British Prime Minister Andy Burnham has announced plans to cut taxes on household electricity bills as one of his first major policy moves aimed at easing the cost-of-living crisis.
The measure is among a series of early actions intended to address public frustration over rising living costs and years of limited economic relief.
On his second day in office, Burnham said his government would remove value-added tax (VAT) from domestic electricity bills from Oct. 1.
The move is expected to reduce annual electricity costs by about 45 euros for the average household, which currently pays around 1,862 euros a year.
Burnham said the policy would be funded through savings from the cancellation of a 1.8 billion euro digital identity programme announced on Sunday.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope,” he said in a statement.
Some energy experts, however, questioned the overall impact of the measure, particularly as gas prices have risen amid the conflict in the Middle East, increasing the likelihood of higher energy price caps from October.
Energy bills have been a major contributor to Britain’s cost-of-living crisis since wholesale gas prices surged following Russia’s full-scale invasion of Ukraine in 2022.
The Conservative government at the time spent billions of pounds on energy support measures to shield households from soaring costs.
Although energy prices began easing from mid-2023, they remain significantly higher than pre-crisis levels.
The End Fuel Poverty Coalition welcomed the announcement but said it did not adequately address the scale of the challenges facing households.
“It does not address the scale of what households are facing,” the coalition said.
Ruth Curtice, Chief Executive of the Resolution Foundation, argued that the tax cut would disproportionately benefit higher-income households because it was not targeted at those most in need.
“With bills still set to rise over 150 euros this October, this money would have been better spent on more targeted support,” she said.
Burnham has indicated that more policies will be unveiled in the coming days. He told reporters on Monday that he wanted his administration “to do some things that people will feel and feel quite quickly”, particularly for those on lower incomes.
The strategy is aimed at rebuilding support for the governing Labour Party and countering the growing influence of Reform UK, led by Nigel Farage.
In his first speech as prime minister, Burnham pledged to tackle rough sleeping across Britain and signalled plans to introduce additional measures to ease financial pressures on households.
These are expected to include possible caps on bus fares and other initiatives designed to support families and improve living standards.
“I will put the care of people at the heart of everything I do,” Burnham said.
