LBC Views: Rishi's rescue package needs more thought if it is to really work

27 May 2022, 11:35

Dean Dunham believes Rishi's rescue package is a good start
Dean Dunham believes Rishi's rescue package is a good start. Picture: LBC
Dean Dunham

By Dean Dunham

The £15bn support package, announced by Chancellor Rishi Sunak this week will help millions of struggling households across the UK.

But while it’s a great start, the cost of living package needs more thought if it is truly going to have the positive impact needed.

The decision to give a £400 grant to ALL households is clearly a mistake, as it means that even those households that do not need the payment will receive it.

Surely it would be better make this payment means tested and to increase the amount?

Government also needs to ensure that Ofgem moves quickly on its pledge to take tough action against energy suppliers that are charging people too much for direct debits so that consumers are treated fairly.

So how does the support package affect you…

All households Every household in England, Scotland and Wales connected to mains electricity will receive a non-repayable grant of £400 to help towards the cost of energy bills from October 2022.

This will be paid over six months, rather than in one lump sum. Direct debit and credit users will have the money credited to their account, while those with pre-payment meters will have the money applied to their meter or paid via a voucher.

To be clear this is not a loan, as Government was previously planning. The money does not have to be paid back.

Those on means tested benefits If you receive one of the following benefits, as at 25 May 2022, you will receive a payment of £650 from the Department for Work and Pensions:

  • Child tax credit
  • Income-based jobseekers allowance
  • Income-related employment and support allowance
  • Income support
  • Pension credit
  • Universal credit
  • Working tax credit

You will receive the payment in two lump sums – the first from July and the second in the autumn.

Pensioners Pensioners who are aged 66 or above and in receipt of the Winter Fuel Payment will receive a top up of £300 to be called the 'Pensioner Cost of Living Payment'. This will be paid in November or December 2022 by direct debit. The Winter Fuel Payment (including the top-up) is not taxable and does not affect eligibility for other benefits.

Those on disability benefits If you receive one of the following disability benefits, as at 25th May 2022, you will receive a one-off payment of £150 in September 2022:

  • Armed forces independence payment
  • Attendance allowance
  • Constant attendance allowance
  • Disability living allowance
  • Personal independence payment
  • Scottish disability benefits
  • War pension mobility supplement

The money will be paid straight into the account you currently receive your benefits into. The Government says these payments are exempt from tax, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

Some will receive all four payments It is possible to qualify for all four payments meaning you will receive a combined amount of £1,500.

Will the grants be taxed? My understanding is that the payments will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards. However, Government says eligibility information on the second payment due to those on means tested benefits will be set out "in due course"; so the tax position here could change.

Extra money for the 'Household Support Fund' The Household Support Fund is designed to help those in need with payments towards the rising cost of food, energy, and water bills. The local authorities in England, and to the devolved Governments in Northern Ireland, Scotland, and Wales decide how to spend this cash. Government has pledged a further £500 million to the fund, which will also be extended from this October to March 2023.