U.K. Cost-of-Living

The story so far

As of July 21, 2026

In the opening days of a new Labour government, Prime Minister Andy Burnham is mounting a cost-of-living agenda to cut energy bills and tackle housing pressures. The fight is over how quickly the state can ease the squeeze on 7.4 million struggling households and head off warnings of rising homelessness linked to housing policy. The stakes run from family budgets to local services already strained by need.

After winning the Labour leadership, Burnham used his first speech to elevate cost-of-living action as his central mission. He then directed his team to build a cost-of-living government, as a projection warned homelessness could rise by 25% without steps to reverse aspects of Right to Buy. Asked to form a government and appointed prime minister, he put housing alongside energy costs at the top of his opening agenda.

At his first Cabinet meeting as prime minister, Burnham unveiled the first deliverable: removing VAT from household electricity bills for six months from October 1. The cut applies to domestic meters, so home charging benefits while public charging and business use remain at the standard rate. He coupled the move with an emphasis on housing measures and highlighted the squeeze on 7.4 million households struggling to afford essentials.

Next up: the VAT removal is due to kick in on October 1, the first concrete test of the government’s cost-of-living program. Funding choices are already shaping the approach, with a planned digital ID scheme dropped to help pay for the electricity tax cut. Ministers are now moving on housing decisions, where reversing elements of Right to Buy and options like rent caps are in scope because a 25% rise in homelessness sits in the balance if policy does not change.