like Amazon.
Burnham is also changing how Downing Street communicates. His team plans a “more social first” approach, with less polished content and more collaborations with online influencers. On his first day as PM, he appeared on a TikTok series called “The Career Ladder”, run by Ukrainian creator Max Klymenko, whose audience is mainly 18- to 24-year-olds. Young TikTokers who worked on his by-election campaign were invited to Downing Street. The strategy echoes how Burnham built his own brand as Greater Manchester mayor.
For UK readers, these policies have direct, practical effects. The VAT cut will lower electricity bills for every household with a domestic supply, though savings rise with usage. EV owners who charge at home will benefit particularly: on a cheap overnight tariff, the cost per mile could fall from about 1.6p to 1.52p. However, critics point out that public charging points still attract 20% VAT, widening the gap between drivers with driveways and those without. The business rates cut should help protect pubs and music venues, which have faced rising costs since Covid-era relief ended, but it only covers England; charities have called for equivalent support in Scotland and Wales.
Q: How much will I save from the VAT cut on electricity? A typical household will save about £45 a year from 1 October 2026. Those who use more electricity — for example, large families or people running medical equipment at home — will save more. The reduction applies automatically to all domestic customers, including those on fixed tariffs.
Q: Will the business rates cut affect my local pub? If your local pub is in England, it will likely receive a 20% discount on its business rates bill from April 2027. The government expects almost 32,000 pubs, clubs and live music venues to benefit, with an average saving of £1,100. The largest venues are excluded. The cut is funded partly by increasing rates on large fulfilment warehouses and reviewing relief for vape shops.
Q: How is the government paying for these cuts? The VAT cut is funded by cancelling the digital ID programme, which would have cost £1.8bn over three years. The business rates cut is paid for by a mix of higher rates on fulfilment warehouses and removing relief from businesses deemed not to make a positive contribution, such as vape shops. Critics, including former chief secretary Darren Jones and Conservative shadow chancellor Mel Stride, argue the digital ID money was never allocated, making the cut unfunded. The business secretary, Jonathan Reynolds, said funding is secure only until the end of the financial year in March 2027; any extension must be set out in the next budget.
The immediate question is whether Burnham can sustain these measures. The US ambassador, Warren Stephens, has warned that increasing taxes on American tech giants — which Burnham is considering to help fund his plans — could trigger further US tariffs. Meanwhile, the new prime minister faces pressure to set out an overarching economic strategy, with commentators noting that productivity growth has stalled since 2008. Burnham has promised a full budget later in the year, where the details of his long-term funding plans will become clear.