Burnham scraps Digital ID to cut electricity bills from October
Key Points
- Government removes VAT from domestic electricity bills from 1 October
- Cut saves around £45 on the average annual bill of £1,862
- Cancelling the £1.8 billion Digital ID programme funds the measure
- Former minister Darren Jones questions how the government will pay for it
Prime Minister Andy Burnham will remove VAT from domestic electricity bills from 1 October, saving households around £45 a year in his first policy announcement since entering Downing Street.
The cut applies to the average annual electricity bill of around £1,862 and takes effect on 1 October, with the government funding it through savings from cancelling the £1.8 billion Digital ID programme.
Cutting VAT on electricity bills is expected to take around £45 off the yearly Ofgem price cap in October. This is on top of the £150 removed from bills at the last Budget.
All suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off energy bills announced at the last Budget.
Small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit.
“Westminster has not been working for people for too long, with families struggling with the cost of living,” Burnham said.
“That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister. We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
Chancellor John Healey, appointed on Monday, said the energy tax cut will give families breathing room on bills and provide reassurance this winter. He added that the measure will help bring down inflation while supporting households in every postcode.
The Digital ID trade-off
The measure kills off the Digital ID scheme that former Prime Minister Keir Starmer announced ahead of last year’s Labour conference, which would have made digital identification mandatory for right-to-work checks as part of a crackdown on illegal immigration.
Anyone expecting to use a government digital identity for employment checks will now not receive one, and employers preparing for the system can stand down.
The Bank of England announces its next interest rate decision in just over a week, and inflation figures land tomorrow. Both will shape how much further help households can expect this year.
