Prime Minister Andy Burnham has announced a cut in VAT on household electricity bills from 5% to zero taking effect on October 1, saving a typical household £45 a year. The policy, funded by scrapping a planned digital identity card scheme, will not apply in Northern Ireland, where EU VAT rules under the Brexit deal prevent the reduction. The Northern Ireland Executive will instead receive comparable funding to support households directly.
Communities Minister Gordon Lyons criticised the arrangement as overly complex. The measure arrives as household energy prices remain elevated following a £221 rise in the price cap on July 1, bringing it to £1,862 annually. Cornwall Insight forecasts the October cap will fall by only around 0.5%, while energy debt sits at a record high and wholesale gas prices have surged more than 40% in the past two weeks. The VAT cut is funded through the financial year to March 31, with further measures expected at the Budget.