- Chancellor Rishi Sunak has announced a £15 billion cost-of-living package for struggling UK households.
- The Treasure will also give away a grant of £400 to every household, taking the total support package to £21bn.
- The UK Government has finally accepted the call for a windfall tax on oil and gas companies, aiming to raise £5bn from the tax over the next year.
Amid the escalating cost-of-living crisis, Chancellor Rishi Sunak has announced a £15bn support package for the UK households, which have been struggling to pay their fuel and food bills. Sunak has also taken a U-turn on his decision not to levy a windfall tax on oil and gas companies. In addition to the initially announced package of £15 billion, the Treasure will also give away a grant of £400 to every household, taking the total support package to £21 billion.
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The cost-of-living package
Soaring energy bills have been the dominant contributor to the UK’s rising inflation levels. To reduce the energy bills, Labour has been calling for a windfall tax on oil and gas companies, which have generated bumper profits amid rising prices. The UK Government has finally accepted the idea of a windfall tax and has implemented the one-off levy from 26 May. But the Treasury won’t get any additional income from the recent profits made by the oil and gas firms.
Oil giants BP and Shell together declared bumper profits of £11.5 billion in Q4 last year and Q1 of 2022 alone, but these profits can’t be channelised towards supporting the households now. However, as a part of the support package, the Treasury plans to raise £5 billion from the levy over the next year. The levy would be phased out when prices get back to normal levels.
In February, the Government announced a loan of £200 for all UK households. But in Thursday’s announcement, this loan was converted into a grant and was doubled to £400. In addition to this, the poorest 8.3 million UK households would receive a £650 one-off payment. This came in response to the UK inflation levels hitting a 40-year high level of 9% last month.
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Under the support package, £300 would be given to the 8 million pensioners getting winter fuel payments. For the people getting disability benefits, an additional payment of £150 has been declared. Also, from October to March next year, the Household Support Fund would be given an additional amount of £500 million, increasing the total funds available with local councils to £1.5 billion.
Are these measures enough?
In April, the energy price cap had increased by 54%, surging by £693 a year. This has significantly hit the budgets of households, but worse is yet to come. Ofgem is expected to raise the energy price cap by 42% again in October, with energy bills jumping by another £800 in the autumn. The Bank of England (BoE) has also warned of an "apocalyptic" hike in food prices in the wake of the Russia-Ukraine war.
Choosing between heating and eating, the UK households are already struggling enough, and the situation is expected to deteriorate further as BoE anticipates the inflation levels to cross 10% over the coming months.
According to Sunak, 75% of the announced support will go towards the most vulnerable section of society, and the measures are timely and targeted. But he is being criticised for being too late to implement these measures, which probably won’t even be sufficient to combat the rising inflationary pressures.
During these difficult times, the UK Government is taking steps to support the households in dealing with the rising inflationary pressures. However, the current measures might not be enough for stabilising the situation. Fears of a recession are looming over the UK economy amid rising inflation, falling real wages, slowing business activity, falling consumer confidence, and contracting GDP. The households are in for a rough ride and the situation doesn’t appear to be stabilizing anytime soon.