Today, Rishi Sunak presented a new cost-of-living bailout, with every household set to save hundreds of pounds on their soaring costs.
Following warnings from watchdogs that the Ukraine situation may cause energy costs to rise by more than 40% this autumn, the Chancellor is introducing a new package of assistance for struggling families.
Following weeks of bickering in Cabinet, he acknowledged that the government is doing an unprecedented U-turn on imposing a windfall tax on oil and gas companies’ soaring earnings.
But he said the levy – which should raise £5billion – will be ‘temporary’ and there will be big tax breaks for companies that invest.
The £200 per household state loan for energy bills – which was due to be paid back over the next four years – is being converted to a permanent grant and doubled to £400 to take the edge off the misery of spiking inflation for 27million homes.
Mr Sunak said eight million households on benefits will get £650 lump sum payment, paid in two stages in July and autumn – which will costs the Treasury £5billion.
Pensions and disabled people will get £300 payments, and he confirmed that the triple lock will be applied to the state pension this year.
Mr Sunak set out the grim scenario with inflation at a 40-year high, and said the government cannot ‘solve every problem’ but will not allow people to be ‘set so far back they might never recover’.
He cautioned that inflation was becoming entrenched, saying: ‘Over the course of the year the situation has evolved and got more serious.’
‘I know the governor and his team will take decisive action to make sure inflation gets back on target,’ he said.
Mr Sunak was heckled with shouts of ‘what took you so long’ and ‘about time’ after he began his statement by noting that high inflation is causing ‘acute distress’ for people in the country, adding: ‘I know they are worried, I know people are struggling.’
He told the Commons: ‘I trust the British people and I know they understand no government can solve every problem, particularly the complex and global challenge of inflation.
‘But this Government will never stop trying to help people, to fix problems where we can, to do what is right, as we did throughout the pandemic.’
Ministers are also eager to move on from the Partygate scandal, after Sue Gray’s report demanded Boris Johnson took responsibility for his staff boozing, vomiting and fighting in Downing Street when the rest of the country was under brutal lockdown restrictions.
The Treasury have been dismissing claims that the package will be worth £30billion, but it is expected to leave a significant dent in the public finances as the windfall tax is only likely to raise around £7billion.
Mr Sunak and the Prime Minister finalised the support package yesterday after the measures were fast-tracked amid concerns the Government risked looking out of touch.
After announcing the new package to MPs in the House of Commons before doing media interviews.
The move is a bid to quell increasing disquiet among Tory backbenchers, particularly from the 2019 intake.
They have been demanding further action for constituents fighting to make ends meet as inflation keeps rising.
Mr Sunak had planned to wait until July to unveil the package, when Ofgem will be able to give a more precise estimate of the likely rise in the price cap in October.
But, in a highly unusual move, the energy regulator’s boss this week revealed he was writing to the Chancellor immediately to say the cap is likely to rise to £2,800.
Mr Brearley said that although the figures were ‘uncertain’, the situation has deteriorated and the expectation for the new level was £2,800 for a typical family – compared to £1,972 at the moment. Before April it was just £1,277.
He also admitted that there is a risk prices could go even higher if there is more disruption from the standoff with Russia.
IFS director Paul Johnson warned that a major package of spending could fuel inflation.
‘There’s a very strong case for giveaways to help those who are struggling most. But if you’re going to do that, because of the dangers associated with inflation, there’s a case for tax rises elsewhere so that there isn’t significant additional money swirling around in the economy,’ he said.
‘Now we do have some tax rises coming in this year, so the Chancellor is already taking some money out of the economy.
‘But I think he does need to think quite hard about that balance and the risks associated with inflation. What you generally don’t want to do in the face of lots of inflation is chuck lots more money at the economy.’
Despite the ambitious package of measures, the government is still likely to face pressure from its critics who will say ministers could go further amid an impending energy cap rise from October.
Consumer groups said the prediction would strike ‘terror’ into the hearts of millions of householders.
It comes as the pursestrings for millions of families are likely to be tightened further over the coming year, with inflation exacerbating the pressures felt by record-high petrol, energy and food prices.
Petrol has become around 41p per litre more expensive over the past 12 months, adding around £23 to the cost of filling a typical 55-litre family car.
RAC fuel spokesman Simon Williams said the price of petrol has reached ‘another unfortunate landmark’.
‘While wholesale prices may have peaked for the time being last week, they are still worryingly high, which means there’s no respite from the record-high pump prices which are so relentlessly contributing to the cost-of-living crisis,’ he said.
New analysis has also shown that four million ‘squeezed middle’ households are currently missing out on the same level of Government assistance handed to others in the face of soaring bills. Among those is a widower in his 80s who is only eating two meals a day in order to save on food costs.
Caroline Abrahams, charity director at Age UK, told MailOnline that the Council Tax rebate was ‘nowhere near enough’ to address the cost-of-living crisis.
She warned the squeeze on incomes is ‘pushing millions into deep financial hardship and leaving them unable to afford the basics’.
Boris Johnson yesterday vowed to do ‘everything we can to help people’ through the crisis, but warned the pressures on household finances would last for ‘a while to come’.
The Prime Minister told a press conference yesterday: ‘We will continue to respond just as we responded throughout the pandemic.
‘It won’t be easy, we won’t be able to fix everything, but what I would also say is that we will get through it and we will get through it well.
‘There’s no question we have pressure now on household finances… and the Government is going to do everything we can to help people.’
Whitehall sources pointed to a speech Mr Sunak delivered last week saying the Government has ‘a collective responsibility to help the most vulnerable in our society’.
A Treasury spokesman said: ‘We understand people are struggling with rising prices, which is why we’ve provided £22billion of support to date.’