Andy Burnham became Prime Minister on 20 July 2026, promising to give people “breathing space” on the cost of living. Within hours, he announced a VAT cut on household electricity bills and plans to scrap the controversial national digital ID scheme. His early decisions signal a sharp pivot from the Starmer era, prioritising everyday financial pressures over large-scale state projects.
The new PM has made cost of living his defining issue. In his first speech outside Downing Street, Burnham said many people “can't go out for a pint on a Friday, can't take the kids out and can't go on holiday” because of financial strain. His first concrete move was cutting VAT on domestic electricity bills from 5% to zero from 1 October 2026, saving a typical household about £45 a year. Larger households will save more as they use more electricity. The policy is a relaunch of Labour’s earlier pledge to cut energy bills, though the government admits the wholesale cost of gas – largely beyond its control – still sets overall energy prices.
“Andy Burnham's first policies as PM: VAT cut on energy, digital ID scrapped, and cost-of-living focus explained for UK readers.”
Burnham also moved to scrap plans for a mandatory digital ID for all British adults, a scheme inherited from Sir Keir Starmer. The Office for Budget Responsibility had estimated the programme would cost £1.8bn over three years. By dropping it, Burnham’s spokesperson said “the time and resource that was going to be spent on a national ID scheme will go instead to where it's most needed, such as helping with the cost of living.” The digital ID had already been watered down to a voluntary system after nearly three million people signed a petition opposing it; a cross-party committee had called its launch “nothing short of a fiasco”.
Other cost-of-living measures are reportedly being considered. Burnham has promised to keep the state pension triple lock until at least 2029, ensuring pensions rise by the highest of inflation, wage growth, or 2.5%. He has also floated lowering the threshold for the mansion tax from £2m to £1.5m, and replacing inheritance tax with a “national care levy” to fund a National Care Service. For electric vehicle owners, ministers are exploring a two-tier road tax that would see EV charges rise with the lower Consumer Prices Index while petrol and diesel taxes track the higher Retail Prices Index, making EVs cheaper to run.
But delivering these promises will require tough choices. Burnham’s chancellor, John Healey, will have to outline how to pay for them. The cost of living remains volatile: even after Starmer’s government cut energy levies by £150 in April, bills soon rose again due to the impact of US‑Israeli strikes on Iran. As Adam French of Moneyfacts put it, “a more volatile world is a more expensive world.”
Q: Will Andy Burnham cut income tax or raise the personal allowance? Burnham has said he will “look at” how much people can earn before paying tax (the tax-free personal allowance) ahead of his first Budget in autumn 2026. But he admitted changing it would be difficult, and no specific plans have been announced.
Q: What is happening with the digital ID scheme? The national digital ID for all British adults is being scrapped entirely. The resources earmarked for it – estimated at £1.8bn over three years – will be redirected to cost-of-living priorities. The scheme had already been made voluntary after public opposition.
Q: How will electric car road tax change under Burnham? The government is reportedly considering a two-tier system where electric vehicle excise duty rises with the lower CPI, while petrol and diesel taxes continue to track the higher RPI. This would make owning an EV cheaper than a traditional car once pay-per-mile charging arrives.
What happens next depends on the autumn Budget. Chancellor John Healey will set out detailed spending and tax plans, including how to fund the VAT cut on electricity and any changes to personal allowances. Burnham’s pledge to cut household energy bills by £300 by 2030 remains under scrutiny, and the new PM must navigate a volatile global economy that can quickly derail domestic promises.