British Prime Minister Andy Burnham announced on Tuesday a major tax cut on energy bills to help ease the cost-of-living crisis, in his first major policy move since taking office.

The British news agency reported that Burnham replaced Keir Starmer as Prime Minister on Monday, after becoming leader of the Labour Party last Friday.

Starting from October 1, electricity bills will be exempt from value-added tax, equivalent to a reduction of £850 million ($1.14 billion), which the government said would save households around £45 annually.

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The move will be partially funded by scrapping the digital identity project approved by the previous administration, which was estimated to cost around £600 million annually over three years.

Burnham said, 'I wanted to give people some breathing space, so I am announcing this cut on my second day as Prime Minister.'

He added, 'We are taking immediate action to cut taxes on energy bills and put more money in people's pockets and restore hope.'