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UK PM Burnham removes VAT on electricity bills from Oct 1
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New UK Prime Minister Andy Burnham has announced the removal of VAT from electricity bills, effective October 1, as part of his promise to lower the cost of living. The move is expected to reduce the energy price cap by £45. The policy will be funded by scrapping former PM Keir Starmer's digital ID plan, which was projected to cost £1.8 billion over three years. However, the VAT cut itself is estimated to cost around £850 million annually, leading to some confusion over the funding gap. Burnham stated the action will 'put more money in people's pockets and bring back hope.' New Chancellor John Healey said the tax cut will provide families breathing room and help bring down inflation. Burnham is also expected to announce a £2 cap on bus fares the following day.
Source report
Andy Burnham announces tax cut funded by cancellation of digital ID programme
LONDON — VAT is to be removed from electricity bills as Prime Minister Andy Burnham moves to fulfil his pledge to reduce the cost of living, Downing Street confirmed on Tuesday.
The measure, which takes effect from October 1, is expected to reduce the energy price cap by £45.
'Putting Money in People's Pockets'
Announcing the policy on his second day in office, Burnham said the move would "put more money in people's pockets and bring back hope."
"Westminster has not been working for people for too long, with families struggling with the cost of living," he said. "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."
Funding and Fiscal Questions
The tax cut will be funded by scrapping former leader Keir Starmer's planned digital ID programme, which was expected to cost £1.8 billion over the next three years.
However, questions emerged over the funding gap. Cutting VAT on electricity bills from 5% to zero is estimated to cost approximately £850 million per year — significantly less than the projected cost of the cancelled digital ID scheme.
New Chancellor John Healey, who replaced Rachel Reeves on Monday, defended the policy.
"For too long, too many people have struggled with the cost of living," Healey said. "Today's energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.
"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."
Further Announcements Expected
Burnham is expected to announce on Wednesday that bus fares will be capped at £2.
This is a breaking news story and will be updated. Follow HuffPost UK on Twitter, Facebook and Instagram.
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UK PM Burnham cuts electricity VAT and caps bus fares to ease cost of living