Rishi Sunak has targeted help at low-income households in his emergency support package while warning electricity generators that he is “evaluating” steps to take in response to the sector’s “extraordinary profits”.
In his statement on the cost-of-living crisis, delivered to the House of Commons on Thursday (26 May), the chancellor of the exchequer unveiled £15 billion of assistance to help households cope with spiralling heat and power bills.
The chief element in the package is a new, one-off payment of £650 to more than 8 million low-income households on universal credit, tax credits, pension credit and legacy benefits.
Pensioner households and individuals receiving disability benefits will receive separate one-off payments of £300 and £150 respectively because they are considered to be most vulnerable to rising prices.
On top of this targeted support for low-income households, the energy bills discount payable to all households this October is being doubled from £200 to £400.
The requirement to pay back the discount over five years will also be scrapped.
The combination of the targeted support, the energy bills discount and the £150 council tax rebate many families received last month means that support this year for low-income customers adds up to a total of at least £1,200, according to the Treasury.
The chancellor also announced a £500 million increase for the local authority delivered Household Support Fund to £1.5 billion, while extending the scheme from October until March 2023.
To help pay for the measures, Sunak has announced a new temporary 25% energy profits levy on oil and gas firms, which is designed to raise around £5 billion over the next year.
Sunak said that the new levy, which follows pressure by opposition parties to tax oil and gas companies’ windfall profits, does not apply to the electricity generation sector.
But he said the Treasury will “urgently evaluate” the scale of the “extraordinary profits” currently being made by the power generation sector. Sunak added that the “appropriate steps”, which should be taken in response to recent increases in wholesale electricity prices, will be considered.
He said the government is consulting with the power generation sector and investors on energy market reforms as flagged up in last month’s energy security strategy.
Announcing the package, Sunak said: “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.”
Sunak’s announcement follows a forecast by Ofgem chief executive Jonathan Brearley on Tuesday that the energy price cap will rise to £2,800 in October.
It also follows Sunak’s £9.1 billion support package in February, which included the £200 per household energy bills discount and the £150 one-off council tax rebate.