London: British Prime Minister Liz Truss on Thursday unveiled a two-year plan to place a maximum annual cap of GBP 2,500 on soaring energy bills for households from October 1 to address the country’s cost-of-living crisis.
In her first major announcement since taking office earlier this week, the new leader said her measures would save people around GBP 1,000 a year based on expected energy prices.
This is because the energy price cap set for companies as a maximum limit they can charge customers was due to rise from the current level of GBP 1,971 to GBP 3,549 in October, an effect of spiralling global costs in the wake of the Russia-Ukraine conflict.
This is the moment to be bold. We are facing a global energy crisis and there are no cost-free’ options. There will be a cost to this intervention,” Truss said in the House of Commons.
We are supporting this country through this winter and next and tackling the root causes of high prices so we are never in the same position again, she said.
As part of a three-pronged strategy, she said the government will take action to ramp up supply of domestic energy, boost growth and curb inflation by up to five percentage points , and up to GBP 40 billion will be made available to ensure wholesale energy firms have the cash they need to manage price volatility .
The move is in addition to the GBP 400 payment to households set out by former chancellor and Tory leadership contender Rishi Sunak earlier this year.
A six-month scheme for businesses, schools and hospitals will provide equivalent support over the winter, with further targeted support for specific industries like hospitality set to follow after that. There is currently no cap on energy costs for businesses and a specific figure on support has not been given due to differences in how the wholesale energy market operates compared to the retail market for households.
Truss said her new Chancellor, Kwasi Kwarteng, will be setting out the costs of the energy bills plan as part of his fiscal statement later this month and reiterated that her government will not be giving in to the Leader of the Opposition who calls for this to be funded through a windfall tax .
That would undermine the national interest by discouraging the very investment we need to secure home-grown energy supplies, she said.
The Opposition Labour Party argues a freeze on bills should be paid for through a windfall tax on the profits of oil and gas producers instead, something the new Prime Minister has been against throughout her leadership campaign to be elected Conservative Party leader.
The cost-of-living crisis triggered by soaring energy bills was the dominating issue over the course of her eight-week race with Sunak for the top job to replace Boris Johnson at Downing Street. In her inaugural speech at 10 Downing Street, Truss had indicated that her first major announcement would address this issue.
She hasn’t said how much the price cap will cost, but estimates have put it at over GBP 100 billion. Labour leader Keir Starmer said the bill will be picked up by working people,” rather than oil companies that are forecast to make GBP 170 billion in windfall profits over next two years because of soaring energy prices.
Thursday’s announcement will bring relief to many, though critics say the government help should be targeted at the most vulnerable. Those already straining to keep up with relentlessly rising costs say they will still struggle though maybe not as much as feared.
The invasion of Ukraine has caused an energy crisis across Europe as Russia blockes the supplies of cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes. Britain imports most of its natural gas though largely from Norway, not Russia and so is vulnerable to shifts in global prices.
The reason we are in this difficult situation is because of (Russian President Vladimir) Putin’s appalling war in Ukraine. But we do need to make sure that our energy supplies are more resilient and more secure, so we are never in this situation again, Truss said.
Truss announced a new energy supply task force that will negotiate long-term energy contracts with domestic and international suppliers, and said Britain would ramp up all domestic energy sources. The UK has dramatically increased the amount of energy generated by wind power in recent years and plans to build more nuclear power stations.
Truss also said she would issue more than 100 new licenses for North Sea drilling and end a ban on fracking in Britain. Both controversial measures as environmentalists worry Truss may backtrack on the UK’s legally binding commitment to reduce carbon emissions to net zero by 2050.
During the campaign, Truss insisted she supports the net zero commitment to fighting climate change but that it should not come at a huge cost to people and businesses.
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