Spring Statement: what the government’s latest cost of living announcement actually means
News

Everything you need to know about the government’s cost of living support packages

All the support packages the government has announced to help with the cost of living crisis, and how you can claim them. 

Between rising inflation, household bills, fuel prices, national insurance and grocery costs, 2022 has already shaped up to be a financially challenging year for many.

A recent report found that the under-30s are likely to be among the hardest hit in the country as they face a “triple whammy” of tax increases alongside higher bills on student loans.

The UK’s energy regulator Ofgem has said the typical household energy bill is set to rise by £800 in October, bringing the typical household bill to £2,800 a year. Bills had already risen on average by £700 in April, with Ofgem warning that 12 million households could be placed into fuel poverty.

However, reports suggest that UK households are set to have hundreds of pounds knocked off energy bills this winter as part of a £10 billion government package to help people cope with soaring prices.

You may also like

“Economic crises hit us hardest”: why women and minorities have the most to lose from the cost-of-living crisis

What measures has the government introduced to help with the cost of living crisis?

As the chancellor announced on 26 May, UK households will receive a £400 energy grant to help with the cost of living crisis. The grant will replace the £200 loan that Sunak previously promised, and will not have to be paid back.

Eligible households will also receive a one-off £650 cost of living payment which applies to people receiving the following means tested benefits: Universal Credit, Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit, and Pension Credit.

Eligible pensioner households will receive an extra £300 this year.

When will the payments be available?

The government has announced that the first of two cost of living payments will hit people’s bank accounts from 14 July.

More than eight million UK homes on benefits will receive £326 by the end of July, with a second payment of £324 set to follow in the autumn.

The two cost-of-living payments - worth £650 in total - will be paid automatically to anyone in England, Wales, Scotland and Northern Ireland receiving any benefit.

To be eligible for the first installment, people must have started a successful benefits claim by 25 May.

Rishi Sunak delivered the Spring Statement in the House of Commons today
Rishi Sunak delivered the Spring Statement in the House of Commons today

Sunak had previously announced a £9 billion plan to help around 28 million people in the UK deal with soaring energy costs and rising household bills, despite warnings that the war in Ukraine could push food and energy prices even higher.

In his Spring Statement in March, he said: “The actions we have taken to sanction Putin’s regime are not cost free to us at home [but] the government will support the British people as they deal with the rising costs of energy. We will stand by them, as we have throughout the last two years.”

You may also like

Cost of living crisis: 6 women around the UK reveal how they’re feeling about price hikes

In the Spring Statement, Sunak announced three immediate measures. The first was a cut of 5p per litre to fuel duty, the biggest cut to rates ever, which will remain in place for a year until March 2023.

The second was the scrapping of VAT on green home measures, such as solar panels and heat pumps to help increase energy efficiency and reduce bills by up to £300 a year.

The third was an extra £500 million for local authority hardship funds to help the most vulnerable households in the UK that require targeted support.

An increase of the National Insurance threshold to £12,750, which equates to a saving of £330 a year, and the increase of employment allowance for smaller businesses to £5,000 were also promised by the chancellor. 

You may also like

Period poverty: 1 in 4 UK women and girls are struggling to afford period products amid the cost of living crisis

In response, many campaigners criticised the government at the time for not doing enough. Miatta Fahnbulleh, CEO of the New Economics Foundation, broke down the true impact of the fuel duty cut on the poorest households.

“Fuel duty cut of 5p will be worth £1.80/month to the poorest households. Only 7% of benefit will go to poorest 20%, but 30% of benefit will go to the richest 20%,” she tweeted.

Green Party MP Caroline Lucas also wrote on Twitter: “Sunak can’t use the Ukraine war as an excuse for the cost of living crisis we find ourselves in. Some of us were pointing this out to him six whole months ago – why did he ignore all the warnings?”

“Making those on lowest incomes pay so much for cost of living isn’t just a crisis, it’s a scandal and a political choice. Chancellor could have introduced windfall tax on obscene energy company profits and used it for real support to households – but chose not to.”

How to claim the £400 cost of living energy grant

Eligible households will receive a £400 discount on their energy bills in October in the form of a grant that does not need to be repaid, replacing the previously promised £200 loan.

Households with a domestic electricity meter will receive the £400 over six months (from October) from energy suppliers. Direct debit and credit customers will have the £400 credited to their account. People who pay with pre-payment meters will have the money applied to their meter or paid via a voucher.

This specific support will apply to households in England, Wales, and Scotland, while the government will “deliver equivalent support” to people in Northern Ireland.

The £400 energy grant is in addition to the £150 council tax rebate.

You may also like

Cost of living: Jack Monroe shares how she keeps her weekly food shop costs low using this one brilliant method

What do the announcements mean for you?

While the latest announcements will go some way to easing the financial strain for many, it’s important that we are aware of what additional help is out there to mitigate rising costs. Budgeting tricks alone won’t solve the crisis. As many are forced to make tough choices between selling their cars and putting the heating on, Money Saving Expert Martin Lewis gave the grim announcement that he’s “out of tools” to help people save money.

“We have a real, absolute poverty issue going to come in the UK, with food banks oversubscribed, and debt crisis agencies do not have any tools,” Lewis told the BBC’s Sunday Morning.

“I need to say, as the Money Saving Expert who’s been known for this, I am out of tools to help people now.

“It’s not something money management can fix, it’s not something that for those on the lowest incomes telling them to cut their belts will work, we need political intervention.”

So what difference will the government’s measures make to the lives of everyday people?

“Rishi Sunak handed a tax cut worth £330 to millions of Britons today – with the promise of more to come,” explains James Andrews, senior personal finance editor at money.co.uk.

“He also announced plans to help with rising bills, cutting fuel duty 5p a litre from tonight as well as removing VAT for energy efficient home improvements and adding more money to the fund councils have to help people struggling with energy bills.

“But with bills still set to soar and petrol and diesel prices well ahead of last year even after the cut, that doesn’t mean you can relax and should make sure you’re getting all the help available to you.”

If you are struggling, Andrews advises that your first line of financial support is Universal Credit, a monthly allowance from the government, to help you cover basic necessities like food, rent and bills.

“If you are over the age of 18, unemployed, or on low income, you can apply for Universal Credit through the government website. You can also claim an additional allowance if you have children,” he says. 

You may also like

How the cost of living crisis is disproportionally affecting ethnically diverse communities

As the Chancellor himself admitted, it’s too early to know the full impact of the Ukraine war on the UK economy and combined with the continued economic hardship of the pandemic, we can sadly be sure that more uncertainty and insecurity lies ahead.

“If you’re really struggling and need short-term support, you can get independent advice from several specialist services,” Andrews suggests. “StepChange is a charity that provides advice and help on budget and debt management. Similarly, Citizens Advice and National Debtline offer free, confidential advice to people facing debt problems in the UK.”

If you are concerned about money or are struggling with debt, charities like StepChange provide free and impartial financial advice. 

Sign up for the latest news and must-read features from Stylist, so you don't miss out on the conversation.

By entering my email I agree to Stylist’s Privacy Policy

Images: Getty