Cost of living: What new support has Rishi Sunak announced and what does it mean for your finances?

 (Sky News)
(Sky News)

The chancellor unveiled a £15bn pound package of financial help on Thursday including hundreds of pounds off energy bills to help people thorugh a deepening cost-of-living crisis.

The level of support on offer had to be balanced against concerns that injecting too much money into the the economy risked pushing prices rises even higher.

The support was "siginicant", as well as "timely, temporary and targeted", the chancellor said. But is he right? What has been announced and what does it mean for you?

One-off £650 cost-of-living payment

Around 8 million people who curently receive means-tested benefits like universal credit will get a one-off cost-of-living payment of £650, payable in two instalments in July and the autumn. The money will go straight into people's bank accounts. They do not need to apply.

The amount is more generous than many had predicted. The chancellor said the one-off payment would give more help than an alternative proposal to uprate benefits which would have given low-income families £530.

£350 pensioner payment

Pensioners will receive a one-off £300 payment which will be paid automatically. Many pensioners are vulnerable and have a greater need for heating, the chancellor said. Large numbers of pensioners also do not claim existing support that they are entitled to.

£150 disability payment

Around 6 million people who are in receipt of disability benefits will receive a one-off £150 payment.

Many disabled people who are also in receipt of benefits such as universal credit will get both the £150 paymant and the £650 cost-of-living payment.

The Treasury will also put an additional £500m into the Household Support Fund, which is handed out by councils on a discretionary basis to people in need.

Three-quarters of the support will go to vulnerable people and those on lower incomes, the chancellor said.

Universal support - £400 grant

Sunak announced a universal discount on energy bills of £400 for all households. It replaces a £200 discount announced earlier this year which was widely criticised because it was repayable through a levy on bills over the next five years.

This support has now "unambiguously" been converted into a grant that does not have to be repaid, he said.

It will be seen as a major u-turn after Labour pushed the chancellor to scrap what they had labelled his "buy now, pay later" loan scheme.

The "vast majority" of households will receive £550 in support in total, the chancellor said. That is made up of the £400 grant and a £150 council tax rebate for millions of people that was announced in the spring.

£550 is around a third of the amount that bills will have increased under the price cap, which is rising from £1,138 last September to an expected £2,800 this October.

Britons have also seen their real incomes eroded sharply as prices for other essentials like food have jumped faster than wages.

How will the government fund this support?

The flagship new policy was a windfall tax on oil and gas producers and energy generators who have enjoyed what the chancellor described as "extraordinary profits" as a result of huge rises to energy prices.

He said the new tax, known as the "energy profits levy", was a "pragmatic" and "sensible middle ground" that would be fair, while not discouraging investment. The Treasury estimates that the levy will bring in around £5bn - around a third of the cost of new financial support being offered.

The chancellor sought to distance himself from Labour's windfall tax proposal, which the oppostion party has been pushing for months. Labour’s plan would have collected £1.2bn in a single year. The government’s new tax will last until the end of 2025 if oil and gas prices remain high.

To soften the blow for oil and gas producers, and counter the argument that the tax will deter investment, Sunak also introduced an investment allowance, similar to a "super-deduction" brought in last year.

It will offer a tax break to energy companies when they invest in the UK.

For every pound a company spends on new investment they will get back 90p in tax relief, the chancellor said.