Amid High Inflation, UK Govt Announces ?15 Billion 'Cost Of Living' Support Package For All Households

Britain has announced a 15-billion-pound ($18.9bn) package to support households struggling to pay soaring energy bills amid the cost of living crisis.

The UK has also slapped a 25% windfall tax on profits of oil and gas firms.

For the uninitiated, windfall tax is usually a one-off tax imposed by the government on a company, which in this case are the energy firms who are getting much more money for their oil and gas than they were last year, partly because demand has increased as the world emerges from the pandemic and partly because of supply concerns due to Russia's invasion of Ukraine.

The move, which will give each and every United Kingdom household a 400-pound ($500) discount on energy bills and provide more for the lowest-income households, marks a change of heart for UK Prime Minister Boris Johnson¡¯s government, which had previously resisted windfall taxes, calling them a deterrent to investment, as per Al Jazeera report.

A new, one-off British pound sterling (referred to as GBP) 650 payment will be offered to more than 8 million low-income households on Universal Credit, Tax Credits, Pension Credit and other benefits, with separate one-off payments of GBP 300 to pensioner households and GBP 150 to individuals receiving disability benefits, as per PTI.

With soaring energy bills, this is the second emergency policy intervention this year.

EPA

As per PTI. the Treasury claims that the new Cost of Living Support package will mean that almost all of the 8 million most vulnerable households will receive at least GBP 1,200 of extra support this year.

Also Read: Research Says More Than 250,000 UK Households Will Fall Into Extreme Poverty Next Year

What The UK Finance Minister Said

AP

¡°Energy firms were making extraordinary profits while Britons struggled¡± says Finance Minister Rishi Sunak, as per a report in Al Jazeera.

This is amidst the intense political pressure in the UK to provide more support for bill-payers coping with what political opponents and campaigners have called a cost-of-living crisis.

Finance Minister Sunak had reportedly told the Parliament ¡°We will introduce a temporary and targeted energy profits levy, but we have built into the new levy a new investment allowance that means companies will have a new and significant incentive to reinvest their profits¡±.

¡°The more a company invests, the less tax they will pay.¡±

UK¡¯s FM Sunak did not refer to it as a windfall tax. He said it would raise 5 billion pounds ($6.30bn) in the next 12 months and be phased out as oil and gas prices return to normal. He did not set out how the rest of the package would be funded.

He also said there would be a new Investment Allowance that would nearly double the tax relief available for firms on their investments.

Whereas on Tuesday this week, the UK energy regulator had said that a cap on gas and electricity bills was set to rise by another 40% in October, caused by a surge in global energy prices, as per Al Jazeera report.

For the uninitiated, inflation in the UK reached a 40-year peak of 9% in April 2022, and is projected to rise further. The government forecasts last month showed that living standards in UK were set to see their biggest fall since records began in the late 1950s.

¡°The high inflation we are experiencing now is causing acute distress for people in this country. I know they are worried, I know people are struggling,¡± FM Sunak reportedly said, backing the Bank of England to use interest rates to bring the situation under control.

For the latest financial news, keep reading Indiatimes Worth. Click here.