Rishi Sunak announces further support for households

Rishi Sunak has said that the government will be providing households with  further support in an effort to offset rising energy costs.

This will be funded partly by a proposed £5bn windfall tax on oil and gas companies who profited during the pandemic. A further £10bn will raised through borrowing. 

The announcement, which has come after months of pressures from opposition parties and campaigners, represents a significant u-turn for the Conservatives. Both the Sunak and Johnson had previously ruled out a windfall tax as being bad for future investment. 

Speaking on the decision, Shadow Chancellor Rachel Reeves took aim at the Tories.

“Today it feels like the chancellor has finally realised the problems that the country is facing,” said Reeves. “We first called for a windfall tax on oil and gas producers nearly five months ago to help struggling families and pensioners. Today he has announced that policy but he can’t dare say the words. It’s a policy that dare not speak its name.”

As part of the new measures, the previous £200 energy bills loan will be replaced with a £400 grant. The eight million households who are deemed to be most vulnerable will receive an additional one-off payment of £650. Further support includes £300 payments to eight million pensioners and £150 to six million people suffering from disabilities.

While April’s price cap increase of 54%has already caused difficulty for households, there have been recent warnings that an even larger hike could be coming at the next adjustment. On the 24th of May, Head of Ofgem Jonathan Brearley warned MPs that October could see the cap rise as high as £800. 

 “The price changes we have seen in the gas market are genuinely a once-in-a-generation event not seen since the oil crisis of the 1970s,” he said.

It comes as no surprise then that Sunak’s announcement was made days later, as. However, the speed of his response indicates that it was being considered prior to Brearleys comment.

Despite some questioning from opposition parties on the timing and scope of support, the move was largely welcomed as necessary during unprecedented times. The reaction from the Tory party, however, was mixed, with MP Craig Mackinlay going as far to describe the decision as “inherently wrong”.

While much of the focus of the current cost of living crisis has been on energy bills, it’s not the only culprit. Inflation is also being driven by rising grocery and petrol costs. Rental prices also reaching previously unthought-of levels, with London recently seeing a 14% year on year increase, the highest on record.

Sources