Burnham urges cabinet to explore ‘all possible ways’ to tackle cost of living crisis

New UK Prime Minister Andy Burnham urged his cabinet to examine “all possible ways” to tackle the cost of living crisis on his first full day in power. He told ministers his would be a “cost of living government” focused on making life cheaper for voters within existing borrowing rules.

On Tuesday, Burnham announced the removal of VAT from electricity bills from October 1, reducing the energy price cap by £45 at a total cost of £850 million next year. He pledged to fund this by scrapping the government's digital ID scheme, but Darren Jones, the minister formerly in charge of the policy, said the money for that scheme had not yet been identified. Downing Street confirmed the tax cut is funded for the next financial year but future years would require spending cuts from departmental budgets.

Burnham also faces questions over funding an expected defence spending uplift – an issue that led his new chancellor John Healey to resign as Keir Starmer’s defence secretary last month. A spokesperson said Burnham has ruled out higher borrowing to pay for defence.

Sources told the Guardian Burnham is working on a major social care announcement in the coming weeks, aiming to accelerate the introduction of a national care service. The review by Louise Casey, initially due by 2028, is now likely to report as soon as next year. However, any funding model risks political backlash, given past controversies over a “death tax.”

Allies say Burnham has abandoned a plan to raise the income tax starting threshold, which would have been costly. He told his cabinet that fiscal discipline and commitment to fiscal rules are essential.

Meanwhile, disquiet persists among Starmer’s allies over Burnham’s pledge to end factional infighting, after more than half of the former prime minister’s cabinet were removed or demoted in Monday’s reshuffle.