Long-awaited government support to help consumers meet the unprecedented increases in energy costs was announced by the Chancellor this week.
His measures have been widely appreciated, but will he need to return with more largesse to meet even more prices increases in oil, gas and electricity prices in the autumn?
What has he offered consumers?
A brief summary of the measures announced are:
- A doubling of the previously announced Energy Bills Support Scheme to £400. Energy suppliers will deliver this support over a six-month period starting October 2022. Recognising consumer concerns, this support will no longer be recovered (treated as a loan) but will be provided as a non-repayable grant.
- A £650 one-off cost of living payment for those on means tested benefits. This will be paid by the DWP in two instalments, the first in July 2022 the second in the autumn.
- A one-off £300 additional payment to pensioners paid on top of their Winter Fuel Payment.
- A one-off £150 Disability Cost of Living Payment.
- Additional £500m of funding to the Household Support Fund. This funding will be made available to Local Authorities to target support to those in need to meet rising food, energy and water bills.
How will this be paid for?
The overall cost of the above support initiatives is estimated to be £15bn. £5bn of this will be raised by a short-term Energy Profits Levy of 25% on the oil and gas industry. The electricity generation sector will also be asked to contribute but their position will not be disclosed until later this year.
No mention was made by the Chancellor of how the other £10bn will be funded.
Tax-free
The notes released by government make it clear that the grants offered in this package will not be taxed. Additionally, the means-tested cost of living payment of £650 will not count towards the benefit cap and will not have any impact on existing benefit awards.
Too little, too late?
For many working families already stretched by rising prices, there is little in the Chancellor’s announcements that will ease their current cash flow problems as the majority of the assistance announced will commence in the autumn.
It remains uncertain if the Chancellor will need to return to Parliament in short measure to extend his assistance to this wider community.