A Keir Starmer ally sacked by Andy Burnham has warned the new Prime Minister that he may already have a funding black hole. Former chief secretary to the prime minister Darren Jones said Mr Burnham needed to explain how he would pay for his first big announcement – a plan to cut VAT cut on household energy bills. According to the new Government, the money will come from scrapping plans for a digital ID scheme. But Mr Jones mocked that idea.
Mr Jones said in a post on X: “Good news that VAT will be cut on electricity bills. It’s a simple way for families to save a few quid, and to mechanically help to keep inflation that little bit lower. But the DigitalID program was unfunded. The government will have to set out how it will pay for its new policies at the budget.”
Darren Jones (Image: Getty)
The new Prime Minister announced an £850 million tax cut on energy bills to help ease the cost-of-living crisis in his first significant policy as Prime Minister.
From October 1 energy bills will be VAT free, saving households around £45.
The move will be funded in part by scrapping Sir Keir Starmer’s digital ID project, which had been estimated to cost around £600 million-a-year over three years.
Funding for that scheme was due to have come from savings within existing departmental budgets, which will now be reprioritised to fund the VAT cut.
Mr Burnham had called for an end to “factionalism” within Labour and urged the party to unite. But his reshuffle was seen as a purge of allies of Sir Keir Starmer. And the intervention by Mr Jones suggests Labour’s in-fighting will continue.
Shadow defence secretary James Cartlidge has said new policies have “got to last more than a few minutes” of scrutiny. The Conservative politician told Times Radio that the OBR (Office for Budget Responsibility) also said last year that the digital ID card scheme has not been funded.
He said: “They (the OBR) literally said that, so you can’t fund a tax cut with… with savings from a programme that itself wasn’t funded.
“So you know, big question here, backed up by someone who – as you can rightly say – was only recently was in the heart of government under Labour – so it’s a fairly extraordinary position… I certainly agree with the new Prime Minister that cost of living is a big issue, I think we all agree with that, it’s still the number one thing that comes up on the doorstep with my constituents.
“But if you’re going to have policies to deal with it, they’ve got to last more than a few minutes in terms of scrutiny, to be honest.”
The energy price cap set by Ofgem is forecast by industry analysts to be £1,849 for a typical household, although the resumption of military action in the US-Iran war could push prices higher because of the disruption to global oil and gas markets.
The Prime Minister said: “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.”
Energy suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs, the Government said.
Chancellor John Healey said: “For too long, too many people have struggled with the cost of living.
“Today’s energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.
“This measure is funded this year from cancelling the digital ID programme, and it will help bring down inflation while supporting households in every postcode.”