Exclusive: Chancellor to tackle cost-of-living crisis by announcing additional reductions funded by windfall tax on oil and gas firms
Source - Daily Telegraph - 26/05/22
Every household in the country will get extra money taken off their energy bills this autumn under a new cost of living support package to be unveiled by Rishi Sunak on Thursday.
Boris Johnson nor Rishi Sunak in a picture published as part of the Sue Gray report. The energy bill relief announcements could help Downing Street bounce news of revelations about lockdown-breaking parties out of the headlines C
The Chancellor is set to announce an increase to the £200 saving unveiled earlier in the year and scrap plans to make people pay back the amount over the coming years.
To fund the move, he will announce an oil and gas windfall tax that will see the amount companies pay linked to how much they invest.
The multi-billion pound package is also expected to include new “targeted” support for the poorest households, possibly through Universal Credit or extra help for pensioners.
Boris Johnson and Mr Sunak hammered out the agreement after talks earlier this week as they faced growing pressure from voters and Tory MPs to act.
Mr Sunak will announce the new package to the Commons and is pencilled in for a round of broadcast interviews on Friday morning to justify the moves.
A senior government source said: “Given exceptional circumstances, we’ve always said we’d stand ready to provide more support. We will set out more details of those plans on Thursday.”
The announcements could help Downing Street bounce news of revelations about lockdown-breaking parties out of the headlines and turn media focus back on to policy.
Details of the package, agreed on Tuesday night, can be revealed by The Telegraph after numerous well-placed sources described what was coming.
One key announcement involves the energy bills rebate, which Mr Sunak announced in February in initial moves to help with the cost-of-living crisis.
A £200 discount on energy bills was announced for all UK electricity customers, with the money to be paid back in £40 chunks over five years.
The Treasury has agreed to ditch the loan part of the deal – heavily criticised by Labour – and increase the amount from which each household will benefit.
It means Mr Sunak can declare that around 28 million households are getting money off their energy bills, without a need to repay it, from October.
However, the support will still be dwarfed by the jump in energy bills that is coming. The energy price cap will increase to £2,800 according to estimates by Ofgem, the energy regulator. It is around £2,000 currently, and was around £1,300 last October.
Earlier this month, The Telegraph revealed that some people working on the original loan scheme had complained that it was highly complex and difficult to implement.
A political challenge will come in selling a windfall tax on oil and gas giants to Cabinet ministers, many of whom have criticised the idea publicly, and Tory MPs.
Mr Johnson had been holding round-table discussions with leading economists this week to ensure the tax would not deter investment and about the threat of inflation.
He is understood to have decided that “the pain is worth the gain” from the move, despite initial reluctance about signing off a tax rise on some businesses.
The tax is expected to be linked to the amount oil and gas firms invest. “The more you invest, the less you contribute,” said one source familiar with the proposal.
The reaction of Tories, already frustrated by a tax burden at its highest point in 70 years, and companies such as BP and Shell, will be closely watched on Thursday.
Smaller moves that had been considered, such as an extension to the warm homes discount scheme, are expected to have been rejected in favour of the energy bills rebate.
A measure specifically targeting households most impacted by the cost-of-living squeeze, such as pensioners and people on benefits, is also likely to be in the package.
Treasury and Downing Street spokesmen declined to comment on Wednesday night.
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