New British Prime Minister Andy Burnham said on Tuesday he would cut taxes on electricity bills as one of his first moves as prime minister.
This is the first of several early moves to signal his intent to ease a cost-of-living crisis and quell anger over successive governments’ failure to bring change.
In his second day in office, Burnham said his government would remove the value-added tax from domestic electricity bills from Oct. 1, cutting around 45 euros from the average annual bill of around 1,862 euros that households pay.
With bond investors watching closely for how any fiscal support would be paid for, he said the move would be funded by savings from the cancellation of a 1.8 billion euros ($2.42 billion) digital ID programme, announced on Sunday.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope,’’ he said in a statement, having pledged to give people more “breathing space” in their lives.
Some energy experts questioned whether the change would have a deep impact on households, especially when gas prices have risen due to the conflict in the Middle East, making it likely that the price cap on energy bills will rise in October.
Energy bills have been one of the main drivers of Britain’s cost-of-living crisis after the wholesale gas price, which heavily influences British electricity prices, surged after Russia’s full-scale invasion of Ukraine in 2022.
The Conservative government at the time spent billions of pounds to shield households through the energy price guarantee.
However, while prices eased from mid-2023, they remain up to 60 per cent higher than before the energy crisis.
The End Fuel Poverty Coalition welcomed the move as a sign of positive intent but added: “It does not address the scale of what households are facing.”
Ruth Curtice, chief executive of the Resolution Foundation, said the move could benefit higher-income families because the cuts were not targeted.
“With bills still set to rise over 150 euros this October, this money would have been better spent on more targeted support,” she said in a statement.
Burnham has said he will unveil more early policies, telling reporters on Monday he wanted his new government “to do some things that people will feel and feel quite quickly”, especially those on the lowest incomes.
It is a strategy he hopes can win back voters to the governing Labour Party and fight a challenge from the populist Reform UK, led by Brexit campaigner Nigel Farage.
There is a lot at stake.
Dubbed the “King of the North” for his dogged defence of Greater Manchester, Burnham is the most popular leader of Britain’s main political parties, for now.
Britain’s revolving door of prime ministers over the past decade has underlined how quickly parties can move against leaders who are not seen as delivering for voters.
He wants to hit the ground running, and in his first speech as prime minister on Monday, Burnham said his ambition was to end rough sleeping in Britain.
To ease pressures on families, he is also expected to look at possible caps to bus fares, something he did in Manchester and other measures, to back up his assertion that “I will put the care of people at the heart of everything I do”.