Starmer ally swipes at Burnham VAT energy bills cut
Andy Burnham has cut VAT on household electricity bills from October, but Starmer ally Darren Jones has already questioned how the VAT energy bills move is paid for, saying the cancelled Digital ID scheme was unfunded and funding must be set out at the Budget.
On his second day as prime minister, Burnham announced that VAT on domestic electricity will fall from 5% to 0% from 1 October, in time for the next Ofgem price cap. Downing Street says typical households should see around £45 taken off the yearly price-cap bill.
The policy is Burnham’s first major cost-of-living move, and it landed hours before his first cabinet meeting. For more political breakers, follow Celebrity Breaking News on BlasterPost.
Key Takeaways
- VAT on household electricity bills drops from 5% to 0% from 1 October 2026.
- Government estimates an average £45 saving on the Ofgem price cap and an £850m cost in 2026-27.
- Funding this year is tied to cancelling the £1.8bn Digital ID programme.
- Former Starmer aide Darren Jones said Digital ID was unfunded and urged a Budget funding plan.
- Further longer-term measures will be set out at the Budget with an OBR forecast.
What did Andy Burnham announce on VAT energy bills?
According to a GOV.UK press release, the cut applies to domestic electricity bills and is funded for this financial year. Ministers say suppliers are expected to pass the reduction to all customers, including those on fixed tariffs.
The government also estimates the move will trim CPI inflation by about 0.10 percentage points and RPI by about 0.14 percentage points. Chancellor John Healey said the tax cut would give families “breathing room” this winter while supporting households “in every postcode.”
Small businesses that qualify for domestic energy VAT relief and are not VAT-registered, plus eligible charities and residential care homes, should also benefit. Northern Ireland will get comparable funding via the NI Executive because EU VAT rules still apply there on electricity.
Why did a Starmer ally criticise the funding?
Darren Jones, who until Monday was chief secretary to the prime minister under Sir Keir Starmer, posted on X that cutting VAT on electricity was “good news” for families and inflation. He then added that the Digital ID programme “was unfunded” and that the government must explain how it will pay for new policies at the Budget.
BBC political editor Chris Mason reported that the Office for Budget Responsibility’s November Economic and Fiscal Outlook repeatedly noted unclear funding for Digital ID, including a reference to no specific funding and a £0.6bn annual cost risk. Jones’s jab lands just after Burnham pledged to end “factionalism” inside Labour.
How is the electricity VAT cut being paid for?
No.10 says this year’s cost—estimated at about £850 million in 2026-27—is met by cancelling Digital ID, previously put at £1.8 billion over three years. Any further action, including longer-term funding, will come at the Budget alongside an OBR forecast and must meet the government’s fiscal rules.
Burnham framed the move as immediate breathing space after promising on the Downing Street steps to ease the cost of living. The cut sits on top of £150 already removed from bills at the last Budget, according to the government.