Andy Burnham has announced a VAT cut to domestic electricity bills from October to help people with the cost-of-living crisis.
The new prime minister said the move would “put more money in people’s pockets and bring back hope”, as he unveiled the flagship policy on his first full day in office.
“Westminster has not been working for people for too long, with families struggling with the cost of living,” he said.
“That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
It is estimated that the change will reduce the annual Ofgem price cap by around £45 from October 1, with companies expected to pass the reduction onto customers.
Chancellor John Healey, who was appointed on Monday, said the move would be funded by cancelling the Digital ID programme announced by outgoing prime minister Sir Keir Starmer.
“For too long, too many people have struggled with the cost of living,” Healey said.
“Today’s energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.”
He continued: “This measure is funded this year from cancelling the Digital ID programme, and it will help bring down inflation while supporting households in every postcode.”
The Digital ID programme was announced by former prime minister Sir Keir Starmer, ahead of last year’s Labour conference, saying it would be mandatory for right-to-work checks as part of a crackdown on illegal immigration.
But Burnham’s team has scrapped the scheme to fund the fresh tax cut.
The policy announcement on his first full day in office comes after the new premier promised to provide early “breathing space” for households struggling with the cost of living as he stood on the steps of No 10 on Monday.
He said some of these measures would be announced as early as Tuesday, when he will chair his first cabinet meeting.
In his first address to the nation as prime minister, Burnham pledged the biggest change to British politics in 40 years, and said he would deliver “a new political model and a new economic model” for Britain.
On Monday evening, he made sweeping changes to the Cabinet, starting with the appointment of John Healey as the new Chancellor to succeed Rachel Reeves.
A swathe of major figures from Starmer’s era joined Reeves in leaving government, including ex-deputy prime minister David Lammy, former attorney general Lord Hermer and former housing secretary Steve Reed.
Their replacements in senior government roles were announced throughout Monday evening and will join Burnham around the Downing Street Cabinet Room table on Tuesday.
Louise Haigh, a key ally of Burnham who was instrumental in getting him into No 10, was made First Secretary of State and Chancellor of the Duchy of Lancaster, giving her a role as a fixer across government.
Ed Miliband was appointed foreign secretary, and Shabana Mahmood remains as home secretary, while Wes Streeting became the new defence secretary, and Angela Rayner returned to government as housing secretary.
Once the dust had settled, it became clear that Burnham had chosen not to appoint a new deputy prime minister, a post previously held by Rayner and Lammy.
The Department for Science, Innovation and Technology (DSIT) was meanwhile scrapped, with responsibilities for its areas of policy assigned to other departments.
Jonathan Reynolds was made business secretary with a beefed-up portfolio for his department that now includes science and innovation, while Lisa Nandy remained as culture secretary with an extended brief covering digital.
A No 10 source said the new Cabinet brought together all parts of the Labour Party to deliver Burnham’s agenda for the country.
Those who had proven delivery and who had the most experience had been tasked with overseeing the new Prime Minister’s key domestic priorities, the source said.
They also pointed out that Burnham’s Cabinet had a balanced make-up – 50% men, and 50% women – and claimed that he had boosted the number of ethnic minority members.
Among the measures Burnham is exploring to help hard-pressed households with the cost of living are rent controls, support for energy bills and capping the cost of bus fares.
“We’re looking at measures that could make a difference this year. So we are looking at all of those things, but we’ll make more announcements tomorrow,” he told reporters in Downing Street’s rose garden on Monday.
A flurry of diplomatic phone calls also characterised Burnham’s first day as prime minister.
The first among these were calls with US President Donald Trump and Ukraine’s President Volodymyr Zelenskyy.
In a Truth Social post, Trump said he and the new prime minister had a “very good conversation”, adding: “The Prime Minister has got a big job ahead of him, but he will be able to do it and, of course, the U.S.A. will be there to help! We discussed North Sea Oil, Trade, the Military Alliance, Demining of the Hormuz Strait, and many other topics. The call was interesting, and went very well.
“I wished Prime Minister Burnham, GOOD LUCK AND GODSPEED!”
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