LONDON (dpa-AFX) - A day after taking office, new UK Prime Minister Andy Burnham took immediate action to cut taxes on electricity bills to give millions of households breathing space this winter.
In one of his first acts as Prime Minister, Andy Burnham promised to 'put more money in people's pockets and bring back hope.'
This follows his commitment to the nation on the steps of Downing Street Monday to give people some breathing space and help with the cost of living.
Government is tackling rising bills with a tax cut to remove VAT from domestic electricity bills from October 1 in time to impact the next Ofgem price cap. This immediate action applies and is funded for this financial year.
The cost of this tax cut is being funded from the cancellation of the 1.8 billion pound Digital ID program.
Any further action, including on funding for longer-term measures, will be taken at the Budget alongside an OBR forecast, the Prime Minister's Office said. All decisions at that point will continue to be funded and also consistent with the government's fiscal rules.
Prime Minister Andy Burnham said Westminster has not been working for people for too long, with families struggling with the cost of living.
'That needs to change. I said I wanted to give people breathing space, and that's what I'm announcing on my second day as Prime Minister. We're taking immediate action to cut taxes on energy bills, put more money in people's pockets and bring back hope.'
Cutting VAT on electricity bills is expected to take around 45 pounds off the yearly Ofgem price cap in October. This is on top of the 150 pounds removed from bills at the last Budget.
By targeting electricity bills, more people will be supported with rising bills and the government is helping to keep inflation down, according to 10 Downing Street.
It clarified that all suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the 150 pounds of costs taken off energy bills announced at the last Budget.
Small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit.
This VAT cut, from 5 percent to 0 percent, is estimated to reduce CPI inflation by around 0.10 percentage points and RPI by around 0.14 percentage points.
This action is estimated to cost around 850 million pounds in 2026-27 on the basis of estimated electricity prices. Updated costs will be set out at Budget.
Copyright(c) 2026 RTTNews.com. All Rights Reserved
Copyright RTT News/dpa-AFX
© 2026 AFX News
