Liz Truss introduces ‘energy price guarantee’ to tackle cost crisis
The Prime Minister said it was time to be ‘bold’ in presenting an estimated £150billion contingency plan so there was ‘no free option’. Energy costs are capped, meaning a typical household will pay around £2,500.
Wholesale costs will be limited to six months to lower bills for businesses and institutions such as schools, hospitals and churches.
Ms Truss said inaction would hurt the country and the economy, but warned long-term supply issues now needed to be addressed as she announced the fracking ban would be lifted.
She told the Commons: ‘This is a bold moment. We are facing a global energy crisis and there are no free options.
The government will not announce the full cost of the package until Prime Minister Kwasi Kwarteng presents his first budget later this month.
But the measures are expected to reduce inflation by 5%, thereby reducing the cost of servicing the national debt.
For a typical household, the price cap to control energy bills is set to rise to £3,549 from £1,971 next month and £6,000 next year.
Ms Truss removed the cap and replaced it with a two-year energy price guarantee that sets a limit on unit gas costs.
According to the government, the average annual bill will be capped at £2,500 for two years from October 1, saving households an average of £1,000 a year.
Plans already announced for a £400 cut on the energy bill and extra help for those most in need will continue this year, but are not expected to be reintroduced in 2023.
Freeze factor to suspend green levies worth around £150 per household.
Details of the six-month business plan are still being finalized as the system is more complex, but the government has said it will provide support to prevent them from facing cost spikes of up to 500%.
After that, there will be ongoing assistance for the most vulnerable industries and a review over a three-month period to determine what should be targeted.
A fund will be set up for those who use fuel oil, live in houses in the park or in the heating network.
Ms Truss said historic intervention was needed after Russian President Vladimir Putin’s weaponization of energy supplies exposed a failure to invest in local energy.
The government will borrow billions of dollars on global markets to fund the deal.
Ms Truss said she wants the UK to become a net exporter of energy by 2040.
She said: “It’s part of my vision to rebuild the economy – a secure energy supply is vital for growth and prosperity, but it has been neglected for too long.
“I will end the UK’s short-term approach to energy security and supply once and for all.
“This is what I promised on the steps of Downing Street, and today we are going to decisively deliver on that promise.
“It will help us build a stronger, more resilient and safer Britain.”
Shevaun Haviland, chief executive of the British Chambers of Commerce, said: “The BCC welcomes this swift and aggressive intervention by the government. It is clear that the new Prime Minister has listened to business and is delivering a strong package of support for business that amounts to essential support for consumers. .
“We welcome a wide range of services for all non-domestic energy users, including businesses, charities and public sector organisations.”
Martin McTagg, national chairman of the Federation of Small Businesses, said the announcement was a “huge relief” for millions of small businesses.
“A lot of people are being pushed to the brink by heavy energy bills, so we’re delighted to be able to help,” he said.
“The pernicious combination of uncapped energy hikes, high taxes, inflation and negative growth has become an existential threat to many.
“The limitation on the size of small business energy bills is unprecedented; we now have a high-level principled commitment to help businesses survive the cold winter intact. Done well, it will be a lifeline – protecting jobs, communities and future economic recovery.
Caroline Abrahams, Director of Charities at Age UK: “Our first reaction was that we recognized that this was huge government financial support for consumers, so it was very popular, but the question for Age UK was whether it targeted pensions, which are our worst fears. Adequate financial support for beneficiaries: those who receive little money and are entirely dependent on public pensions and means-tested benefits, and those who are in poor health due to disability and particularly high costs, or who live in homes with high indoor heating costs.
Dennis Reed, director of the 60s campaign group Silver Voices, said: “Setting the energy cap above current levels without increasing the basic income of millions of state pensioners is a permanent cut. Living standards, not deterrent costs – the crisis of living this winter. »
Sam Hall, Director of the Conservative Environment Network, said: “The Prime Minister’s Energy Price Guarantee program will provide welcome protection to households and businesses against sky-high gas prices caused by Vladimir Putin’s war in Ukraine. .
“The enormous cost of this unprecedented intervention exposes the cost of our dependence on unstable and expensive natural gas.”
Independent Age’s head of policy and influence Morgan Vine said the announcement would “provide much-needed respite” for older people struggling with energy bills.
Labor leader Sir Keir Starmer said Ms Truss’ refusal to fund the schemes through a windfall tax was ‘dogmatically motivated’ meaning ‘workers will pay for it’ .
Analysis by Jeff Ho
Liz Truss has pledged to take action on the energy crisis, and while she’s already contributed to the family, sadly that’s only half the job for the new prime minister.
While a typical household’s electricity bill is capped at £2,500, double what it was last Christmas, the fact that the cap will last for two years sends a clear message to millions of households.
For businesses, however, this level of certainty has yet to arrive, even though it is something they desperately need.
Ms Truss has promised businesses, charities and public sector groups an “equivalent guarantee” for six months, after which the government will provide further support to vulnerable groups.
She promised Business Secretary Jacob Rees-Mogg would work with businesses to determine within three months what additional support should be targeted.
But while the bosses are happy to have a pledge of support from the prime minister, what they really need are the details. They are now making plans for next year and the year after. They cannot be expected to view the future on the basis of vague promises. Only details can give them confidence.
Depending on what they are going through – doubling and, in some cases, tripling their energy bills, while facing higher personnel, fuel and raw material costs – companies take a long-term view of their expenses and their investment plans. In short, they are looking to cut costs and prepare for what is expected to be a prolonged recession.
What they want are details on the exact level of support, who will receive the additional support and, most importantly, more information on how these costs will be paid for. You can’t go wrong expanding support for businesses already impacted by Covid.
If Ms Truss’ support for businesses is as strong as it is for households, it should have the desired effect of easing some of the looming economic pain and helping to ease the cost crisis of life. Time is running out, however, and concerns will persist until the details are ironed out.
- Geoff Ho is the editor of the Daily Express Business
● From 1 October, energy bills will be capped at £2,500 a year for the next two years as part of the energy price guarantee. The freeze includes the temporary removal of the green levy on household bills, worth around £150.
● The measure will save an average family around £1,000 a year, on top of the £400 support announced by former Prime Minister Rishi Sunak in May for all families.
● Those who use the regular fares may receive a corresponding discount after the government negotiates with suppliers. Families who do not pay gas and electricity bills directly, such as those living in park houses, with fuel oil or heating networks, are no worse off and say they will receive individual support through a separate fund.
● Businesses and public sector organizations will benefit from a new six-month program offering ‘equal support’. This is expected to be an intervention to subsidize wholesale gas prices. At the end of the six months, support for “vulnerable sectors” will continue.
● The policy could cost the government £150 billion, depending on how oil prices move, which means more borrowing. The government believes it can reduce costs by negotiating long-term gas contracts, negotiating with renewable energy producers to reduce the prices they charge, and accelerating the supply of new energy. It is also hoped that fiscal costs will be reduced by having a positive impact on gross domestic product, tax revenue and household income.
● Ministers want the plan to reduce inflation by 4% to 5%.
● Liz Truss has pledged to take action to strengthen long-term energy supply and make the UK energy independent by 2040. This includes lifting the ban on fracking and issuance of more than 100 new licenses for North Sea oil and gas.
● Lifting the moratorium on fracking will allow developers to apply for planning permission with local support, which could allow gas to arrive within six months. It is planned to produce 24 GW of nuclear power by 2050. The government’s net zero strategy will also be reviewed.
● These policies will apply across the UK, but in Northern Ireland they will take a different form as the structure of the energy system is different.