UK’s Burnham targets lower energy bills in first move as PM
By Elizabeth Piper and Kate Holton
LONDON, July 21 (Reuters) – British Prime Minister Andy Burnham said on Tuesday he would cut taxes on electricity bills in his first attempt to ease a long cost-of-living crisis that has angered the public and fueled political instability.
On her second day in her new role, Burnham said her government would remove value added tax from domestic electricity bills from October 1, cutting around £45 from the average annual bill paid by households of around £1,862.
It said the move would be funded by savings from the cancellation of the £1.8 billion ($2.42 billion) digital identity program it announced on Sunday, as bond investors closely watch how any financial support will be paid for.
“We’re taking immediate action to reduce taxes on energy bills, put more money in people’s pockets and bring hope back,” he said in a statement, promising to give people more “breathing space” in their lives.
BURNHAM TRYING TO ACT QUICKLY TO OFFER SUPPORT
The energy announcement is designed to show Burnham will act quickly to improve living standards after years of stagnation.
But Darren Jones, an ally of former prime minister Keir Starmer, said his call for unity in the ruling Labor Party could fail at the first sign and questioned whether the new leader had the money to cover his policy push on energy bills, saying his digital identity scheme was unfunded.
“The government will have to determine how it will pay for its new policies from the budget,” he said in X.
Energy bills have been a key driver of Britain’s cost-of-living crisis following Russia’s full-scale invasion of Ukraine in 2022, when the wholesale price of gas soared, which has massively affected Britain’s electricity prices.
At the time, the Conservative government spent billions of pounds protecting households through an energy price guarantee. But while prices will fall from mid-2023, they remain up to 60% higher than before the energy crisis. They have increased in recent months due to the Iran war.
The End Fuel Poverty Coalition welcomed the move as a sign of positive intent, but added: “This fails to address the scale of the situation facing households, with millions still paying an unaffordable share of their income on energy and record energy debt accumulating over successive winters of high bills.”
THE REVIVABLE DOOR OF LEADERS
Burnham has vowed to launch a program she believes could turn Britain around, hoping a bolder agenda could win voters back to the ruling Labor Party and combat the challenge of the populist Reform UK led by Brexit campaigner Nigel Farage.
There’s a lot at stake.
Burnham, dubbed the “King in the North” for his dogged defense of the Greater Manchester region in northwestern England when he was mayor, is the most popular leader of Britain’s main political parties and has overwhelming support from the Labor Party.
But Britain’s revolving door of prime ministers over the past decade has highlighted how quickly parties can move against leaders who do not serve voters, and Burnham will need to act quickly to stamp her authority on the government.
He wants to hit the ground running.
In her first speech as prime minister on Monday, Burnham said her first aim was to end Britain’s insomnia, but she also wanted people to feel the change in government quickly in their pockets.
MARKETS ARE BEING CLOSELY MONITORED
He is also expected to look at possible bus fare caps and other measures, as he did in Manchester, and back his claim: “I will put people’s interests at the heart of everything I do.”
“This won’t solve everything, it won’t take away all the pressure,” he told reporters. “But it just shows the direction of travel and… helping them.”
Markets will listen carefully to how Burnham and her unexpected choice for finance minister, former defense secretary John Healey, plan to fund further support after borrowing costs rose on Monday, sending 30-year gold yields to a two-month high.
Some investors were disturbed by Burnham’s comments that he planned to use “any flexibility” within existing fiscal rules.
Demonstrating limited room for maneuver, the International Monetary Fund praised the previous government for not introducing broad, untargeted energy subsidies in response to the Iran conflict; The OECD, on the other hand, called on the UK to reduce VAT exemptions rather than expand them to increase tax revenue.
(Reporting by Elizabeth Piper; Additional reporting by David Milliken and Paul Sandle; Editing by Kate Holton, Alexandra Hudson and Alison Williams)
