Andy Burnham has made his first major policy announcement since becoming Prime Minister, cutting tax on energy bills to help with the cost of living. The move has already sparked a row within Labour over how it will be funded, with one of Keir Starmer’s top supporters criticising it on social media.
VAT removal on electricity bills
Early this morning, the new PM announced VAT would be removed from household electricity bills from October 1. It is expected this will mean around £45 will be taken off the energy price cap in October, which is anticipated to rise sharply due to Donald Trump’s war in Iran.
In an appearance on Radio 4’s Today programme, new Business Secretary Jonathan Reynolds said the measure would stay in place for the rest of the financial year. Any longer-term decisions would need to be made in the Budget, he added.
Funding dispute
John Healey, Burnham’s surprise pick for Chancellor, 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.’ He said the cut is ‘funded this year from cancelling the Digital ID programme’.
However, that claim prompted a skeptical response from Darren Jones, Starmer’s former Chief Secretary to the Treasury, who led the Digital ID scheme. 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 Digital ID program was unfunded. The government will have to set out how it will pay for its new policies at the budget.’
Political reactions
His intervention was shared by opposition MPs, including the Conservatives, who previously called for VAT on energy bills to be scrapped. Shadow energy secretary Claire Coutinho said: ‘If Andy’s nicked our plan to cut VAT? Good. But everyone’s energy bills are up by £300 since Labour came to office, and the former minister in charge of the Digital ID scheme has said this VAT package is unfunded – which means more tax rises are coming in the Budget.’
Further announcements expected
The electricity bill announcement is expected to be the first of several this week, which Burnham said would ‘give people breathing space’ amid the cost of living crisis. In an interview with the Times at the weekend, he said frustration at the level of the personal allowance was ‘one thing I heard most on the doorsteps’.
Following his arrival at No 10 yesterday, he sacked Starmer loyalists including Rachel Reeves, David Lammy, Steve Reed and Peter Kyle from Cabinet. Alongside Healey and Reynolds, he has appointed Ed Miliband as foreign secretary, Wes Streeting as defence secretary, and given Angela Rayner back her old job of housing secretary.
