Prime Minister Andy Burnham has announced a new tax cut that will remove Value Added Tax (VAT) from domestic electricity bills beginning October 1. The current 5% VAT rate on household electricity will be reduced to 0%, a measure Burnham stated is intended to provide financial relief and put more money into people's pockets.
The cancellation of the Digital ID Programme is expected to offset the lost tax revenue, saving an estimated £850 million in the current financial year. The government projects the VAT cut will reduce typical annual bills by approximately £45 and lower inflation by one percentage point. This announcement marks one of the first major economic policy changes under the new Prime Minister.
Chancellor of the Exchequer John Healey said the measure aims to provide reassurance during the winter months, acknowledging that many individuals have struggled with the cost of living. Healey also noted that the funding for the tax cut this year comes from the Digital ID programme's cancellation, which he believes will help reduce inflation and support households nationwide.
Prime Minister Burnham, in his initial statements as leader, emphasized a need for change in Westminster, stating that the government has not been working effectively for the public and that families have been struggling with the cost of living. He reiterated his commitment to giving people