Government says households will save around £45 a year as electricity VAT falls to zero
UK Prime Minister Andy Burnham has announced that his government will remove Value Added Tax (VAT) from household electricity bills, making it his first major policy decision since taking office.
Under the new plan, the 5% VAT rate on domestic electricity will be reduced to 0% from 1 October, with the government estimating that the average household will save around £45 per year.
The announcement comes a day after Burnham entered Downing Street, where he pledged to provide “more breathing space” for families facing continued cost-of-living pressures.
Cost-of-living relief at the centre of agenda
Burnham said easing the financial burden on households would be one of his government’s immediate priorities.
The VAT cut is aimed at lowering electricity costs ahead of the winter months, when energy demand typically increases.
Government officials say details of how the policy will be funded have been outlined, with ministers arguing the measure is part of a broader plan to support struggling households while maintaining economic stability.
Chancellor backs the move
New Chancellor John Healey welcomed the policy, saying it would provide reassurance for millions of families.
He described the VAT reduction as an important step in helping households manage rising living costs during the colder months.
The government says the measure forms part of a wider package of economic policies expected to be announced in the coming weeks.
Burnham begins reshaping government
The announcement follows Burnham’s first full day as prime minister after officially succeeding Keir Starmer.
He has already unveiled a new Cabinet, appointing Ed Miliband as Foreign Secretary, Wes Streeting as Defence Secretary and Louise Haigh as Chancellor of the Duchy of Lancaster.
Angela Rayner has returned to her previous role as Housing Secretary, while Shabana Mahmood remains Home Secretary.
The newly appointed Cabinet is expected to hold its first official meeting later today as ministers begin implementing the government’s legislative agenda.
Focus on economic stability
Burnham has promised a government focused on improving living standards, boosting economic growth and restoring confidence after years of political uncertainty.
He says helping families cope with everyday expenses will remain at the heart of his administration’s priorities.
The removal of VAT on household electricity bills marks the first major economic policy of his premiership and signals the government’s intention to focus on cost-of-living support in its early months in office.
