UK's Burnham cuts energy VAT, targets EU reset in cabinet purge
New UK Prime Minister Andy Burnham has slashed VAT on electricity bills and appointed a dedicated EU relations minister in a sweeping cabinet purge, signalling a sharp policy shift and a renewed push to repair post-Brexit trade ties.
Andy Burnham has announced an £850m tax cut on electricity bills, reducing household costs by an average of £45 a year from October. The move marks the new prime minister's first major policy intervention after taking office. "I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as prime minister," Burnham said.
The policy exposes the continuing friction of Brexit for the UK economy. Because of the Northern Ireland protocol, EU VAT rates apply to electricity bills in the region, meaning the tax cut cannot be implemented there directly. Instead, the Stormont executive will receive funding to deliver an equivalent level of support.
Downing Street says the tax cut will be paid for by scrapping Keir Starmer’s digital ID scheme, estimated to cost £1.8bn over three years. However, Darren Jones, Starmer’s former chief secretary to the treasury who was sacked by Burnham, warned the scheme was unfunded. "The government will have to set out how it will pay for its new policies at the budget," Jones wrote online. Chancellor John Healey defended the move, stating it will "bring down inflation while supporting households in every postcode".
Beyond domestic taxation, Burnham is moving to reset the UK's relationship with the EU. He appointed Hamish Falconer as minister for intergovernmental and European relations. Falconer, a former diplomat, will be tasked with navigating highly technical post-Brexit barriers, including the sanitary and phytosanitary agreement designed to help food exporters, and electricity trading systems.
Thomas Byrne, Ireland’s Europe minister whose country holds the EU’s rotating presidency, signalled openness to the new approach. "I look forward to working closely with him," Byrne said of Falconer's appointment.
These policy shifts follow a dramatic clearing out of Starmer loyalists from the cabinet. Sacked ministers include Rachel Reeves, David Lammy and Peter Kyle, replaced by figures like Ed Miliband as foreign secretary and Jonathan Reynolds as business secretary. Reynolds, who defended the VAT cut as "a statement of priorities", dismissed concerns that the new cabinet's heavy concentration of ministers from northern England would create a regional divide.
Burnham is expected to announce further economic measures within days, including a 20% reduction in business rates for the hospitality sector and a £2 cap on bus fares. He has also pledged an additional £340m over three years to end rough sleeping in England, funded by underspends in the housing department's existing budget.
