Prime Minister Andy Burnham has announced his first major cost-of-living policy since taking office, confirming plans to remove VAT from domestic electricity bills beginning October 1 in a move aimed at easing financial pressure on millions of households.

The government says scrapping the 5% VAT on household electricity bills will save the average home around £45 a year, offering relief ahead of the winter months as families continue to grapple with elevated energy costs.

Burnham described the measure as an immediate step toward tackling the UK’s ongoing cost-of-living challenges, arguing that government should deliver practical support that puts more money back into people’s pockets.

According to the government, the tax cut will be funded by scrapping the previous administration’s £1.8 billion digital ID programme, a policy Burnham criticized during his election campaign.

The announcement marks one of Burnham’s first major policy decisions after becoming prime minister and is intended to demonstrate that his administration will prioritize lowering everyday household costs.

While the proposal has been welcomed by supporters as a direct way to reduce electricity bills, it has also drawn criticism from some political opponents, who have questioned whether the measure is fully funded and raised concerns about its long-term impact on public finances.

The VAT cut comes against a backdrop of energy prices that remain significantly higher than before the 2022 energy crisis, with many households still facing financial strain despite recent easing in wholesale prices.

Burnham has indicated that the VAT removal is only the beginning of a broader package of measures aimed at improving living standards, with additional proposals expected to address household bills and other everyday costs in the coming months.

Source: Various Sources.