Households in England, Scotland and Wales will see VAT on electricity bills cut from 5% to zero from 1 October, saving a typical household about £45 a year, the government has confirmed. The move is part of new Labour Party leader Andy Burnham's pledge to help with the cost of living.
Government confirms VAT cut on electricity bills
Jonathan Reynolds, the new business secretary, said the cut would give people some "breathing space". He confirmed that the policy is funded until the end of the financial year in March 2027, with any changes beyond that to be announced in the next Budget.
The reduction applies to England, Scotland and Wales, but equivalent funding will be given to Northern Ireland, which is regulated differently, the government said.
Political reactions to the VAT cut
Conservative Party Shadow Chancellor Mel Stride criticised the use of the Digital ID budget to fund the VAT cut. He said: "The cuts to the Digital ID card budget are not real because the money was never provided in the first place. We are only one day in and already it is smoke and mirrors on the public finances."
But Mr Reynolds told the BBC's Today programme that a VAT cut to electricity bills would be funded through a "straightforward switch spend" redirecting money for digital ID. He said money for digital ID "would have had to have been found" and that scrapping the scheme removed "pressure" from the budget, allowing the government to "give real help to people".
Liberal Democrats leader Sir Ed Davey said: "I think we'll have a summer of these little headline grabbing small announcements. What we need is the big picture so people know they are getting real help with the cost of living."
Reform UK leader's view on the policy
Reform UK leader Nigel Farage said the VAT cut was "something that is only allowed because of Brexit", but he said it would not "address the real issue of the cost of living" and of running a home, because "most houses are heated by oil or gas" and bills were being inflated by green levies.
The VAT cut is set to take effect on 1 October, providing a modest saving for households across the country, while the government continues to face scrutiny over its funding approach.
