Andy Burnham is abolishing VAT on domestic electricity bills from October as he commits to easing the cost of living on households.
The rate will be cut from 5% to 0%, though it will only save a typical household £45 a year – equal to the average price (£5.50) of eight pints of beer. It may also be absorbed in any increase in the price cap as a result of global pressures on energy prices.
In his first policy announcement since becoming Prime Minister, Mr Burnham said the cut – which had been predicted – would “give people breathing space” and “put more money in people’s pockets.”
The announcement will cost the Treasury £850m this financial year and would be funded by savings from the cancellation of the Digital ID programme, which was expected to cost £1.8bn over three years.
John Healey, the new chancellor, says the announcement will “provide some reassurance this winter.”
There has been talk of removing green levies from energy bills for both households and businesses that would have a meaningful impact on company finances.
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