Andy Burnham has told his Cabinet they must find budget cuts to fund his promises on the cost of living, according to The Telegraph, as questions grow over how a planned tax cut on household electricity bills will actually be paid for.

VAT is a tax added to the price of most things you buy, including energy bills. Cutting it on household electricity would mean lower bills for consumers, but the government would collect less money — so it has to make up the difference from somewhere else.

The instruction, reported on 21 July, means ministers have been warned that the new prime minister's key promises to consumers need to be paid for with savings elsewhere in government. It follows Burnham's announcement that he will scrap plans for a government-issued digital ID for all British adults — a pledge he made when he entered Downing Street. The abandoned scheme had previously been identified as a way to help fund the VAT reduction on electricity and energy bills (BBC).

The VAT cut is now scheduled to take effect in October, the BBC reported on 21 July, giving a concrete date to what has been a central Burnham promise on household costs (BBC).

But the question of how to pay for it has immediately drawn criticism from within Labour's own ranks. Darren Jones — described by the BBC as "Sir Keir Starmer's former right hand man" — has cast doubt on Burnham's funding plan, stating that the digital ID scheme was itself unfunded (FT; BBC).

The BBC has also published a video segment asking the central question directly: "Will scrapping digital ID pay for a VAT cut?" (BBC). The point is straightforward. If the digital ID programme was never given its own funding, cancelling it does not free up money to spend on something else. Jones's argument is that Burnham is claiming savings from money that was never committed in the first place.

A separate BBC guide to the new prime minister, published on 17 July, confirmed Burnham's intention to scrap the digital ID plans, placing the commitment in the opening days of his premiership rather than as a later adjustment (BBC).

The sequence runs as follows. Burnham enters office and commits to abandoning the digital ID scheme. That scheme had been presented as a way to help pay for a VAT cut on electricity and energy bills. The VAT cut is then confirmed for October. But the funding logic — scrap digital ID, redirect the savings — is challenged by Jones, who says the ID scheme was never funded to begin with. The Telegraph reports on 21 July that Burnham has told Cabinet to find the budget cuts needed to fund his cost-of-living pledges, a move consistent with the need to find real savings rather than ones that only exist on paper.

The Cabinet directive signals that the search for funding has shifted from announcing policies to asking ministers to cut their own departmental budgets. Ministers are being asked to find savings in their own areas to pay for a tax cut that directly benefits consumers — a politically difficult task that puts the Cabinet's willingness to work together to an early test.

The broader context here is one of fiscal credibility under time pressure. A VAT cut on household electricity bills taking effect in October is a commitment with a fixed deadline. The way it will be paid for is, on the best available reporting, not yet settled. Jones's intervention, coming from a figure associated with the previous government's approach to public finances, frames the issue as a question of whether the new government is building its promises to consumers on solid financial ground.

The Burnham premiership's first week has produced two parallel stories that now meet: a consumer policy with a firm start date, and a funding gap that the prime minister has asked his own ministers to close. Whether the Cabinet can find enough cuts before October will determine whether the VAT reduction goes ahead on time or picks up the kind of financial caveats that opposition figures are already looking for.