The UK government is introducing a £5 billion tax on the windfall profits of its oil and gas companies, bowing to pressure from campaigners to raise money to help millions of people struggling with the worst cost-of-living crisis in decades.

Finance Minister Rishi Sunak unveiled the new 25% tax on the profits of energy producers such as BP (BP) and Shell (RDSA) on Thursday.

The levy will be phased out once oil and gas prices fall back to more normal levels, he said.

The tax will help fund a new package of benefits worth about £15 billion.

Sunak says the government will make one-off direct payments to millions of the country’s most vulnerable households.