The Chancellor has unveiled a support package to help households across the UK manage the cost of living crisis.
The measures, on top of the previous package of support announced in February and the Spring Statement, bring total government spending on the cost of living crisis to £37bn. The package includes:
- All households will receive a £400 discount on energy bills from the autumn, once the 40% energy price cap takes effect. This scheme replaces the original £200 rebate where consumers would have paid this back with higher bills over the following 5 years.
- Households on means-tested benefits will receive £650, to be paid in two lump sums in July and the autumn.
- Reflecting the need that pensioners and those living with disabilities have higher energy costs, there is further support. Pensioners will receive an additional £300 Winter Fuel Payment and those who receive disability benefits will receive a £150 Disability Cost of Living Payment.
- In addition, to assist those who still find themselves in financial difficulty, the Household Support Fund has been increased by a further £500m from October.
- There will be a temporary Energy Profits Levy of 25% on oil and gas firm profits, which is projected to raise £5bn.
This is the third set of measures the Chancellor has announced, having announced support for households twice previously in both February and March. The package announced today is by far the most generous for vulnerable households.
In October, average energy bills will have risen by around £1500 in a year, the support package announced today, combined with the £150 council tax rebate in April totals around £1200, covering around 80% of the price rise.
The additional payments for pensioners and those living with disabilities is another example of targeted spending.
There are however two considerations that continue to squeeze living standards for UK households:
- Energy price rises in April only contributed 2.5% of the total 11.1% RPI inflation figure. Inflationary pressure is now being felt across all forms of household spending, this support does not account for price rises in food and fuel, which is now at record levels.
- The support is targeted to those on Universal Credit and other forms of benefit payments. There is little coverage for the ‘working poor’ who are faced with the same energy price rises but only receive around £550 from the government. It is likely that the hardest hit households over the coming year will be those in the ‘squeezed middle’.
Click chart to enlarge
More economic news and analysis
Sign up to our bulletin
Our round-up of the latest economic and political news, focused on FMCGs