Key facts
- Andy Burnham announced a VAT cut on domestic electricity bills effective October 1.
- The funding for the VAT cut is intended to come from the cancellation of the £1.8bn Digital ID program.
- The OBR estimated the Digital ID program's costs but stated no specific funding had been identified.
- Burnham's office also cited freeing up government machinery as a benefit of scrapping the Digital ID scheme.
- Privacy campaigners welcomed the cancellation of the mandatory Digital ID proposal.
Andy Burnham's decision to scrap Labour's digital ID scheme may not generate the anticipated funds for his cost of living agenda, despite his assertion that the move would finance a cut in VAT on energy bills. Burnham announced that VAT would be removed from domestic electricity bills starting October 1, a measure he claimed would be funded by canceling the £1.8 billion Digital ID program.
However, the Office for Budget Responsibility (OBR) estimated the digital ID program would cost £1.8 billion over three years but noted that no specific funding had been identified for it, describing the costs as provisional and warning of no explicit provision for its estimated £600 million annual cost. Savings for the digital ID plans were expected to come from existing budgets through 'reprioritisation,' which will now be redirected to the VAT cut, according to Burnham's announcement.
Labour deputy leader Lucy Powell indicated that the financial savings from scrapping the Digital ID were not the sole consideration, emphasizing the importance of freeing up government attention and focus. Burnham's office argued that the cancellation would also free up government machinery, allowing ministers to concentrate on delivering tangible changes for citizens.
The Digital ID policy, initially proposed by Starmer to combat illegal working and later expanded to overhaul government services, faced significant opposition from campaigners and Labour MPs. Proposals for a compulsory scheme were dropped before Burnham ultimately scrapped it. This decision contrasts with several European countries, such as Belgium, and the EU's rollout of a digital identity wallet.
Brent Hoberman, co-founder of Lastminute.com, suggested that ministers had not adequately explained the potential public benefits of digital identity. Privacy campaigners, including Jack Coulson of Big Brother Watch, welcomed the decision, viewing it as a response to public concerns about mandatory ID. However, Coulson cautioned that the broader debate on digital identity continues, with concerns that online age verification proposals could lead to a de facto mandatory ID regime for the internet.