Millions of households across the UK are struggling to make their incomes stretch to cover the rising cost of living. The government will provide over £15 billion in additional support, targeted particularly on those with the greatest need.
- 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
- Energy Bills Support Scheme doubled to a one-off £400
- One-off £300 Pensioner Cost of Living Payment - over 8 million pensioner households across the UK will benefit
- £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:
- 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
- New temporary Energy Profits Levy on oil and gas firms will raise around £5 billion over the next year to help with cost of living, with a new investment allowance to encourage firms to invest in oil and gas extraction in the UK
The significant intervention includes a new, one-off £650 payment to more than 8 million low-income households on Universal Credit, Tax Credits, Pension Credit and legacy benefits, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits – groups who are most vulnerable to rising prices.
To check what support you can get please visit here.
The Chancellor, Rishi Sunak, announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means households will receive a £400 discount on their energy bills from October.
In the House of Commons, James welcomed this additional support package in the face of higher bills and also called for a strong focus on growth, investment, and supply side reform to drive our economy.
The new Cost of Living Support package will mean that almost all of the eight million most vulnerable households will receive at least £1,200 of extra support this year, including the £150 council tax rebate that many families received last month – equal to the average energy price cap rise over this year.
To ensure there is support for everyone who needs it, Mr Sunak also announced a £500 million increase for the Household Support Fund, delivered by Local Authorities, extending it from October until March 2023. This brings the total Household Support Fund to £1.5 billion.
To help pay for the extra support, which will extend the government's total cost of living support to £37 billion this year, the Chancellor said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. At the same time, in order to increase the incentive to invest the new levy will include a generous new 80% investment allowance. This balanced approach allows the government to deliver support to families, while encouraging investment and growth.
There is now more certainty that households will need further support, with inflation having risen faster than forecast and Ofgem expecting a further rise in the energy price cap in October.
Today’s announcement is on top of the government’s existing £22 billion cost of living support which includes February’s energy bills intervention and action taken at this year’s Spring Statement including a £330 tax cut for millions of workers through the NICs threshold increase in July and 5p cut to fuel duty.
Energy Profits Levy
Surging commodity prices, driven in part by Russia’s war on Ukraine, has meant that the oil and gas sector is making extraordinary profits. Ministers have been clear that they want to see the sector reinvest these profits in oil and gas extraction in the UK. In order both to fairly tax the extraordinary profits and encourage investment, the Chancellor announced a temporary new Energy Profits Levy with a generous investment allowance built in.
The new Levy will be charged on oil and gas company profits at a rate of 25% and is expected to raise around £5 billion in its first 12 months, which will go towards easing the burden on families. It will be temporary, and if oil and gas prices return to historically more normal levels, will be phased out.
The new Investment Allowance, similar in style to the super-deduction, incentivises companies to invest through saving them 91p for every £1 they invest. This nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.
The Levy does not apply to the electricity generation sector – where extraordinary profits are also being made due to the impact that rising gas prices have on the price paid for electricity in the UK market. As set out in the Energy Security Strategy the government is consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
The Chancellor announced that the Treasury will urgently evaluate the scale of these extraordinary profits and the appropriate steps to take.
- Find the factsheets here
- 75% total support goes to the most-vulnerable households. Distributional analysis of the package is published here
- The majority of these measures will apply UK-wide except the Household Support Fund, which is England only. The Devolved Governments will receive Barnett funding as a result of this measure. The Energy Bill Support Scheme is only in Great Britain but we will deliver equivalent support to people in Northern Ireland.
- These new cost of living payments will be paid directly to households across the UK by the UK Government.
- In the absence of a functioning Executive in Northern Ireland, the UK Government is taking decisive action to support the people of Northern Ireland through these measures.