Rishi Sunak announces help with the cost of living crisis

It seems that the much talked about windfall tax on energy companies is now a reality.

According to Alison Ring, Public Sector and Taxation Director for the ICAEW, the recently announced £7.2 billion downward revision to the public sector finance deficit to the end of March, “will help the Chancellor build up his coffers to support struggling households, particularly when combined with a likely windfall tax.”

Ring went on to say that the higher debt interest rates caused by soaring inflation and anticipated further increases to base rate will continue to overshadow the outlook for public finances.

E.ON’s UK CEO Michael Lewis is also calling for substantial Government intervention to help people deal with rising energy costs. E.ON is expecting 1 in 5 to struggle to pay their Autumn bills and suggests that consumers will face higher bills for at least another 18 months.

It appears that the Chancellor has listened to these concerns as he has just announced his Cost of Living support plan to Parliament. You can find the cost-of-living support factsheet here.

The main measures include:

  • The £200 one off payment that was announced earlier in the year has been doubled to £400 for all households and will now be a grant not a loan, so it will not need to be repaid.
  • A £650 one-off cost of living payment for those on means tested benefits
  • A £300 one-off cost of living payment to pensioners who receive the Winter Fuel Payment
  • A £150 one-off cost of living payment to those receiving certain disability benefits

The support is expected to be partially funded by a windfall tax on oil and gas firms which should raise £5bn. The new Energy Profits levy will introduce a 25% surcharge on the extraordinary profits the oil and gas sector is making. Within the levy there is provision for a new super-deduction to encourage firms to invest in oil and gas extraction in the UK. You can find the Energy Profits levy Factsheet here.

Although this support for households is welcome, no doubt business organisations like the CBI will continue to press for direct support for businesses, particularly for those in energy intensive industries.

We will keep you updated on developments.