Cost of Living Support package

2nd May 2022

The announcement, made in the Commons on 26 May, was the Chancellor’s second emergency policy intervention of the year and came days after energy regulator Ofgem said its gas and electricity price cap looks set to rise by 40% in October. The move would see the average household energy bill rise by a further £800 a year to £2,800, prompting Ofgem to warn that the number of people living in fuel poverty could double to 12 million.

Mr Sunak said the new package offered “significant support for the British people” with every household set to receive an energy bill discount of £400 in October, with extra financial help targeted
at poorer households, pensioners and the disabled. In total, the Chancellor said the combined measures were worth £15bn, taking the overall amount of government support pledged this year to around £37bn.

The Chancellor also announced that the cost of the support package will be partly offset by a “temporary and targeted energy profits levy” on oil and gas firms which will see the tax rate on North Sea profits rise from 40% to 65%. This temporary increase is expected to raise £5bn for the exchequer this year but will be phased out when oil and gas prices return to normal levels.

Responding to the announcement, Institute for Fiscal Studies Director Paul Johnson said, “Rishi Sunak has announced a genuinely big package of support. On average the poorest households will now be approximately compensated for the rising cost of living this year.” However, Mr Johnson also suggested that,  if energy prices remain high or rise further, “it may turn out hard to ensure these changes are genuinely temporary.”