Andy Burnham, newly appointed Prime Minister and Labour MP for Makerfield, has announced an immediate cut to household electricity bills by removing VAT, aiming to provide urgent relief amid rising living costs.
Effective from October 1, the government will eliminate VAT on domestic electricity bills, a move designed to influence the next Ofgem price cap and deliver an estimated £45 saving per household annually. This measure builds on the earlier £150 reduction in energy bills introduced during the previous Budget.
Funding for this initiative, which applies for the current financial year, will come from the cancellation of the £1.8 billion Digital ID programme. This fiscal decision underscores the government’s commitment to prioritizing household relief over other expenditures.
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Burnham stated, “Westminster has neglected families grappling with the high cost of living for too long. Immediate action was necessary. I promised breathing space, and this VAT cut is a step towards restoring hope and putting money back in people’s pockets.”
All energy suppliers, including British Gas, EDF, EON, Ovo, and Octopus Energy, have been urged to pass on these savings fully to their customers. Chancellor John Healey added, “This tax cut will provide families with much-needed breathing room on bills and reassurance this winter. It also plays a role in lowering inflation while supporting households across the country.”
This decisive policy move reflects the government’s proactive approach to tackling the ongoing cost-of-living crisis head-on.