Households in Salford and across the UK will benefit from immediate action to help  with their electricity bills this winter, Labour’s new Prime Minister has announced as one of his first decisions in office. This follows Andy Burnham’s commitment to the nation on the steps of Downing Street yesterday to give people some breathing space and help with the cost of living.

Salford MP, Rebecca Long-Bailey, said, “This welcome immediate reduction in bills must be the first step towards the Prime Minister’s wider commitment to securing greater public control over essential services such as energy.

“For too long, households have paid the price of an energy system run primarily in the interests of private shareholders. I look forward to working with the Government on the lasting structural reform needed to bring bills down, strengthen public accountability and ensure our energy system serves the public interest.”

Cutting VAT on electricity bills is expected to take around £45 off the yearly Ofgem price cap in October. This is on top of the £150 removed from bills at the last Budget. By targeting electricity bills, more people will be supported with rising bills and the government is helping to keep inflation down.  

New Prime Minister and former Mayor of Greater Manchester, Andy Burnham, said, “Westminster has not been working for people for too long, with families struggling with the cost of living.  That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister. We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.” 

All suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off energy bills announced at the last Budget. Small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit.

—ENDS—

Notes to editors: 

• This VAT cut, from 5% to 0%, is estimated to reduce CPI inflation by around 0.10 percentage points and RPI by around 0.14 percentage points. 

• This action is estimated to cost around £850 million in 2026-27 on the basis of estimated electricity prices. Updated costs will be set out at Budget. 

• We are funding this through the cancellation of the Digital ID programme, which was going to cost £1.8bn over the next three years. Savings were due to be identified from within existing budgets through reprioritisation, which will now be redirected towards this measure. Any further action, including on funding for longer-term measures, will be taken at the Budget, and all decisions at that point will be funded and also consistent with the government’s fiscal rules.  

• The government expects all suppliers to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off energy bills announced at the last Budget.