Chancellor announces new financial support to help families with soaring cost of living

This week, Chancellor Rishi Sunak announced a new package of UK-wide financial support measures to help families struggling because of the cost of living crisis. The package includes a universal payment for all households, to offset increasing energy bills, along with more targeted measures for those families who need it most.

This is important in a context where we know the rising cost of living is having a much greater impact on those on low incomes, compared to other households. For example, the Institute for Fiscal Studies found that inflation for those on low incomes is 3 percentage points higher than that being faced by families on the highest incomes.

The Chancellor has also committed to uprate benefits next April in line with inflation, offering some security for lower income households in the next financial year, who this year saw benefits rise at a much lower rate than prices

This package of support is welcome, and will provide some much needed relief for the millions of families who are struggling. It rightly seeks to prioritise those hit hardest by the cost of living crisis. However, much more than a one-off boost is needed, and for many households the money may not stretch very far. In particular, larger families with children – who will likely be spending more on energy – will receive the same flat rate of support as a single person household.

To make a real difference, the Chancellor needs to uprate benefits in line with inflation now, lift the benefit cap and two child limit, and invest in strengthening the social security system for the longer-term.

Summary of measures

Four main financial support measures were announced:

1. Every household in the UK will get £400 of support to help with increasing energy bills from October.
2. Those on the lowest incomes (approximately 8 million people on means tested benefits) will receive a one-off cost of living payment of £650 in two lump sums, in July and the Autumn. Importantly, this will include all means tested benefits, including legacy benefits, and not just households in receipt of Universal Credit.
3. Pensioners who receive winter fuel payment will also receive a one-off payment of £300.
4. People who receive disability allowance will receive an additional one-off grant of £150.

Some households will be eligible for several of the payments above, while others will be eligible for only the £400 support with energy bills.

The measures will be partially funded through a temporary windfall tax on the profits of oil and gas companies at a rate of 25%. Further detail on each of the measures can be found below.

Energy Bills Support Scheme: £400 one-off payment

From October, every household in the UK will receive £400 to reduce their energy bills. The money is a grant, rather than a loan, and does not have to be repaid.

The scheme will apply directly for households in England, Scotland and Wales. Energy suppliers will deliver the support to households with a domestic electricity meter over six months from October, there is no need to apply. Direct debit and credit customers will have the money credited to their account, while customers with pre-payment meters will have the money applied to their meter or paid via a voucher.

Equivalent funds will be given to households in Northern Ireland, although the mechanism to do this has yet to be worked out Further information will be made available in due course.

Cost of living payment for those on means tested benefits: £650 one-off payment

The cost of living payment will be rolled out through the benefits system, enabling payments to be made directly to eligible households across the UK. Two payments will be made, the first from July and the second in the Autumn.

To be eligible, claimants will need to be in receipt of one of the following benefits, or have begun a claim which is later successful, as of 25 May 2022:

• Universal Credit
• Income-based Jobseekers Allowance
• Income-related Employment and Support Allowance
• Income Support
• Working Tax Credit
• Child Tax Credit
• Pension Credit.

The additional support will be tax-free, will not be counted towards the benefit cap and will not impact on existing benefit awards.

Pensioner cost of living payment: £300 one-off payment

Pensioner households, many of which are disproportionately impacted by higher energy costs, will receive an extra £300 to help cover rising energy costs this winter.

Pensioner households across the UK who receive the Winter Fuel Payment will receive the cost of living payment as a top-up to their annual Winter Fuel Payment in November or December.

For pensioners also in receipt of means tested benefits, this £300 will be on top of the £650 they will receive separately. The payment is not taxable and does not affect eligibility for other benefits.

Disability cost of living payment: £150 one-off payment

A one off payment of £150 will be made to around 6 million people across the UK who have a disability. To be eligible, claimants will need to be in receipt of one of the following benefits, or have begun a claim which is later successful, as of 25 May 2022:

• Disability Living Allowance
• Personal Independence Payment
• Attendance Allowance
• Scottish Disability Benefits
• Armed Forces Independence Payment
• Constant Attendance Allowance
• War Pension Mobility Supplement.

For the many disability benefit recipients who receive means tested benefits, this £150 will come on top of the £650 they will receive separately. The additional support will be tax-free, will not be counted towards the benefit cap and will not impact on existing benefit awards.

Further information

For more information on the cost of living support measures announced by the Chancellor, there is a factsheet produced by the Government.

There is also helpful information available from the Energy Saving Trust on the small changes that could help to reduce your energy bills across the year.

To make sure your family is claiming all the financial support you are entitled to, contact the Family Benefits Advice Service for a free, personalised ‘better off’ calculation. Freephone 0800 028 3008 or email hello@employersforchildcare.org.