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The British government announced on Tuesday that it will exempt households from value-added tax on domestic electricity bills during the coming winter, in the first measure aimed at boosting purchasing power taken by new Prime Minister Andy Burnham since taking office on Monday.

In a statement from Burnham: "I said I wanted to give people a bit of a break, and that's what I'm announcing on my second day as Prime Minister." The decision to abolish this tax takes effect from October 1st.

According to government estimates, this tax measure is expected to reduce the electricity bill for an average household by about 45 pounds sterling ($60) per year, according to AFP.

This measure will cost the state budget £850 million ($1.14 billion) this year, with funding to be secured from savings resulting from scrapping the digital ID card project.

Before taking office, Burnham announced that he intended to suspend this project, which his predecessor Keir Starmer announced in September to combat illegal immigration, but the project faced strong opposition because the idea of identity verification raises concerns in Britain where there is no identity card.

The government estimated the savings from scrapping this project at around £1.8 billion ($2.4 billion).

Energy price cap

The UK energy regulator sets a price cap every three months, taking into account developments in international markets while ensuring the most appropriate price for suppliers and consumers.

The date of the tax repeal on October 1 coincides with the next review of this cap, and the government hopes, through this measure which will not include gas, to mitigate the impact of a possible increase in energy bills before winter.

Markets are awaiting the steps the new government will take, fearing they could lead to an increase in public debt, but the new government stressed that "any additional measures, including those related to financing longer-term measures, will be taken when the budget is presented," and stressed that "financing will be available for all decisions, and budget rules will be observed."

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