Andy Burnham Cuts Electricity VAT Amid Funding Row

Prime Minister Andy Burnham announced an £850 million tax cut to remove VAT from household electricity bills starting October 1, 2026. The measure is intended to reduce the annual price cap by approximately £45 per household, lowering it from £1,654.07 to £1,609. Chancellor John Healey stated the cut is funded by cancelling a £1.8 billion Digital ID programme, a move designed to provide cost-of-living relief and lower inflation.

The funding source sparked immediate controversy. Darren Jones, a sacked former cabinet minister, claimed the Digital ID programme was originally unfunded, meaning the tax cut is also unfunded. Conservative leader Kemi Badenoch and Shadow Chancellor Mel Stride echoed this, accusing the government of playing fast and loose with public finances. In response, Badenoch proposed an alternative plan to cut bills by £200 through increased North Sea drilling and the removal of net zero policies.

Finance expert Martin Lewis described the cut as a welcomed totemic step, but warned that a predicted 3.1% rise in the Ofgem energy price cap on the same date could increase bills by over £50, potentially negating the savings. Green Party leader Zack Polanski called the move a start but argued it was insufficient for families facing winter.

These announcements are part of a broader policy blitz including a £2 cap on bus fares and planned business rate cuts for the hospitality sector, funded by higher rates on large out-of-town warehouses. The measures coincide with a major Cabinet reshuffle and the scrapping of the Department for Science, Innovation and Technology.