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The government of Boris Johnson has unveiled a £500m fund to support the UK’s poorest households over the winter following the end of the furlough scheme and withdrawal of a temporary uplift to universal credit benefits.

Ministers are bracing themselves for a difficult few months, with living standards expected to be squeezed due to rising fuel and food costs. The furlough job support scheme closed on Thursday, with a million workers still on the scheme, according to the Office for National Statistics.

The end of a temporary £20 weekly rise in universal credit next month, introduced to support struggling families during the pandemic, will add further pressure on the cost of living.

The Household Support Fund will deliver “small grants to meet daily needs such as food, clothing and utilities”. The fund will open in October, with the money distributed through councils in England and the devolved parliaments in Scotland, Wales and Northern Ireland.

Chancellor Rishi Sunak said the new fund would “provide a lifeline for those at risk of struggling to keep up with their bills over the winter”. He added that “everyone should be able to afford the essentials”.

Thérèse Coffey, work and pensions secretary, said the fund would help those who needed “further support” following the pandemic. “Our targeted Household Support Fund is here to help those vulnerable households with essential costs as we push through the last stages of our recovery,” she said.

But the Labour party said the government was creating a “perfect storm this winter”. Jonathan Reynolds, shadow work and pensions secretary, described No 10’s approach as a “temporary and inadequate sticking plasters” and called on ministers to keep the universal credit uplift.

The Joseph Rowntree Foundation think-tank criticised the initiative for failing to address “fundamental inadequacy of our social security system”, calling on the government to scrap the cut to universal credit. “It does not come close to meeting the scale of the challenge facing millions of families on low incomes as a cost-of-living crisis looms and our social security system is cut down to inadequate levels,” it said.

Dropping the £20-a-week uplift could leave more than 100,000 renters in England facing eviction, warned the homelessness charity Crisis. A cut to universal credit would push low-income renters who are two or months behind on rent closer to homelessness, it said.

“For many struggling renters this cut could be the final blow that forces them from their homes,” said Jon Sparkes, the charity’s chief executive.

Simon Clarke, chief secretary to the Treasury, defended the end of the furlough scheme, arguing there were a million vacancies in the labour market and that the unemployment rate has dropped to 4.6 per cent.

“There are these opportunities,” he told Sky News. “This is absolutely a time that people should be reassured that the support is there and the opportunities are there.”