May 26, 2022 12.55 pm

Chancellor announces £400 energy bill discount

And government u-turns on windfall tax

More than eight million of the lowest income households in the UK will receive a one-off £650 payment to tackle the cost of living crisis, the government has announced.

A previously announced £200 off energy bills to be given to all households in October has also been doubled to £400 and will no longer have to be repaid.

Chancellor Rishi Sunak was giving a speech in the House of Commons today when he also announced a further eight million pensioner households would receive an extra £300 in winter fuel payments, while six million disabled people will receive a further £150.

In his statement, he said that from next year a review of benefits would see them upgraded by this September’s CPI (Consumer Price Inflation). The Household Support Fund will also be extended by half a billion pounds.

He also announced a windfall tax on oil and gas firms – which had previously been resisted by the government – would raise about £7bn.

However, the government called it a “targeted energy profits levy”. It will be charged on profits of oil and gas companies at a rate of 25%.

The measures announced today would cost in total £15billion, said Mr Sunak, bringing the total support to £37 billion.

Additional help was also announced including increases in the winter fuel allowance, a further cut in council tax and a VAT cut.

Making the announcement, Mr Sunak said the government would “never stop trying to help people”.

“This government will not sit idly by while there is a risk in this country that some could be set so far back they will never recover,” he said.

“I want to reassure everyone – we will get through this.

“We will make sure the most vulnerable and least well off get the support they need.”

However, he said fiscal support needed to be “timely, temporary and targeted” and that the government would “not allow short term inflationary pressures to lead people to expect high inflation will continue over the long term”.

He said the oil and gas sector was “making extraordinary profits” and that he was “sympathetic to the argument to tax those profits fairly”.

“But as ever, there is a sensible middle ground. We should not be ideological about this we should be pragmatic,” he said.

“It is possible to both tax extraordinary profits fairly and incentivise investment.”

Mr Sunak said the measures would help a third of all UK households with a cost of living support worth £9 billion.

A motion to the Conservative led Lincolnshire County Council calling on the authority to write to the government asking for such a tax lost last week after the Tories voted against it.

A windfall tax is a one-off levy on a company which benefits from something it is not responsible for. In this instance, oil and gas firms are getting more money than last year with companies such as BP and Shell reporting big profit increases due to the pandemic and Russia’s invasion of Ukraine.

The UK’s energy regulator Ofgem said earlier this week that the typical household energy bill was set to rise by £800 in October.

It would mean the typical household bill would be £2,800 a year and Ofgem warned 12 million households could be placed into fuel poverty.

A £150 rebate on tax bills has already started to go out to residents in council tax bands A-D.