New support announced for families struggling to pay household bills
£200 energy bill "loan" scrapped and replaced with a £400 grant, funded by a new tax on energy companies
Last updated 26th May 2022
Chancellor of the Exchequer Rishi Sunak has announced a new £15bn package to help families struggling with the cost of living crisis.
Speaking in Parliament earlier (on Thursday) he set out measures he says will make a difference to families hit by a massive rise in bills.
This includes:
- £650 payment to 8m low income and vulnerable families currently receiving benefits
- £200 "loan" on energy bills to be scrapped, and replaced with a £400 grant.
- £300 payment for pensioners receiving winter fuel allowance
- £150 payment for people on disability benefits
- A new "energy profits levy" targeting the profits of energy companies
The Chancellor has been under pressure to make an emergency statement after it was announced there would be another 42% increase in energy bills in October.
That's on top of huge price rises in April, as well as soaring costs at the supermarket and petrol pumps.
Second time he's been forced to act
Earlier this year the Chancellor announced a £150 rebate on some council tax bills, and a £200 delay on energy bills - to be paid back over the next five years.
He also cut 5p off a litre of petrol.
But he was criticised for not going far enough to avert the biggest drop in the standard of living for generations.
Inflation is currently set to average 9% for 2022. That means something that cost £1 in 2021 will now cost £1.09.
"Energy Profits Levy"
Today the Chancellor announced a new tax on energy companies, echoing Labour's calls for a windfall tax on profits.
Describing it as an "energy profits levy" he also set out plans to cut taxes for companies who reinvest profits into the business.
He told Parliament it would raise £5bn in the next year.
The Chancellor of the Exchequer Rishi Sunak said:
“We know that people are facing challenges with the cost of living and that is why today I’m stepping in with further support to help with rising energy bills.
“We have a collective responsibility to help those who are paying the highest price for the high inflation we face. That is why I’m targeting this significant support to millions of the most vulnerable people in our society. I said we would stand by people and that is what this support does today.
“It is also right that those companies making extraordinary profits on the back of record global oil and gas prices contribute towards this. That is why I’m introducing a temporary Energy Profits Levy to help pay for this unprecedented support in a way that promotes investment.”
Opposition responds to announcement
Labour's Shadow Chancellor Rachel Reeves accused Rishi Sunak of taking too long to make the announcement, and took credit for the new tax on energy companies.
She also claimed the government were missing other opportunities to support people.
She told the Commons: "Labour called for a windfall tax because it is the right thing to do.
"The Conservatives are doing it because they needed a new headline nd we see that too from all the other things that he didn’t address today.
"The non-doms keep their tax privileges while the Chancellor hikes taxes on working people.
"Young working people paying more but those who earn money buying and selling stocks and shares are not.
"Contracts handed to Conservative friends and donors while our British businesses miss out.
"Global tech giants making billions in profits while smaller businesses and energy intensive industries struggle – with higher bills and higher taxes.
"And £11.8 billion lost in fraud because of a total lack of respect for taxpayers’ money."
UK cost of living crisis
Interest rates and inflation go up
Inflation rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022. With interest rates also rising to 4%, those saving money will earn more interest on their finances, whilst those paying mortgages would pay more interest to the bank.
Energy bills
The price of energy went up incredibly as the cost of living crisis hit, with the gas price spike caused largely by the war in Ukraine. The price cap - which is set by an independent regulator to help offset costs onto customers - was set to rise to £3,549 for an average home in October but a price freeze from the government restricted the typical bill to £2,500. That's still an increase of 27% from the previous energy cap and as it's a cap on unit cost, the more energy you use the higher your bill will be.
Food prices
The cost of a weekly shop also has gone up as a result of the cost of living crisis. As a result of the war in Ukraine, a number of products including cooking oils and wheat have been disrupted. This means that several products are now considerably more expensive, driving bills up for customers.
Prices at the pumps
The average cost of petrol has also rose to unprecedented levels. Supply lines for petrol have been thrown into doubt as a result of the war in Ukraine, as Russia is a large export partner for gas, oil and fuel. In April 2022, the average price for a litre of petrol on the forecourt was 160.2p, whilst a litre of diesel would cost 170.5p. By late June 2022 the price had risen to an average of 190.9p for a litre of unleaded and 198.9p for a litre of diesel. In March 2023 the price wass on average of 147.03 in petrol and 167.04 in diesel.
Average cost of filling up a car with petrol hits £100
On 9th June 2022, the average cost of filling up a car with petrol hit £100 for the first time ever. Diesel had already hit that milestone. It comes as the cost of fuel hit a record high of one pound eighty a litre. The 2p rise was the biggest daily jump in 17 years. Prices have dropped by at least 20p per litre since the high point.