Andy Burnham Announces VAT Cut on Electricity Bills
Prime Minister Andy Burnham has revealed plans to reduce VAT on household electricity bills from 5% to 0%, aiming to alleviate cost-of-living pressures for families.
By The Guardian
Prime Minister Andy Burnham has announced a reduction in VAT on household electricity bills from 5% to 0%, effective from 1 October. This initiative is expected to save a typical household approximately £45 annually by lowering the yearly Ofgem price cap.
The government plans to cover the £850 million cost for this financial year by discontinuing the previous administration's £1.8 billion digital ID programme. Energy suppliers have been instructed to ensure that the VAT reduction is passed on to all household customers, including those on fixed tariffs.
This measure will apply across England, Scotland, and Wales, with equivalent funding allocated to Northern Ireland due to its distinct regulatory framework. Additionally, small businesses eligible for domestic energy VAT relief, as well as charities and residential care homes that qualify for the reduced rate, will also benefit from this change.
John Healey, the new Chancellor, stated that this move will provide reassurance for individuals facing challenges with the cost of living. On his first full day in office, Burnham described the VAT cut as a way to put “more money in people’s pockets and bring back hope.”
This announcement marks the second government intervention regarding energy bills within six months, following a £150 reduction implemented during the last Budget. Further details on the updated costs for this measure are expected to be outlined in the upcoming Budget.