Cost of living crisis: Rishi Sunak announces government support
Chancellor Rishi Sunak has announced a £15billion emergency package to deal with the cost of living crisis, including a £400 rebate on energy bills
Millions of households will get a £400 rebate on their energy bills as the Chancellor unveiled a £15 billion support package to help ease the cost of living crisis.
Rishi Sunak said eight million low-income households will benefit from the payment, which will be paid in two lump sums – one starting in July and the other starting in the fall.
He said it will give vulnerable people “reassurance that we are by their side during this challenging time,” but added the government would also provide “general” support.
The Chancellor confirmed the £200 energy bill rebate would no longer have to be repaid and the payment, which he said is “clearly now a subsidy”, will also be doubled to £400.
He told MPs: “I have heard people’s concerns about the impact of these repayments on future bills, so I have decided to cancel these repayments.
In addition to universal payment, there was targeted support for the poorest, the elderly and the disabled.
Mr Sunak also confirmed a temporary windfall tax for oil and gas companies that “will generate around £5bn in revenue over the next year”.
He said: “The new levy will be levied at a rate of 25% on oil and gas company profits.
“It will be temporary, and when oil and gas prices return to more historically normal levels, the levy will be phased out.”
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Last updated: Thursday, May 26, 2022 at 12:49 p.m
Vulnerable are “priority number one”
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.”
Windfall tax expected on energy company profits
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.
Labor says windfall tax reversal is ‘inevitable’
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”.
Tories worry about windfall tax risks for investments
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 confirms windfall tax
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.
New levy for oil and gas companies
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.
Low-income households receive a one-off payment of £650
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 energy bill subsidy has been doubled to £400
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.
Pensioners receive a one-off payment of £300
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.
https://www.nationalworld.com/news/politics/cost-of-living-rishi-sunak-windfall-tax-energy-3709326 Cost of living crisis: Rishi Sunak announces government support