Energy crisis

Ministers consider ‘Covid’ options to help firms

Nadhim Zahawi at Treasury
Nadhim Zahawi: options

Chancellor Nadhim Zahawi and Business Secretary Kwasi Kwarteng are considering a number of options, including ‘repurposing’ Covid schemes, to bail out businesses facing possible collapse because of rocketing electricity prices.

With the government awaiting instructions from a new Prime Minister, Mr Zahawi has asked officials to look at funding mechanisms that have already worked on the scale needed to support struggling firms.

Grants to small and medium-sized enterprises, as well as VAT and business rates holidays to reduce their overall bills were deployed during the pandemic and are likely to be revived to get companies through the winter.

However, this could be problematic for Tory leadership frontrunner Liz Truss who has already pledged to cut national insurance contributions, reverse the planned increase in corporation tax and remove green levies on energy bills. Economists say these will cost up to £50 billion before any support schemes are put in place.

Moves to support businesses are being considered ahead of the next price cap level on households being set by Ofgem this Friday. It is forecast to rise to about £3,500, from the existing level of £1,971, and set to rise to over £4,000 in January.

Business groups and some opposition politicians have called for a similar price cap for businesses, and have called for the tax measures being pledged by Ms Truss.

Her rival Rishi Sunak and his supporters claim such moves will merely fuel inflation and make it more challenging to bring it under control.

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