In a bold move on his first full day as Prime Minister, Andy Burnham has called on his cabinet to explore every avenue to address the escalating cost of living crisis. However, as he lays out ambitious proposals—including the removal of VAT from electricity bills and a promise to expedite the establishment of a national care service—questions loom about how these initiatives will be funded.
A Cost of Living Government
Gathering his ministers at Downing Street, Burnham declared his administration would be a “cost of living government,” committed to alleviating financial pressures on British households. He challenged his cabinet to consider both large and small measures that could contribute to this mission. “What can we do just to take that little bit of pressure off people’s shoulders?” he asked, emphasising the need for tangible relief and renewed hope for citizens.
Among the immediate actions is a significant reduction in the national bus fare cap, slashing it from £3 to £2, set to be officially announced on Wednesday. This initiative is part of a broader strategy to ease financial burdens, with Burnham’s government aiming to implement various measures while adhering to existing borrowing regulations.
Controversy Over Funding Sources
While the Prime Minister has pledged to remove VAT from electricity bills starting 1 October—expected to lower costs by £45 per household at an estimated £850 million cost for the coming financial year—his funding strategies have come under fire. Critics, including former minister Darren Jones, have questioned the viability of financing these initiatives through cuts to the government’s digital ID scheme, highlighting that no alternative funding sources have been clearly identified.
Downing Street has confirmed that the tax cut is funded for the immediate future, but subsequent financial planning appears precarious, relying on existing departmental budgets which may lead to imminent spending cuts.
Cabinet Restructuring and Political Backlash
Burnham’s cabinet reshuffle has also ignited controversy, particularly among Labour loyalists. The Prime Minister has dismissed over half of the previous cabinet members, leading to concerns about internal party unity. An unnamed official remarked that this shake-up sends a perilous message, as it seems to prioritise loyalty to Burnham over commitment to party principles.
In the backdrop of these changes, Burnham is eyeing significant reforms in social care, with plans for a major announcement in the weeks ahead. He aims to accelerate the review process led by Louise Casey, potentially introducing a national care service funded through taxation or a social insurance model that could limit out-of-pocket costs for individuals. However, such proposals are fraught with political risk, given past backlash against similar funding mechanisms.
Long-Term Vision and Fiscal Discipline
Despite the pressing need for urgent action, Burnham has acknowledged the financial constraints he faces. He asserted the importance of fiscal responsibility and the commitment to maintaining fiscal rules while navigating the cost of living crisis. Allies have indicated that he may abandon plans to raise the income tax threshold, which has been stagnant for years, to avoid violating Labour’s manifesto commitments.
As Burnham settles into his role, he will spend the week in Manchester, urging civil servants involved in economic growth to relocate. The government is facilitating this move with relocation packages, indicating a significant shift in focus and resources towards the northern city.
Why it Matters
Burnham’s ambitious agenda arrives at a critical juncture, as the cost of living crisis continues to affect millions across the UK. His ability to deliver on these promises while managing the financial implications will not only define his tenure but could also reshape the Labour Party’s landscape ahead of upcoming elections. As scrutiny increases over funding methods and internal party dynamics, the Prime Minister’s next steps will be pivotal in securing both public support and political stability.
