Andy Burnham's government has announced a £850 million cut to VAT on electricity bills, funded in part by scrapping the digital ID programme. The savings from that cancellation have not yet been published.
The VAT cut, unveiled on 21 July, reduces the rate charged on domestic electricity from 20 per cent to 5 per cent for the remainder of this parliament. The Treasury says the measure will cost £850 million in 2026/27.
The OBR's November 2025 Economic and Fiscal Outlook had set out the digital ID programme's cost over the Spending Review period at £1.8 billion, made up of roughly £500 million in costs for setting up and £1.3 billion in running costs across the forecast period.
The OBR put the provisional cost of digital ID at £600 million a year over the Spending Review period.
The VAT cut is expected to cost £850 million in 2026/27.
On those published figures, the new policy costs roughly £250 million more this year than the annual spending pressure the OBR had allowed for digital ID.
That does not necessarily mean there is a £250 million hole. The digital ID estimate was provisional and the government had not created a dedicated £600 million annual budget for the programme. Darren Jones told MPs in March that ministers did not yet know what the final scheme would cost because its design had not been settled.
But the comparison does leave something for Burnham's government to explain.
The OBR had treated digital ID as an unfunded spending pressure of £600 million a year. It said departments were expected to absorb the cost from existing budgets, although no specific savings had been identified.
Burnham has now cancelled that programme and says those departmental savings will instead pay for an £850 million VAT cut.
The government has not published the departmental arithmetic showing how £600 million of annual digital ID pressure becomes £850 million available for the VAT measure in 2026/27.
Nor has it said which existing budgets will be reprioritised, what spending will be reduced or delayed, or how much each department is expected to contribute.
Cancelling digital ID removes a genuine future spending pressure. It does not, by itself, identify £850 million of cash savings.
That is the distinction Darren Jones's criticism gets partly right. Digital ID had no separately funded pot waiting to be transferred. But the OBR had already allowed for its cost in the fiscal forecast.
Burnham has changed what the proposed departmental savings are supposed to pay for. Ministers have yet to publish how the full £850 million will be found.
When the Commons Science, Innovation and Technology Committee pressed Darren Jones on this in March, he told MPs the £1.8 billion figure was the OBR's own estimate, which the government had disputed, and that ministers did not yet know what the finished scheme would ultimately cost. Ian Murray, now responsible for the digital ID brief, has not published a revised costing since the programme's cancellation.
The £45 figure that has circulated in coverage of the cut is an annualised estimate based on the current Ofgem price cap, not a guaranteed saving for any individual household. Actual bills vary with usage, and the price cap itself is reviewed quarterly, so the benefit in real terms will shift as wholesale prices move.
Martin Lewis's analysis for MoneySavingExpert found that a VAT cut of 15 percentage points would be expected to reduce a typical bill by around 4.8 per cent in cash terms once standing charges and elements not subject to VAT are accounted for, meaning the headline annualised saving significantly overstates what most households will actually notice. He also noted that if the price cap itself rises in the same period, as had been separately forecast, much of the VAT cut's benefit would be absorbed by that increase before bills are compared with the previous year, effectively eating into the saving before it reaches the consumer.
The government has not published a date by which it intends to set out the departmental savings underpinning the measure, or confirm whether any will fall on budgets unrelated to digital ID.