Cost of living crisis: Rishi Sunak announces government support

The Chancellor is widely expected on Thursday to finalize a package to help the poorest cope with the rising cost of living.

He will also need to be careful that any additional aid he pours into the economy doesn’t further fuel inflation, which is currently at a 40-year high.

As well as the potential impact on inflation, Mr Sunak’s ability to help beyond the already announced £22billion package will also be constrained by the country’s fiscal position.

A Treasury spokesman said: “The Chancellor was aware that our response will vary as the situation evolves, with the most vulnerable being his top priority.”

The Prime Minister said the hundreds of billions poured into fighting the Covid pandemic had left the country in a “very difficult financial position”.

Speaking at a Downing Street press conference, he conceded that households “will be under pressure for a while” due to the rise in global energy prices and post-pandemic supply chain issues.

But he said: “We will continue to respond as we have responded throughout the pandemic.

“It won’t be easy, we won’t be able to fix everything. But what I would also say is that we will get through this and we will get through it well.”

Mr Sunak is expected to impose a windfall tax on energy companies’ soaring profits today (26 May), although ministers have spent months criticizing the idea for its potential impact on investment.

On Wednesday, however, a Tory source said the arguments had been “rigorously tested” in both Treasury and Government.

He said: “There is a high threshold that any package we propose will bring more gain than pain, that the gain is worth the pain and that it will not jeopardize the investment.

“They don’t introduce arbitrary taxes that make the economic environment unpredictable.”

Offshore Energies UK (OEUK), which represents the offshore oil and gas industry, has warned that a one-off tax on North Sea companies would lead to higher prices and harm the oil and gas industry in the long term.

Shadow Chancellor Rachel Reeves said Rishi Sunak was dragged “kicking and screaming” into making an about-face over an unexpected tax on oil and gas companies.

Labor has backed the measure against opposition from Boris Johnson, who said the tax would “deter investment”, was “utterly ridiculous” and “raise prices for consumers”.

The Chancellor also expressed opposition, but has been laying the groundwork for a policy shift in recent weeks, saying he was “pragmatic” about the possibility.

Some of the most vehement criticism came from Brexit Opportunities Secretary Jacob Rees-Mogg, who argued it was wrong to loot the “honey pot of business” and that the measure would ultimately result in the public paying more in taxes.

But Labor leader Sir Keir Starmer has argued a reversal is “inevitable” as the tax on North Sea companies would “bring in billions of pounds and lower energy bills across the country”.

The Chancellor of the Duchy of Lancaster, Steve Barclay, said the Conservatives disagreed with the Labor Party’s proposal for a windfall tax because of “the risk to foreign investment”.

He told BBC Breakfast: “What we recognize is that the Government needs targeted support, particularly for those most affected by these higher bills, and that is what the Chancellor will set out.

“We recognize that meeting this combination of energy costs and food costs is a major challenge for households.

“What the Chancellor will set out is how we do that by looking at the balance … and how you do that in a way that also recognizes that we need a long-term currency strategy and one that attracts investment from abroad. “

Chancellor Rishi Sunak has confirmed a temporary windfall tax for oil and gas companies as part of the government’s plan to deal with the cost of living crisis.

He said the tax would include a “new investment allowance” to encourage reinvestment of profits.

Rishi Sunak said a temporary new 25% levy would be imposed on oil and gas company profits.

He said this would raise around £5billion over the next year.

Eight million low-income households will receive a one-off payment of £650, the Chancellor announced.

He said: “I can announce today that we will send around 8 million of the lowest income households a one-off living cost payment of £650 direct, a support worth over £5 billion to give peace of mind to vulnerable people give that we stand by them at this challenging time.

“DWP will make the payment in two lump sums, the first from July, the second in the autumn, with payments from HMRC for those with tax credits to follow shortly thereafter.”

The Chancellor has turned the £200 loan for energy bills into a grant that no longer has to be repaid.

He also announced that support would be doubled to £400.

He said: “We have decided that support for household energy bills will be doubled from £200 to £400.

Mr Sunak confirmed pensioners will receive a one-off payment of £300 from the autumn.

He said: “I can announce today that from the autumn we will be sending an additional one-off pensioner living allowance of £300 to over eight million pensioner households receiving the winter fuel payment.”

The Chancellor also announced a one-off living cost payment for disabled people of £150.

He added: “To help the six million people who receive non-means-tested disability benefits, we will give them an additional one-off disability living payment worth £150 from September.”

He confirmed many of these people will also receive a £650 payment announced for low-income households, bringing their total support to £800.