Rishi Sunak made the announcement on Thursday, promising a £400 energy bill discount for British households.
UK Government plans for a windfall tax on energy companies has been welcomed by charities supporting struggling households in Scotland, who warned that this move must simply be the start of efforts to mitigate the worst effects of the cost of living crisis.
On Thursday Chancellor Rishi Sunak announced that every household across the country will receive an energy bill discount of £400 later this year as part of a package of new plans to tackle soaring prices.
The move, unveiled in the House of Commons, will also see Britain’s poorest households get a payment of £650 to help with the cost of living and will be partly offset by a 25 per cent windfall tax on oil and gas firms' profits.
Energy firms have cashed in in recent months as bills have soared, with working people across the country left struggling.
Mr Sunak said: "We know that people are facing challenges with the cost of living and that is why today I'm stepping in with further support to help with rising energy bills.
"We have a collective responsibility to help those who are paying the highest price for the high inflation we face."
A breakdown of the moves from the Chancellor show that eight million households on means-tested benefits will get £650 paid directly into their bank accounts in two lump sums.
There will also be separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits.
Devolved governments will receive funding equivalent to the emergency Household Support Fund, which is allocated by councils in England, which is to be extended by £500m to £1.5bn.
The plans come after energy regulator Ofgem said household energy bills are set to rise by £800 in October to around £2,800 a year - up a total of £1,500 from pre-April.
There are now fears that 12 million households could be pushed into fuel poverty.
While the moves on Thursday have been welcomed, campaigners urged the Conservative government to go much further.
Peter Kelly, director of the Poverty Alliance said: “Government should be about making sure everyone can live a dignified life, and finding the courage and compassion to tackle poverty and inequality.
“We’re pleased that the Chancellor has finally listened to calls for a windfall tax on energy companies to help people who are struggling to pay their gas and electricity bills. It’s good that there is extra help being put in place for the poorest and most vulnerable households.
“The £650 grant going into the pockets of those on the lowest incomes, and the additional £150 for those who are also disabled, is support that is urgently needed. Together with the £400 energy bill deduction for all households, this will provide a safety net for those most impacted by the rising cost of living.
“The Chancellor accepted that today’s support will not fully mitigate the rising cost of living. Some groups – larger families, those who become unemployed in the coming months – will need additional support. We would encourage the Chancellor to keep his plans under constant review.
“The announcements made today are long overdue and underline the importance of a decent social security system in helping keep people afloat. The UK Government must ensure these commitments represent the start of a reinvestment in social security and begin the process of undoing more than a decade of cuts.”
Some charities have expressed serious concerns that families with children were not included in the list of most vulnerable households.
Azmina Siddique, policy and impact manager at The Children’s Society, said: “There was an opportunity here to provide targeted support to families with children - a third of whom were already in poverty before the cost of living crisis. Expanding free school meals to all children whose parents are on Universal Credit or a £10 increase to child benefit could have made a real difference.
“Much of the support mentioned today was for one-off payments when we know that families need more sustainable support, and that the Household Support Fund should have long-term funding.
“The government must learn lessons from the pandemic and this new crisis and invest in a social security system that works for children and struggling families - instead of pulling them back from the brink of a financial emergency every time.”
In Scotland, those already struggling are being urged to seek help from organisations such as Citizens Advice Scotland (CAS).
Chief executive, Derek Mitchell, said: “People have been desperate for support and today’s announcement is very welcome, however those on low incomes are still going to feel a significant squeeze on their household budgets and no one should be in any doubt about what that means - people choosing between feeding their children or keeping them warm.
“One in five people in Scotland are already running out of money regularly before pay day. Demand for online advice around food banks and crisis support is now almost double what they were last year. Today’s cost of living crisis risks a tsunami of poverty, debt and destitution in the months and years ahead.”
Those working in the third sector in the UK have said charities lie ready and waiting to step in while households wait for this vital support to begin later this year.
Helen Barnard, research and policy director at Pro Bono Economics, said: “This is a very welcome move from the Chancellor to help ease the financial pain from a cost-of-living crisis that is being felt most acutely by the poorest in society.
“A support package of this size is desperately needed and charities across the UK on the frontline of this crisis will be pleased to see this action.
“We now know some relief from the government is coming, but in the meantime it is important that people are supported to limit the build-up of debt and its impact on mental health.
“Providing this vital support will fall to charities that are already facing ever-growing demands, as well as having to cope with staff burnout, rising costs and the falling value of donations due to inflation.
“The charity sector will undoubtedly step up to this latest challenge as it always does and the Chancellor’s commitment today to support the most vulnerable should give the sector some much-needed breathing space.”