Prime Minister Andy Burnham has confirmed two changes that will benefit road users starting from October, delivering combined savings of £82 per household. The measures include a VAT reduction on energy bills and a lower bus fare cap, part of his first-week policy blitz since taking office.
£45 VAT Cut on Energy Bills
Mr Burnham has cut VAT rates on energy bills, saving the average bill payer £45. The reduction will take effect from October and is particularly advantageous for electric vehicle (EV) owners who charge their cars at home, as they will benefit from cheaper electricity rates for charging.
This move is one of the first major policy announcements from the Labour Party government, aiming to ease cost-of-living pressures. The savings apply to all domestic energy consumers, with the VAT cut expected to reduce household energy costs during the colder months.
Bus Fare Cap Reduced to £2
Following the VAT cut, bus users will see a fare reduction from January 2027. The previous fare cap of £3 will be lowered to £2, saving passengers an estimated £37 per year on average. According to the Department for Transport, the average number of bus passenger journeys per head in England outside London was 37 in the year ending March 2025.
Sarah Bodger, who owns a wool shop in Royal Leamington Spa, told the BBC that her daily commute involves a two-hour bus journey each way, costing nearly £58 per week. “The bus fare cap will help keep a lot,” she said. “I own a very small shop and the cost of bus travel is crippling.” She noted that her annual travel costs exceed £3,000, adding that “the cap will save me over £500 a year.”
Combined Savings of £82 for Households
When combined, the VAT cut and bus fare reduction total £82 in savings for households that use both energy and bus services. The government estimates that millions of families will benefit from these policies, which are designed to support low-income and working households.
However, questions remain about the funding and long-term impact. Max Warner from the Institute for Fiscal Studies said, “It's not clear how much we would expect to be paid back nor what the interest rates will be. Both matter for how much the government will ultimately save from this switch to loans.”
Shadow Chancellor Mel Stride accused the government of not specifying where the money to fund the initiative is coming from, calling it “a worrying sign.” Liberal Democrat transport spokesman Olly Glover criticized the policy for leaving millions of people behind, particularly those in rural areas who struggle with few or no bus services. “The government is ignoring the needs of rural communities,” Glover said.
