Every household in the UK to get £400 to help with rising energy bills

Millions of people will receive at least £400 off their energy bills after the government announced new grants to help with the cost of living crisis.

It comes after chancellor Rishi Sunak performed a U-turn on a windfall tax for energy on the soaring profits of oil and gas firms to fund a relief package for households struggling with rising bills.

Sunak told MPs he will scrap a requirement to repay the previously-announced £200 discount on energy bills and will increase the level of the grant to £400.

MORE: How do I get my £400 cost of living payment?

Other measures which are part of the package worth around £10bn are expected to be targeted at the poorest households.

On top of the basic grant, Sunak also announced a one-off disability cost of living payment of £150, pensioners will receive a one-off £300 payment and eight million of the lowest income households will be sent a one-off payment of £650.

He said the new 25pc levy on oil and gas profits would raise around £5bn over the next year.

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.

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.

She asked: “Why has it taken so long? Why have families had to struggle and worry while he dragged his feet?”

The timing of the Sunak’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 government.

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.”

With MPs away from Westminster on a half-term break next week, Mr Barclay said the “parliamentary timetable” was also a factor.

Ofgem’s chief executive Jonathan Brearley indicated this week that the energy price cap will increase to £2,800 in October.

Ministers have spent months criticising the idea of a windfall tax because of its potential impact on investment.

But on Wednesday a Tory source said the arguments had been “tested rigorously” within both the treasury and wider government.

He said: “There’s a high threshold that any package that we bring forward delivers more gain than pain, that the gain is worth the pain, that it does not jeopardise the investment.

“You don’t introduce random taxes that make the economic environment unpredictable.”