VAT CUT ON ELECTRICITY BILLS TO TAKE EFFECT IN OCTOBER

Prime Minister Andy Burnham has announced a reduction in VAT on household electricity bills, effective from 1 October. The VAT rate will fall from 5%, saving a typical household approximately £45 annually, according to government figures. The measure is estimated to cost £850m in the current financial year. The government stated the cut would be funded through savings from the cancellation of the digital ID programme, which was projected to cost £1.8bn over three years.

Chancellor John Healey said the announcement would "provide some reassurance this winter" for households facing energy costs. Healey was appointed to the Treasury as part of Burnham's cabinet on Monday, replacing Rachel Reeves, who served as chancellor under Sir Keir Starmer following Labour's 2024 election victory. Burnham became Prime Minister on Monday with a stated commitment to "bring back hope" to Britain. His new cabinet was scheduled to meet for the first time on Tuesday at lunchtime.

The VAT reduction represents one of Burnham's first acts in office and forms part of the government's approach to addressing cost-of-living pressures. The announcement came a day after Burnham took office as the UK's seventh prime minister since 2016. The government framed the measure as delivering immediate financial relief to millions of households as winter approaches.