Support to help people deal with soaring energy bills this winter has been outlined by the chancellor, Rishi Sunak.
The measures are a mix of broad help and specific payments to those on lower incomes.
All UK households to get an energy bill discount
All UK households will get a grant which will reduce energy bills by £400 from October.
Previously, the chancellor had said £200 would be knocked off everyone’s energy bills, but would have to be paid back in instalments over five years.
Now, the discount has been doubled to £400 and he has cancelled the requirement to repay.
In other words, from October, everyone’s energy bill will be reduced by £400.
In technical terms. it will apply directly for households in England, Scotland, and Wales. The equivalent funds should be given to Northern Ireland to distribute, although the way to do this has yet to be worked out.
Straight payments will be made to millions of people on various state benefits or pensions.
A £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits.
This will be an automatic payment into bank accounts. It comes in two instalments – the first in July and the second sometime this autumn. Payments for those on tax credits only will follow shortly afterwards.
Those on disability benefits will receive £150 in September, which may be on top of the £650 payment.
Pensioners will get money for winter fuel bills
Households that receive the Winter Fuel Payment – which is homes with at least one person of pension age – will receive an extra £300 in November or December.
Those on lower incomes, who claim pension credit, will also receive the £650 mentioned earlier.
A small group of pensioners with disabilities will receive a total of £1,500 when all the new payments and discounts they are eligible for are added up.
About 80% of households are already receiving a £150 energy rebate, often through their council tax bill.
The mechanics can differ depending on how you pay your council tax and which part of the country you live in.
Some payments have been made to people with fuel vouchers, for example, through the Household Support Fund distributed by councils. An additional £500m has been added to the fund by the chancellor.
How the chancellor will pay for it
A windfall tax – which he called a temporary levy – will be imposed on energy companies (not your domestic supplier) which should raise about £5bn over the next year.
Companies that get oil and gas out of the ground are getting much more money for it 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.
Electricity generation companies may also be taxed more.
The tax will cover some, but not all, of the bill for the Treasury, which means the chancellor will have to dip into other funds.
The cost of living will still go up
Prices are already rising at a faster rate than at any time in the last 40 years.
Official forecasters say that the rate is set to accelerate. Prices will not fall next year and beyond, but the rate of increase is expected to slow.
The big unknown is what will happen to energy bills in the next few years. That depends to a great extent on the war in Ukraine, and its wider impact on energy supplies from Russia and how that changes the wholesale prices paid by energy suppliers.
Why support is needed
The cost of living across the UK has been surging, driven primarily by the rising price of necessities such as gas and electricity, but also food and fuel.
Before he announced his plans, Mr Sunak needed to know the scale of the problem. On Tuesday, it was made crystal clear by the boss of the energy regulator Ofgem.
A typical domestic energy bill is estimated to rise to £2,800 in October, Jonathan Brearley told MPs. That is an £800 a year increase, on top of a £700 a year rise which took effect in April.
That is a bigger hit to domestic budgets than had been anticipated by many analysts. For about 19 million of the 23 million households affected in England, Scotland and Wales, the higher cost will reflected in bigger direct debit demands from their supplier. Prepayment meter users will see a sudden jump from October.
Households in Northern Ireland have already faced higher prices, where there is no price cap.
The chancellor said he could not cancel the problem for everyone, but was lifting some of the pressure.
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