Andy Burnham told ministers he will lead a “cost-of-living” government as he chaired his first cabinet meeting since entering No 10.
The prime minister assembled his top team hours after announcing his first policy – a VAT cut to household electricity bills from October to help people with the cost of living.
He told his cabinet “we need to be a cost-of-living government” and give people a “sense that help is coming”.
Opposite Burnham sat his newly appointed chancellor, John Healey, who said the move to cut VAT on electricity bills would provide reassurance over the winter.
Healey acknowledged the policy would not “solve the cost of living” but said it would help 29 million homes feel better off.
The VAT rate on household electricity will be cut from 5% to 0% starting on October 1 for six months until the end of the financial year in March. It is expected to take £45 off the annual price cap.
The policy will cost the Exchequer around £850 million in 2026/27.
The cut will be funded through the cancellation of the digital ID programme, proposed by Keir Starmer’s government ahead of last year’s Labour conference, which aimed to make it mandatory for right-to-work checks as part of a crackdown on illegal immigration.
But Burnham’s team has scrapped the scheme to “refocus priorities”.
“Westminster has not been working for people for too long, with families struggling with the cost of living,” Burnham said as he announced the tax cut.
“That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
However, the move has faced criticism from Darren Jones, formerly chief secretary to Starmer, who claimed the Digital ID programme was unfunded. He called on the government to “set out how it will pay for its new policies”.
Jones is not alone in his criticism of the policy, with consumer expert Martin Lewis saying “in practice people won’t feel much benefit”, particularly as the energy price cap is predicted to rise 3.1% in October, meaning the saving will be less noticeable.
There is also a gap in the required spending, with Digital ID expected to have cost £600 million, leaving the government £250 million short of the required £850 million to remove the VAT.
Conservative Leader Kemi Badenoch also expressed concerns, saying: “You can’t use the funding from an unfunded programme to pay for cheaper bills.”
She suggested the government should “steal” her ideas to drill in the North Sea and scrap net-zero.
The policy announcement on Burnham’s first full day in office comes after the new premier promised to provide early “breathing space” for households struggling with the cost of living as he stood on the steps of No 10 on Monday.
He said some of these measures would be announced as early as Tuesday, when he will chair his first cabinet meeting.
In his first address to the nation as prime minister, Burnham pledged the biggest change to British politics in 40 years, and said he would deliver “a new political model and a new economic model” for Britain.
On Monday evening, he made sweeping changes to the Cabinet, starting with the appointment of John Healey as the new chancellor to succeed Rachel Reeves.
A swathe of major figures from Starmer’s era joined Reeves in leaving government, including ex-deputy prime minister David Lammy, former attorney general Lord Hermer and former housing secretary Steve Reed.
Their replacements in senior government roles were announced throughout Monday evening and will join Burnham around the Downing Street Cabinet Room table on Tuesday.
Louise Haigh, a key ally of Burnham who was instrumental in getting him into No 10, was made First Secretary of State and Chancellor of the Duchy of Lancaster, giving her a role as a fixer across government.
Ed Miliband was appointed foreign secretary, and Shabana Mahmood remains as home secretary, while Wes Streeting became the new defence secretary, and Angela Rayner returned to government as housing secretary.
Once the dust had settled, it became clear that Burnham had chosen not to appoint a new deputy prime minister, a post previously held by Rayner and Lammy.
The Department for Science, Innovation and Technology (DSIT) was meanwhile scrapped, with responsibilities for its areas of policy assigned to other departments.
Jonathan Reynolds returned to the role of business secretary with a beefed-up portfolio for his department that now includes science and innovation, while Lisa Nandy remained as culture secretary with an extended brief covering digital.
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A No 10 source noted Burnham’s Cabinet had a balanced make-up – 50% men, and 50% women – and claimed that he had boosted the number of ethnic minority members.
Among the measures Burnham is exploring to help hard-pressed households with the cost of living are rent controls, support for energy bills and capping the cost of bus fares.
“We’re looking at measures that could make a difference this year. So we are looking at all of those things, but we’ll make more announcements tomorrow,” he told reporters in Downing Street’s rose garden on Monday.
A flurry of diplomatic phone calls also characterised Burnham’s first day as prime minister.
The first among these were calls with US President Donald Trump and Ukraine’s President Volodymyr Zelenskyy.
In a Truth Social post, Trump said he and the new prime minister had a “very good conversation”, adding: “The Prime Minister has got a big job ahead of him, but he will be able to do it and, of course, the U.S.A. will be there to help! We discussed North Sea Oil, Trade, the Military Alliance, Demining of the Hormuz Strait, and many other topics. The call was interesting, and went very well.
“I wished Prime Minister Burnham, GOOD LUCK AND GODSPEED!”