All households will get £400 as energy bills are set to rise for a second time this year.

In a number of measures worth £15 billion Rishi Sunak said a previously announced £200 loan set to land in all household accounts in autumn will now not have to be repaid and will be doubled.

Rishi Sunak announces the measures

A one-off payment of £650 will be sent to eight million low-income households in two lump sums from July, more than eight million pensioner households will get a one-off payment of £300 through winter fuel payments and six million disabled people will get £150.

Next year's benefits increase will been uprated by this year's rate of inflation - a 40-year high of more than 9% - and a triple lock will apply to state pension, menaing the government will increase it by he higher of inflation, average wage growth or 2.5%.

The household support fund will be extended by £500m from October.

Mr Sunak said these measures combined mean the vast majority of households will get £550, pensioners will get £850 and the eight million most vulnerable will get £1,200, a figure he said was equal to the year-on-year rise in energy bills.

The Chancellor made the announcement as he u-turned on a windfall tax on the soaring profits of oil and gas giants.

A "temporary targeted energy profits levy" of 25% on profits will be applied and will raise £5 billion but companies will be able to claim 90p back in tax relief for every £1 spent investing in the UK.

It comes as the energy cap is set to rise to £2,800 in October meaning household gas and electricity bills will go up for the second time this year.

Addressing the House of Commons this afternoon Mr Sunak also told MPs the measures were to "make sure the most vulnerable and least well of get the support they need."

"We have the tools we need and resource it will take to reduce inflation," he added, after saying the UK's rate was predicted to continue rising at a faster rate than the US and Europe.

Shadow chancellor Rachel Reeves earlier 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 Chancellor’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 No 10 operation.

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.

The Times reported the previously announced £200 loan on energy bills will be replaced with a grant that will not have to be paid back, with the discount possibly increasing to as much as £400.

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.

“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,” he said.

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

Offshore Energies UK, which represents the offshore oil and gas industry, has warned a one-off tax on North Sea firms would see higher prices and do long-term damage to the sector.

The Chancellor will need to be careful that any extra help he puts in to the economy does not add further to inflation, which is running at a 40-year high.

As well as the possible impact on inflation, the Chancellor’s ability to help beyond the £22 billion package already announced will also be restricted by the state of the nation’s finances.

A Treasury spokesman said: “The Chancellor was clear that as the situation evolves, so will our response, with the most vulnerable being his number one priority.”

The Prime Minister said the hundreds of billions poured in to dealing with the Covid pandemic had left a “very difficult fiscal position”.

At a Downing Street press conference, he acknowledged households “are going to see pressures for a while to come” as a result of the spike in global energy prices and supply chain problems following the pandemic.

But he said: “We will continue to respond, just as we responded throughout the pandemic.

“It won’t be easy, we won’t be able to fix everything.

“But what I would also say is we will get through it and we will get through it well.”

Mr Johnson has previously said a windfall tax would “deter investment”, would be “totally ridiculous” and would “raise prices for consumers”.

The Chancellor also voiced opposition but began laying the grounds for a change of policy in recent weeks, saying he was “pragmatic” about the possibility.

Some of the most vehement criticism has come from Brexit opportunities minister Jacob Rees-Mogg, who has argued it is wrong to raid the “honey pot of business” and the measure would ultimately see the public pay more tax.

But Labour leader Sir Keir Starmer had argued a Government u-turn was “inevitable” as the tax on North Sea firms would “raise billions of pounds, cutting energy bills across the country”.

Environment Secretary George Eustice told LBC: “We are treading a very difficult path here because if we just borrow lots more money and throw it at the situation we could compound inflation, we could make the situation worse and see prices rise further.

“So we have got to try to dampen that inflation and that means showing some restraint but, equally, helping people, particularly those on the lowest incomes, who will struggle with some of these price rises.”

Mr Eustice, whose portfolio includes the food industry, suggested consumers are already switching to cheaper brands to cut their grocery bills.

He previously suggested that is a way to save money but insisted: “I wasn’t lecturing or telling anyone what they should do.

“What I was pointing out is that last time we had this price spike, in 2008, what actually happened was that household spending on food didn’t rise by as much as food prices and that’s because people did change their shopping habits, they bought different items and in some cases, yes, they downtraded to some of the value brands.

“That’s just an observational comment; it’s what some families did in 2008 and it is what people will be doing now.”