Chancellor Rishi Sunak has announced a £15 billion package in support for living expenses, including a £400 discount on energy bills for all and a one-off £650 payment to the poorest eight million households.
The measures will be funded in part by a temporary levy on oil and gas companies benefiting from bumper profits as a result of skyrocketing prices expected to raise £5 billion. Over the next year.
Announcing the policy in the House of Commons, Sunak said: “We know households are being hit hard right now. We will provide significant support to the British people.”
The cost of living includes:
• Temporary targeted energy surplus tax of 25% of oil and gas companies’ profits. Phased out when prices return to normal.
• One-off payment of £650 to eight million of the lowest-income households – via two lump sums in July and autumn
• Eight million pensioners who get winter fuel payment to also get a £300 payment
• £150 extra payment for people on disability benefits
• The discount scheme for energy bills is doubled to DKK 400 and does not have to be repaid
Ministers had been resistant to Labour’s proposal for a stormfall tax, claiming it would deter investment, but with inflation hitting a four-decade high and the Bank of England’s warnings of worse in the future, the pressure to act has intensified.
Rachel Reeves, Labour’s shadow chancellor, attacked the government’s “dither and delay” for not acting earlier, saying the measures from the Conservatives were only announced “because they needed a new headline”.
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Sunak’s announcement comes a day after Sue Gray’s damning report into lockdown parties in Downing Street that lay bare details of drunken parties, quarrels and karaoke at the heart of government at a time when COVID-19 restrictions were in place.
It is based on a package worth around £22 billion announced in February offering £200 off energy bills for all and £150 from most households’ council tax bills.
But this policy would have seen the £200 energy rebate paid back by consumers over five years. Mr Sunak’s latest announcement scraps this requirement, adding £200 to bring the total discount due in October to £400.
This discount represents about half of the £800 increase in energy bills that Ofgem predicts will result when it next adjusts its price cap.
Mr Sunak said the measures together added up to £37 billion. Support, or 1.5% of GDP, which he said was higher than or similar to measures taken in France, Germany, Japan and Italy.
Three-quarters of the support will go to vulnerable people, he said.
Prime Minister’s Chief of Staff Steve Barclay former brushed off the proposal that the launch of the cost of living policy was designed to divert attention from the partygate scandal during an interview on Sky News.
He pointed instead to a forecast earlier this week by regulator Ofgem that an increase in the price cap was expected to see the typical annual energy bill rise to £2,800 this autumn.
Rising energy costs have already pushed inflation to 9%, the highest level since the early 1980s, and The Bank of England has warned it could peak 10% later this year and that a recession is looming.
Bank Director Andrew Bailey have also warned of “apocalyptic” food price increases as the war in Ukraine hits wheat and cooking oil supplies.