UK PM Burnham Cuts VAT on Electricity Bills, Cites Cost of Living Relief
6 verified4 unconfirmed
New British Prime Minister Andy Burnham announced on July 21 that VAT will be removed from household electricity bills beginning October 1, a move expected to reduce annual costs by about £45 per household. The measure, funded by scrapping the government’s digital ID program, is aimed at easing cost-of-living pressures and marks Burnham’s first major policy action since taking office. The prime minister stated the cut would “give people breathing space” and help lower energy bills. Burnham appointed former defence secretary John Healey as chancellor, who said the tax cut would provide “breathing room” for families this winter. The government estimated the VAT reduction will cost approximately £850 million in the 2026-27 fiscal year. Public sector borrowing for June came in at £15.989 billion, below expectations and down from £23.94 billion a year earlier, according to Office for National Statistics data. Burnham is set to convene his first cabinet meeting later on Tuesday.
What’s verified
Andy Burnham announced the removal of VAT on household electricity bills effective October 1, 2026.
The cut is expected to save households about £45 per year off the energy price cap.
Funding comes from cancellation of the digital ID program, which was to cost £1.8 billion over three years.
The VAT reduction is estimated to cost around £850 million in 2026-27.
John Healey was appointed as chancellor, replacing Rachel Reeves.
The measure is Burnham’s first major cost-of-living policy since becoming prime minister.
Not yet confirmed
One source reported that June borrowing was £300 million lower than the Office for Budget Responsibility forecast, largely due to lower inflation-linked debt interest costs.
One source noted that consumers in Northern Ireland will continue to pay VAT, but the government will give the Northern Ireland executive equivalent funding for its own cost-of-living package.
One source mentioned that Burnham’s allies have discussed reducing bus fare caps and temporarily freezing private sector rents.
One source reported that Angela Rayner returns as housing secretary after resigning in September 2025 amid a property tax controversy.
Key figures
Andy Burnham, Prime Minister of the United Kingdom
John Healey, Chancellor of the Exchequer
Rachel Reeves, former finance minister
Sources: The Guardian, dw.com
