22 Jul 2026The government recently announced that VAT will be cut from household electricity bills from 1 October in time to impact the next Ofgem price cap. The move is part of new Prime Minister Andy Burnham's commitment to help ease the cost of living. The cost of this immediate action for this financial year is being funded from the cancellation of the £1.8 billion Digital ID programme. Any further action on energy bills will be taken at the Budget, alongside the publication of a forecast from the Office for Budget Responsibility (OBR). All decisions at that point will continue to be funded and also consistent with the government's fiscal rules. The Prime Minister said: 'Westminster has not been working for people for too long, with families struggling with the cost of living. 'We're taking immediate action to cut taxes on energy bills, put more money in people's pockets and bring back hope.'