The UK government is sending £326 to more than eight million UK households by the end of July, as part of a £37bn government package to help families combat inflation. A second payment of £324 is set to follow in the autumn.

Inflation has forced the government to act

Government spending during the pandemic, combined with the slashing of the interest rate to a historic low, created inflationary pressure due to the increase in money supply and flow. However, current inflation rates far supersede government forecasts from 2020, mainly due to geopolitical volatility.

Inflation has been exacerbated by the Russian invasion of Ukraine which has caused fuel prices to soar. This has increased business’ transportation costs alongside consumer fuel and energy costs, perpetuating inflationary pressure.

With inflation at a 40-year-high, many homes in the UK are struggling with increased living costs. Bills are set to continue to rise with Ofgem claiming that the typical household bill will rise by a further £800 in October following an average rise of £700 in April.

Other measures are also set to ease pressure on households

Measures include contributing £400 to each households’ energy bills regardless of income or usage, coupled with a £150 council tax rebate. Pensioners are also set to receive £300, while disabled people can expect £150 which would be paid on top of the cost-of-living payment where eligible.

The government claims this will support millions of vulnerable families with the current state of soaring costs.

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The cost of relief packages will partly be paid for by a windfall tax announced by the government on UK energy firms. Firms will now pay an additional 25% over the next 12 months, largely due to the record profits announced by oil and gas companies, including BP and Shell.

BP have more than doubled their profits in Q1 of 2022, while Shell’s profits nearly tripled. This led to calls from opposition parties to levy a windfall tax to which the government ultimately succumbed.

Some have criticized the broad nature of the payments

While most commenters have expressed their relief at the government stepping in to help the most vulnerable, some have noted that the payment is a flat amount for all beneficiaries.

This means those with dependents will be worse off than those without. Additionally, if someone had recently made their first claim, they will be timed out of the first payment and only eligible for the second.