Andy Burnham has wasted no time in offering up potential solutions to the cost of living crisis, announcing on his second day in office that he will "bring back hope" for struggling families by cutting VAT on energy bills.
VAT on Electricity Bills Axed
Burnham has started making good on his promise for “breathing space” for struggling households, a key plinth of his economic plans unveiled in his maiden speech outside No 10 on Monday. The move will see VAT removed from domestic electricity bills from October 1.
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.”
It is estimated that the change will reduce the annual Ofgem price cap by around £45 from October, with companies expected to pass the reduction onto customers.
Chancellor John Healey's Statement
Chancellor John 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”. He continued: “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.”
The fully priced plan from Mr Healey comes as Burnham continues to pad out his cabinet, with a number of key appointments made since yesterday, including Ed Miliband receiving the FCDO brief, Angela Rayner returning as Housing Secretary, and Shabana Mahmood staying on as Home Secretary.
Funding and Impact
Johnathan Reynolds, Burnham's newly-minted business secretary, has said the PM's VAT move is funded until "the end of the financial year", with anything beyond then needing to be included in his boss' first Budget. He added that funding for the policy has come from the Government's decision to scrap digital IDs, adding the £45 saving would be "on average", and "additional" for households alongside a £150 saving. Reynolds, who said he does not "anticipate any problems" with the move, added that he expects energy providers to be "very responsive".
Early Boost: Government Borrowing Falls
Andy Burnham and his new Chancellor, John Healey, got an early boost as official figures revealed government borrowing dropped by a third in June. The Office for National Statistics (ONS) said borrowing – the difference between what the government rakes in from taxes and spends - stood at £16billion last month, down £7.9billion on June last year. It was also £300million below the Office for Budget Responsibility’s forecast. The welcome fall was largely because of lower inflation-linked debt interest costs, the ONS said.
Former defence secretary Mr Healey, whose appointment as Chancellor by new PM Andy Burnham came as a surprise, said: “The Prime Minister and I have talked about how we will work in lockstep to meet the fiscal rules with a buffer against uncertainty and how we’ll make life more affordable for working people right across the UK…”
