About time! Rishi is FINALLY set to announce £10bn cost-of-living package with hundreds of pounds off bills for EVERY household as he U-turns on imposing a windfall tax on surging energy firm profits
Rishi Sunak will finally unveil a £10billion cost-of-living bailout today with every household expected to get hundreds of pounds off their sky-rocketing bills.
The Chancellor is announcing a new package of help for struggling families after watchdogs warned that the Ukraine crisis means energy costs are set to soar again this Autumn – by more than 40 per cent.
The move comes after the government performed an extraordinary U-turn on imposing a windfall tax on the surging profits of oil and gas firms, following weeks of wrangling in Cabinet.
Ministers are also eager to move on from the Partygate scandal, after Sue Gray’s report demanded Boris Johnson took responsibility for his staff boozing, vomiting and fighting in Downing Street when the rest of the country was under brutal lockdown restrictions.
The proceeds will be used to turn the existing £200 per household state loan for energy bills – due to be paid back over the next four years – into a permanent grant. The value could also be doubled in a bid to take the edge off the misery of spiking inflation for 27million homes.
Billions of pounds of assistance could also be targeted at the most vulnerable in society, with a major increase in the Warm Home Discount Scheme being mooted. That is currently worth £150 to three million low-income households, but could be hiked to £500.
However, calls to slash the 5 per cent VAT rate on energy bills or restore the £20 a week uplift to Universal Credit from the pandemic have been ignored.
Rishi Sunak will today unveil a £10billion cost-of-living bailout that aims to provide financial assistance to help every household in Britain pay for surging energy bills
With energy prices set to soar again this autumn the Chancellor will intervene and announce additional measures, funded by a windfall tax on oil and gas giants, to ease the pressure on household finances
Ofgem’s expectation for the energy cap in October is £2,800 for a typical family – compared to £1,972 at the moment. Before April it was just £1,277
PM Boris Johnson, flanked by Rishi Sunak (right) at a Cabinet meeting on Tuesday, is understood to have hammered out the terms of the multi-billion package of measures with the Chancellor
How does the energy price cap work?
The energy price cap puts a limit on how much a supplier can charge for their default tariffs.
That includes the standing charge and price for each kWh of electricity and gas – which are used to calculate bills.
Ofgem expressed the cap as a cash figure for how much a typical home can expect to pay annually.
However, total bills can be far higher for many households as it depends on how much energy you use.
The average used by Ofgem is a household of 2.4 people, who use an average of 242 kWh of electricity and 1,000 kWh of gas per month.
Before April, the cap was set at £1,277. But amid soaring wholesale prices it was then increased to £1,972. But today the Ofgem chief executive Jonathan Brearley predicted it will reach £2,800 when it is revised again in October.
This means it will have more than doubled in the space of just six months.
Officials last night remained tight-lipped on the exact details, but other measures thought to be under consideration include bringing forward a planned increase in benefits.
Mr Sunak and the Prime Minister finalised the support package yesterday after the measures were fast-tracked amid concerns the Government risked looking out of touch.
The Chancellor is set to announce the new package to fellow MPs in the House of Commons and will address the media in a round of interviews on Friday.
His announcement is expected to quell the increasing disquiet among Tory backbenchers, particularly from the 2019 intake, who had demanded further action from the cabinet to aid their constituents.
Ministers have been under pressure over recent months to intervene as families face a perfect storm of rising taxes, bills and energy costs.
Last night a Tory party source said: ‘On a windfall tax, the arguments have been tested rigorously within the Treasury and within government.
‘We need to help families who would consider themselves comfortably off but are feeling the pinch, but the vast majority of help will be directed at those who need it most.’
The Chancellor recently promised that he was ‘ready to do more’ amid the inflation crisis, and vowed that ‘as the situation evolves our response will evolve’.
In a speech last week, he spoke of a ‘collective responsibility to help the most vulnerable in our society’.
Mr Sunak had planned to wait until July to unveil the package, when Ofgem will be able to give a more precise estimate of the likely rise in the price cap in October.
Ofgem chief executive Jonathan Brearley revealed his latest estimate for the price cap as he gave evidence to MPs on the Business Committee
The Treasury raked in £50.2billion in taxes in April – £5.5billion higher than the same month last year after the national insurance hike came in
The government’s tax take is now significantly higher than it was prior to the Covid-19 pandemic
The average price of diesel and unleaded petrol in UK forecourts is shown in this graph with data going back six years
Fuel prices are displayed at a Shell petrol station on Hadfield Road in Cardiff earlier this month
Those in Council Tax bands E to F are not receiving the £150 rebate announced by Chancellor Rishi Sunak earlier this year
Ex-Ofgem chief admits it could have done more to head off crisis
A former Ofgem chief executive Dermot Nolan has admitted the regulator could have stopped some of the sector’s failures ‘if we had moved faster’.
Dermot Nolan, who headed up the regulator between 2014 and 2020, said the ‘body politic’ wanted Ofgem to prioritise competition over regulatory supervision because of the ‘Big Six’ firms’ enduring share – 98 per cent to 99 per cent – of the market.
Mr Nolan said from around 2015 ‘many’ new firms entered the market under a ‘permissive’ regime ‘encouraged by government but also a conscious decision of the Ofgem board’.
However, it became apparent from 2017/18 that ‘in certain cases firms had entered the market in a speculative manner that was probably not reasonable, not fair and we needed to do something about it’.
But, in a highly unusual move, the energy regulator’s boss this week revealed he was writing to the Chancellor immediately to say the cap is likely to rise to £2,800.
Mr Brearley said that although the figures were ‘uncertain’, the situation has deteriorated and the expectation for the new level was £2,800 for a typical family – compared to £1,972 at the moment. Before April it was just £1,277.
He also admitted that there is a risk prices could go even higher if there is more disruption from the standoff with Russia.
Despite the ambitious package of measures, the government is still likely to face pressure from its critics who will say ministers could go further amid an impending energy cap rise from October.
The need for extra help was illustrated by Ofgem chief executive Jonathan Brearley’s indication the energy price cap is to increase by a further £830 in October.
Consumer groups said the prediction would strike ‘terror’ into the hearts of millions of householders.
It comes as the pursestrings for millions of families are likely to be tightened further over the coming year, with inflation exacerbating the pressures felt by record-high petrol, energy and food prices.
Petrol has become around 41p per litre more expensive over the past 12 months, adding around £23 to the cost of filling a typical 55-litre family car.
RAC fuel spokesman Simon Williams said the price of petrol has reached ‘another unfortunate landmark’.
‘While wholesale prices may have peaked for the time being last week, they are still worryingly high, which means there’s no respite from the record-high pump prices which are so relentlessly contributing to the cost-of-living crisis,’ he said.
New analysis has also shown that four million ‘squeezed middle’ households are currently missing out on the same level of Government assistance handed to others in the face of soaring bills. Among those is a widower in his 80s who is only eating two meals a day in order to save on food costs.
Caroline Abrahams, charity director at Age UK, told MailOnline that the Council Tax rebate was ‘nowhere near enough’ to address the cost-of-living crisis.
She warned the squeeze on incomes is ‘pushing millions into deep financial hardship and leaving them unable to afford the basics’.
Boris Johnson yesterday vowed to do ‘everything we can to help people’ through the crisis, but warned the pressures on household finances would last for ‘a while to come’.
The Prime Minister told a press conference yesterday: ‘We will continue to respond just as we responded throughout the pandemic.
‘It won’t be easy, we won’t be able to fix everything, but what I would also say is that we will get through it and we will get through it well.
‘There’s no question we have pressure now on household finances… and the Government is going to do everything we can to help people.’
Whitehall sources pointed to a speech Mr Sunak delivered last week saying the Government has ‘a collective responsibility to help the most vulnerable in our society’.
A Treasury spokesman said: ‘We understand people are struggling with rising prices, which is why we’ve provided £22billion of support to date.’