Chancellor Rishi Sunak has announced a fresh round of financial help for households facing ever-mounting living costs as inflation rises.

Sunak announced a raft of measures to help raise money and doled much of it out to households in varying amounts. It comes in the wake of an announcement a few days before from energy regulator, Ofgem, that the cap on average energy bills could rise to £2,800 per annum in the Autumn.

The package of measures has drawn criticisms at both ends with the Labour Party accusing the Chancellor of not doing enough for households, while economists have been questioning the wisdom of pouring more money into households’ pockets while inflation soars, and the Bank of England raises rates to attempt to slow spending.

But not all households are receiving equivalent amounts. So, what do the measures contain?

(Not a) windfall tax

The main tax-raising measure that the Chancellor has announced in order to fund measures for households is by taxing oil & gas and energy firms for the extraordinary profits they’ve received as a result of high energy prices.

The tax has been dubbed a ‘windfall tax’ in the media, but in practice is going by another name. Firms such as BP, Shell and British Gas owner Centrica will see a temporary 25% “Energy Profits Levy” imposed on their profits. This will increase their overall tax rate to 65% of profits, a combination of corporation tax and other levies they already pay.

The Chancellor says the measure will raise around £5 billion in the first year, but firms will be able to offset 91p for every £1 of their obligations if they invest in the UK’s energy infrastructure, a significant incentive.

Help for households

At the other end of the announcement – Sunak has announced significant help for households to pay for rising bills.

The core of this plan is a £400 grant which every household will receive in the Autumn. This replaces a previously launched £200 loan which was set to be paid back through higher energy bills in the future.

The grant will be paid out automatically to customers who use direct debit or credit payments for their energy bills. Households with prepaid or voucher-aid meters will have it applied to their meter automatically too.

Beyond this, around eight million households which currently receive means-tested benefits will get £650 cost-of-living payments, payable in two instalments in July and the Autumn. Those eligible will get the money automatically and needn’t apply.

Pensioners will also receive a £350 one-off payment, paid automatically. The disabled will also get another £150 one-off payment. Again, neither have to be applied for and will be funded through existing systems.

In total, the package of measures is expected to cost £15 billion – some way higher than what is being raised from the so-called windfall tax. The Government plans to fund the rest of the package through borrowing, but says it is doing so while maintaining fiscal responsibility.