British Prime Minister Andy Burnham announced plans on Tuesday to reduce energy costs by cutting taxes on electricity bills, marking one of his first policy actions since taking office. Beginning October 1, the government will eliminate the value-added tax (VAT) on domestic electricity charges, a move expected to reduce the average household electricity bill by approximately £45 annually. The average annual electricity bill currently stands at around £1,862.

Burnham framed the tax cut as part of a broader effort to address the ongoing cost-of-living crisis and respond to public dissatisfaction over previous administrations’ handling of energy costs. The prime minister emphasized that the government’s approach would balance immediate relief with fiscal responsibility.

Funding for the VAT reduction will come from savings generated by cancelling a planned £1.8 billion digital identification programme, which was announced by Burnham’s administration on Sunday. The prime minister stated that this reallocation of resources would allow the government to provide financial support without jeopardizing fiscal discipline.

At his first cabinet meeting, Burnham reiterated the importance of maintaining prudent fiscal policies as the foundation for government action. Chancellor Jeremy Healey echoed this sentiment, underscoring that fiscal discipline remains a priority even as the government seeks to ease pressures on households.

Bond investors have been closely monitoring the UK government’s fiscal policies amid concerns over public spending and economic stability. Burnham’s early measures are seen as an attempt to balance economic support with market confidence.

The VAT cut on electricity bills is the first of several steps Burnham has signaled he will take to provide relief to citizens facing rising living costs. The administration’s next moves and their financing will continue to garner attention from markets and the public alike.