Prime Minister says £45-a-year reduction will give struggling households “breathing space” this winter
PRIME MINISTER Andy Burnham has announced that VAT will be removed from domestic electricity bills from October 1 as part of his Government’s first major intervention on the cost of living.
The move, unveiled alongside new Chancellor John Healey on Tuesday morning, is expected to reduce the annual Ofgem energy price cap by around £45, provided suppliers pass the full saving on to customers.
It comes less than 24 hours after Mr Burnham entered Downing Street promising immediate action to support households struggling with rising bills and stretched finances.
Mr Burnham said: “Westminster has not been working for people for too long, with families struggling with the cost of living.
“That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
The Government said the measure would initially be funded by cancelling the planned Digital ID programme.
Mr Healey said: “For too long, too many people have struggled with the cost of living.
“Today’s energy tax cut will give families some breathing room on bills and provide some reassurance this winter.
“This measure is funded this year by cancelling the Digital ID programme. It will help bring down inflation while supporting households in every postcode.”
The announcement represents the first policy move of Mr Burnham’s premiership and comes ahead of the first meeting of his newly appointed Cabinet.
In his first address from Downing Street, Mr Burnham promised the biggest transformation of British politics in four decades, pledging to create what he described as “a new political model and a new economic model” for the country.
He began reshaping the Government on Monday evening, appointing Mr Healey as Chancellor in place of Rachel Reeves.
A number of senior figures from Sir Keir Starmer’s administration also left Government, including former deputy prime minister David Lammy, former attorney general Lord Hermer and former housing secretary Steve Reed.
Their replacements are expected to join Mr Burnham around the Cabinet table on Tuesday as the new administration begins setting out its priorities.
The Prime Minister has also indicated that his Government is considering further measures to ease pressure on household finances, including controls on rents and a cap on bus fares.
Further details on those proposals have yet to be announced.
