- The most vulnerable households across Scotland will receive support of over £1,000 this year, including a new one-off £650 cost of living payment
- Universal support increases to £400 across Great Britain, as the October discount on energy bills is doubled and the requirement to repay it over 5 years scrapped
- This new £15 billion support package is targeted towards millions of low-income households and brings the total cost of living support to £37 billion.
- New temporary Energy Profits Levy on oil and gas firms will raise around £5 billion over the next year to help with cost of living, with a new investment allowance to encourage firms to invest in oil and gas extraction in the UK.
The significant intervention includes a new, one-off £650 payment to more than 8 million low-income households on Universal Credit, Tax Credits and legacy benefits to be made in two tranches starting in the summer, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits - groups who are most vulnerable to rising prices.
Rishi Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means the vast majority of households will receive a £400 discount on their energy bills from October.
The new Cost of Living Support package will mean that the most vulnerable households in Scotland will receive over £1,000 of extra support this year.
To ensure there is support for everyone who needs it, Mr Sunak also announced a £500 million increase for the Household Support Fund. This brings the total Household Support Fund to £1.5 billion.
To help pay for the extra support - which takes the total direct government cost of living support to £37 billion - Mr Sunak said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. At the same time, in order to increase the incentive to invest the new levy will include a generous new 80% investment allowance. This balanced approach allows the government to deliver support to families, while encouraging investment and growth.
The Chancellor of the Exchequer Rishi Sunak said:
I know that people in Scotland are anxious about keeping up with rising energy bills, which is why today we have introduced measures which will take the support for millions of the lowest income households over £1,000.
As a nation we have a responsibility to help the most vulnerable, which is why this support is mostly targeted at people on low incomes, pensioners and disabled people. But we understand that all households in Scotland will be concerned about the rise in energy costs this Autumn, so every household is set to get £400 off their energy bills from October, with no repayments necessary.
It is right that companies making extraordinary windfall profits from rising energy prices should contribute, and I'm introducing a temporary energy profits levy to help pay for this support, while still encouraging the investment that generates jobs in Scotland.
Scottish Secretary Alister Jack said:
Global issues are causing real pressures in the cost of living for UK families. We understand how tough it is at the moment for many households, which is why the Chancellor has today announced a further £15 billion support package.
A total of £400 per household towards fuel bills will help protect families from rising energy costs. Cash payments of £650 for low-income households on means tested benefits will target support at the most vulnerable in our society at this difficult time. This comes on top of our existing £22bn support package.
Some of these measures will be paid for by a temporary levy on oil and gas companies - one which incentivises investment in the UK's energy security.
There is now more certainty that households will need further support, with inflation having risen faster than forecast and Ofgem expecting a further rise in the energy price cap in October.
So as part of the government's targeted support, the Chancellor announced that around eight million of the lowest income households on Universal Credit, Tax Credits, and legacy benefits will receive an automatic £650 cost of living payment in two instalments via the welfare system this year. Today's announcement is on top of the government's existing £22 billion cost of living support which includes February's energy bills intervention and action taken at this year's Spring Statement including a £330 tax cut for millions of workers through the NICs threshold increase in July and 5p cut to fuel duty.
Energy Profits Levy
Surging commodity prices, driven in part by Russia's war on Ukraine, has meant that the oil and gas sector have been making extraordinary profits. Ministers have been clear that they want to see the sector reinvest these profits in oil and gas extraction in the UK.
In order both to fairly tax the extraordinary profits and encourage investment, the Chancellor announced a temporary new Energy Profits Levy with a generous investment allowance built in. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax it will pay.
The new Levy will be charged on oil and gas company profits at a rate of 25% and is expected to raise around £5 billion in its first 12 months, which will go towards easing the burden on families. It will be temporary, and if oil and gas prices return to historically more normal levels, will be phased out.
The new Investment Allowance, similar in style to the super-deduction, incentivises companies to invest through saving them 91p for every £1 they invest. This nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.
The government expects the combination of the Levy and the new investment allowance to lead to an overall increase in investment, and the OBR will take account of this policy in their next forecast.
The Levy does not apply to the electricity generation sector - where extraordinary profits are also being made due to the impact that rising gas prices have on the price paid for electricity in the UK market, which has also been making extraordinary profits partly due to record gas prices but also due to how the market works. As set out in the Energy Security Strategy the government is consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
The Chancellor announced today that the Treasury will urgently evaluate the scale of these extraordinary profits and the appropriate steps to take.
During the announcement, the Chancellor also set out the government's strategy to control inflation through independent monetary policy, fiscal responsibility, and supply side activism - a plan he said that should see inflation come down and returning to its target over time.
