Prime Minister Andy Burnham has announced his first major policy since taking office: a cut to the tax on electricity bills. VAT will be removed from domestic electricity from October 1, 2026, according to an announcement made this morning (July 21). The policy is funded by cancelling the Digital ID programme, Chancellor John Healey confirmed.
Policy Details and Impact
The electricity tax cut is part of Mr Burnham's plan to 'bring back hope' for families struggling with the cost-of-living crisis. It is estimated that the change will reduce the annual Ofgem price cap by approximately £45 from October, with suppliers expected to pass savings on to customers. This measure marks Mr Burnham's first major policy announcement just a day after entering 10 Downing Street.
Prime Minister Burnham stated: “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 Economic Context
Chancellor John Healey explained: “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 added: “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.”
In his first address to the nation as Prime Minister, Mr Burnham pledged the biggest change to British politics in 40 years, promising 'a new political model and a new economic model' for Britain. On Monday evening, he made sweeping changes to the Cabinet, appointing Mr Healey as Chancellor to succeed Rachel Reeves. Several major figures from Sir Keir Starmer’s era, including former deputy prime minister David Lammy, former attorney general Lord Hermer, and former housing secretary Steve Reed, left Government. Their replacements were announced throughout Monday evening and will join Mr Burnham around the Downing Street Cabinet Room table on Tuesday.
