New Prime Minister Andy Burnham announces VAT cuts on household electricity bills over winter

It’s been less than 24 hours since Andy Burnham officially became Prime Minister, and he’s already announced his first measure.

After giving his first speech as Prime Minister outside the doors of Number 10 yesterday, where he said he intended to ‘give people some breathing space’ straight out the gate, it has now been announced that millions of households across the UK will benefit from immediate action to help with their electricity bills this winter.

The Government says it wants to address the cost of living crisis first and foremost, and will do this by tackling rising bills with a tax cut to remove VAT from domestic electricity bills from 1 October, just in time to impact the next Ofgem price cap.

This immediate action applies and is funded for this financial year.

The cost of this immediate action for this financial year is being funded from the £1.8bn Digital ID programme – which Burnham also announced he would be scrapping.

Any further action – including on funding for longer-term measures – will be taken at the Budget, alongside an Office for Budget Responsibility (OBR) forecast, and all decisions at that point will continue to be funded with the Government’s fiscal rules, it has been confirmed.

Cutting VAT on electricity bills is expected to take around £45 off the yearly Ofgem price cap in October, and this is on top of the £150 removed from bills at the last Budget.  

All suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs.

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.  

‘I will give this my all’ – Andy Burnham’s speech in full as he becomes Prime Minister

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“Westminster has not been working for people for too long, with families struggling with the cost of living,” commented Prime Minister Andy Burnham.

“That needs to change.

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“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.”

Featured Image – Matthew Henry (via Unsplash)