Andy Burnham Launches Cost-of-Living Blitz with Energy VAT Cut

Prime Minister Andy Burnham launched a "cost-of-living Government" on July 21, 2026, headlined by the removal of VAT from domestic electricity bills starting October 1. The £850 million measure is expected to save average households approximately £45 annually. Chancellor John Healey stated the cut is funded by cancelling a £1.8 billion Digital ID programme established by former Prime Minister Keir Starmer.

This policy coincided with a broad cabinet reshuffle that removed Starmer loyalists and appointed John Healey as Chancellor and Wes Streeting as Defence Secretary. Burnham also announced a return to a £2 single bus fare cap in England starting January, alongside free bus travel for children aged 5-15 throughout August. To support the hospitality sector, he plans to reduce business rates for pubs, clubs, and music venues, funded by increasing rates on large out-of-town warehouses.

The administration's financial claims faced immediate backlash. Sacked minister Darren Jones and Conservative leader Kemi Badenoch argued the energy tax cut is "unfunded" because the Digital ID programme had no original budget. While consumer expert Martin Lewis called the VAT cut a "good totemic step," he warned that predicted rises in the Ofgem energy price cap could offset the savings.

Burnham's first days in office also included a phone call with U.S. President Donald Trump to discuss Middle East security and the Fifa World Cup. Despite early hints at unfreezing the tax-free personal allowance, Burnham later abandoned the plan to maintain fiscal discipline.