The cost of living crisis has been weighing heavily on households across the UK, with electricity bills being a major concern for many families struggling to make ends meet. In a bid to alleviate some of this pressure, Prime Minister Andy Burnham has announced that Value Added Tax (VAT) will be removed from household electricity bills – a move that could save the average household up to £100 per year.
The news comes as new economic data from the Office for National Statistics (ONS) reveals a mixed picture of the UK's labour market. Unemployment has stabilised at 4.9%, but job vacancies have dropped significantly, suggesting that employers are taking a cautious approach to hiring amid economic uncertainty. Meanwhile, private sector earnings growth has slowed down to 2.9% over the past three months, with average earnings, including bonuses, rising by just 4.3% – short of economists' forecasts.
The Trades Union Congress (TUC) welcomed the VAT cut but urged the government to go further. General Secretary Paul Nowak suggested that hiking taxes on banks could generate up to £60 billion over four years, which could then be used to reduce household bills even more substantially. He also highlighted the need for expanded youth job guarantees and a renewed focus on reindustrialising Britain.
Economists believe that the labour market is gradually loosening its grip, providing the Bank of England's Monetary Policy Committee (MPC) with 'good cover' to maintain current interest rates at its upcoming meeting. However, the challenge for the government remains in delivering substantial cost of living support without breaching fiscal rules.