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British pound slips as UK officials question funding for energy VAT cuts

UK PM Andy Burnham pledged VAT removal from domestic electricity bills from Oct. 1, but a lawmaker said the policy is already unfunded, driving GBP weakness and canceling a £1.8 billion digital ID program.

Reported · Written up by our desk · Central Banks

UK Prime Minister Andy Burnham’s first fiscal policy pledge to cut value-added tax on domestic electricity bills from Oct. 1 sparked a market reaction, with the British pound edging lower after a UK lawmaker questioned how the government would pay for the plan. FXStreet said a statement from Darren Jones, an ally of former PM Keir Starmer, raised doubts about the funding source for Burnham’s energy bill tax cuts.

Burnham, in his first speech on Monday, vowed to remove VAT from domestic electricity bills starting Oct. 1, cutting around £45 from the average annual bill of about £1,862. He also said the cost would be covered by funds allocated for the UK’s £1.8 billion digital ID program, which would be canceled, Reuters reported in the FXStreet write-up.

According to FXStreet, a corrective move was seen in GBP after Jones posted on X that the funding source for the tax cuts was already unfunded and that the government would need to set out how it will pay for the policies at the budget. At press time, GBP/USD was near 1.3440, down from an intraday high of 1.3455, and slightly above Monday’s close of 1.3430.

Latest closeGBP/USD 1.348 ▼0.5%

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