Millions of households will receive a £400 discount on their energy bills, and a £5bn tax will be levied on oil and gas giants as Rishi Sunak moved to counter the soaring cost of living.
The chancellor was forced to unveil emergency measures as part of a £15bn package to tackle the impact of soaring inflation, which has reached a 40-year high.
Measures include a £650 payment for 8 million of the worst-off households, a one-off £300 payment to 8 million pensioner households and £150 each to 6 million disabled people.
The plans will be funded by around £10bn of extra borrowing, but Mr Sunak insisted he had a “responsible fiscal policy”.
Mr Sunak also scrapped his £200 energy bills loan, replacing it instead with a £400 grant, available to all households. He said that tax breaks for innovation would ensure the windfall tax did not reduce investment in green power.
Shadow chancellor Rachel Reeves said Mr Sunak’s announcement showed the Labour Party was “winning the battle of ideas”, adding: “This government’s dither and delay is costing the country dearly.”
As he began his statement to MPs, Mr Sunak was heckled with shouts of “what took you so long” and “about time”.
Sketch: The chancellor who’s having to be everything he’s not
While he sees himself as an Ebeneezer Scrooge-style Tory, Rishi Sunak is in fact best understood as the Ocean Club Marbella Veuve Clicquot Champagne Spray Chancellor, says sketch-writer Tom Peck:
Sunak’s support and what it means for your finances
Our business correspondent Ben Chapman analyses what the measures will mean for readers’ finances:
Shell ‘recognises burden of rising bills’
A spokesman for oil giant Shell said: “We have consistently emphasised the importance of a stable environment for long-term investment.
“This is fundamental to our aim to invest between £20billion and £25billion in the UK in the next decade, mostly in low- and zero-carbon products and services, with a significant amount also focused on ensuring security of energy supply for the UK.
“The Chancellor’s proposed tax relief on investments in Britain’s energy future is a critical principle in the new levy.
“We recognise the burden that increased energy prices have across society, in particular on the vulnerable, and have hardship plans in place to help our customers.”
How to get the new £650 energy bill grant
Amont the chancellor’s new measures is a one-off payment of £650 for 8 million families on benefits to ease the pressure of rising energy bills.
The sum will be applied to those on Universal Credit, Tax Credits, Pension Credit, and legacy benefits from July. Zaina Alibhai explains that those eligible should receive it automatically:
Businesses and unions condemn Sunak’s steps
Businesses and unions have attacked the chancellor’s announcements for different reasons.
Rain Newton-Smith, the CBI’s chief economist, said helping people facing real hardship amid one of the worst cost-of-living crunches in recent memory was the right thing to do.
But she added: “Despite the investment incentive, the open-ended nature of the energy profits levy, and the potential to bring electricity generation into scope, will be damaging to investment needed for energy security and net zero ambitions.
“It sends the wrong signal to the whole sector at the wrong time against a backdrop of rising business taxation elsewhere.”
TUC General Secretary Frances O’Grady said: “The Chancellor should have acted far sooner after his inadequate spring statement. His dither and delay has caused unnecessary hardship and worry for millions.
“The government still doesn’t have a plan for giving families long-term financial security.
“With energy bills rising 23 times faster than wages we urgently need to get pay packets rising and to pay universal credit at a permanently higher rate – not just a one-off boost.”
Kitty Ussher, chief economist at the Institute of Directors, said: “Ultimately, what is good for household confidence is also good for the economy as a whole.
“However, it is still the case that high energy prices are causing huge concern for business leaders.”
Hannah Essex, Co-Executive Director of the British Chambers of Commerce said: “Unless steps are also taken to ease business costs, they will likely [sic] feed into the inflationary pressure on the economy and quickly eat into the financial support announced today.
“A change of course is needed now. If the government does not act quickly, then rising costs will put our economy in a stranglehold.”
Manuel Cortes, Transport Salaried Staffs Association General Secretary, said: “This package although somewhat late is welcome, but we need an emergency budget to deal with the cost-of-living crisis to ensure that no-one is left behind.”
Tory MP calls for minimum wage rise beyond inflation
Conservative MP John Baron called for the government to raise minimum wages ahead of inflation and scrap the corporation tax increase to help fund the measure.
The MP for Basildon and Billericay said: “The Chancellor and the Government’s absolutely right to recognise that more needs to be done. But I would suggest to him also that generally lower taxes bring forward greater prosperity over the medium- to longer term.
“Given that inflation is going to be less transitory than many believe… will the Chancellor give consideration to raising the minimum wages ahead of inflation to help the lowest paid, given we have record low unemployment, whilst scrapping the corporation tax increases to help industry pay for that?”
Rishi Sunak said: “I’m proud that the minimum wage has gone up this year significantly, putting £1,000 extra into people’s pay cheques, and actually we have a target long term to increase it to two-thirds of median earnings, which will ensure that it does tend to rise faster than inflation in normal times.
“But I’m happy to work with him on making that happen.”
What is a windfall tax and what does it mean for me?
Saphora Smith explains exactly what the chancellor’s announcement means for everyone:
Windfall taxes in place until prices hit more normal level, Sunak says
The windfall tax will be in place until “prices return to a more normal level”, Rishi Sunak has said.
Mr Sunak told the Commons: “We will put a backstop sunset clause in the legislation with the energy profits levy. It’ll remain in place until prices return to a more normal level.”
Tory MP warns Sunak against ‘throwing red meat to socialists’
A Tory MP has warned Rishi Sunak against “throwing red meat to socialists by raising taxes on businesses and telling them where to invest their money”, warning this is “not the Conservative way of encouraging those who create our prosperity and jobs to do just that”.
Richard Drax asked the chancellor whether he agreed that “by setting this bar, we’re in danger – were we ever to lose power – of allowing the socialists to raise it, which they would do with relish, again and again and again”.
Mr Sunak said he believed a “pragmatic and compassionate Conservative government would act to provide support to the most vulnerable at a time of acute need, and a fiscally responsible government would look to try to fund as much of that as possible in as fair a way as possible”.
Earlier, the chancellor had said that the government’s cost-of-living support measures were “more generous” than those called for by Labour.
Tory MP quizzes Sunak on why Japan and Switzerland have escaped inflation rise
Tory former minister Sir Desmond Swayne has asked Rishi Sunak what “difference in monetary policy has protected Japan and Switzerland from the levels of inflation” encountered in the UK, US and the rest of Europe.
The chancellor replied: “Japan as he will appreciate is a very particular case but even there, they are experiencing their highest inflation rates relative in many, many years.
“With regard to Switzerland, the reason is a couple of things. One is a strong, particularly strong Swiss franc, which happens at times like this, but also a very different mix of energy, which I believe is provided overwhelmingly by hydro-nuclear from memory, but it’s a completely different energy mix, which means that they suffer less from the shock that we are experiencing.”
