One step Andy Burnham could take now to make us all richer and happier
A 5% reduction in electricity bills from October is not to be dismissed lightly. Households need every bit of help available as energy costs look set to surge this winter amid the ongoing Iran conflict.
Bills are forecast to be higher this winter than last, even with the Prime Minister's intervention. The VAT cut from 5% to 0% on electricity will run from 1 October 2026 until 31 March 2027, funded by scrapping the planned Digital ID programme that was set to cost £1.8 billion over three years.
Well-off households with large homes or high energy usage will benefit most from the measure, which applies in England, Scotland and Wales. Those who keep heating ramped up or have swimming pools to heat will see the biggest savings.
But rather than giving families genuine breathing room, as Andy Burnham hopes, for most households the saving will barely make a dent. The VAT removal is estimated to reduce inflation by just 0.10 percentage points on the Consumer Prices Index.
The limits of what Burnham can control
The truth is that the things which would genuinely lighten the load are largely beyond the Prime Minister's immediate control. Reducing inflation would help enormously, with lower prices at supermarket checkouts and petrol pumps providing instant relief to household budgets. Most people know the cost of everyday items like a litre of unleaded or a block of butter, so price falls would be noticed immediately.
But inflation is driven by global forces. The Iran war, which began on 28 February 2026, has caused what the International Energy Agency calls the largest supply disruption in the history of the global oil market. With the Strait of Hormuz closed and energy infrastructure under attack, Brent crude prices surged from around £72 per barrel before the conflict to nearly £120 at their peak. Bank of England policy also plays a major role. There is only so much Burnham can do.
Boosting take-home pay would also help. In theory, Britain's 59th Prime Minister could achieve this with a single policy shift by cutting income tax or National Insurance, or raising the personal allowance. But he would need to find the money elsewhere. Every £100 increase to the tax-free allowance costs the Treasury roughly £1 billion annually, according to experts.
Questions already surround how the £850 million energy bill measure will be sustained beyond March, let alone finding funds for income tax cuts.
The one thing that would cost nothing
But there is one action Burnham and new Chancellor John Healey could take that would not cost a penny and could save households thousands of pounds in anxiety and delayed decisions. They need to bring forward their first Budget and announce it as quickly as possible.
Former Chancellor Rachel Reeves, who resigned on 20 July 2026 after two years in the role following Labour's 2024 election victory, pushed her Budget back to 26 November last year. It led to months of damaging fear and speculation.
The longer Burnham leaves a vacuum in which we know tax rises are coming but do not know where they will land, the more damage he will inflict. Inevitably, households and businesses will act out of caution over what might lie ahead. Or equally damaging, they will put plans on hold until they have clarity, grinding business investment, the property market and job moves to a halt.
Revealing his plans as early as possible will provide clarity and stability. That is something all households will value, even if they dislike what the Budget contains.
Giveaways do not buy popularity
If Burnham hopes giveaways will win him popularity while he delays revealing his long-term plans, he should look to his predecessors for a cautionary tale.
The political backdrop to his premiership is turbulent. Burnham became Prime Minister on 20 July 2026, the seventh leader in a decade, after Keir Starmer announced his resignation in June following painful local election defeats in May. Starmer acknowledged that his parliamentary party no longer believed he was best placed to lead Labour into the next general election, after eighteen months of policy reversals and questions about his judgement.
Liz Truss announced energy bill support worth up to £150 billion, several times more than Burnham's current measure. She was still out of office within days. Reeves cut average energy bills by £150 in April. Four months later, she was gone, declining an alternative cabinet position and returning to the backbenches.
Burnham says he has a plan. He needs to share what it is, and he needs to do it now.
