In response to high energy bills, government financial support has changed, with households now due to receive a £400 grant in October.
The grant replaces a previously announced loan payment.
In addition, the poorest households will receive £650 in support to help with the cost of living crisis.
Announcing the measures in a ‘mini-Budget’, Chancellor Rishi Sunak referred to the “significant support” the government would provide to those in “acute distress” due to rising prices.
The package of support is worth £15 billion and will be funded by a 25% windfall tax on the profits of oil and gas companies.
However, the announcement’s timing has been questioned, as it immediately followed the publication of Sue Gray’s report into lockdown parties at Downing Street.
The Chancellor said the government had a “collective responsibility to help those who are paying the highest price for the high inflation we face.”
Eight million households who receive means-tested benefits will receive £650, paid directly into their bank accounts. These payments will be split in two, paid in July and in the autumn.
Pension households will receive a separate £300 one-off payment, with individuals receiving disability benefits getting £150.
In addition, the Household Support Fund, administered by local authorities in England, will be boosted from £1 billion to £1.5 billion, with devolved administrations receiving equivalent funding.
The new financial support follows a warning from energy regulator Ofgem that the price cap is likely to rise by £800 in October to a new high of £2,800 a year.
Announcing the measures, the Chancellor said the Russian invasion of Ukraine, lockdowns in China and the post-pandemic recovery have all contributed to rising price inflation. However, the situation had “evolved and become more serious” recently, prompting government action.
The windfall tax on energy firm profits is already facing criticism, with the Confederation of British Industry (CBI) warning it could damage investment.
Rain Newton-Smith, CBI chief economist, said the tax “sends the wrong signal to the whole sector at the wrong time”, pointing to a “backdrop of rising business taxation”.
However, think tank the Resolution Foundation supported the measures, calling them “progressive.”
Resolution Foundation chief executive Torsten Bell said:
The decision to provide one-off payments this year to poorer households, pensioners and those with a disability is a good attempt to target those with higher energy bills – although the relative lack of support for larger families stands out.
