Prime Minister Andy Burnham declared his administration will operate as a "cost of living government," emphasizing immediate action on household expenses during his first cabinet meeting. A key initiative announced is a reduction in VAT on household energy bills, set to take effect in October.
This policy aims to provide immediate financial relief, with the government stating that the estimated £850 million cost for the remainder of the fiscal year will be funded by reallocating £1.8 billion previously earmarked by the prior government for the rollout of a digital ID scheme. However, this funding strategy has already generated controversy.
Darren Jones, who was removed from the cabinet following the reshuffle, questioned the funding for the VAT cut, stating the digital ID program was "unfunded" and that Burnham needed to clarify the fiscal arrangements. Opposition parties, including Conservative shadow chancellor Sir Mel Stride, also raised concerns, noting that the government's budget watchdog had previously indicated that funding for the digital ID program was to be sourced from existing budgets. A spokesperson for the prime minister insisted that the necessary funds would be secured through "savings" identified within government departments to cover the cost of the ID scheme.
The cabinet meeting followed a significant reshuffle on Monday evening, which saw the departure of several figures aligned with former leader Sir Keir Starmer, including Rachel Reeves and David Lammy. Ed Miliband has been appointed as the new foreign secretary, and Louise Haigh, an ally of Burnham, has been appointed to lead the Cabinet Office. In a move that surprised many in Westminster, John Healey has been appointed as the new chancellor. Healey, who previously served as a minister during the New Labour era, stated that fiscal discipline would be his "first duty" and committed to adhering to the tax and spending rules established by his predecessor. He also indicated that the government would aim to maximize public investment within these parameters, alongside leveraging private and international investment.
Burnham received a round of applause from his senior ministers at the start of the meeting. Further appointments of junior ministers are expected. Healey addressed Treasury staff, reiterating his commitment to fiscal prudence while also signaling an intent to utilize public investment strategically.