As families across the UK struggle to make ends meet, Prime Minister Andy Burnham has made a landmark pledge to provide some much-needed respite. From 1 October 2026, he's set to axe Value Added Tax (VAT) on domestic electricity bills – a move that could save households around £45 per year through reduced Ofgem price caps.
Speaking directly to the nation, Mr Burnham acknowledged the burden of living costs, saying: “Westminster has not been working for people for too long, with families struggling to get by. That needs to change.” His new administration's first major policy initiative aims to give hard-pressed households a vital breathing space.
Energy suppliers are expected to pass on the VAT savings directly to their customers, who could benefit from this timely relief as winter sets in. The government estimates that removing VAT will bring down the annual Ofgem price cap by approximately £45 – money that can be put towards heating bills or other essentials.
Chancellor John Healey confirmed that funding for the tax cut comes from cancelling the Digital ID programme, a significant shift in priorities under the new leadership. This move demonstrates the administration's commitment to targeting support where it's needed most: tackling living costs and giving families some much-needed peace of mind this winter.
This swift response from the government shows that, at long last, there is a renewed focus on putting people first – rather than just paying lip service to public concerns. While more work needs to be done to address the cost-of-living crisis, today's announcement marks an important step in the right direction for thousands of households.