Burnham scraps electricity VAT and digital ID, pledges £340m to tackle homelessness

First cabinet meeting

Andy Burnham convened his first cabinet as UK Prime Minister on Tuesday, a day after replacing Keir Starmer. The 56-year-old Labour leader, positioned to the left of his predecessor, told ministers the government must be "focused on purchasing power and reducing the cost of living, exploring every possible avenue to achieve it." He removed 11 Starmer loyalists from government posts on Monday evening, a purge that surprised some party members.

Electricity VAT cut

The centrepiece announcement was the elimination of the 5% value-added tax on household electricity bills, effective from October. The measure will save the average household around £45 (€53) per year, according to government figures. Burnham said the move would "put more money in people's pockets and restore hope." The tax cut will reduce state revenue by approximately £850 million (€1 billion), which the government will offset by scrapping the digital identity card project inherited from Starmer. Northern Ireland is excluded from the VAT cut due to post-Brexit tax alignment with the EU; the government will instead provide additional funds for other cost-of-living measures there.

We are taking immediate action to cut electricity taxes, put more money in people's pockets and restore hope.

Digital ID scrapped

Burnham's first act upon entering Downing Street was to abandon the mandatory electronic identity card scheme designed to curb irregular immigration. The plan had long been unpopular in the UK, where no national ID document exists. By cancelling it, the government freed up funds to pay for the electricity tax reduction. Burnham framed both decisions as a "change of priorities" away from Starmer's agenda.

We have already announced the elimination of VAT on household electricity bills. It's not all we're going to do, but it shows our determination to do something about the cost of living.

Homelessness funding

The cabinet also committed an additional £340 million (€400 million) over three years to end homelessness, drawing on unspent funds from the Department of Housing. The programmes will replicate initiatives Burnham introduced as mayor of Greater Manchester. He has previously argued that social care should be funded like the National Health Service, free and without means-testing, though no legislation on that point was announced.

Cabinet and fiscal discipline

The new 23-member cabinet includes 12 women and 11 men. The most striking appointment was John Healey as Chancellor of the Exchequer, replacing Rachel Reeves. Healey had served as Defence Secretary under Starmer but resigned over budget disagreements. Burnham stressed that his government would adhere to fiscal rules, telling ministers, "We must demonstrate that our commitment to fiscal rules is authentic and we are willing to take difficult decisions in that regard." The UK faces weak economic growth and high public debt, constraining the new administration's room for manoeuvre.

We must demonstrate that our commitment to fiscal rules is authentic and we are willing to take difficult decisions in that regard.

Political reaction

The rapid purge of Starmer allies drew internal criticism. A former close aide to Starmer described the moves as factional, warning that Burnham risked repeating the divisions he had accused his predecessor of fostering. Burnham also promised future tax cuts for bars and restaurants, though no details were provided.