economy
Martin Lewis explains the reason Andy Burnham’s VAT cut isn’t reducing bills
Martin Lewis has explained why Prime Minister Andy Burnham's VAT cut isn't reducing bills for everyone as the Ofgem price cap for October was announced. On Wednesday, August 26, the regulator announced a 4% increase of the energy price cap for the period covering October 1 to December 31, 2026.
TL;DR
- Ofgem has announced a 4% increase in the energy price cap for October 1 to December 31, 2026.
- This increase occurs even with the government's six-month VAT cut on electricity, which began on the same day.
- Martin Lewis stated that rates will be approximately 17% higher than in April, during the high-use winter period.
- Electricity-only users might experience a smaller rise or a slight fall in bills due to a reduction in the electricity standing charge.
- The VAT cut on electricity is estimated to reduce bills by about 4.8%, but rising wholesale rates negate this effect.
- The price cap applies only to standard variable/default tariffs, not fixed or most special tariffs.
- Energy Secretary Miatta Fahnbulleh stated the VAT cut aims to provide families with some breathing room amidst rising energy costs driven by the Iran War.