John Healey, the new chancellor of the exchequer, 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.”
At an estimated cost of £850 million in 2026-27, this measure will be funded by cancelling Starmer’s Digital ID programme. This was set to cost £1.8 billion over the next three years, according to the Office for Budget Responsibility last November. However, Starmer ally Darren Jones has claimed the policy was unfunded.
By bringing down the Ofgem energy price cap by around £45 a year (the price cap is the typical amount an average household can expect to pay for energy bills), Burnham is saving people around £3.75 a month. Every little bit helps, but it’s a long way to go before British people start to feel richer month to month.
What could Burnham do next to help people with the cost of living?
Helen Barnard, director of policy and research at Trussell, said: “Today’s proposal to cut VAT on electricity bills shows the prime minister’s focus will be on tackling the cost of living. But this first step will do little for people being forced to turn to food banks to survive.
“We need to see more targeted support for families at the sharpest end of the cost of living crisis, who are being forced to turn to food banks because they don’t have enough money for the essentials.”
In the last year, 2.6 million emergency food parcels were distributed to people facing hunger and severe hardship in the UK. That’s equivalent to a parcel every 12 seconds.
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Trussell is calling for the government to lift the freeze on local housing allowance. It also wants to see the government make steps towards an essentials guarantee, which would ensure the basic rate of universal credit at least covers the cost of essentials.
There are more than eight million people in the country claiming universal credit to help them afford to live. That is roughly an eighth of the population. Starmer’s government increased universal credit to £98.05 a week for single people aged 25 or over and £166.74 a week for a couple.
But that’s still more than £20 off the money needed each week just to afford the essentials and £30 for couples, according to estimates from the Joseph Rowntree Foundation. Big Issue is backing the campaign for an essentials guarantee to be embedded into universal credit to ensure people can afford the basics they need to survive, at least.
Chris Belfield, chief economist at the Joseph Rowntree Foundation, said: “We face a tough living standards outlook, with the lowest-income households facing the biggest squeeze. Any action to help with that is to be welcomed. But there is still so much to do. The new government has an opportunity to meet this crisis head-on, with bold policy that fundamentally rethinks how we build household economic security.”
Belfield suggests measures such as controlling the growth of private rents, making basic energy use more affordable and improving the adequacy of universal credit and in-work safety nets to boost living standards for the majority of British people.
Burnham is reportedly considering controls to make renting more affordable. Although the Renters’ Rights Act was widely welcomed, the key criticism was that it did not do enough to address the affordability of renting.
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On Monday (20 July), the Cost of Living Action (COLA) coalition sent an open letter to Burnham, calling for urgent action on the cost of living crisis with policies including private sector rent controls and building large-scale social housing. Burnham has already committed to the latter, promising the largest council house programme seen since the post-war period.
Clara Collingwood, director at the Renters’ Reform Coalition, said: “Everyone needs a decent affordable home, but soaring rents drive tenants into poverty, push us out of our homes and communities, and create huge social and economic costs for the whole of society. With rent rising faster than wages for 11 of the last 15 years, it’s obvious any attempt to improve cost of living that doesn’t include some form of rent controls will be trying to fill a leaking bucket.”
Burnham said in his speech on Monday that he would increase job support for young people, a key issue for the government to tackle as more than a million young people are not in education, employment or training. He also recommitted to more council housing and said that together these policies are the “fair and sustainable way to bring the welfare bill down”.
It comes after Starmer’s government faced significant controversy over plans to cut disability benefits in a bid to slash the welfare bill and was forced to U-turn.
Burnham has pledged to “build a new economy where we put life’s essentials back under stronger public control to make them affordable to you again”. This includes plans to “re-industrialise Britain, using public procurement to back British industry”.
Danny Sriskandarajah, chief executive at the New Economics Foundation, said: “At the New Economics Foundation, we have been waiting 40 years for a PM who promises to “build a new economy”.
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“What we need to see now are the measures that will deliver the promises he just made on Downing Street. The new government’s top priority needs to be early action to address cost of living pressures through policies like a national energy guarantee, rent controls and free bus fares for under-25s.”
Starmer set a national bus cap of £3, while Burnham kept fares at £2 on his Bee Network in Greater Manchester. The Treasury stumped up £100 million to make bus travel free for kids throughout August as a cost of living measure, but there has been no wider national policy on free travel for young people.
“Over the longer term, the government needs to help rebuild the foundational parts of our economy that keep society functioning, through policies like a mass social housebuilding programme, accelerating the building of wind and solar, and renationalising key industries like water,” Sriskandarajah added.
Other potential options for the new prime minister include wealth taxes or a universal basic income. Burnham has previously backed a targeted universal basic income trial in Greater Manchester.
Starmer’s government made some big and positive changes to help people with the cost of living, such as ending the two-child limit on benefits to lift hundreds of thousands of children out of poverty, expanding free school meals to every child in a family on universal credit and introducing the Renters’ Rights Act which gives greater powers to renters.
The question is whether changes like this can ever be enough after 14 years of austerity under the Conservative government decimated public services, the pandemic and global conflicts damaged the economy further, and the cost of living crisis plunged millions into hardship. In some ways, perhaps Burnham has an impossible job on his hands to make people feel as though life is getting better in Britain. Time will tell.
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