Andy Burnham has announced a major cost-of-living policy on his first full day as Prime Minister, cutting VAT on electricity bills to zero and saving every household £45. The former Manchester mayor, installed in Downing Street on Monday (July 20), spent the rest of the day appointing his cabinet, including the surprise selection of John Healey as Chancellor.
Details of the announcement
On Tuesday (July 21), Burnham confirmed the government will slash VAT rates on electricity bills from 5 per cent to zero, effective from October 1. According to officials, this measure is expected to save £45 for every household and reduce inflation by approximately 0.1 per cent.
Prime Minister 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.”
Funding and context
The decision is expected to cost £850 million. It will be funded by cancelling Keir Starmer’s planned digital ID scheme, which was set to cost £1.8 billion over the next three years. The previous government under Keir Starmer had already removed another £150 from energy bills at the last budget, which Labour says will give poorer families breathing room as the cost-of-living crisis enters its fifth year.
Any further measures will be announced in the next budget and must meet Labour’s ‘fiscal rules’ on spending, introduced by Rachel Reeves and reaffirmed by Burnham during his leadership bid.
International outreach
Burnham used his first day in Number 10 to speak to world leaders, including US President Donald Trump. He invited Trump to Manchester, and the Republican is said to have accepted the invitation.
