Burnham cuts VAT on electricity bills in first major policy announcement as PM

In his first major policy announcement as prime minister, Andy Burnham has introduced an £850m tax cut on electricity bills, reducing household bills by an average of £45 a year from October. The cut will be partly funded by scrapping Keir Starmer's digital ID scheme, which was estimated to cost £1.8bn over three years.

New Chancellor John Healey said the move would "bring down inflation while supporting households in every postcode," signalling the new cabinet's direction. Burnham also pledged to end rough sleeping in England, allocating an additional £340m over three years—replicating similar schemes from his time as Greater Manchester mayor. Homelessness campaigners welcomed the pledge, but critics noted that rough sleeping rose during his tenure as mayor.

Criticism and calls for a budget

Lib Dem leader Ed Davey criticised the VAT cut, calling it "coming apart at the seams" on Times Radio, and urged Burnham to hold a budget as soon as possible for proper scrutiny. Davey's party proposes an "essential energy guarantee" that would give every household 50% of typical consumption at a discounted rate.

Darren Jones, Starmer's former chief secretary who was sacked, wrote on X that the digital ID programme was unfunded, so the government must explain how it will pay for new policies. Shadow defence secretary James Cartlidge echoed this, noting the OBR had said the scheme was not funded. However, Business Secretary Jonathan Reynolds defended the cut as "a statement of priorities" and a legitimate switch of resources.

Burnham has reshuffled the cabinet, removing several Starmer loyalists including Rachel Reeves, David Lammy, and others. The new cabinet includes John Healey as chancellor, Ed Miliband as foreign secretary, and Shabana Mahmood as home secretary. The first cabinet meeting is scheduled for 12:30pm.