Cost-of-living-crisis: How will Government plans help me?

Government plans to tackle the cost-of-living crisis have been announced, but will it help individuals and businesses during this difficult time?

It came after the Prime Minister and Chancellor came under mounting pressure in recent weeks to provide greater support for families and businesses as the cost-of-living crisis deepens.

The intervention comes as the cost of fuel, food and energy continues to soar, with inflation reaching nine per cent in May – its highest level in decades.

In a further blow, energy regulator Ofgem has warned that bills could shoot up by more than 40 per cent in October.

As the crisis shows no signs of slowing down, what measures have the Government introduced and do they go far enough?

A windfall tax on energy producers
Plans for a windfall tax on North Sea oil and gas producers have gained traction in recent months, putting the Government under pressure to act.

A windfall tax is essentially a one-off tax imposed on a company by Government to target firms that have benefitted from something they
were not responsible for.

In this case, oil and gas companies have made a lot more money this year due to increased demand following the pandemic and supply issues following the Russian invasion of Ukraine.

Proponents of a windfall tax believe it could fund a direct energy bill rebate to help families and businesses, worth £10 billion.

On the other hand, critics of such a windfall tax argue it could deter investment in the industry and firms ploughing money into new projects.

Under the measures announced by Rishi Sunak, all households will receive an energy grant worth £400, while eight million low-income households will be given £650.

Eight million pensioners will receive an extra £300 on their Winter Fuel Payment, while six million people on disability benefits will receive £150.

These measures will be partially funded by the Chancellor’s decision to impose a 25 per cent levy on oil and gas firms.

What about tax cuts?
A cut to VAT had been mooted but was absent from the Chancellor’s intervention. If implemented, this would impact individuals and businesses across the board. The move would also help the lower paid as they are disproportionately hit by VAT.

There was also the possibility that income tax could be cut by one percentage point; a move that could be brought forward from the cut promised by the Chancellor to be introduced in 2024. This cut was not announced but expect calls to grow for this to happen.

Whatever impact these measures make, rising costs and inflation are going to continue to impact individuals and businesses in the months ahead.

Are you concerned about the impact of rising costs on your business? Contact our expert team today at Ashford & Partners for financial advice or request a call back.