Within 48 hours of entering Downing Street, Andy Burnham has announced two major cost-of-living measures: a £2 bus fare cap across England and a reduction of VAT on household electricity bills to zero.
The bus fare cap, which will take effect from January 2027 and apply across England except London, reverses an increase introduced by Keir Starmer and Rachel Reeves in 2024. The initiative is expected to cost more than £500m, with about £400m coming from switching investment in international climate finance to loans, the rest from savings in the Department for Energy Security and Net Zero budget and about £50m from Department for Transport funding already set aside for buses.
“New PM Andy Burnham cuts electricity VAT to zero and caps bus fares at £2 in first week.”
“Good, affordable transport links are an essential. No one should be priced out of those and left behind,” Burnham said on Wednesday. “But for too long people have said that cheaper transport isn’t an option. I don’t accept that. I’ve done it before and I will do it again now: a £2 cap on bus fares for millions across the country.”
The VAT cut, announced on Burnham’s first full day as prime minister, will reduce the rate on household electricity bills from 5% to zero from 1 October, saving a typical household about £45 a year. Ministers said it would be funded by savings from the cancellation of the digital ID programme, which was going to cost £1.8bn over the next three years. The government estimated the cut will cost £850m this financial year. The reduction will apply in England, Scotland and Wales, with equivalent funding for Northern Ireland, though it cannot be automatically applied there due to EU rules.
Business Secretary Jonathan Reynolds said the VAT cut would give people “breathing space”, and that suppliers have been told to pass the reduction on to all household customers, including those on fixed tariffs. He added that funding is secured until the end of the financial year in March 2027, with any changes beyond that to be announced in the next Budget.
Both measures have attracted criticism. Darren Jones, sacked as chief secretary to the prime minister on Monday, described the VAT cut as an unfunded tax cut, writing on X that the digital ID programme was unfunded. Shadow Chancellor Mel Stride said: “The cuts to the Digital ID card budget are not real because the money was never provided in the first place. We are only one day in and already it is smoke and mirrors on the public finances.”
On the bus fare cap, Romilly Greenhill, chief executive of the NGO network Bond, accused Burnham of “continuing to raid the diminished UK aid budget”, arguing that climate finance “must not worsen the debt burden of countries that are already suffering the worst – and most costly – impacts of a climate crisis they did not cause.”
Despite the backlash, Burnham appears to be doubling down on the everyman style he cultivated as mayor of Greater Manchester, where he previously set a £2 bus fare cap and oversaw the Bee Network. The question now is whether “Brand Burnham” can survive the transition from Manchester town hall to Number 10.