Prime Minister Andy Burnham's announcement of an £850 million tax cut on electricity bills has been criticized as 'unfunded' by a sacked ally of Sir Keir Starmer. The policy, which removes VAT from domestic electricity bills from October 1, aims to ease the cost-of-living crisis in Burnham's first major move since entering Downing Street.
Funding Shortfall and Digital ID Cancellation
Chancellor John Healey stated the tax cut would be funded by cancelling the Digital ID programme, estimated to cost around £600 million a year over three years. However, this falls short of the £850 million hit to tax revenues from the VAT cut. The digital ID funding was originally meant to come from unidentified Whitehall savings.
Darren Jones, a former ally of Sir Keir Starmer who lost his Cabinet post as chief secretary to the Treasury when Burnham took office, questioned how the policy would be paid for. Jones, who oversaw the digital ID scheme, posted on X: “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 DigitalID program was unfunded. The government will have to set out how it will pay for its new policies at the budget.”
Political Reactions and Impact
Jones's public criticism signals potential friction from Starmer loyalists within Burnham's premiership. The Government insisted the £1.8 billion cost of the digital ID scheme over three years had been 'scored' by the Office for Budget Responsibility, meaning the money would have had to be found. Chancellor Healey defended the move: “This measure is funded this year from cancelling the digital ID programme, and it will help bring down inflation while supporting households in every postcode.”
Burnham stated: “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.” However, Conservative leader Kemi Badenoch countered: “It’s only one day into Burnham’s Government and already the explanations are falling apart. You can’t use the funding from an unfunded programme to pay for cheaper bills.”
Limited Consumer Benefit
Martin Lewis, founder of MoneySavingExpert, said the VAT cut would have little impact. “This is a good totemic step and very welcomed,” he said. “Yet in practice people won’t feel much benefit.” The cut would reduce the annual Ofgem price cap by around £45, a modest saving for households.
