Andy Burnham’s first full day in Downing Street opened with a promise to cut household electricity bills and a row inside his own party over whether the numbers add up.
The new prime minister said VAT will be removed from electricity bills from October 1, the same day the next energy price cap takes effect. The change is expected to cut about £45 from the yearly Ofgem price cap, which is currently £1,663.
Burnham said the policy would be paid for by cancelling the previous government’s £1.8 billion digital ID programme. He said the cut would “put more money in people’s pockets and bring back hope”.
John Healey, the new chancellor, said the measure “will give families some breathing room on bills, and provide some reassurance this winter”. Downing Street said longer-term cost-of-living measures would come in the autumn budget.
But the announcement immediately exposed tension between Burnham’s incoming team and allies of former prime minister Keir Starmer. Darren Jones, who was sacked from cabinet on Monday, said the digital ID programme itself had not been funded.
Jones said it was “good news that VAT will be cut on electricity bills”, but added: “The government will have to set out how it will pay for its new policies at the budget.”
Business Secretary Jonathan Reynolds defended the decision, saying ministers understood that “people need some breathing space”. Asked about the funding gap, he said the VAT change was “funded for the rest of this year”, with later decisions to be taken at the budget.
The policy will also touch Northern Ireland differently because of post-Brexit VAT arrangements. Downing Street said the Northern Ireland Executive would receive comparable funding because EU approval is needed for VAT rate changes there.
Liberal Democrat leader Ed Davey said the cut was not the best way to lower energy costs, adding: “If I’m honest with you, I don’t think it’s very big, actually.”
