Andy Burnham, in one of his initial actions as Prime Minister, has declared the removal of VAT on electricity bills. This move, aimed at providing relief on the cost of living as promised in his first address from Downing Street, is anticipated to reduce the average bill by £45. The Prime Minister’s office stated that this initiative, estimated to incur £850 million in 2026-27, will be financed through savings from the discontinued digital ID program.
Mr. Burnham emphasized the necessity for change, stating that the government must prioritize the well-being of its citizens who have long struggled with financial burdens. He expressed his commitment to easing the pressure on households by announcing immediate tax cuts on energy bills to inject more money into people’s pockets and restore hope.
Starting October 1, the Government will eliminate VAT from residential electricity bills, coinciding with the upcoming price cap announcement in late August. Furthermore, small businesses eligible for domestic energy VAT relief, charities, and residential care homes qualifying for reduced rates will also witness reductions in their bills.
Newly appointed Chancellor John Healey MP hailed the energy tax cut as a crucial step to alleviate financial stress on families and bolster them for the approaching winter. He highlighted that the funding for this measure, derived from halting the Digital ID program, will help combat inflation and support households across the nation.
As Mr. Burnham gears up to convene the revamped Cabinet for the first time, he is reshaping the ministerial ranks by replacing key figures from the previous administration. The Prime Minister affirmed his commitment to addressing the cost of living crisis during his early days in office, signaling a new direction for political and economic policies to revitalize communities affected by past challenges.
Downing Street assured that additional long-term measures to tackle the cost of living will be outlined in the forthcoming autumn budget.