New Prime Minister Andy Burnham has confirmed that VAT on electricity bills will be removed from 1 October, delivering a £195 cost of living boost for households. The move is expected to take around £45 off the yearly Ofgem price cap, adding to the £150 removed by Sir Keir Starmer's government in the budget last year.
Funding and Impact
Mr Burnham says the cut, estimated to cost £850m, will be funded by his decision to scrap the previous government's £1.8bn digital ID programme. The new PM, who succeeded Sir Keir Starmer on Monday, says the move will "put more money in people's pockets and bring back hope". The cut will come into effect on the same day as the new energy price cap, which is set every three months and determines how much the average household pays.
Chancellor's Statement
John Healey, the new chancellor, says the cut "will give families some breathing room on bills, and provide some reassurance this winter". Mr Healey was among Mr Burnham's cabinet picks on Monday night. He quit cabinet last month accusing Keir Starmer and Rachel Reeves of putting the UK’s security at risk, saying the defence investment plan fell well short. He will now be responsible for finding the money to raise military spending to 3% by 2030. Mr Healey said it is the “greatest privilege” to take on the role.
In a statement posted on X, he said: “It is the greatest privilege to be appointed Chancellor of the Exchequer by the Prime Minister. Together, we will build a new economy, build new hope and advance the working people of this country. Time to get on with the job.” Mr Healey said the government led by Mr Burnham “will meet our commitments on defence to our international allies”.
