Can Burnham really cut the cost of living for the UK?

The government's policy announcement of the day dropped before the new cabinet met, before markets opened. Andy Burnham's team is determined not to unnerve those who buy British debt. But as they waited for the new boss, conversation fell to who'd got the best seats. His message for them and the world beyond, fiscal discipline, not splashing the cash, is essential. Can I just say, I expect this every meeting. Thank you so much colleagues and congratulations first, those of you who've taken new positions. The first of what he promises to be a series of cost of living measures was removing VAT from electricity bills this winter, an £850 million giveaway that cuts about £45 off an average annual bill. It's not everything, but it shows our determination to do something about people's living standards and it kind of points the way for further measures. It doesn't solve the cost of living, but it does indicate that we're offering better help, we're offering a bit of hope, but we're only doing that, we're only doing that because of the reprioritisation, the tough decisions that actually Rachel and the previous cabinet have taken to establish financial discipline. The government said it would be funded from the cancellation of the digital ID programme. One member of the previous cabinet, Darren Jones, sacked yesterday, quickly tweeted, but the digital ID programme was unfunded. Echoing the Office for Budget Responsibility report last year, which said several times no savings in other departments to fund that digital ID project had yet been identified. The Prime Minister and the Chancellor repeated their claim, it's fully funded. We've got to show fiscal discipline, we've got to show that our commitment to the fiscal rules is real and we're prepared to make difficult decisions in relation to that. I know you all understand that, but it's just crucial, isn't it? It will require us to be disciplined together. I mean fiscal control is the first duty of any Chancellor, it is mine. Experts queried whether the measure would have much impact on the poorest, as well as whether it was fully funded. The government said they're not going to go ahead with the digital ID scheme. That was, however, not yet funded really. The departments have been told to free up some savings to fund that scheme. They no longer have to fund that scheme, but they are going to have to still free up some savings to fund this VAT cut instead. And as of yet, they haven't found those savings. There is still work to be done to cut back something else the government is doing to free up the cash to pay for this VAT cut. If you were looking for real help for people with their energy bills, particularly their heating bills, is this how you'd do it? Not really. So for real help, you'd want something more substantive than just a VAT cut. 5% of bills, £45 isn't going to move the dial on the huge increases in energy bills we've seen in recent years and the real hardship people are facing from that. So a way to help with that is to, instead of giving a small discount to everybody, is to give a bigger discount to a smaller number of people. And that means targeting that discount at people who are going to be in real need. Thank you. Welcome to Waddington Park. Thank you for being my first visitor. The brand new Defence Secretary, Wes Streeting, welcoming his Japanese counterpart to London, had arrived at his desk to discover what the government believes was a carefully timed flexing of military muscle by Russia. A heavily armed Russian warship, part of the Baltic Fleet, fired its main gun for 30 minutes just outside UK waters south of Plymouth yesterday morning, a couple of hours before the change of Prime Minister happened. We should see yesterday's events as performative and irresponsible. It's not the first time that Russia has behaved like this. And frankly, it's the tip of the iceberg of the daily threats that this country faces. Before Cabinet, ministers visited St James's Palace to pick up their seals of office in smart red boxes. A brief happy distraction from the ministerial red boxes with so many challenges inside. Gary Gibbon reporting. One place where the VAT cut won't apply is Northern Ireland. Under terms of the UK's EU exit deal after Brexit, European VAT rates will apply on goods, including electricity. Downing Street says the Northern Ireland executive will instead receive extra funding to support households there. Well, the news came as government borrowing in June came in at 16 billion pounds, nearly bang on the target. That is perhaps encouraging news for the Prime Minister as critics picked holes in the funding of his energy VAT cut. Our economics reporter Neil Macdonald is here with me. Neil, how much should Andy Burnham and John Healey take comfort from today's figures? Some comfort, but perhaps not too much. I mean, as you're saying, it's 16 billion pounds in one month, but that was down by a third on the same period last year. However, if you take the first three months of the financial year in total, borrowing is still running ahead of where we thought it would be. And city economists think that on that sort of trend, we're going to exceed our full year total by about 6 billion pounds. Now, these figures are volatile. You know, a peace deal in Iran could change things, for example. But I think they show that today's row about an 850 million pound rescue package is quite a small part of what remains a very tight financial position. And they're pretty ambitious, aren't they? They have an ambitious programme. If they want to borrow more, how much could they borrow? Well, the problem the Prime Minister has given himself is he's stuck with the fiscal rules of the last government. And of course, the last government was struggling to fit its plans inside those fiscal rules. So there's a lot of chatter about maybe trying to tweak the rules. And there's some talk about trying to push more borrowing through other government institutions like the National Wealth Fund. But one person I spoke to today who's very close to these government debt markets says that this is all missing the point. What he wants us to focus on is just the sheer amount of debt the government is trying to push into financial markets. And I've got the figures to show you. So this year, they're planning to sell £252 billion of this debt. There's more the year after and years to come. It adds up to £1.3 trillion. That is quite a big number, I think we can agree, by the end of this decade. And so on this view, investors are just worried about any indication they're going to be asked to absorb more of this borrowing. And so that's why they're watching what the Prime Minister says so very closely. And all of this comes alongside wider news, doesn't it, about things that could affect the cost of living squeeze? Yeah, I mean, rising wages helps knock out the effect of rising prices. And today's latest market figures show that wages are still outstripping inflation, but only just. I just want to show you the figures. So you can see here that over the last couple of years, real wages have been growing, but you can see at a slower and slower pace. Now, the thing is, if inflation is about to go up, if wage growth continues to slow down, that could turn negative. That increases the pressure on everyone's cost of living. That increases the pressure on the government to do something about it. Thank you, Neil. Sobering there at the end. Well, the new Secretary of State for Energy, Security and Net Zero is the economist Meata Thambulla, who took over from Ed Miliband. Her rise has been meteoric. She only became an MP two years ago. I spoke to her a short time ago and began by asking how the new government is planning to pay for that tax cut. Well, listen, two things. Let's just say what it is first. We were really clear on day one that we needed to show people that we understood that they're under pressure. The VAT cuts means £45 off bills. Now, this is being paid for by deciding that we're going to deprioritise something else that actually... But it's not actually being paid for by that, because the money hadn't been found for that. So where is the money coming from? That's not true. As the OBR said, £1.8 billion was allocated to digital ID. We were all going to find that within our departmental budgets. And what the Prime Minister said is, rather than doing that, let's do it on something that is a massive priority for the country, the cost of living. So it sounds like it will come from inside departments, things that you want to deprioritise. I mean, obviously, the reason we know about the funding is because of Darren Jones. Are you annoyed that he lobbed that grenade as he walked out the door? No, not at all. Listen, I've got a lot of respect for Darren. He's a brilliant colleague. I think he did a really fantastic job in the Cabinet Office. Sour grapes? I don't think it's sour grapes. Darren's a good, decent guy. That's not the way that he works. And candidly, we're all part of one team. We're part of one Labour team. As the Secretary of State responsible for the policy, I can tell you that the policy is absolutely solid. And the government's priority is the cost of living, because candidly, that is the priority of the public. And let's speak about that, because here's a really difficult thing. You can't control many factors that are basically hitting people right now. Say, for example, the impact of the Iran war. Cornwall Insights have done some work on this today. And basically, they've calculated that while this is welcome, it's not going to cut our bills in October. It's just going to stop them rising by as much as they would have otherwise risen. People aren't necessarily going to feel that. They're not necessarily going to thank you for that. Well, listen, we can't control what's lobbed at us from outside. Absolutely not. External shocks will happen. But the job of government is to stand by people and stand up by our communities. But you accept that this is less of a rise rather than an actual cut in terms of what people will see in their bills in October? If I'm thinking about families in October who will be really worried about the winter coming, actually, this will provide some breathing space. But, and this is really important when I say this, it's a down payment. We know that we need to do the job of bringing bills down for good. And everything I am doing in the department, whether that is trying to get to homegrown clean energy, which, by the way, you talked about Ukraine, you talked about Iran, we have got to reduce our dependence on global fossil fuel markets that can be impacted by external events so that we can bear down on costs. Let's talk about fossil fuel markets then. You know, we've got an American president who's desperate for you to drill in the North Sea. We've got two outstanding licences. It may not breach your manifesto to allow those licences to go ahead, but your predecessor was fighting hard, particularly against Rosebank because of the level of emissions, but also because of the signalling. Will you carry on? Will you take the baton from Ed Miliband and also fight against that? Listen, let's do a couple of bits. We are already drilling in the North Sea and we've been really clear that oil and gas are part of our energy mix for the foreseeable future as we do this transition. But the climate pollution from Rosebank is the equivalent to the entire annual emissions from 28 low-income countries. It's not insignificant. If you'll forgive me, the decision on Jackdaw and Rosebank go through a quasi-judicial process. So for your viewers, that's almost a legal process. I'm the one that will be tasked with making that decision. I've got to make that decision based on the evidence. What I will absolutely say is, look, we are really clear, we're pragmatic on the North Sea. Our fundamental problem is at the moment, anything that we do in the North Sea is sold on the global fossil fuel market. So we are price takers. And if our priority is bills and affordability, which it absolutely is, it does not solve that problem. So those projects, just to be clear, will not change anything when it comes to pricing. It will not solve the problem of affordability. What we need to do is be laser focused on how we bring down bills. And ultimately, we've got to get to a world where we've got homegrown energy that we can control, because that is the way in which we fundamentally drive down bills. You say no infighting, but people are pointing out the people who've got the top jobs in Cabinet are those who helped Andy Burnham to get where he is. And all the Starmer loyalists have gone. I've been speaking to some of those privately. They don't feel that this feels like an inclusive change. Well, listen, I was at the Cabinet and actually the thing that struck me, and I'm a newbie to this, so first time in the Cabinet, and actually we had every family and tradition, every sort of tradition and part of the Labour family represented there. We've achieved 50-50 in terms of gender balance. But look, lots of colleagues are coming at this from different perspectives, but we are united in one thing. We have got to deliver the change the country wants, and that requires us to work across departmental silos. It requires us to work in place to make sure that we're doing that. Thank you very much. Thank you. That was Meata Phambola. So what do voters think about all of this? Well, our North of England correspondent, Claire Falun, has been speaking to people in the High Peak area of Derbyshire to find out what their first impressions are of Andy Burnham as Prime Minister and his new-look Cabinet. Power done differently. In the town of New Mills, it's not just the mantra of a new PM. With a hydroelectric turbine making energy from water and where we're testing the mood towards Andy Burnham's household electricity tax cut. It's a good way to start his new regime. Working out for the less wealthy. I just walk him on a Tuesday for him. While for John, doing dog daycare for his daughter, there's a note of caution. He's going to get rid of one thing, but he'll have to find a way to put it on something else, won't he? They always do, don't they? It's knocking the vat off. What do you think? Well, where's £45 a year going to keep us? But you've got to give him a chance. Yeah, give him a chance. That cautious welcome from Wendy and Janet on holiday in the Peaks became more enthusiastic on the prospect of a number 10 in the North. Hopefully, he's going to come up to Manchester. Number 10. Hot desk, I think, is he? So, let's see what happens. What, and have Downing Street in Manchester? No, no, you'll still have Downing Street. Number 10, Downing Street. That will never go. Besides sitting at a hot desk in Manchester, what do you actually want him to do? Look after working class. First things first. Look after those who are struggling. This will clearly be a balancing act for the new prime minister. Helping people with the cost of living and doing enough so those struggling actually feel a tangible difference versus being seen as fiscally responsible. Sticking to the manifesto and not spooking the markets. With more cost of living easing measures expected later this week, Andy Burnham has previously raised the prospect of business rate reforms to help high streets and in particular, for pubs. But in New Mills, at one of the oldest pubs in this town. So you've literally grown up in pubs? Yeah. And this will be the first time when you're not working in a pub? Yeah. Any idea what you're going to do? Retire. No, I have no idea. At 25, Jacob and his landlady mum are quitting this pub in the next couple of weeks. Friday or Saturday night, it would be lucky if you get 20 people in. All night? All night. There's no money to be made anymore. And then there's the bosses. I'm waiting for the 358 now to go into Marple. If I miss this one, I have to wait for the next hour. If the fare cap in England is cut to two pounds, as it is just two miles from here in Greater Manchester, getting about will get cheaper for Tracy. But bills are the big expense. I don't think we should have to pay tax on our bills in general, you know? So cos that, like, I mean, I'm my dinner lady, so I'm not a much money, you know, a lot of money, so it would help. As we set off on Andy Burnham's mission to change Britain for people who, for years now, it's felt relentlessly tough. The message back to the PM for many is that the talk must turn to action.