On his first full day as prime minister, Andy Burnham announced a cut in VAT on household electricity from 5% to zero, effective 1 October, saving a typical household about £45 a year. The £850m cost this financial year is to be funded by scrapping the digital ID programme — a move that drew immediate fire from Labour's Darren Jones, sacked as chief secretary on Monday, who called it an “unfunded tax cut”. Conservative shadow chancellor Mel Stride said: “We are only one day in and already it is smoke and mirrors on the public finances.”
Two days later, Burnham unveiled a 20% cut in business rates for almost 32,000 pubs, clubs and live music venues in England from April, with a typical pub expected to save £1,100. The £100m package will be funded partly by reviewing relief for businesses deemed “non-positive”, such as vape shops, and is widely reported to involve a 20% increase in business rates for large fulfillment warehouses used by Amazon and ASOS. New business secretary Jonathan Reynolds said the cut would give people “breathing space”.
“Burnham cuts VAT and business rates, funded by digital ID cancellation and warehouse tax, sparking US tariff threats and Tory criticism.”
But Donald Trump’s ambassador to the UK, Warren Stephens, warned that if Britain raises taxes on American tech giants to fund the relief, it could trigger a tariff response. “If we go down further taxation on primarily American companies, that could certainly [elicit a tariff response],” he told Sky News. Stephens also criticised the government’s social media ban for under-16s as “a little draconian from a freedom of speech point of view”.
The VAT cut on electricity has also exposed a divide in the EV transition. Tanya Sinclair, chief executive of Electric Vehicles UK, said it “entrenches one of the biggest inequalities in the UK’s EV transition”, since drivers without off-street parking must pay 20% VAT on public charging while those with driveways pay none.
Conservative leader Kemi Badenoch challenged Burnham to rule out tax rises to pay for his “spending spree”, comparing him to Liz Truss and warning of a looming bill for taxpayers. Meanwhile, Downing Street plans a “more social first” approach, with collaborations with influencers such as Ukrainian creator Max Klymenko, whose “career ladder” series quizzes people about their job history. A Downing Street source said the aim is to reach audiences that “will not see or interact with content that is coming from government”.
Burnham inherits an economy with stagnant productivity growth since 2008, and his critics — from the US ambassador to domestic opponents — are already questioning whether his raft of policies amounts to a coherent strategy.