Firms’ energy bills to fall, plan to cut stamp duty
Businesses should see their energy bills capped at ‘less than half’ anticipated winter levels, while homebuyers in England may benefit from a cut in stamp duty under government plans to underpin the economy.
A cap on energy bills for businesses through an Energy Bills Relief Scheme will apply to contracts from 1 October and fixed contracts taken out since April, though the discount will apply for just six months, after which it will be reviewed.
The move caps bills at £211 per MWh for electricity and £75 per MWh for gas – less than half the expected cost this winter – and removes green levies.
Business Secretary Jacob Rees-Mogg announced details of government support earlier today, but firms will be concerned about what happens when the cap is lifted.
Businesses are the beating heart of the British economy.— Jacob Rees-Mogg (@Jacob_Rees_Mogg) September 21, 2022
Today we are announcing support for businesses, charities and public bodies, which will reduce the burden of rising energy bills, protect jobs and promote growth.https://t.co/qqqKFE4qbR pic.twitter.com/YEZxYaGIn5
There will be an option to extend it for “vulnerable businesses”, understood to include hospitality firms. Hospitals, schools, community halls and churches will also get help.
Unlike households, businesses are not covered by an energy price cap, which is the maximum amount a supplier can charge per unit of energy. Legislation would be necessary to force energy firms to pass on the price cuts
Matthew Fell, CBI chief policy director, said: “The package will ease worries about otherwise viable businesses shutting-up shop and smaller companies especially will benefit from the discounted rate.
“Businesses will also want to know more about the exit strategy and what happens when the six-month cap runs out.”
Shevaun Haviland, director general of the British Chambers of Commerce, said: “For those that will benefit, six months support is not enough to make plans for the future.
“We understand there are a range of unknowns for the Government in looking ahead, but without further reassurance very few firms will make plans to invest or grow.
“Some businesses will still struggle to meet their bills despite this government intervention, the Chancellor must prioritise those firms in his mini-budget on Friday.
“There are a range of other challenges that must be addressed including labour shortages, supply chain disruption, and rising raw material costs.
“To truly revitalise our economy for the difficult months ahead then there must be a clear long-term plan that gives business the confidence to grow.”
Andrew McRae, Scotland policy chair for the Federation of Small Businesses, said: “For those who were facing four or fivefold increases in their bills, a reduction on the cost per unit will provide some welcome relief and allow them to plan their way through surviving the winter.
“At the same time, we’re concerned that there is no mention of a cap on rises to standing charges. We’ll need to watch that closely so today’s move leads to a genuine, significant reduction in bills.
“The promise of equivalent support for those using heating oil is also welcome, as it is relied on by many small businesses, especially in more rural areas.
“Yet, there are questions about what happens when the six months run out. We can’t have businesses simply falling over a cliff in the spring if this relief is withdrawn.
“Neither can we have businesses who had no choice but to sign up to expensive deals before April left out in the cold. That’s why we are calling for a hardship fund to be created for those who fall outside of the current support, or for whom the current support will be insufficient.”
Stamp duty help for housing sector
The Chancellor Kwasi Kwarteng is expected to announce a cut in stamp duty in his fiscal event on Friday, according to government sources.
Mr Kwarteng and Prime Minister Liz Truss believe that cutting stamp duty will encourage economic growth. If confirmed, it would put pressure on the Scottish government to follow suit with a cut in land and buildings transaction tax – Holyrood’s version of stamp duty.
David Alexander the chief executive of lettings agent DJ Alexander Scotland, said: “If the Scottish government cannot match this commitment, and indeed go further, to reduce the disparity between tax levels then I fear that Scots homeowners will be at a greater disadvantage in the future.
“I would hope that the forthcoming Scottish budget will raise the level at which first time buyers pay stamp duty to match the English rate of £300,000
“I would also want the 10% starting level to be raised from the current £325,001 to match the English rate of £750,001.
“To create a level playing field I would urge the Scottish government to unify stamp duty rates across the country to ensure that homebuyers in Scotland are not unduly penalised for wanting to live here.”
Ms Truss is also keen to bring forward to next year a cut in income tax promised for 2024 by former Chancellor Rishi Sunak. Sources say income tax changes are more likely to be announced in a full budget in November.
The Prime Minister said that she was willing to be unpopular if it meant boosting growth by pushing forward policies such as lifting the ban on bankers’ bonuses and ending the moratorium on fracking for shale gas.