MORE SUPPORT NEEDED, SAYS SCOTTISH FINANCE SECRETARY
- The most vulnerable households across Scotland will receive support of over £1,000 this year, including a new one-off £650 cost of living payment
- Universal support increases to £400 across Great Britain, as the October discount on energy bills is doubled and the requirement to repay it over 5 years scrapped
- This new £15 billion support package is targeted towards millions of low-income households and brings the total cost of living support to £37 billion.
- New temporary Energy Profits Levy on oil and gas firms will raise around £5 billion over the next year to help with cost of living, with a new investment allowance to encourage firms to invest in oil and gas extraction in the UK.
Millions of households across the UK will benefit from a new £15 billion package of targeted UK government support to help with the rising cost of living, the Chancellor announced yesterday.
The significant intervention includes a new, one-off £650 payment to more than 8 million low-income households on Universal Credit, Tax Credits and legacy benefits to be made in two tranches starting in the summer, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits – groups who are most vulnerable to rising prices.
Rishi Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means the vast majority of households will receive a £400 discount on their energy bills from October.
The new Cost of Living Support package will mean that the most vulnerable households in Scotland will receive over £1,000 of extra support this year.
To ensure there is support for everyone who needs it, Mr Sunak also announced a £500 million increase for the Household Support Fund. This brings the total Household Support Fund to £1.5 billion.
To help pay for the extra support – which takes the total direct government cost of living support to £37 billion – Mr Sunak said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. At the same time, in order to increase the incentive to invest the new levy will include a generous new 80% investment allowance. This balanced approach allows the government to deliver support to families, while encouraging investment and growth.
The Chancellor of the Exchequer Rishi Sunak said: ““I know that people in Scotland are anxious about keeping up with rising energy bills, which is why today we have introduced measures which will take the support for millions of the lowest income households over £1,000.
“As a nation we have a responsibility to help the most vulnerable, which is why this support is mostly targeted at people on low incomes, pensioners and disabled people. But we understand that all households in Scotland will be concerned about the rise in energy costs this Autumn, so every household is set to get £400 off their energy bills from October, with no repayments necessary.
“It is right that companies making extraordinary windfall profits from rising energy prices should contribute, and I’m introducing a temporary energy profits levy to help pay for this support, while still encouraging the investment that generates jobs in Scotland.”
Scottish Secretary Alister Jack said: “Global issues are causing real pressures in the cost of living for UK families. We understand how tough it is at the moment for many households, which is why the Chancellor has today announced a further £15 billion support package.
“A total of £400 per household towards fuel bills will help protect families from rising energy costs. Cash payments of £650 for low-income households on means tested benefits will target support at the most vulnerable in our society at this difficult time. This comes on top of our existing £22bn support package.
“Some of these measures will be paid for by a temporary levy on oil and gas companies – one which incentivises investment in the UK’s energy security.”
There is now more certainty that households will need further support, with inflation having risen faster than forecast and Ofgem expecting a further rise in the energy price cap in October.
So as part of the UK government’s targeted support, the Chancellor announced that around eight million of the lowest income households on Universal Credit, Tax Credits, and legacy benefits will receive an automatic £650 cost of living payment in two instalments via the welfare system this year.
Yesterday’s announcement is on top of the government’s existing £22 billion cost of living support which includes February’s energy bills intervention and action taken at this year’s Spring Statement including a £330 tax cut for millions of workers through the NICs threshold increase in July and 5p cut to fuel duty.
Energy Profits Levy
Surging commodity prices, driven in part by Russia’s war on Ukraine, has meant that the oil and gas sector have been making extraordinary profits. Ministers have been clear that they want to see the sector reinvest these profits in oil and gas extraction in the UK.
In order both to fairly tax the extraordinary profits and encourage investment, the Chancellor announced a temporary new Energy Profits Levy with a generous investment allowance built in. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax it will pay.
The new Levy will be charged on oil and gas company profits at a rate of 25% and is expected to raise around £5 billion in its first 12 months, which will go towards easing the burden on families. It will be temporary, and if oil and gas prices return to historically more normal levels, will be phased out.
The new Investment Allowance, similar in style to the super-deduction, incentivises companies to invest through saving them 91p for every £1 they invest. This nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.
The government expects the combination of the Levy and the new investment allowance to lead to an overall increase in investment, and the OBR will take account of this policy in their next forecast.
The Levy does not apply to the electricity generation sector – where extraordinary profits are also being made due to the impact that rising gas prices have on the price paid for electricity in the UK market, which has also been making extraordinary profits partly due to record gas prices but also due to how the market works.
As set out in the Energy Security Strategy the government is consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
The Chancellor announced yesterday that the Treasury will urgently evaluate the scale of these extraordinary profits and the appropriate steps to take.
During the announcement, the Chancellor also set out the government’s strategy to control inflation through independent monetary policy, fiscal responsibility, and supply side activism – a plan he said that should see inflation come down and returning to its target over time.
Finance Secretary Kate Forbes has welcomed the short term action announced by the Chancellor of the Exchequer, but warned more support is needed for households and businesses as the cost of living crisis worsens.
Following calls from the Scottish Government, the UK Government has taken steps to ensure that cash grants, rather than loans, are provided to those on lowest incomes. Ms Forbes has also cautiously welcomed the decision to introduce a Windfall Tax on energy companies benefiting from significant profits but commented that it means Scottish industry is disproportionately funding interventions across the UK.
Responding to the Chancellor’s statement, Ms Forbes has said UK Ministers should have acted earlier and gone further to provide more support that would make a real long term impact, including following the Scottish Government’s lead by doubling the Scottish Child Payment to £20 per week – which is due to increase to £25 from late 2022 helping lift an estimated 50,000 children out of poverty in 2023-24.
Ms Forbes said: “Many households will be relieved to see the support belatedly announced today, but we still need a long term solution to the cost of living crisis and reassurance that the UK Government is going to tackle long term inequalities rather than provide one-off bursts of crisis support.
“Rather than listen to our plea for a comprehensive funding package that fully addresses the unprecedented rise in the cost of living and uses the full £30 billion of fiscal headroom, this piecemeal approach makes it highly likely that more support will be needed later when energy prices rise significantly in the autumn.
“There is also a severe lack of support for businesses – many of them are still struggling to recover from the pandemic and now face crippling increases in energy costs and the damaging impacts of Brexit on supply chains and the labour market. Without urgent economic support there is a real risk that the UK economy is heading for a recession.
“Inflation is at its highest levels in 40 years and the UK Government’s failure to fully invest in increasing incomes, tackling inequality and boosting economic competitiveness will only risk pushing households into further debt and poverty
“The UK Government has almost £30 billion of fiscal headroom, spending only half of this during a cost of living crisis does not go far enough, especially when a further £5 billion from the Windfall Tax will be raised.
“The introduction of a windfall tax is a start, but as a stand-alone measure this means Scottish industry is carrying the weight of UK-wide interventions.
“The removal of the £20 Universal Credit uplift last year was a hammer blow to hard pressed families and the Chancellor’s failure to restore it and increase it to £25 only places a disproportionate burden on the shoulders of those who need help most. The statement was also worryingly silent on public-sector pay with no related consequential funding, when the lowest paid need urgent assurance in the face of rising inflation.
“The refusal to reverse the National Insurance increase implemented in April and temporarily suspend VAT on household energy bills will also cost families hundreds of pounds annually at a time when their budgets have never been more squeezed.
“The Scottish Government has already taken action to support people, communities and businesses as much as possible, with almost £770 million per year invested in cost of living support. We have increased eight Scottish benefits by 6%, closer to the rate of inflation, and introduced a range of family benefits not available elsewhere in the UK.”
Commenting on the government’s cost of living support package announced today (Thursday), TUC General Secretary Frances O’Grady said: “Unions have repeatedly called for an Emergency Budget to help families, and a windfall tax on energy companies.
“The Chancellor should have acted far sooner after his inadequate Spring Statement. His dither and delay has caused unnecessary hardship and worry for millions.
“While today’s intervention is badly needed, we should have never been here in the first place.
“Years of attacks on wages and universal credit have left many households on the brink.
“The government still doesn’t have a plan for giving families long-term financial security.
“With energy bills rising 23 times faster than wages we urgently need to get pay packets rising and to pay universal credit at a permanently higher rate – not just a one-off boost.
“That’s the best way to protect livelihoods and to support the economy.”
24
0
20
