Chancellor’s Statement

Chancellor Rishi Sunak has delivered a statement in the House of Commons outlining the Government’s plans to support people in the face of rising costs of bills and food via the Cost of Living Support package. Around three-quarters of the total support will go to vulnerable households.

   

He began by saying that high inflation is causing “acute distress” and that he knows that people are struggling. He said that the Government cannot solve every problem but “we need to make sure for those whom the struggle is too hard… they are supported”.

   

He described the current situation as “simply unacceptable” and said that the Government will never allow people to be left destitute. He reassured people that the country will get through the crisis and that the Government has the tools they need to combat and reduce inflation. He confirmed that the least well off and most vulnerable will get the support they need, adding that the Government will turn the current situation into a “springboard of opportunity”.

   

The Government can use monetary responsibility (interest rates), fiscal responsibility (not spending too much) and supply side activism (building more nuclear energy plants and offshore windfarms) to address the problem of high inflation. He said that any fiscal support should be “timely, temporary and targeted”.

   

Almost all of the eight million most vulnerable households across the UK will receive support of at least £1,200 this year, including a new one-off £650 cost of living payment. This new £15 billion support package is targeted towards millions of low-income households and brings the total cost of living support to £37 billion this year.

   

Energy Profits Levy

The Chancellor confirmed that the Government will introduce a temporary levy on the profits of oil and gas companies at a rate of 25%. He said that the sector is making “extraordinary profits”, due to surging global commodity prices driven in part by the war in Ukraine, and that these profits must be taxed fairly and incentivise investment.

   

The levy will raise around £5 billion over the next year. The new 80% Investment Allowance will mean businesses will get a 91p tax saving for every £1 they invest – providing them with an additional, immediate incentive to invest. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax they will pay.

   

The levy will be phased out when prices return to more normal levels and the more a company invest the less tax they will pay.

   

The Energy Profits Levy factsheet can be read here.

   

£650 one-off Cost of Living Payment for those on means tested benefits

Around eight million of the lowest income households will be sent a one-off payment of £650. This includes all households receiving the following benefits:

• Universal Credit
• Income-based Jobseekers Allowance
• Income-related Employment and Support Allowance
• Income Support
• Working Tax Credit
• Child Tax Credit
• Pension Credit

   

DWP will make the payment in two lump sums – the first from July, the second in the autumn. Payments from HMRC for those on tax credits only will follow shortly after each to avoid duplicate payments. This payment will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

   

Energy Bills Support

The £200 loan for energy bills will now be a grant that no longer needs to be paid back and it will be increased to £400.

   

Energy suppliers will deliver this support to households with a domestic electricity meter over six months from October. Direct debit and credit customers will have the money credited to their account, while customers with pre-payment meters will have the money applied to their meter or paid via a voucher.

   

One-off £300 Pensioner Cost of Living Payment

From the autumn, over eight million pensioner households will receive an extra winter fuel payment of £300.

   

This additional one-off payment will go to pensioner households across the UK who receive the Winter Fuel Payment and will be paid on top of any other one-off support a pensioner household is entitled to, for example where they are on pension credit or receive disability benefits.

   

The Winter Fuel Payment (including the extra Pensioner Cost of Living Payment) is not taxable and does not affect eligibility for other benefits.

   

£150 Disability Cost of Living Payment

Around six million people across the UK who receive the following disability benefits will receive a one-off payment of £150 in September:

• Disability Living Allowance
• Personal Independence Payment
• Attendance Allowance
• Scottish Disability Benefits
• Armed Forces Independence Payment
• Constant Attendance Allowance
• War Pension Mobility Supplement  

   

£500m increase and extension of Household Support Fund

The Government is providing an extra £500 million of local support, via the Household Support Fund, which will be extended from this October to March 2023.

Links

The Cost of Living Support Package can be read here.

The press release can be read here.

The Energy Profits Levy factsheet can be read here.