Andy Burnham used his first cabinet meeting as prime minister to declare a 'cost-of-living government', cutting VAT on household electricity while critics questioned how his pledges will be paid for.
Key facts
- Burnham chaired his first cabinet meeting as UK prime minister on 21 July 2026.
- He announced a cut to VAT on household electricity bills as a first cost-of-living move.
- Burnham created a new department, the Office of the Prime Minister and Cabinet, led by Louise Haigh.
- Critics questioned how the VAT cut and an expected defence spending uplift would be funded.
- New chancellor John Healey resigned as Keir Starmer's defence secretary last month.
Andy Burnham told his first cabinet meeting as prime minister that his administration must be a “cost-of-living government”, according to reporting from Al Jazeera and the BBC. He urged ministers to examine “all possible ways” to help families struggling with high costs, the Guardian reported.
In one of his first acts in power, Burnham announced a cut to VAT on household electricity bills, which the BBC said he confirmed before chairing the cabinet. The Guardian described the move as his first cost-of-living measure.
Burnham also moved quickly to reshape Whitehall. According to the Guardian, he created the Office of the Prime Minister and Cabinet, headed by his ally and enforcer Louise Haigh, drawing in parts of the Cabinet Office, Treasury and housing ministry to become what was described as the “dominant driver of the UK’s economy”. The new department will oversee the No 10 operation in London, a forthcoming No 10 North in Manchester and parts of the Cabinet Office.
The prime minister faced immediate scrutiny over funding. The Guardian reported that Burnham is under mounting pressure to explain how he will pay for his policy pledges, including the removal of VAT from electricity bills and an expected uplift in defence spending. That defence spending issue led his new chancellor, John Healey, to resign as Keir Starmer’s defence secretary last month, according to the Guardian.
On the international front, António Costa, the president of the European council, said in a post on X that he held a “good” phone call with Burnham the previous night. Costa said they agreed to “further strengthen” EU-UK relations and to continue cooperating in support of Ukraine, and that they discussed “common geopolitical challenges facing Europe”. Costa did not specify which challenges he meant.
Why it matters
The cost of living remains a top concern for households, and Burnham's early decision to cut VAT on electricity signals where his government intends to focus. But questions over how the measures will be paid for, alongside an expected rise in defence spending, will shape whether the new prime minister can deliver on his pledges.
Frequently asked questions
What is Andy Burnham's first cost-of-living policy?
According to the BBC and the Guardian, Burnham announced a cut to VAT on household electricity bills as his first cost-of-living move.
What new government department did Burnham create?
The Guardian reported that Burnham created the Office of the Prime Minister and Cabinet, led by Louise Haigh, drawing in parts of the Cabinet Office, Treasury and housing ministry and overseeing No 10 in London and a planned No 10 North in Manchester.
Who is Burnham's new chancellor?
John Healey is Burnham's new chancellor. The Guardian reported that he resigned as Keir Starmer's defence secretary last month over the issue of defence spending.