Prime Minister Andy Burnham has confirmed a £45 reduction in electricity bills for households, effective from October 1, as his first major policy announcement. The move involves an £850 million tax cut on electricity bills, achieved by removing VAT on electricity, resulting in a £45 saving per household. Energy suppliers are urged to pass the savings onto customers.
Impact on Energy Price Cap
The cut comes as Cornwall Insight predicts the energy price cap will rise to £1,654.07 from October. With the £45 reduction, the effective cap would fall to approximately £1,609. The government aims to ease financial pressures on households facing high energy costs.
Political Reactions
Green Party leader Zack Polanski described the move as a “start” but warned it “won’t nearly” be enough for millions of families struggling with energy bills who face “another tough winter”. He called for a robust energy price cap to protect people from the fallout of “Trump’s illegal war in Iran”.
Conservative Party leader Kemi Badenoch welcomed the cut but questioned how the government would fund Burnham’s policies without raising taxes or increasing borrowing. “It’s only one day into Burnham’s government and already the explanations are falling apart,” she wrote on X. “You can’t use the funding from an unfunded programme to pay for cheaper bills.” She advocated for her party’s “cheap power plan”, funded by scrapping net zero policies and North Sea drilling, which she claims would cut family energy bills by £200. She urged Chancellor John Healey to “steal our ideas”.
Ofgem Changes and Forecast
From July 1, Ofgem will revise its definition of an ‘average household’ (typical domestic consumption values) to reflect falling average household energy use. The forecast suggests electricity prices will account for £871.92 of the £1,654 cap from October.
