Andy Burnham announced an £850m tax cut on electricity bills on his second day as prime minister, removing VAT to save households £45 a year from October. The move, his first major cost-of-living policy, will be partly funded by scrapping Keir Starmer’s digital ID scheme, which Downing Street said would have cost an estimated £1.8bn over three years.
“I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as prime minister,” Burnham said. “We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
“Burnham cuts VAT on electricity bills, saving households £45, but sacked minister says funding is unclear.”
But within an hour, Darren Jones – the former chief secretary sacked in Burnham’s reshuffle – cast doubt on the funding. In an X post, he wrote: “Good news that VAT will be cut on electricity bills. It’s a simple way for families to save a few quid, and to mechanically help to keep inflation that little bit lower. But the DigitalID program was unfunded. The government will have to set out how it will pay for its new policies at the budget.”
The chancellor, John Healey, defended the cut as a way to “bring down inflation while supporting households in every postcode”. Because of Brexit, EU VAT rates apply on electricity bills in Northern Ireland, so the cut will not apply there; instead the Stormont executive will receive funding for an equivalent level of support.
Burnham will chair his first cabinet meeting at 12.30pm after removing Starmer loyalists including Rachel Reeves, David Lammy, Darren Jones, Steve Reed, Peter Kyle, Richard Hermer, Liz Kendall, Jo Stevens and Hilary Benn. Reeves was understood to have turned down another job to return to the backbenches.
The policy has been criticised by Lib Dem leader Ed Davey for not going far enough. Meanwhile, António Costa, the president of the European council, said he held a “good” phone call with Burnham, agreeing to “further strengthen” EU-UK relations and cooperate on Ukraine and “common geopolitical challenges”.
With the funding question unresolved, Jones’s intervention has set the stage for a potential clash over fiscal credibility ahead of the budget.