In a screeching U-turn, Rishi Sunak has agreed to impose a windfall tax on the soaring profits of oil and gas firms to fund a cost of living relief package.
Labour said the Chancellor had been “dragged kicking and screaming” into backing its call for a levy on fossil fuel giants which have benefited from high global prices.
Mr Sunak said the 25% energy levy would raise around £5billion that will be used to send a one off payment of £650 to more than eight million households.
The payments will be made by the Department for Work and Pensions in the summer and autumn.
Other measures announced include a one off £300 payment to eight million pensioners and benefits will be uprated later this year, giving a "significant" boost to households.
Mr Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means households will receive a £400 discount on their energy bills from October.
Mr Sunak said: "This is a significant set of interventions to support the most vulnerable in our country.
"Taken together, our direct cash payments will hep a third of all UK households with the cost of living - support worth £9billion."
Shadow chancellor Rachel Reeves welcomed the Chancellor’s U-turn on a windfall tax, after months of Tory opposition to Labour’s calls for a levy.
But asked: “Why has it taken so long? Why have families had to struggle and worry while he dragged his feet?”
The timing of the Chancellor’s announcement, the day after the publication of the embarrassing Sue Gray report on the partygate scandal, has led to claims that ministers were seeking to avoid further damaging headlines about Boris Johnson’s No 10 operation.
But the Prime Minister’s chief of staff Stephen Barclay insisted the decision to announce the package was in response to Ofgem’s indication that the energy price cap would rise by more than £800 in October.
He told Sky News: “In terms of the timing, firstly we don’t control the timing of the Sue Gray report. The timing of that is shaped by the Met Police investigation.
“What we’ve always said is, in terms of the fiscal response, we wanted to see from the Ofgem guidance what the full impact would be in the autumn on families so that we can get the design of that package right.
“We’ve had that guidance this week from Ofgem. That is why the Chancellor is coming forward today.”
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