Cost of living support package to bring only 'temporary relief' to families

Catherine Gaunt
Friday, May 27, 2022

Charities and campaigners have welcomed the Chancellor’s short-term measures to support families struggling with the soaring cost of bills and inflation, but warn they are not a long-term solution to child poverty and growing inequalities

Chancellor Rishi Sunak has announced a £5bn windfall tax on energy firms to ease cost of living crisis
Chancellor Rishi Sunak has announced a £5bn windfall tax on energy firms to ease cost of living crisis

Speaking in Parliament on Thursday, Rishi Sunak announced he was Introducing a ‘Temporary targeted energy profits levy’ that will be charged on oil and gas companies on their ‘extraordinary profits’, which have come from ‘surging global commodity prices, driven in part by Russia’s war’.

The new grant will be partly funded by a 25 per cent tax on energy companies' profits.

The legislation will include a ‘sunset clause’ which means it that will be phased out when current high prices return to more normal levels.

The levy will raise about £5 billion of revenue, to help fund the government’s energy support package.

The chancellor said the UK is experiencing the highest inflation for 40 years, averaging about 9 per cent this year, with the Covid pandemic and the war in Russia having the biggest impact.

Energy bills are set to rise on average by £1,500 this year, due to increases in April and October.

The total support package is worth £15 billion to help families with rising costs, and the most vulnerable.

It includes:

Welfare support

Financial support targeted to the poorest – 8 million households on means-tested benefits will receive a one-off ‘cost of living payment’ of £650, direct to people’s bank accounts.

Universal support

All households will receive £400 delivered through their energy bills - the repayment of the £200 repayable loan, previously announced will be turned into a grant and doubled from October. This £400 payment will be spread over six months, not  given as a lump sum.

Direct debit and credit users will have the money credited to their account, while those with prepayment meters will have the money applied to their meter or paid via a voucher.

Pensioners and disabled households

  • 8m pensioner households who receive winter fuel payments will receive a ‘pensioner cost of living payment’ of £300
  • 6m non-means-tested disability benefit recipients will receive a £150 payment

Alison Garnham, the chief executive of the Child Poverty Action Group charity, said, ‘It’s a relief that government is finally waking up to the fact that families need more support and today’s announcement of interventions through the benefits system is a good start. 

‘But with almost 4 million children living in poverty the Chancellor is kidding himself if he thinks that the problem is temporary. 

‘If the chancellor is serious about supporting those who are struggling then he will need to make long-term changes to the structure of the social security system and restore the value of benefits to something that families can really live on.’

Imran Hussain, director of policy and campaigns at Action for Children, said, We’re pleased the Chancellor has listened and started to target support towards low-income households overwhelmed by real-term falls in benefits and soaring energy prices.

‘The measures announced today will help, but won’t fully shield families with children from the pain they’re experiencing. With more mouths to feed, more rooms to heat and more clothes to wash, families with children feel price rises the most and are at greatest risk of falling into poverty.

‘Ultimately, we need a stronger social security system to ensure all families with children can meet their basic needs. With nearly four million children in families on Universal Credit, increasing the child element of this benefit would protect more children from growing up in desperate hardship and help give them the bright futures they deserve.’

Dr Camilla Kingdon, paediatrician and President of the Royal College of Paediatrics and Child Health said that with costs set to continue to rise, the temporary funding was not enough to address poverty and widening child health inequalities over the long-term. 

‘We know that many are already making stark choices between heating, eating or going into debt. Figures show hundreds of thousands of children are being pushed into poverty by soaring energy bills and inflation.  

‘The impact of poverty and inequality on children’s health and wellbeing is undeniable. Child poverty exacerbates chronic conditions, obesity, and poor mental health.  The impact of this will be felt far into the future.  Even before the current crisis, children living in the most deprived communities fared worse than children in the least deprived.’ 

‘The Chancellor has another spending opportunity in the autumn to do more for children and families. In the meantime, the Government’s much anticipated white paper on Health Disparities is due, and it must include an explicit focus, with national targets, on reducing child poverty and child health inequalities and be published without delay.’

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