Burnham cuts VAT on household electricity bills; UK borrows less than expected in June – business live | Business
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Unemployment in the UK was 4.9% in May in a ‘stale’ labor market
New figures elsewhere this morning OUNCE It shows that unemployment remains at 4.9% in April; This underlines one of the challenges ahead Andrew Burnham.
Employers delayed hiring new staff in the three months to May, reducing the number of job vacancies to 712,000, almost half the level in 2022.
The new prime minister has pledged to raise living standards in all regions as part of a 10-year economic plan, but the latest wage data showed private sector earnings growth fell to 2.9 per cent and the average increase in earnings, including bonuses, remained at 4.3 per cent.
Economists had forecast an increase in average wages with bonuses from 4.4% for the three months to the end of April to 4.5% for the three months to May.
Thomas Pughchief economist of consulting firm RSM UK He said the figures point to “a labor market that smacks of staleness but is still slowly easing.”
This gives the PPC good hedges to keep interest rates unchanged next week as we wait to see the impact on inflation of the latest escalation in the conflict in Iran.
Meanwhile, stagnant or even negative real wage growth in the second half of this year will increase the pressure on Burnham and Healey to find a package that will support the cost of living. But doing anything significant without violating fiscal rules or the manifesto’s commitments is looking increasingly difficult given the deterioration in space.
…Looking ahead, the unemployment rate is likely to continue to rise gradually over the summer as the full impact of rising input costs, tight finances and increased uncertainty puts pressure on hiring appetite.
Moreover, wage growth in the range of 3.0% – 3.5% means that despite lower oil prices, real wages are likely to remain flat in the second half of this year, despite the VAT cut on electricity; This will reduce inflation by 0.1 percentage points. This poses a major challenge for the new government, which has made tackling the cost of living a priority.
VAT cut on electricity bills is positive but ‘not a cure’, energy campaigner says
Removing VAT from electricity bills is a positive but does not solve the scale of the problem facing British households, campaigners say. End Fuel Poverty Coalition I told you.
Simon FrancisThe coordinator of the group said:
Removing VAT from electricity bills is a positive statement of intent from the new administration. But this does not address the scale of the situation facing households; Millions of people still pay an unaffordable share of their income for energy, and record energy debt has accumulated as a result of successive winters of high bills.
The Prime Minister’s next move should be to go further in reducing the cost of energy and provide higher levels of targeted support to those who need energy most: increased warm homes rebate, improved cold weather payments and an energy debt relief scheme.
This breathing space is not a cure either. The only way to reduce bills completely is to change the way they are issued. This means breaking the link between gas and electricity prices, tackling excessive profits in the energy industry, and ending our exposure to volatile fossil fuel markets through self-produced renewables and more energy-efficient homes.
But many in the energy industry today welcome Burnham’s move. Martin Pibworthgeneral manager SSE,:
Reducing VAT provides immediate relief to homes and businesses and is a very welcome first step towards making electricity as cheap as possible. Electrifying our economy is how we can leverage cheap, home-grown renewable energy to reduce bills, reduce energy dependency, and increase economic growth.
SSE added that its analysis found that 70 percent of the increase in domestic energy bills since 2017 was due to global commodity prices and inflation.
Richard Neudeggregulation manager Uswitch.comHe added that the removal of VAT on electricity bills in October could help households cope with global increases in energy prices triggered by conflict in the Middle East.
There continues to be pressure on wholesale prices due to the situation in the Middle East, which means a price ceiling increase on October 1 is likely.
Some supplier forecasts suggest the next price cap for a household using both gas and electricity could rise by 5% from October, so this tax change could ease the pain of a possible increase.
There’s still time for customers to make significant savings by switching to an affordable flat rate before winter.
The cheapest deals currently fall £210 below standard prices for the average household. Doing this, in addition to the VAT change, could ensure that households are significantly better off over the winter.
Entry: Burnham cuts VAT on home electricity bills
Good morning; Welcome to our in-depth coverage of business, financial markets and the world economy.
new prime minister Andy Burnham This morning it announced that VAT would be deducted from households’ electricity bills as part of a plan to help with living costs.
The Prime Minister said he would scrap the tax from October 1, in a move expected to reduce the annual price cap set by the energy regulator by around £45.
The government said the decision would be funded by savings from the cancellation of the digital identity scheme, which is expected to cost £1.8bn over the next three years. Ministers said the VAT cut is estimated to cost around £850m in 2026/27, based on electricity price forecasts.
Burnham said in a statement:
Westminster hasn’t been working for people for too long, families are struggling to make ends meet.
This needs to change. I said I wanted to give people breathing space, and I’m announcing this on my second day as prime minister.
We’re taking immediate action to reduce taxes on energy bills, put more money in people’s pockets and bring hope back.
It came just a day after Burnham officially became prime minister, pledging a “new economic model” for the country.
But the government added this morning: “Any further action, including financing of longer-term measures, will be carried out in the budget, at which point all decisions will be funded and will also be consistent with the government’s fiscal rules.”
Investors will watch the bond market carefully today as they debate the appointment of Burnham’s new cabinet, including the surprise appointment of the former defense secretary John Healey As chancellor.
Public sector finance figures released this morning should provide a boost; June borrowings amounted to £15.989 billion; This was below expectations of £18bn and down from £23.94bn the previous year.
The gap between total public sector spending and revenues was £16bn in June 2026. Office for National Statistics. This was £7.9 billion (33.1%) less than in June 2025.
This was £300 million less than before Office for Budget Responsibility (OBR) forecast is largely due to low inflation-related debt interest costs.
This, along with Healey’s comments from last night, should offer some comfort to bond investors today:
Financial control is every chancellor’s first duty. It’s me. Fiscal reliability is the cornerstone of economic stability and national security, and this afternoon you heard the prime minister say: In this more dangerous world, we will honor our defense commitments to our international allies…
