Nearly three-quarters of Britons believe Andy Burnham’s decision to scrap VAT on household electricity bills will do little to ease the cost of living crisis, reports BritPanorama.
The findings represent a setback for Labour’s new leader, who has advocated that the measure—his initial major policy as prime minister—will enhance household budgets and “bring back hope.”
Launched amid much publicity on his second day in office, the £850 million tax cut is set to make electricity bills VAT-free from the beginning of October, equating to an annual savings of around £45 for households.
However, a survey by Opinium indicates that 72 per cent of adults perceive the policy as unlikely to materially affect their household finances.
Among the demographic segments, young people exhibited the most optimism, with 39 per cent expressing belief in its efficacy. This figure significantly decreased to just 24 per cent among those aged 35 to 49, and a mere 6 per cent for individuals over 50.
The poll also showcased stronger support for another initiative Mr. Burnham has proposed, with over half of respondents, 52 per cent, believing that unfreezing and raising the tax-free personal allowance in accordance with inflation would result in improved financial situations.
Although Mr. Burnham has left the door open for increasing this allowance in his government’s first Budget in October, he cautioned that such changes would come at a great cost and present challenges amid the current financial climate.
This allowance has remained stagnant at £12,570 for the past five years, thereby dragging an increasing number of people into the income tax bracket as inflation elevates wage levels.
The highly regarded Institute for Fiscal Studies has estimated that unfreezing the threshold could incur annual costs ranging between £8.5 and £9 billion.
Matthew Howlett, Opinium’s research manager, remarked, “Most people don’t expect Burnham’s first major economic announcement to make much difference to the cost of living.”
Howlett added that as the new prime minister and chancellor approach their first Budget in October, a majority of voters believe that unfreezing the tax-free personal allowance would significantly impact their finances.
The survey sampling involved 2,050 UK adults, conducted between July 29 and July 31.
Mr. Burnham has conveyed to his cabinet his intent to lead a “cost of living government,” pushing ministers to be “prepared to reprioritise” budget allocations to facilitate this goal.
In announcing the VAT cut, he emphasized the intention to provide people with breathing space, noting, “We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
Ministers have stated that energy providers will be required to pass the VAT reduction on to all customers, including those bound by fixed tariffs.
