Key facts
- Prime Minister Andy Burnham appointed John Healey as Chancellor.
- VAT on electricity bills will be cut from October 1.
- The VAT cut is expected to cost £850 million next year.
- Burnham aims to be a "cost of living government" prioritizing lower costs for voters.
- Funding for the VAT cut is secured for the next financial year, with future costs to be met from existing budgets.
- Plans to accelerate a national care service rollout are underway.
Prime Minister Andy Burnham has made a rapid start to his premiership, appointing John Healey as Chancellor and announcing a cut to VAT on electricity bills within his first 24 hours in office. Burnham declared his government would be a "cost of living government," prioritizing measures to reduce expenses for voters, while also facing pressure to explain how he will fund other policy pledges, including an uplift in defence spending and the acceleration of a national care service.
The VAT cut on electricity bills, effective from October 1, is expected to reduce the price cap by £45 and will cost an estimated £850 million next year. Downing Street stated the measure is funded for the upcoming financial year, with future costs to be absorbed by existing departmental budgets, suggesting potential spending cuts.
Questions have been raised about the funding for these initiatives, particularly after Darren Jones, who previously managed the now-scrapped digital ID scheme, noted that funding for that policy had not been identified and that the government would need to outline its payment plans in the upcoming budget.
Burnham also indicated plans to bring forward the review into social care, led by Louise Casey, potentially by next year, with options for funding including tax-funded national service or a social insurance model. However, any funding model for social care is anticipated to be politically contentious.
In a significant cabinet reshuffle, more than half of the previous prime minister's cabinet were removed or demoted. Burnham has also reportedly abandoned plans to raise the income tax threshold, a move that could have been costly and potentially conflicted with Labour's manifesto pledges.