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Rishi Sunak Announces Windfall Tax And One-Off Grants To Help Households With Cost Of Living Crisis

Rishi Sunak Announces Windfall Tax And One-Off Grants To Help Households With Cost Of Living Crisis
4 min read

Rishi Sunak has unveiled a new package of household support for combatting the cost of living crisis, including a windfall tax on gas and oil companies, which he says is worth £15bn.

The Chancellor said the government had been forced to take further action to help the British public because the pressures on household bills have "got more serious" in recent months.

"We know that households are being hit right now," Sunak said, telling MPs that a range of global factors, including Russia's invasion of Ukraine, had pushed UK inflation to a 40-year high.

In a major government U-turn, Sunak announced a temporary 25% windfall tax on the "extraordinary profits" of gas and oil companies to help fund more financial support for households, or what he called a "targeted energy profits levy".

Shadow Chancellor Rachel Reeves said the decision to adopt a windfall tax showed that Labour was "winning the battle of ideas in Britain". Last week, government whips instructed Conservative MPs to vote against a Labour amendment calling for a windfall tax.

The Chancellor announced one-off direct payments to the country's most vulnerable groups.

Eight million of the lowest-income households will receive £650 in two lump sums, Sunak said – the first in July and the second in the Autumn. Eight million pensioner householders will receive payments worth £600, while six million disabled people will receive payments worth £150, he told MPs.

He announced that the £200 energy bill reduction that he unveiled earlier this year, which was widely criticised for effectively being a loan, will be raised to £400 and people will no longer have to repay it over time. It will be paid to all households in October. 

This change means the measure is "unambigiously a grant," Sunak said.

Speaking in the House of Commons on Wednesday morning, the Chancellor also said that in April he would raise benefits in line with the September's estimated inflation of 9%.

Paul Kissack, chief executive of the poverty-focused Joseph Rowntree Foundation charity, said the measures would bring "very welcome relief" to struggling households and welcomed the commitment to raise benefits in line with inflation, though he urged Sunak to stick to this pledge in the long term. Senior Tory MP Stephen Crabb, who had been urging ministers to expand social security, said this commitent was "welcome" and "provides some certainty to welfare policy".

Sunak told MPs: "We'll make sure the most vulnerable and least well off get the support they need at this time of difficulty and we will turn this moment of difficulty into a springboard for economc renewal and growth."

He said he wanted to reassure the public "we will get through this" and that the rising cost of energy and costs will not be a long-term trend.

"We cannot and must not allow short-term inflationary pressures to lead people to expect that high inflation will continue in the long term," the Chancellor said.

"It may take time, but we have the tools we need and resolve it'll take to reduce inflation."

Sunak and Boris Johnson had been under growing pressure to give more support to households amid the worsening cost-of-living crisis, including from many Conservative MPs.

Jonathan Brearley, chief executive of Ofgem, this week said he expected the energy price cap to rise by £830 to £2,800 in October.

On Tuesday he told MPs on the Business, Energy and Industrial Strategy Committee that conditions in the global gas market had "worsened" due to Russia's invasion of Ukraine.

"At times they have now reached over 10 times their normal level," he said.

"I know this is a very distressing time for customers, but I do need to be clear with this committee, with customers, and with the government about the likely price implications for October," he said.

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