ishi Sunak has unveiled a £15 billion emergency aid package to help millions of the most vulnerable households tackle the cost of living crisis.
The Chancellor’s latest round of government support — to be partly paid for by a windfall tax on oil and gas giants — will hand all households a £400 grant to help pay their soaring energy bills. The payment replaces an earlier plan for a one-off £200 rebate on people’s energy bills in October, which was supposed to be clawed back over five years.
In addition, Mr Sunak, right, announced extra support for the poorest families, with those on means tested benefits set for further help with their bills.
Following a Cabinet call to sign off the Treasury’s plan this morning, Mr Sunak told MPs on Thursday: “This Government will never stop trying to help people and fix problems where we can.”
The latest package of support comes after energy regulator Ofgem warned earlier this week that the energy price cap is set to rise by about £800 from £1,971 a year to £2,800 in October. After a £693 rise in April, energy bills are set to rise by an eye-watering 119 per cent in a year.
Despite resisting calls to act sooner, ministers insist the Chancellor was waiting for clarity on how energy bills might rise in the autumn before deciding how to help ease the squeeze on household budgets, which have also been hit by rising food prices and an increase in mortgage payments as the Bank of England puts up interest rates.
But the timing of the announcement, a day after the damning partygate report by senior civil servant Sue Gray, raised questions on whether the aid package was being used by Boris Johnson to distract from criticism of his leadership.
Mr Sunak’s decision to U-turn on a windfall tax after arguing it could stop oil and gas companies from investing in renewable energy in the UK was criticised by Labour which accused the Chancellor of being dragged “kicking and screaming to this obvious solution”.
Labour leader Sir Keir Starmer, who has been calling for weeks for a one-off levy on energy firms to pay for extra support for struggling households, tweeted ahead of Mr Sunak’s announcement: “First the Tories said they couldn’t introduce a windfall tax because producers were the ones struggling.
“Then they called it ‘unconservative.’ Now Labour has dragged them kicking and screaming to this obvious solution. Why has it taken them so long while households suffered?”
Despite opposition from some Cabinet ministers and Tory MPs to the move, Mr Sunak’s new windfall tax will include ‘levers’ to ensure firms are still incentivised to invest some of their profits in the UK. Those companies which invest more in will pay less of the levy which is expected to raise billions of pounds.
Resistance to the tax has also fallen away in the Treasury and inside No10 as oil and gas firms have seen their profits surge on the back of a spike in energy prices following the Covid-19 pandemic and the war in Ukraine. BP chief executive Bernard Looney said recently that a windfall tax would not deter his company from investing in Britain.
Speaking ahead of the Chancellor’s announcement, Cabinet Office minister Steve Barclay tried to distinguish Mr Sunak’s windfall tax from Labour’s plans, insisting its proposal would have deterred “inward investment”.
Mr Sunak, who announced a £9 billion package in February which also included a £150 council tax rebate for most households, had planned to wait until the Budget in the autumn to address the cost of living crisis.
But with inflation climbing to a four-decade high of nine per cent in April and economists warning that poorer households could be hit by 14 per cent inflation because they spend more of their income on energy and food bills, the Chancellor has brought forward his plans to try and ease the crisis now.
As well as announcing emergency support today, the Chancellor also set out plans to combat the longer term inflation crisis.
He said: “We will turn a moment of economic difficulty into a springboard for economic renewal and growth.”
A decision on broader tax cuts, such as bringing forward the planned 1p reduction in income tax due in 2024 or reducing VAT, is set to be delayed until the autumn.