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- Families to have £45 removed from their bills on 1st October
- This is on top the £150 removed from bills in the Autumn Budget
- Burnham says he is prioritising helping poorest families
New Prime Minister Andy Burnham will cut VAT on electricity bills from 1st October, removing about £45 from the average household costs.
The move is Burnham’s first big decision as prime minister and will be funded by scrapping the Digital ID scheme and will come at a cost to the government of about £850mn.
In a statement, the government said the move follows Burnham’s decision to “give people some breathing space” during the cost-of-living crisis.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope,” Burnham said.
New chancellor of the exchequer John Healey said the decision will “give families some breathing room on bills, and provide some reassurance this winter”.
Reacting to the announcement, Dhara Vyas, chief executive of Energy UK, described it as “very welcome” and “an encouraging first step” but warned that there is still a lot to do to get household bills down.
“Household energy debt is at a record high and the wholesale gas price has increased by over 40% in the last two weeks alone, which will likely put further pressure on customers this winter,” Vyas stated.
“This policy is a quick and simple way to provide some much-needed relief for customers.”
Whether this will be enough to bring down energy bills in the long term will depend on the speed of electrification and how quickly the UK can get away from fossil fuels.
Speaking to The Eco Experts, Camilla Born, CEO of Electrify Britain, said that Burnham’s decision to take VAT off electricity and not gas shows that he has “got the memo that the priority is to get Britain using our homegrown clean power”.
According to Born, this will bring down household bills across the county and leave “plenty of room” for Burnham to “go further in the Autumn” such as remove more levies.
“Electricity bills are still way too high due to other charges and levies.
“Moving some of these into general taxation would take even more off the average bill and enable more households to move onto modern electric tech that doesn’t rely on unstable oil and gas,” Born told The Eco Experts.
The £45 cut to household energy bills will be on top of the £150 removed from costs at the Autumn Budget in 2025.
Energy bills have ballooned since the beginning of the US-Iran war in February, with the current energy price cap rising by 11% to £1,862 in July.
