Andy Burnham announces energy VAT cuts and bus fare cap reinstatement

Prime Minister Andy Burnham has unveiled a series of economic interventions this week, marking a shift in government policy as he seeks to address cost-of-living pressures facing households and hospitality businesses across England. The Prime Minister entered No.10 on Monday promising to give people "breathing room" against rising prices and a historically high tax levels.

Energy and Transport Relief

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. 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.

Media additions

Burnham announces 20% business rates cut for pubs and clubs in London - live

Mr Burnham on Tuesday reversed Sir Keir's decision to increase the bus fare cap, reinstating the £2 fare limit. 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. Reinstating the £2 maximum fare will partly be funded by switching grants for international climate projects to repayable loans instead. Starmer ally, Darren Jones, criticised the move as "unfunded".

Hospitality Business Rates

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 Night Times Industries Association (NTIA) has welcomed the new scheme with open arms. Michael Kill, CEO of the NTIA, shared happily, “Having worked closely with the new Prime Minister’s team over recent weeks, it is encouraging to see a positive outcome from genuine engagement with the sector.” Allen Simpson, chief executive of UK Hospitality, said that there needs to be bigger solutions to provide relief for everyone in the industry. Steve Perez, who owns two hotels, both including a pub and a restaurant, told Bbc Radio 4’s Today programme: “And this tiny, well, obviously it’s welcome £1,100, but this won’t make any material difference to any pub.”

Political Context and Future Outlook

Gary Lineker is among 120 UK-based millionaires calling on Mr Burnham to impose higher taxes on their wealth in an open letter. Chief Secretary to the Treasury Emma Reynolds said: ‘I welcome the fact that people of good means are saying that they want to pay more. They can pay more.” But, she added that she would not be drawn into the debate, explaining it was only day four of this new government and any major tax changes would be announced at a budget.

Conservative deputy chairman and shadow crime and policing minister Matt Vickers has raised doubts on the financing of the 20% cut to business rates, deeming it “the third unfunded spending commitment in three days”. Mr Burnham is set to meet with the first ministers of Scotland and Wales later today for the first time since becoming PM.

Summary of Announced Measures

He is expected to meet with the First Minister and Deputy First Minister of Northern Ireland on his tour of the United Kingdom in August, where he will visit places across England, Scotland, Wales and Northern Ireland.