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Pensioners will receive £850 to help cover their energy bills, Rishi Sunak has announced in a new £15 billion cost-of-living-rescue package partly funded by a windfall tax on oil and gas giants.
The Chancellor has pledged to hand every family in Britain a one-off cash payment of £400 this autumn, with eight million of the most vulnerable households getting support amounting to £1,200.
He has been forced to significantly boost the total financial package from £22 billion to £37 billion - or 1.5 per cent of GDP - after a poll revealed one in five Britons are now struggling to make ends meet.
Retirees will be given an extra £300 winter fuel payment which, combined with the £400 all households are receiving and the £150 council tax rebate previously announced, adds up to an £850 windfall.
Mr Sunak also restated his pledge to bring back the “triple-lock”, which was suspended this year, from next April. The mechanism sees pension payments rise by whichever is higher out of wage growth, inflation, or 2.5 per cent.
Eight million households on means-tested benefits will be handed a £650 payment. The cash will be delivered in two installments, one in July and another in the Autumn, straight into their bank accounts.
When combined with all the other measures it means families on welfare, including Universal Credit, will get £1,200, which is the same amount by which energy bills are set to rise in October.
Two significant Government U-turns
Mr Sunak also unveiled a new £150 payment for six million disabled people, to be paid in September, as he delivered a speech to the Commons which contained two significant Government U-turns.
First he scrapped his controversial £200 energy rebate, which all families would have had to pay back in the form of higher bills over a five-year period, replacing it with the new £400 grant.
“I’ve heard people’s concerns over the impact of these repayments on future bills so I’ve decided those repayments will be cancelled. For the avoidance of doubt this support is now unambiguously a grant,” he said.
The Chancellor then announced the bumper package would be part-funded with a windfall tax on the profits of oil and gas companies, despite ministers previously opposing the levy on the grounds it would deter investment.
To sarcastic cheers from the Labour benches he told the chamber: “We should not be ideological about this, we should be pragmatic. It is possible to both tax extraordinary profits fairly and incentivise investment.”
He said the 25 per cent “temporary targeted energy profits levy” will raise £5 billion over the next year and will include an investment clause, meaning those firms that put more money into projects in the UK will pay less tax.
Mr Sunak hinted a tax on electricity suppliers could soon follow, telling MPs he is “urgently evaluating the scale of these extraordinary profits” they are making “and the appropriate steps to take”.
In his address to the Commons, the Chancellor said ministers understand the pressure millions of families are facing from rising prices but didn’t commit to tax cuts as being demanded by Tory MPs.
‘I know people are struggling’
“The high inflation we are experiencing now is causing acute distress for the people of this country. I know they are worried. I know people are struggling,” he told the Commons.
“This government will never stop trying to help people to fix problems where we can to do what is right as we did throughout the pandemic.
“We need to make sure that for those for whom the struggle is too hard and for whom the risks are too great are supported.
“This Government will not sit idly by while there’s a risk some in our country might be set so far back they might never recover. This is simply unacceptable and we will never allow that to happen.”
Mr Sunak stressed that the support on offer is “timely, temporary, and targeted” and said he is mindful of adding to inflationary pressures, adding that “unconstrained stimulus will make the problem worse”.
He insisted the Government has “the tools and the determination we need” to bring rising prices down and pledged his support for the independence of the Bank of England, which has faced criticism.
“We cannot and must not allow short-term inflationary pressures to lead people to expect that high inflation will continue over the long term. We will turn this moment of difficulty into a springboard for economic renewal and growth,” he said.
Labour claims Treasury stole its policies
Shadow chancellor Rachel Reeves accused the Treasury of stealing her party’s policies by adopting the windfall tax and reversing the plan to make households pay back the help with their energy bills.
“After five months of being dragged kicking and screaming, the Chancellor has finally come to his senses, U-turned, and adopted Labour’s plan for a windfall tax on oil and gas producer profits to lower bills,” she said.
“Despite only bringing in the plan months ago, he’s had to ditch his dodgy buy now, pay later loan that was always destined for failure.
“There couldn’t be a more appropriate illustration of this Conservative government’s lacklustre, out-of-touch approach to managing our economy - arriving at the common sense solution months too late.
“And they still have no long-term plan to grow our economy and pull us out of the mess they’ve got us into.
“Only Labour will tackle the cost-of-living crisis, grow our economy and make it stronger to protect it from shocks.”