Sunak gives every household £400 off energy bills after windfall tax U-turn

26 May 2022, 06:39 | Updated: 26 May 2022, 14:34

  • Every household will be given £400 off their energy bills
  • The most vulnerable in society will be given a one-off £650 payment
  • A temporary 25% windfall tax on oil and gas companies will be introduced in a major u-turn
  • Pensioners will be given £300 to help them get through the cost of living crisis
  • And £150 will be given to disabled people
Rishi Sunak has announced a support package to ease the cost of living crisis, funded by a windfall tax.
Rishi Sunak has announced a support package to ease the cost of living crisis, funded by a windfall tax. Picture: Parliament TV/Alamy

By Daisy Stephens

Chancellor Rishi Sunak has announced plans to give every household in Britain £400 off their energy bills to help ease the cost of living crisis.

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The Chancellor said a temporary 25 per cent windfall tax on oil and gas companies will be introduced in a major U-turn to fund the grants.

He scrapped his initial plan to loan households £200 and make them repay it over five years.

A one-off cost of living grant of £650 will also be given to the most vulnerable in our society, meaning almost all of the eight million most vulnerable households will receive support of at least £1,200 this year.

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Pensioners will be given a one-off £300 payment, while disabled people will get £150.

Supply problems after the pandemic, the war in Ukraine and renewed Covid lockdowns in China have all contributed to prices going up, Mr Sunak said.

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As he outlined his package of support, Mr Sunak said: "The oil and gas sector is making extraordinary profits not as the result of recent changes to risk taking or innovation or or efficiency as the result of surging global commodity prices driven in part by Russia's war.

"For that reason I am sympathetic to the argument to tax those profits fairly.

"It is possible to both tax extraordinary profits fairly and incentivise investment."

The new levy on oil and gas firms will raise around £5 billion over the next year to help with cost of living.

The dramatic U-turn comes after the Tories voted down a bid to impose a windfall tax on oil and gas giants just last week.

Conservative MPs rejected a Labour amendment to the Queen's Speech backing a one-off levy on North Sea firms, despite Brits facing a cost of living crisis.

MPs rejected the move by 310 votes to 248, and not one Tory MP backed it.

Rachel Reeves, Labour's Shadow Chancellor, said the Chancellor "has finally come to his senses".

“Despite only bringing in the plan months ago, he’s had to ditch his dodgy buy now, pay later loan that was always destined for failure," she said.

“There couldn’t be a more appropriate illustration of this Conservative government’s lacklustre, out of touch approach to managing our economy - arriving at the common sense solution months too late."

While leader of the Liberal Democrats, Ed Davey, wrote on Twitter: "Sunak's like a thief who steals your car and then wants you to be grateful when he returns the steering wheel.

"The British people won't fall for the Sunak Scam. They need a tax cut now to put food on the table, heat their homes and fill up their cars."

Brits have been grappling with a worsening cost of living crisis, piling pressure on the Chancellor to offer more help.

Record levels of inflation, soaring bills, surging petrol prices and increases in taxes like national insurance and council tax have all pushed up the cost of living.

More and more people are having to make the choice between heating their homes or putting food on the table - and on Tuesday the boss of Ofgem warned the price cap on energy bills would go up by almost £1,000 in October.

It means prices will have more than doubled in just over six months.

Adam Scorer, chief executive of National Energy Action, said the rise in price cap will "plunge households into deep, deep crisis".

"The financial, social and health impacts are unthinkable," he said.

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He added the announcement will "strike terror into the hearts of millions of people already unable to heat and power their homes".

The £400 grant was among support measures to be announced by the Chancellor, as the prime minister seeks to move on from the partygate scandal.

Yesterday, the Prime Minister refused to resign despite accepting the "bitter and painful" conclusions of the senior official's inquiry that revealed lurid details of partying in Government during lockdowns.

He said he "overwhelmingly" believes he should stay in power to tackle the nation's challenges including the soaring costs of food and energy.

The publication of Ms Gray's report a day earlier led to fresh questions after it emerged she abandoned her investigation into an "Abba party" in the Downing Street flat.

Ms Gray said she judged it was not "appropriate or proportionate" to continue the "limited" progress she had made after the Metropolitan Police launched its investigation.

The acting head of the Met police Sir Stephen House could face questions over the saga when he appears before the London Assembly's Police and Crime Committee on Thursday.

London Mayor Sadiq Khan has demanded an explanation into the force's decisions after Mr Johnson was fined over just one event, despite being pictured drinking at another gathering.

Mr Johnson declined to implement a booze ban in Downing Street despite Ms Gray's findings during a period when the Prime Minister ordered the public into isolation.

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She said officials drank so much they were sick, became involved in altercations and abused security and cleaning staff.

The Prime Minister told a Downing Street press conference: "I understand why people are indignant and why people have been angry at what took place."

Pressed on whether he ever considered resigning, he responded: "I overwhelmingly feel it is my job to get on and deliver.

"No matter how bitter and painful that the conclusions of this may be - and they are - and no matter how humbling they are, I have got to keep moving forward and the Government has got to keep moving.

"And we are."

The Chancellor announced a package of measures on Thursday
The Chancellor announced a package of measures on Thursday. Picture: Alamy

Tory MPs gave a muted response to the Sue Gray report, with the only new call to resign coming from backbencher Julian Sturdy.

A snap poll from YouGov suggested three in five Britons want Mr Johnson to quit.

But a Conservative ally of Mr Johnson argued it would be "ludicrous" for him to resign now.

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The official report said the "senior leadership" in No 10 must "bear responsibility" for the culture which led to lockdown rules being broken at a series of events in 2020 and 2021.

Ms Gray added: "The events that I investigated were attended by leaders in Government. Many of these events should not have been allowed to happen."

The Metropolitan Police issued 126 fines for rule breaches in No 10 and Whitehall, with the Prime Minister receiving a single fixed-penalty notice for his birthday party in June 2020.

Petrol prices have reached record levels
Petrol prices have reached record levels. Picture: Alamy

Mr Sturdy, the York Outer MP, said "it is in the public interest for him to resign".

Former ministerial aide Angela Richardson said the scandal has eroded public trust in politicians and "reflects badly on us all".

"I am clear that had this been a report about my leadership, I would resign," the Tory MP wrote online.

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Labour leader Sir Keir Starmer told the Commons the report "laid bare the rot" in No 10 and called on Tory MPs to tell Mr Johnson "the game is up" and that it is "time to pack his bags".

But it is Conservative MPs who will decide his fate, and Mr Johnson further apologised at a closed-doors meeting of the 1922 Committee of backbenchers.

The report included a series of photos, with Mr Johnson pictured at the surprise birthday party in the Cabinet Room on June 19 2020 for which he received a fine.

He is seen with Cabinet Secretary Simon Case and the Chancellor, with sandwiches, juice and what appears to be lager.

In one picture Mr Johnson is seen raising a can of beer aloft.

Questions also remained over why Mr Sunak and the Prime Minister were fined over the event, but Mr Case was not.