Andy Burnham has cut VAT on energy bills, lowered the bus fare cap to £2 and slashed rates for pubs (Image: Getty)
Andy Burnham has announced a flurry of cuts to taxes and prices as the UK’s new leader seeks to ease cost-of-living pressures on Brits. The Prime Minister entered No.10 on Monday promising to give people “breathing room” against rising prices and a historically high tax levels. Mr Burnham claimed to have a decade-long plan to transform the UK and hinted at cuts to personal taxes. His first cost-of-living announcement came on Tuesday with a VAT cut on energy bills. Figures from the anti-poverty organisation the Joseph Rowntree Foundation out this week underlined the scale of Mr Burnham’s challenge. It found that the number of households unable to afford basic essentials such as food and heating is at a record high.
An estimated 7.4 million low-income UK households were not able to afford at least one essential item in the last six months, according to JRF. This is the highest number since it began running its cost-of-living tracker survey in 2021 and is an increase from 7.1 million a year ago. Below the Daily Express details the tax cuts the Prime Minister has announced to date and what he may do next.
VAT cut on energy bills
Mr Burnham and Britain’s new Chancellor John Healey announced VAT will be removed from domestic electricity bills for six months from October 1, costing the exchequer £850million.
The Prime Minister said: “We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
It is estimated the change will reduce the annual Ofgem price cap by around £45 from October, with companies expected to pass the reduction onto customers.
The move will be funded in part by scrapping Sir Keir Starmer’s digital ID project, which had been estimated to cost around £600m-a-year over three years.
Starmer ally, Darren Jones, criticised the move as “unfunded”. Mr Jones, who this week lost his Cabinet post, welcomed the VAT cut, but said the Government would have to set out how it plans to pay for its new policies at the Budget.
Rise to bus fare cap put in reverse
Mr Burnham on Tuesday reversed Sir Keir’s decision to increase the bus fare cap, reinstating the £2 fare limit.
The cap across England is set at £3 until the end of March next year although some areas – including London and Greater Manchester – have lower top rates for single tickets.
In place from January, the £2 cap will last throughout 2027, undoing the increase to £3 put in place by Sir Keir and his chancellor Rachel Reeves in 2024.
A previous £2 cap had been in place between January 2023 and December 2024 under the Conservatives but the incoming Labour administration argued it was not affordable.
Reinstating the £2 maximum fare will partly be funded by switching grants for international climate projects to repayable loans instead.
Mr Burnham said: “Good, affordable transport links are an essential. No one should be priced out of those and left behind.”
Business rate cut for pubs, clubs and live music venues
Downing Street on Thursday announced business rates will be cut by 20% for pubs, clubs and live music venues across England from April next year.
The discount will apply to nearly 32,000 hospitality businesses and is expected to save a typical pub some £1,100 annually. It will not be available to the very largest live music venues.
No.10 said the business rates overhaul will be funded through a review of reliefs for businesses that “do not make a positive contribution to local communities” such as vape shops.
A crackdown on online marketplaces that do not comply with tax obligations will also help pay for the cut, according to No.10.
The 20% cut comes on top of the 15% relief announced in January.
Replacing stamp duty and council tax
This is not something the Prime Minister has announced, but it is well documented that Mr Burnham could favour it.
The new PM is recognised to be a supporter of a Land Value Tax, which would see an annual levy determined by the value of a property.
Mr Burnham told voters at the Makerfield by-election that he wanted a reform of council tax.
He described the current system as “highly regressive” and its basis in valuations from 1991 as unjustifiable.
According to The Times, Mr Burnham supports ideas put forward by Fairer Share. It would like to see stamp duty and council tax replaced with a property tax which would be 0.48% of the value of a home.
Such moves would prove to be contentious and impact the housing market and cost of moving house.
Increasing the income tax allowance
Mr Burnham said on Wednesday that there is no immediate commitment to increase the income tax personal allowance as a means of easing the cost of living.
But he suggested increasing the £12,570 tax-free personal allowance would be something the Government will look at in the Budget this year.
The Prime Minister had suggested earlier this week that he was open to increasing the allowance after claiming “frustration” about it had come up while knocking doors during the Makerfield by-election.
Uprating the personal allowance by inflation would cost £9.2bn from 2027 to 2030, with the measure costing £3.7bn in 2027-28 alone, according to the Resolution Foundation.
Britain’s income tax personal allowance freeze has been in place since April 2021. It was meant to last until this year, but was extended to at least April 2031.
Mr Burnham admitted that given the UK’s current financial circumstances, it would be “difficult” to increase the allowance.