“This government will not sit idly by whilst there is a risk that some in our country might be set so far back… they might never recover. This is simply unacceptable. I will never allow that happen. And I want to reassure everybody – we will get through this.”
These were the words of reassurance with which UK Chancellor of the Exchequer, Rishi Sunak, rolled out his massive £5 billion Cost of Living Support package to address the country’s soaring inflation and cost-of-living crisis.
The British Indian finance minister, who has been under mounting pressure to come up with a plan to tackle the UK’s highest inflation rate in decades, said he knows people are worried about bills. In his statement to the House of Commons this week, Sunak said the government has the tools to combat inflation over time.
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“We know that people are facing challenges with the cost of living and that is why today I’m stepping in with further support to help with rising energy bills,” said Sunak.
“We have a collective responsibility to help those who are paying the highest price for the high inflation we face. That is why I’m targeting this significant support to millions of the most vulnerable people in our society. I said we would stand by people and that is what this support does today,” he said.
A new, one-off £650 payment will be offered to more than 8 million households on Universal Credit, Tax Credits, Pension Credit and other benefits, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits. The minister had already confirmed an energy bills discount due to come in from October. This week, he announced a doubling of that discount from £200 to £400, with the requirement to pay it back over time scrapped. This effectively means low-income households will receive a £400 discount on their energy bills from October to address the impact of a particularly sharp rise in global fuel prices.
The Treasury claims that the new Cost of Living Support package will mean that almost all of the 8 million most vulnerable households will receive at least £1,200 of extra support this year.
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To help pay for the extra support, the finance minister said a new temporary 25 per cent Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. But in order to increase the incentive to invest, the new levy will include a new 80 per cent investment allowance. Sunak pointed out that the oil and gas sector is making "extraordinary profits" and therefore such a levy will be charged on profits at a rate of 25 per cent and will eventually be phased out.
“It is also right that those companies making extraordinary profits on the back of record global oil and gas prices contribute towards this. That is why I’m introducing a temporary Energy Profits Levy to help pay for this unprecedented support in a way that promotes investment,” said Sunak.