Burnham’s first big announcement is a £45 cut to electricity bills from October, funded by scrapping Starmer’s digital ID scheme. Sounds clean. It isn’t.
Digital ID was expected to cost £1.8 billion over three years. Burnham says cancelling it will help provide the £850 million needed for the VAT cut this year.
The £1.8 billion was never sitting in a digital ID account. Starmer planned to squeeze it out of budgets departments already had, although the OBR said nobody had identified the savings. Burnham is still asking for that money. He just wants to spend it on the VAT cut instead.
Darren Jones oversaw the digital ID programme before Burnham removed him from government. He has since said the digital ID programme was “unfunded” and that ministers will have to set out how they will pay for the new policy. He may have every reason to be sore, but he also knows how the scheme was meant to be funded.
The figures released so far leave another question. The OBR put the cost of digital ID at about £600 million a year. The VAT cut will cost £850 million this financial year. That leaves roughly £250 million still to be found.
Jonathan Reynolds defended the plan on Radio 4 by saying the £1.8 billion had been scored by the OBR as a “pressure within the system.” Reynolds has a point, up to a point. The OBR had allowed for digital ID costing money, even though departments had not worked out where it would come from.
So which budgets lose money? Ministers have not said. We do not know what will be dropped or delayed to pay for it either.
Martin Lewis called the VAT cut a “good totem”, but said most people would barely notice it. It runs for six months, from October to the end of March. The advertised £45 works out at £7.50 a month, and Lewis reckons rising prices could reduce the difference people see to about £20.
The policy might be the right call. Cutting VAT on electricity is defensible. But the money is still coming from cuts elsewhere. Burnham has changed what those cuts will pay for. He has not made them disappear.