Andy Burnham, in one of his initial actions as Prime Minister, has declared the removal of VAT on electricity bills. Emphasizing relief on the cost of living in his inaugural address from Downing Street, the new PM anticipates a reduction of £45 on the average bill due to this decision.

The Prime Minister’s office disclosed that the elimination of VAT on electricity bills, projected to amount to £850 million in 2026-27, will be financed by savings derived from discontinuing the digital ID program. Burnham stated, “Westminster has long failed to serve the people, as families grapple with the burden of living costs. This must change. I promised to provide breathing space, and today, on my second day as Prime Minister, I am delivering on that pledge. Immediate steps are being taken to slash taxes on energy bills, increase disposable income, and restore optimism.”

Effective from October 1, the Government confirmed the removal of VAT from domestic electricity bills, with the forthcoming price cap announcement scheduled for late August. In addition to the £150 reduction initiated by the previous government in the Budget last year, households will experience an extra £45 reduction on the average bill, notwithstanding minor cost increments in other areas contributing to the price cap.

Small businesses qualifying for domestic energy VAT relief, charities, and residential care homes eligible for reduced rates will also witness reductions in their bills. Newly appointed Chancellor John Healey MP remarked, “Many have long grappled with living costs. Today’s energy tax cut will alleviate financial pressure on families and offer comfort for the upcoming winter. This year, the measure is funded by scrapping the Digital ID program, contributing to inflation mitigation while supporting households in all regions.”

Downing Street indicated that additional long-term measures addressing the cost of living will be introduced in the upcoming autumn budget.