New British Prime Minister Andy Burnham has promised to remove VAT from household energy bills in his first policy announcement since taking office.
In his first address to the public after taking over as premier, Burnham said he would take steps to “give people some breathing space and help with living costs.” The VAT cut will apply from October 1, meaning it will have an impact on the next price cap in Ofgem.
This is expected to deliver around £45 off the annual price cap, in addition to the £150 reduction announced at the previous Budget.
The government has said the immediate action will be funded by the cancellation of the £1.8 billion Digital ID programme, but critics have pointed out that no funding has ever been allocated for the programme. The cost of abolishing VAT is estimated at around £850 million by 2026-2027.
Any further action will be taken at the next official budget, according to the government.
Before his official appointment, solar industry trade association Solar Energy UK said it looked forward to working with Burnham to “pursue our shared goal of reducing energy bills”.
Simon Francis, co-ordinator of campaign group the End Fuel Poverty Coalition, called the VAT cut ‘a positive statement of intent’.
“This breather is also not a cure. The only way to bring bills down for good is to change the way they are set. That means breaking the link between gas and electricity prices, tackling excess profits in the energy sector and ending our exposure to volatile fossil fuel markets through homegrown renewables and more energy efficient homes,” he added.
The rhetoric of Labour’s leadership so far has been that developing renewable energy is the best way to achieve lower energy bills. This has been Ed Miliband’s constant line during his time as Energy Minister, a position he has now relinquished. He becomes Minister of Foreign Affairs in Burnham’s cabinet.
Miatta Fahnbulleh has been appointed Secretary of State for Energy Security and Net Zero, after serving as Parliamentary Under-Secretary of State at the Department for Energy Security and Net Zero (DESNZ) between July 9, 2024 and September 6, 2025.
Miliband’s legacy
In his role as Energy Minister, Miliband took swift action. He lifted the de facto ban on onshore wind power and approved major solar projects within weeks of taking office. Since then, he has approved seventeen nationally significant solar infrastructure projects (NSIPs) and overseen two record-breaking Contracts for Difference (CfD) allocation rounds.
He has also pushed through the Future Homes Standard and the Warm Homes Plan, and announced plans to decouple electricity and gas prices.
All this has been done with the same certainty that the Net Zero mission will reduce energy bills. Indeed, one study by CBI Economics (the consultancy arm of the Confederation of British Industry) showed that the net zero economy generates around £105 billion in gross value for Britain and supports 1.1 million jobs. Following the report, CBI chief economist Louise Hellem said: “The politics of net zero may be patchy, but the economic situation has never been clearer.”
However, if The political discourse has evolvedMiliband and his policies have become targets. And as it was announced at the Clean Power 2030 Summit at the beginning of this month, far-reaching approvals for large-scale solar power plants, along with misdirected messagescould jeopardize its clean energy project.
It remains to be seen what Fahnbulleh will take over from her predecessor in her new position.
The oil and gas issue
While Burnham’s appointment has been largely well received by the industry, there are rumors that he plans to approve the permits for the Jackdaw and Rosebank oil and gas fields in the North Sea.
He has been lobbied by the political opposition in Britain’s Conservative and Reform parties, as well as some in the Labor Party, to push through the projects. This is despite the climate need to halt oil and gas drilling and the fact that this would bring little long-term economic benefit to Britain.
Commenting on the appointment of Fahnbulleh, head of energy at the Energy and Climate Intelligence Unit, Jess Ralston said: “Around 90% of oil and gas has already been extracted from the North Sea and production will continue to decline regardless of new drilling.
“So if energy security is a priority, more zero-emission technologies such as solar, wind, electric vehicles and heat pumps will be needed, removing Britain’s dependence on burning oil and gas, which are priced in international markets. More action to reduce the cost of electricity could help accelerate this transition.”
It was a 2024 manifesto commitment from the Labor Party that no new oil and gas fields would be approved, but a loophole allowed the issuance of licenses for projects already within the planning system.
