Prime Minister Andy Burnham moved swiftly on Tuesday to tackle Britain's cost of living crisis by scrapping value added tax on household electricity bills. The Labour leader, who assumed office on Monday, said the tax cut would take effect in October and require government spending of roughly £850 million ($1.143 billion) in the current financial year.
"We're taking immediate action to cut taxes on energy bills, put more money in people's pockets and bring back hope," Burnham said in a statement.
The policy will save the typical household around £45 annually, the government noted. It targets poorer families hardest hit by energy costs, who dedicate a larger share of their income to power bills.
The October rollout aligns with an anticipated rise in the UK energy regulator's price cap for electricity and gas, driven partly by the US-Iran conflict. The government plans to fund the tax relief by axing the previous administration's digital ID scheme, which would have cost taxpayers £1.8 billion.
Burnham also signalled plans to ease the burden on small businesses crushed by tax increases under the prior Labour government. He vowed, however, to maintain strict fiscal discipline established under predecessor Keir Starmer, ensuring day-to-day spending matches tax revenues.
Official figures released Tuesday bolstered the government's fiscal credentials. Public sector net borrowing fell to £16 billion in June, a third lower than the prior year, according to the Office for National Statistics.
The ONS cautioned that "debt remains high by historical standards and close to the annual value of the entire UK economy".
Finance minister John Healey, who replaced Rachel Reeves in the role, seized on the data. "Fiscal control is the first duty of any finance minister," he told reporters.
"And fiscal credibility is the bedrock for economic stability and for national security."
Healey triggered controversy last month when he quit as defence secretary, firing a sharp rebuke at the government's military spending and treasury management—the very department he now leads.
Markets had braced for volatility following Healey's appointment as chancellor. Burnham had told the media Monday of potential "flexibility" in the government's balanced-budget framework, prompting UK bond rates to climb.
Healey sought to calm investor nerves. "The prime minister and I have talked about how we will work in lockstep to meet the fiscal rules with a buffer against uncertainty and how we'll make life more affordable for working people right across the UK," he added.
UK markets held steady on Tuesday, with separate data showing unemployment unchanged at 4.9 percent.
Burnham has signalled longer-term ambitions to rebuild Britain's manufacturing base and accelerate municipal housing construction. Despite sluggish economic growth since Labour returned to power two years ago, the International Monetary Fund expects Britain to outpace other major economies this year.
