Rishi Sunak sets out £15billion package to help tackle cost of living crisis

The Chancellor was forced to unveil emergency measures to tackle the impact of soaring inflation, which has reached a 40-year high.

Oil and gas companies will be charged a temporary 25 per cent levy on their profits to compensate for the record profits firms have made during the unprecedented spike.

“It will be temporary and when oil and gas prices return to historically more normal levels the levy will be phased out,” the Chancellor told the Commons.

In addition, the £200 energy bill loan announced earlier this year will now no longer need to be repaid, and the payback will be upped to £400 for all households.

More than 8 million people who receive means tested benefits will receive a one off payment of £650 from the Government, to be paid in two installments over the coming months.

Pensioners will also receive a one-off payment of £300, while those on disability benefits will get an additional £150 on top of any other payments.

The interventions mean that the most vulnerable households in the country will receive £1,200, Rishi Sunak said, as he pointed out that is the same sum by which the energy price cap is expected to have risen year on year by the autumn.

Mr Sunak told MPs: “We need to make sure that for those whom the struggle is too hard and for whom the risks are too great they are supported.

“This Government will not sit idly by while there is a risk that some in our country might be set so far back they might never recover. This is simply unacceptable and we will never allow that to happen.

The Chancellor stressed the need to keep the public finances under control and set out how a tax on oil and gas firms – who have benefited from globally high prices driven by post-pandemic demand and the war in Ukraine – would raise around £5 billion to help meet the cost.

The idea of a windfall tax had faced resistance in Government, with Mr Sunak himself among ministers to warn about the impact it would have on future investment.

But the Chancellor said his plan for a 25 per cent energy profits levy would be coupled with a new incentive, almost doubling the tax relief available on investment.

Mr Sunak stopped short of also slapping the new levy on electricity generators, although he said the Treasury was evaluating the scale of the profits being made in the industry and what steps could be taken.

Shadow Chancellor and Leeds MP Rachel Reeves said the Government had been dragged "kicking and screaming" into a u-turn, after Labour had been calling for a windfall for months.

She told the House of Commons: “After today’s announcement, let there be no doubt about who is winning the battle of ideas in Britain. It’s the Labour Party.

“Today, it feels like the Chancellor has finally realised the problems the country are facing. We first called for a windfall tax on oil and gas producers nearly five months ago to help struggling families and pensioners.

“Today, he has announced that policy but he can’t dare say the words: it’s a policy that dare not speak its name with this Chancellor.

“And it was Labour that first highlighted the unfairness of this Government buy now, pay later compulsory loan scheme. It shouldn’t have taken a rocket scientist to work out that this wouldn’t cut and we pointed it out at the time.”