Berliner Boersenzeitung - UK PM Burnham's new cabinet to meet as he announces tax cut

A day after replacing Keir Starmer in Downing Street, Burnham announced he was cutting value-added tax (VAT) on consumer electricity bills -- his first significant policy announcement as UK leader.

But a Starmer loyalist, one of several to be culled from the cabinet under Burnham's new team Monday, questioned how the Labour government would fund the cut, suggesting the new premier's call for party unity may go unheeded.

From October 1, electricity bills will be VAT free, saving an average household around £45 ($61) a year, the government said in a statement.

"We're taking immediate action to cut taxes on energy bills, put more money in people's pockets and bring back hope," Burnham said.

The move will cost the government about £850 million ($1.143 billion) in the current UK financial year.

It said the tax cut would be funded by cancelling Starmer's plan for a digital ID scheme that would have cost the taxpayer £1.8 billion.

But in a post on X, former minister Darren Jones said the ID program had been "unfunded".

"The government will have to set out how it will pay for its new policies at the budget," he wrote.

Burnham, parachuted into No. 10 by Labour MPs after they lost confidence in Starmer, will assemble his cabinet for the first time at 12:30 pm (1130 GMT).

Despite vowing to end factionalism in the party, one of Burnham's first acts as prime minister was to cull most of Starmer's supporters from his cabinet, as he signalled a new left-ward direction for the government.

Rachel Reeves was axed as finance minister, replaced by John Healey, while David Lammy left his role as deputy prime minister, as Burnham promoted his own allies and reshuffled the existing pack.

Ed Miliband became foreign minister, Wes Streeting -- who abandoned plans to run against Burnham for the Labour leadership -- was named defence minister, and left-wing figurehead Angela Rayner returned to government.

Fifty-six-year-old Burnham has promised to "give people some breathing space now, some help with the cost of living", and is also exploring rent control measures and caps to bus fares.

In his first speech Monday as Britain's seventh prime minister in just over a decade, Burnham pledged to re-industrialise the country and decentralise power away from London to other cities and regions.

- Challenges -

He vowed to lay out a 10-year-plan for the UK that is expected to include greater public control of utilities and more public housing.

In a busy first afternoon in office, Burnham held calls with numerous foreign leaders, including US President Donald Trump, Ukrainian President Volodymyr Zelensky and French leader Emmanuel Macron.

Burnham, a long-time critic of Starmer's more centrist approach to governing, only returned to parliament four weeks ago following a nine-year stint as Greater Manchester mayor.

Labour MPs hope his down-to-earth persona can stem support for the anti-immigrant Reform UK party, led by Nigel Farage, before the next general election, due in 2029.

But Burnham faces multiple challenges, not least an anaemic economy, high government borrowing costs, a ballooning welfare bill and irregular migrants arriving in small boats.

Unpredictable energy prices due to the US-Iran war and volatile relations with Washington under Trump also threaten to buffet his premiership.

Burnham, an MP between 2001 and 2017, has little room to manoeuvre amid high public debt and strict financial rules requiring him to balance government spending against tax revenue.

His swift appointment as Labour leader, and prime minister by virtue of Labour's huge parliamentary majority, came without him putting forward a clear plan for how he will achieve his aims.

Farage has questioned Burnham's mandate and called for a snap election.

(L.Kaufmann--BBZ)