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Government to announce multibillion-pound cost of living help

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Written by: Emma Lunn
25/05/2022
Chancellor Rishi Sunak could announce a series of measures to help households through the cost of living package tomorrow.

Government intervention in the crisis was not expected until next month. Critics say the announcement is being bought forward to distract Brits from the latest ‘partygate’ revelations and publication of the Sue Gray report.

The news comes as households reel from Ofcom’s prediction that the energy price cap could be a high as £2,800 in October.

Ofgem chief executive, Jonathan Brearley wrote to the chancellor yesterday to tell him that the cap could go up a further £800 in the autumn, following a massive rise from £1,277 to £1,971 just last month.

Analysis by the Resolution Foundation found that the number of families living in fuel stress – defined as spending at least a tenth of their total budgets on energy bills alone – would rise from 5 to 9.6 million (or from 22% to 40.5%) this winter off the back of the upcoming price cap rise.

Jonny Marshall, senior economist at the Resolution Foundation, said: “The sheer scale and depth of Britain’s cost-of-living crisis means the government must urgently provide significant additional support.

“The fact that the crisis is so heavily concentrated on low-and-middle incomes households means it’s clear how the government should target policy support. The benefits system is clearly the best route to support those worst affected in the short term – be that via an early uprating or lump sum payments to help poorer households get through the difficult winter ahead.

“Looking beyond this winter, these households will also benefit most from cheaper renewable energy and lower consumption from better insulated homes – showing why Britain needs to massively step up its retrofitting programme.”

Treasury officials have reportedly been working on plans for a windfall tax on North Sea oil and gas producers and electricity generators.

The cash could be used to fund a direct energy bill rebate as part of a package of measures that could potentially be worth up to £10bn. Other help could be targeted at low paid workers or involve a VAT or income tax cut.

Accountancy firm Blick Rothenberg has calculated that government tax receipts have increased by 20% and says this should give Sunak the headroom he needs to help with the cost-of-living crisis and hold an emergency budget at the earliest opportunity.

Robert Pullen a partner at the firm said: “Tax receipts are way ahead of inflation, increasing 20%, or £121bn, to £729bn overall. The strong figures must surely give Rishi Sunak the prompt to hold an emergency budget and announce measures to support families facing difficulty with cost-of-living.

“National Insurance (NICs) are up 10% year-on-year, with only one month of the higher 1.25% NIC rates in force, with contributions increasing by 15% between March 22 and April 22 alone.

“The chancellor is generating higher than expected tax receipts, and sooner than he would have planned following the pandemic. However, the fiscally prudent and cautious chancellor may still wait until the autumn before showing his hand, but the cost-of-living damage may be too late for some families by then.”

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