Liz Truss is already facing a make-or-break moment in her premiership today as she unveils a £150billion plan to freeze energy bills.
Getting to her feet in the Commons later, the PM will commit the government to keeping costs for households at £2,500 a year until 2024 – less than half the level many feared they would hit. The majority of people shouldn’t see much change to their existing bills by including other aid.
Ms Truss will acknowledge that intervention is necessary in response to Covid. She insists that there is no alternative but to watch the economy take massive losses.
However, she will also declare that there must be change to ensure the country is ‘not in this position again’ – with the fracking ban set to be ditched and a new era of oil and gas exploration in the North Sea.
It will ease the anxiety that is affecting millions of households. The freeze is set to last for at least 18 months and could cost taxpayers anything up to £150billion – more than double the cost of the furlough scheme.
A package of assistance will be available to businesses that are facing financial disaster due to rising energy prices. The details are not yet clear but it is likely to be in place for less time.
Simon Clarke, Levelling Up Secretary said that UK plc will suffer “enormous harm” if it did not respond to the government’s call.
He refused to accept Labour’s demands for a windfall tax that would be applied to huge profits made by energy companies. This could have the potential of raising tens or billions of dollars. Clarke snatched the phrase, “The sun rises at dawn and Labour demands more taxes.”
British Prime Minister Liz Truss hosts her first Cabinet meeting in London’s 10 Downing Street, Britain on September 7, 2022
Ms Truss will lift the moratorium on fracking in areas where it has community support – ending a ban imposed in 2019
Sky News’ Mr Clarke stated that if the government fails to take action, and if the economy is not protected from the shocks of this magnitude, there will be a lot of damage.
“In these conditions, I believe the country will state and markets will accept that it is the best thing to do.
“The Government recognizes that fiscal responsibility is at the core of our plans, but cannot ignore the enormity of the situation.”
The decision to fund the package by increasing borrowing – at a time when interest payments on Government debt are rising – opened up a clear dividing line with Labour, which wants a freeze in energy bills funded by a levy on producers who have enjoyed bumper profits as a result of high global market prices.
Shadow minister Ed Miliband claimed that refusing to levy windfall taxes on excess profits of energy companies is based solely on dogma.
On BBC Radio 4’s Today program, he said that Ms Truss had wrongly suggested that windfall taxes would hurt investment in energy industries.
He said, “This investment argument has been completely discredited; it could have a detrimental effect on the business.”
Ms Truss stated that she knew families and business owners across the country were worried about the future of their finances, ahead last night’s announcement.
‘Vladimir Putin’s war in Ukraine and weaponisation of the gas supply in Europe is causing global prices to rise – and this has only made clearer that we must boost our long-term energy security and supply.
“We will act immediately to help individuals and businesses pay their bills. However, we must also address the root cause of the problem so that it does not occur again.”
She confirmed her intention to ‘open up additional supply in the North Sea,’ with ministers likely to issue an additional 130 drilling and exploration licenses.
North Sea production rose by over 25% this year, as record-breaking prices made it possible to drill in previously uneconomical areas.
Ms Truss also promised to support Boris Johnson’s proposal to authorize a new generation in nuclear power stations.
And Whitehall sources said she would lift the moratorium on fracking in areas where it has community support – ending a ban imposed in 2019.
Sources said that we need to work on all sources of energy. “The seriousness of the problem means that more options for supply are available and political palatable.
Although she had argued against providing universal ‘handouts’ to deal with the fuel crisis, allies say Due to the severe nature of the increase in bills, it was time for a review.
Ministers privately acknowledge that final costs of the energy package are ‘unquantifiable,’ as they will be affected by wholesale gas prices.
This plan effectively subventionizes the cost of energy. Households will pay a fixed rate equating to around £2,500 on an average bill, with the taxpayer bridging the gap with market prices.
The Centre for Policy Studies estimates that funding the freeze would cost £29billion a year if prices stay at the £3,549 level set by the latest price cap.
But the think-tank said this would increase to £81billion a year if prices rise to the £5,387 they are estimated to hit in January.
The cost could jump to a staggering £116billion if gas prices settle at the £6,616 they are forecast to hit next April.
Martin Lewis, money saving expert and guru Martin Lewis appreciated the intervention. However, he stated that none of the options was perfect.
But he warned consumers that there were some who had fixed their bills at higher levels than the current cap.
“People made the right choice to pay their bills. What I’d call for is for everyone who’s on a fix to be permitted by any energy company to move to the state-subsidised tariff, and without penalty for exiting,” Mr Lewis said to BBC.
“I would like that to be part of regulations. I’ll certainly push that if I get a chance to call the minister.
Under Truss’ new plan to tackle rising energy costs, households will pay a fixed rate equating to around £2,500 on an average bill, with the taxpayer bridging the gap with market prices
A separate package for businesses could cost another £40billion, although it is expected to last for just one winter.
Ms Truss stated that there would be assistance for 1.5 million homes across the UK which rely on heating oil. Most of these are located in rural areas.
Yesterday, concerns about Government borrowing were raised by the size of yesterday’s rescue package. This was partially responsible for the recent slide in Sterling.
Talks were held with financial leaders as Mr Kwarteng tried to convince markets that the government is ‘fiscally accountable’.
He said that he will borrow millions of dollars to pay down his taxes and help energy bills. He said that ministers are committed to helping the UK grow faster than its debts.
He said, “The Prime Minister of the United Kingdom and I have made a commitment to take decisive actions to support British people right now while continuing to pursue an unashamedly positive growth agenda.”
We must act decisively and be different. It means that we must be relentlessly focused on how we unlock British business investment and grow our economy rather than on redistributing what is left.
The question of how much fracking might boost supplies is a matter of contention between ministers.
Many fear that the technology may prove to be more risky in the UK’s densely populated areas. This technique is widely used in the USA, which has large open spaces.
Kwarteng, the Business Secretary, was skeptical of its impact on gas prices.
In March, he wrote in The Mail on Sunday: ‘Even if we lifted the fracking moratorium tomorrow, it would take up to a decade to extract sufficient volumes – and it would come at a high cost for communities and our precious countryside.’
Clarke stated today that if we are to achieve energy sufficiency, we must look at all sources, not just new nuclear and more renewables, but also technologies such as fracking.
While he insisted that the Government was committed to net zero emission by 2050, ‘but we will need all types of gas for a transition fuel in the short term. That is something the Prime Minster will be talking more about’.
Jacob Rees Mogg, the new Business Secretary is an enthusiastic advocate for technology. He is currently examining industry needs to reduce planning restrictions.
Plans are being drawn up by Fracking firms to provide discounts up to 25% for those who live near active wells.
Treasury has been informed by the industry that the UK could see its first shale oil heating homes within 12-18 months with government support.