Homes will save around £45 a year through the cut announced on Andy Burnham's first full day as prime minister.

VAT will be cut from household electricity bills, the government has announced, as part of new Prime Minister Andy Burnham's pledge to help with the cost of living. The reduction from 5% VAT to zero will come into effect on 1 October, saving a typical household about £45 a year. Ministers said it would be funded by savings from the cancellation of the digital ID programme, which was going to cost £1.8bn over the next three years. The government estimated it will cost £850m this financial year. But Labour's Darren Jones, who was sacked as chief secretary to the prime minister on Monday, accused the government of announcing an unfunded tax cut. Jonathan Reynolds, the new business secretary, said the cut would give people some "breathing space". He said it was funded until "the end of the financial year" in March 2027 and any changes beyond that would have to be announced in the next Budget. Suppliers have been told the VAT reduction should be passed on to all household customers, including those on fixed tariffs, as was the case when some charges were taken off bills in April. The cut will take effect in England, Scotland and Wales, but equivalent funding would be given to Northern Ireland, which is regulated differently, the government said.