Rishi Sunak has announced a package of support for households worth over £15bn – and there will be an effective windfall tax on the profits of oil and gas companies.
Eight million of the poorest UK households will receive a one-off “cost of living payment” of £650, Mr Sunak said.
In his speech in the Commons, the chancellor did not specifically refer to a ‘windfall tax’ but said he would introduce a “temporary targeted energy profits levy” on oil and gas companies.
The new levy will be charged on profits of oil and gas companies at a rate of 25%, Mr Sunak said.
“It will be temporary. And when oil and gas prices return to historically more normal levels, the levy will be phased out with a sunset clause written into the legislation,” he said.
The cost of living package includes:
• Temporary targeted energy profits levy of 25% on profits of oil and gas firms. Phased out when profits return to normal.
• £650 one-off payment to eight million of the lowest-income households
• Eight million pensioners who get winter fuel payment to also get a £300 payment
• £150 extra payment for people on disability benefits
• Energy bill rebate scheme to double to £400 and will not have to be repaid
Ministers had been resistant to Labour proposals for a windfall tax claiming it would deter investment but with inflation hitting a four-decade high and the Bank of England’s warnings of worse to come, pressure to act has intensified.
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Mr Sunak’s announcement comes a day after Sue Gray’s damning report into lockdown parties in Downing Street, laying bare details of drunken parties, altercations and karaoke in the heart of government at a time when COVID-19 restrictions were in place.
The prime minister’s chief of staff Steve Barclay earlier brushed off the suggestion that the launch of the cost of living policy was designed to deflect attention from the partygate scandal, during an interview on Sky News.
He pointed instead to a forecast earlier this week by regulator Ofgem that an increase in its price cap was expected to see the typical annual energy bill rise by more than £800 to £2,800 this autumn.
Surging energy costs have already pushed inflation to 9%, its highest level since the early 1980s, and the Bank of England has warned it could top 10% later in the year and that a recession looms.
The Bank’s governor Andrew Bailey has also warned of “apocalyptic” food price rises as the war in Ukraine hits wheat and cooking oil supplies.
