Cost of living
Bills capped, action pledged on energy supplies
Liz Truss today froze the cap on household energy bills for two years and for six months for businesses and promised investment in the UK’s home-grown energy supplies.
Admitting there are “no cost-free options”, the Prime Minister said her package, estimated at £150bn, would include interventions in the market, including a £40bn fund agreed with the Bank of England to stabilise wholesale prices.
She confirmed that energy prices for households will be capped at an average of £2,500 a year until October 2024, a 54% rise on current prices, but less than half the level many feared they would face. It had been due to rise from £1,971 to £3,549 in October.
Households will also receive the previously announced £400 handout to cushion the rise.
Businesses are getting “equivalent support” through a six-month cap on bills, with further support targeted at “vulnerable industries”. These include hospitality businesses.
Her package is designed to tackle both the short term price emergency and long term supply and she stressed that she wanted to safeguard the UK’s domestic supplies.
More than 100 licences will be issued for oil and gas in the North Sea and will “speed up” development of clean and renewable sources, including hydrogen, solar, carbon capture and storage, and wind.
A new Energy Supply Taskforce will negotiate with suppliers to agree long-term contracts, that reduce the price they charge for energy. They will negotiate with renewable produces to reduce the prices they charge.
Ms Truss also pledged to “end the situation where electricity prices are set by the marginal price of gas”.
She said that far from being dependent on the global energy market, “we will make sure the UK is a net energy exporter by 2040.”
An emotional Labour leader Sir Keir Starmer again expressed dismay that the Prime Minister had ruled out a further windfall tax on “eye-watering” £170bn profits made by the oil and gas companies. He argued that these profits were purely a result of Putin’s “barbaric war” and that it was nonsense that higher taxes would deter investment.
Sir Keir said one oil company CEO had admitted that if there was a further windfall tax it would not affect its investment plans.
The Labour leader was reminded by Tory backbenchers that there is already a windfall tax which will see energy companies paying 65% of earnings to the Exchequer. He was challenged, without reply, to say how high he wanted the tax to go.
Businesses welcomed any help with costs, but expressed concern – based on the sparse details released – that it will not be enough to save some firms going under.
National chair of the Federation of Small Businesses Martin McTague said: “It’s a huge relief for millions of small businesses to hear confirmation they will be part of the Government’s plans to help on energy. Many have been pushed to the brink by crippling energy bills, and so it is welcome that help is on the way.
“Constricting the scale of energy bills for small businesses is unprecedented; we now have a high-level commitment in principle to help businesses get through the winter intact. Done right, this will be a lifeline – protecting jobs, communities and future economic recovery.
“However, the announcement is very high-level and sparse on detail so we will be working with the new Government to clarify what happens next.”
He noted that the statement leaves a number of questions unanswered, including:
- What will be the fixed unit prices (and standing charges) from October 1?
- What practically will now change – will energy retailers suspend high quotes and contract offers and recalculate from October 1?
- Will those who have accepted hugely increased bills in recent weeks be able to renegotiate to bring their bills down to reasonable levels?
- As a small business normally gets quoted for at least 12 months, does that new quote include 6 months at a low rate and 6 months at a high uncapped rate? How does the energy retailer know who to quote extra support to, for the 2nd six-month period?
Shevaun Haviland, Director General of the BCC, said: “The price cap…will give businesses some financial certainty on the outlook for the next six months. It is crucial that there is a review at three months so there is time to plan for the end of the six-month period.
“However, given the other challenges still facing business on labour shortages, supply chain disruption, and rising raw material costs, it is unlikely that we will see greater investment from business in the short term.”
Scotish Licensed Trade Association managing director Colin Wilkinson said: “Today’s announcement has not gone into enough detail on what ‘equivalent support’ will mean and does not help businesses already planning to close or reduce their opening hours over the winter period.
“This should have been a priority for Westminster months ago when experts were ringing alarm bells and warning of the juggernaut that was on its way. All help is, of course, welcome but Liz Truss is only really giving us a sticking plaster to fix a broken leg.”
Marc Crothall, chief executive of the Scottish Tourism Alliance, said: “There are many mutually reliant sectors within our tourism industry and all must receive support. We would also hope that support will not exclude businesses of a particular size.”
Justina Miltienyte, head of policy at Uswitch.com, noted that householders were still fadcing sharply higher bills than last year. She said: “Taking into account the £400 energy bill support, households could pay on average £237 more for energy over the three coldest months than they did last year.
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