The government has refused to commit to extending the VAT cut on household electricity bills beyond March, as Cornwall Insight predicts typical annual energy bills could soar by £276 from January – the largest rise since January 2023.
Prime Minister Andy Burnham and Chancellor John Healey have not recommitted to keeping VAT off household electricity bills beyond the current freeze, which is set to expire in March. The VAT cut, introduced on October 1, was one of Mr Burnham's first moves after succeeding Sir Keir Starmer in No 10 Downing Street.
VAT cut saves households £45 but future uncertain
The shake-up to energy bills from the former Greater Manchester Mayor kicked in on October 1, and it is estimated that it will save households £45. However, any decision over extending the freeze is likely to be put off to the spending review next year, according to reports.
Mr Healey, who was appointed to the No 11 brief by Makerfield MP Mr Burnham, is still expected to target help at poorer households at the Autumn Budget on October 28. But he is unlikely to recommit to keeping VAT off household electricity bills beyond March.
Chancellor sets out global economic vision in Bangkok
This week, Mr Healey used the IMF Annual Meetings in Bangkok to set out how the UK and its international partners can work together to respond to global economic headwinds and strengthen the conditions for growth. The Chancellor set out his view on how international co-operation can strengthen that resilience globally, focusing on driving economic growth, including by harnessing AI, and building resilience to crises and shocks; and unlocking international finance for development.
Mr Burnham announced the VAT cut in July as part of a package designed to give households “breathing space”. He said he was taking “immediate action to cut taxes on energy bills” as part of a cost-of-living package.
Prime Minister defends early action on energy costs
“I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister,” Mr Burnham said. “We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
With the Autumn Budget approaching on October 28, households face uncertainty over whether the VAT cut will be extended, while Cornwall Insight's forecast of a £276 rise in typical annual energy bills from January adds further pressure on the government to clarify its position on energy costs.
