In late May, the Chancellor announced new measures to counter the rising cost of living, in particular energy prices.
Initial measures for 2022
In early February 2022, the Chancellor announced a package of measures to reduce the impact of the £693 April 2022 increase in Ofgem’s energy price cap. These were primarily:
A new helping hand
After many rumours about windfall taxes and whether/where they would be levied, on 26 May Rishi Sunak revealed a new round of cost of living measures, greater in scope than many had expected:
The total cost of the package is put at £15.3 billion. To help finance this there will be a new temporary Energy Profits Levy on oil and gas company profits of 25%, bringing the total tax rate payable by these companies to 65% and raising £5 billion in its first year.
The levy will be phased out if oil and gas prices return to “historically more normal levels” and in any case will end by the start of 2026. To encourage oil and gas companies to invest, the Chancellor will introduce a new Investment Allowance that will mean total tax relief equivalent to 91.25% of new investment.
The levy will not apply to electricity generators, but the Treasury will now urgently evaluate the scale of the extraordinary profits being made by generating companies and consider “the appropriate steps to take”.
One interesting non-energy nugget that emerged in the Chancellor’s speech was that “…subject to the Secretary of State’s review, benefits will be uprated by this September’s CPI” and “Similarly, the Triple Lock will apply for the state pension.” That could mean rises of around 10% coming in from April 2023.