Rishi Sunak has set out a £15bn emergency package of measures to help support households struggling with the rising cost of living – funded by a temporary windfall tax.
The chancellor said the government would provide “significant support for the British people” as he announced the intervention, having faced mounting pressure to take action to combat rising energy costs for millions, with annual bills set to rise by another £800 in the autumn.
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But funding for the new package is something of a “U-turn” for the government, said the BBC, after ministers previously rejected the introduction of a windfall tax on oil and gas companies.
What are the new measures?
- The chancellor announced universal support measures that all households in the UK will benefit from. The existing £200 repayable loan the government was set to give households in October will now be turned into a grant and doubled, with every UK household now receiving a £400 discount on their energy bills.
- There is also targeted financial support for the poorest households. Those on the lowest incomes – some eight million people already receiving welfare support – will receive a one-off cost of living payment of £650.
- Pensioners who receive the winter fuel payment will receive an additional one-off payment of £300.
- While six million people who receive disability allowance will also receive an additional payment of £150.
Levy on oil and gas companies
The chancellor said that the total cost of the new emergency support package is £15bn, on top of the £22bn the government already announced in the spring.
It will be funded in part by what Sunak has called a “temporary targeted profits levy” on gas and oil companies, who the chancellor said had seen “extraordinary profits” as a result of “surging global commodity prices, driven in part by Russia’s war”.
The government expects the levy to raise about £5bn of revenue, with oil and gas companies set to be charged at a rate of 25% on profits.
Sunak said his plan represented a “sensible middle ground" on the introduction of a new levy, as his plan included a new investment allowance that will mean “for every pound a company invests they will get back 90% in tax relief – the more the company invests the less tax they will pay”. The levy will also have a “sunset clause” written in to the legislation, which means it will be phased out once high prices have fallen.
A levy on energy companies has previously been suggested in various forms by both the Liberal Democrats and the Labour Party, but rejected by government ministers and prime minister Boris Johnson, who warned it could deter much-needed investment.
While “ministers have been clear for some time that more help is on the way”, a “more cynical” view is that “the government had a particularly uncomfortable day on Wednesday with the publication of the Sue Gray report into Downing Street gatherings”, said BBC political correspondent David Wallace Lockhart. So the announcement the next day of a new package of help worth billions for struggling UK households “certainly helps to move the agenda on”.
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