Chancellor Rishi Sunak announced in Parliament this after new emergency measures to help the British public with spiralling energy prices and cost of living increases. This new layer of government support looks to set cost an additional £15bn in addition the already £37bn committed to reducing fuel prices, no VAT on insulation type products and services and grants already offered to the elderly and poorer households.
In a U-Turn, Mr Sunak confirmed that this will be funded by a 25% temporary levy on oil and gas companies given their extraordinary profits due to massive global energy prices. He also claimed that 75% of the support will be directed to poorer and vulnerable households.
Energy Bill Loan now a Grant and Increased
Originally an energy scheme was set up to ‘lend’ households £200 in credit in October to all household electricity bills when the next price cap increase comes in and to be paid back at £40 per year over 5 years.
This has now been changed in that it is no longer a loan it is a grant. You will not have to pay it back. As a relief for many, this grant is also being increased from £200 to £400 per household electricity bill. That’s 28 million household electricity accounts.
8 Million Pensioners Get An Extra £300
The winter fuel payment for pensioners is around £300 to £200 pa depending upon your household position, two people living together or single occupier etc. The winter fuel payment will have an additional payment of £300, taking it up to £500-£600 for this year.
£650 for Up To 13 Million Low Income Households
The lowest income households (usually on universal credits of some sort) will each receive an additional one-off payment of £650 to help towards the increased cost of living. Low-income households are calculated for example as a single person household having an income below £19,200 per annum before tax. There are 13 million households in the UK classes as low income and Sunak estimates another 8 million households will benefit from this additional £650.
This means that when you combine the already granted £150 council tax rebate in addition to the £400 electricity grant and £650 one-off payment. Millions of households may get £1,200 this year in help towards the cost-of-living crisis.
Comment - Inflation, Inflation, Inflation!
Whilst all the above is welcome news for poorer households, it also means the UK is committed to one of the biggest support packages in the World and we add that there is method behind the madness.
Energy companies will continue to make huge profits rather than being forced to cut or cap prices. A 25% windfall tax will likely only push energy prices up even higher. The knock-on effect is even great profits that can be taxed by HMRC as well keeping prices up i.e., keeping inflation up.
We have beaten the drum for two years now telling you that governments need inflation to devalue long term debt e.g., UK £500bn covid-19 debt. Devalue it first over the next 10-15 years with inflation before it is due to be repaid.
Higher inflation will also mean higher prices, higher wages, and higher property prices. Resulting in higher income taxes, stamp duty taxes, capital gains taxes and inheritance taxes. The ‘natural watershed’ for income and costs is being pushed higher, so expect an artificial boom after the coming recession.