- New Prime Minister takes immediate action to cut taxes on electricity bills to give households in Cambridge breathing space this winter
- Tax cut this year funded from cancelled Digital ID programme will see VAT on electricity bills removed from 1 October
- In one of his first acts as Prime Minister, Andy Burnham promises to "put more money in people's pockets and bring back hope”
Households in Cambridge and across the UK will benefit from immediate action to help with their electricity bills this winter, Labour's new Prime Minister has announced as one of his first decisions in office.
This follows Andy Burnham's commitment to the nation on the steps of Downing Street yesterday to give people some breathing space and help with the cost of living.
Local MP Daniel Zeichner has welcomed the announcement, saying it will provide welcome relief to families across Cambridge.
The Labour Government is tackling rising bills with a tax cut to remove VAT from domestic electricity bills from 1 October in time to impact the next Ofgem price cap. This immediate action applies and is funded for this financial year.
The cost of this immediate action for this financial year, taken now before the next price cap, is being funded from the cancellation of the £1.8 billion Digital ID programme.
Any further action, including on funding for longer-term measures, will be taken at the Budget alongside an OBR forecast. All decisions at that point will continue to be funded and consistent with the government's fiscal rules.
Prime Minister Andy Burnham said:
"Westminster has not been working for people for too long, with families struggling with the cost of living.
"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."
Daniel Zeichner MP said:
"Many families across Cambridge are still feeling the pressure of higher household bills, so I welcome this cut to electricity costs.
“Removing VAT from electricity bills will provide practical support for households this winter and is another example of Labour focusing on the everyday issues that matter to people across our city.”
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.
By targeting electricity bills, more people will be supported with rising bills and the government is helping to keep inflation down.
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.
Chancellor of the Exchequer John Healey MP said:
"For too long, too many people have struggled with the cost of living.
"Today's energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.
"This measure is funded this year from cancelling the Digital ID programme, and it will help bring down inflation while supporting households in every postcode.”
As part of the government's commitment to bring back hope to Britain, the change is expected to support households facing the greatest pressure from energy costs, who spend a larger proportion of their income on their bills.
Energy bills have risen since Russia's invasion of Ukraine and have been exacerbated by conflict in the Middle East. The government argues that people need support now, which is why it has acted to provide immediate breathing space for millions of households.
The Northern Ireland Executive will receive comparable funding to enable it to support households with the cost of living, ensuring that people across the UK benefit.
