Downing Street has confirmed that the cancellation of the digital ID cards scheme will fund Andy Burnham's pledge to remove VAT from household electricity bills, hours after the newly installed prime minister's reshuffle removed several of Keir Starmer's closest allies from government.

The announcement on 21 July 2026 came in Burnham's first major policy intervention since entering Downing Street. The VAT removal on domestic electricity was presented as a cost-of-living measure, with No 10 stating that the revenue forgone would be offset by axing the digital ID programme — a scheme the Office for Budget Responsibility had already flagged as unfunded in its November 2025 Economic and Fiscal Outlook (BBC).

The OBR's outlook noted on page 10 that the cost of digital ID cards fell under spending "for which no specific funding has been identified," and stated on page 172 that "no explicit provision has been made for its £0.6bn annual cost" (BBC).

Approximately two hours after Burnham's VAT announcement, Darren Jones — sacked as Chief Secretary to the Treasury in the reshuffle — publicly criticised the policy, describing the energy VAT cut as unfunded (BBC; Yahoo News). Jones had been an advocate of the digital ID cards policy and was among the Starmer-loyal ministers removed when Burnham constructed his new cabinet (BBC).

Jones was dismissed from the Treasury alongside a wider cull of Starmer-era ministers. David Lammy, Peter Kyle, Lord Hermer and Steve Reed were also removed (BBC). Rachel Reeves was offered a cabinet post but turned it down. Wes Streeting was appointed defence secretary in the new line-up (BBC).

Downing Street's assertion that the electricity VAT cut is being funded by cancelling the digital ID scheme provides the first concrete link between two of Burnham's earliest decisions: clearing out Starmer's front bench and redirecting fiscal priorities (Sky News).

The OBR's existing assessment of the digital ID scheme adds a layer of complexity to the Treasury arithmetic. If the programme was never explicitly costed in departmental expenditure limits, its "cancellation" may not release £0.6bn of real-terms headroom in the conventional sense. The fiscal watchdog's language — "no specific funding has been identified" — suggests the spending was a pressure on the reserves rather than a line item with a dedicated allocation. How No 10 accounts for the offset, and whether the OBR scores it as genuine saving in the next forecast round, will matter to anyone tracking the new government's credibility with the markets.

Jones's intervention, coming within 120 minutes of the policy announcement, is notable for its speed. A former Chief Secretary — the minister who oversees day-to-day departmental spending and negotiates settlements with the OBR — publicly contradicting his successor's framing of the numbers is the kind of breach that lobby correspondents will be watching for signs of wider backbench unease. His characterisation of the VAT cut as unfunded directly challenges Downing Street's presentation that the digital ID cancellation covers it.

The split between the two readings of the fiscal position — No 10's claim of a funded offset and Jones's counter that the numbers do not add up — turns on a technical question about scoring. If the OBR had already treated the £0.6bn as an unfunded pressure, cancelling the scheme eliminates a liability rather than releasing a resource. Whether that distinction holds up politically, as opposed to fiscally, is the calculation Burnham's team will now be making.

The reshuffle's scope also bears examination. Removing the Chief Secretary, the Foreign Secretary, the Justice Secretary (Lord Hermer), the Science and Technology Secretary (Kyle) and the Environment Secretary (Reed) in a single sweep — while the former Chancellor declines to serve — leaves Burnham with a cabinet assembled largely from his own faction. The appointment of Streeting to defence, rather than to a domestic brief, signals where the new prime minister may see his government's defining territory.

For Westminster watchers, the sequence matters: a new prime minister announces a flagship tax cut, funds it by cancelling a predecessor's signature project, and faces public pushback from the Treasury minister he fired that morning — all within a single afternoon. Whether this is a one-day story or the opening skirmish of a sustained internal divide will depend on whether other removed ministers follow Jones's lead.