On 26 May, the Chancellor, Rishi Sunak, delivered a Cost of Living Support package. While some support was already provided in March’s Spring Statement, this new support package provides specific policies to tackle energy costs and inflation. But what exactly does this mean for me?
A windfall tax
A windfall tax is a one-off and temporary tax that a government imposes on a company. Windfall taxes intend to target businesses that make a profit (or otherwise benefit) from something they were not responsible for (ie a windfall).
The Cost of Living Support package includes such a temporary windfall tax on oil and gas businesses, which are currently making more money than before. Under this windfall tax, an Energy Profits Levy in the form of a 25% surcharge on the profits of oil and gas sector businesses will apply.
It is expected that this will help raise around £5 billion within a year, which will be used to fund the support package.
The Cost of Living Support package includes support for the poorest and most vulnerable households. A ‘one-off cost of living payment’ of £650 will be provided to those receiving welfare benefits. Pensioner households will also receive a separate one-off payment of £300, while those receiving disability benefits will receive a one-off payment of £150.
However, it is not only the most vulnerable who are being supported. All UK households will receive a £400 energy bill discount from October, which will automatically be credited to individuals’ accounts. This discount was originally envisioned and introduced as a repayable £200 loan; however, the newly doubled discount will not have to be repaid.
It is expected that the Cost of Living Support package, along with the council tax rebate that many households received in April, will provide £1,200 in additional support to the most vulnerable households.
The Household Support Fund, which helps families to obtain essential items during the winter, will also receive an additional £500 million and will be extended from October until March 2023. This the Fund’s total funding to £1.5 billion.
For more information on the Spring Statement, read What does the Spring Statement mean for me and my business? and do not hesitate to Ask a lawyer if you have any questions.