Just two months after his last set-piece spending announcement, he announced a U-turn to hit oil and gas giants with a windfall tax to fund a raft of new measures.
With targeted support to those who need it most and a grant to ease energy bills for all households, here is a quick look at the details.
A new 25% levy will be charged on the extraordinary profits that oil and gas companies are currently making, raising revenue to help families with the cost of living. (1/2) pic.twitter.com/NzCmfwPb0X
— HM Treasury (@hmtreasury) May 26, 2022
Though Mr Sunak did not use the word “windfall”, having spent months opposing the move, he did announce an “energy profits levy” to raise around £5 billion in a year.
The temporary tax will hit oil and gas firms by 25% on extraordinary profits, which have surged because of the invasion of Ukraine and the coronavirus pandemic.
An 80% investment allowance was also announced in order to calm Conservative nerves that the move will dent North Sea firms’ investment, to save them 91p for every £1 they spend.
But it will not necessarily be a one-off, with the Treasury saying it will be “phased out” as “prices return to historically more normal levels”.
– A universal grant
The Chancellor acknowledged the situation has worsened since he announced the energy bills discount, which was effectively a £200 loan.
He has doubled it to a £400 discount on bills for all households from October, and has now genuinely made it a grant that will not need to be paid back.
The Treasury priced the measure at £6 billion, with officials expecting the £10 billion gap between the windfall tax and the spending to be raised through borrowing.
– Targeted measures
Worth £5.4 billion, more than eight million of the lowest income households will receive a £650 one-off payment. It will apply to households on Universal Credit, Tax Credits, Pension Credit and legacy benefits.
Additional one-off payments of £300 will go to pensioners alongside the winter fuel payment this winter, at a cost of £2.5 billion.
Worth £900 million, those receiving disability benefits will receive a £150 cost of living payment by September