Andy Burnham tells Cabinet ministers to 'reprioritise' funding to help with cost of living crisis

The new Prime Minister told his first Cabinet meeting that the announcement to cut VAT on energy bills showed “the government was prepared to reprioritise to reduce the pressure”.

He said that “people across Britain were finding life hard and ministers should think every day about what they could do to take a little bit of pressure off”.

From October 1 electricity bills will be VAT free, saving households about £45 a year as part of Mr Burnham’s promise to help ease the cost of living.

But Darren Jones, a key ally of former prime minister Sir Keir Starmer who lost his Cabinet post on Monday when Mr Burnham took office, said the policy was “unfunded”.

Mr Burnham used the first meeting of his Cabinet to say that ministers must give people “a sense that help is coming”.

He vowed to always “show how we’re going to pay” for policies to help hard-pressed people.

The Government said the electricity bill VAT cut would be funded in part by scrapping Sir Keir’s digital ID project, which had been estimated to cost about £600m a year over three years.

But that falls short of the estimated £850m hit to tax revenues from the VAT cut, and funding for digital ID was meant to have come from unidentified Whitehall savings.

Mr Jones, who was the minister in charge of the digital ID scheme, 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.”

His public criticism is a sign that Mr Burnham’s premiership could face problems from Starmer loyalists.

The Government said the £1.8bn cost of the digital ID scheme over three years had been “scored” by the Office for Budget Responsibility, meaning the money would have had to be found.

The money that would have been used has been reprioritised to fund the tax cut, ministers said.

Mr Burnham told the Cabinet that they needed to examine “all possible ways” to help families struggling with high costs.

After arriving to applause, the Prime Minister told his new-look top team in Downing Street they needed to consider “What can we do just to take that little bit of pressure off people’s shoulders, just to give them that little extra sense that help is coming so that they can have that bit of hope that things are getting better”.

He asked his colleagues to look into what measures “big and small” their departments could do to help.

“We need to be a cost-of-living Government, getting that cost of living down, looking at all possible ways of doing that.”

Mr Burnham sat opposite his new Chancellor John Healey, and was flanked by Cabinet Secretary Dame Antonia Romeo and Education Secretary and deputy Labour leader Lucy Powell.

Mr Healey, who resigned from Sir Keir’s government in protest at funding for the military, warned his colleagues that “we’ve got some big challenges” ahead and that they needed to look closely at their departmental budgets as they refocus spending.

According to the read out, the South Yorkshire MP “reiterated that reprioritisation would allow the government to make life more affordable for people whilst maintaining fiscal discipline”.

Mr Healey went on to say fiscal credibility gives “the economic stability for growth and national security of our society”.

Martin Lewis, founder of MoneySavingExpert, said the VAT cut would have little impact.

“This is a good totemic step and very welcomed,” he said. “Yet in practice people won’t feel much benefit.”