British Prime Minister Andy Burnham has announced plans to remove value-added tax (VAT) from household electricity bills from October 1, his first major move to ease Britain’s prolonged cost-of-living crisis.
The tax cut is expected to save households about £45 a year on an average annual electricity bill of £1,862. Burnham said the measure would be funded by cancelling a £1.8 billion digital ID programme.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope,” Burnham said, adding that he wants to give people more “breathing space” in their lives.
The announcement signals Burnham’s determination to improve living standards quickly after years of economic pressure. However, Labour lawmaker Darren Jones questioned how the policy would be funded, saying the government must explain its plans in the next budget.
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Energy bills have remained significantly higher than pre-2022 levels despite easing from their peak, with recent geopolitical tensions adding further pressure. The End Fuel Poverty Coalition welcomed the tax cut but warned: “It does not address the scale of what households are facing, with millions still left paying an unaffordable share of their income on energy and record levels of energy debt built up over successive winters of high bills.”
Burnham, who recently became Britain’s prime minister, has pledged to restore public confidence, tackle rough sleeping, and improve living standards. He is also considering measures such as bus fare caps, saying: “I will put the care of people at the heart of everything I do.”
Financial markets are closely watching how Burnham’s government will fund its spending plans after borrowing costs rose following his comments about using “any flexibility” within existing fiscal rules.
Reuters
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