Liz Truss to cap energy bills at £2,500 in multi-billion pound plan
Liz Truss has pledged that bills for the typical household will not exceed £2,500 as part of her plans to tackle rising energy bills and soaring inflation.
This will be achieved by capping the price suppliers can charge customers for units of gas as part of a new “Energy Price Guarantee”, which will last two years.
The freeze is set to come into force from October, and will supersede the Ofgem price cap which was set to rise from £1,971 to £3,549 in October.
"I promised I would deal with the soaring energy prices faced by families and businesses across the UK," she told MPs.
"And today I am delivering on that promise. This government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills."
Under the plans, households are projected to save up to £1,000 a year on their energy bills, a total which includes the removal of the green levy and the £400 discount on energy bills announced by the government earlier this year.
The £2,500 figure applies to the “typical household”, with government projections suggesting families in detached households could still pay up to £3,300 a year under the price guarantee, around £1,400 less than they would pay under the Ofgem cap.
The government expects the measures announced today should help curb inflation, which is currently at a 40-year high, by up to five per cent.
“We will deliver this by securing the wholesale price for energy while putting in place long-term measures to secure future supplies of more affordable rates,” Truss said in the Commons.
“We are supporting this country through this winter and that and tackling the root causes of high prices so we are never in the same position again.”
Further details of the support are set to be published by the government next week. It’s understood that the full costing of the plans will be set out in the Chancellor’s fiscal statement in October.
The move could cost up to £150bn, depending on future energy prices, but Truss has rejected calls to fund the package using a windfall tax on oil and gas giants' profits.
For businesses, a new six-month scheme will offer equivalent support to that which is being offered to domestic customers.
Once this scheme ends, new support will be announced focusing on vulnerable industries, and a review will be launched in three months’ time to consider whether these measures should be targeted.
Responding to the announcement, Labour leader Keir Starmer said the package was not generous enough, and suggested "working people" would be forced to pick up the bill.
He described the situation as a "national emergency", and added that the Labour Party had "spent the summer fighting for a price freeze so that no household would pay a penny more on their bills".
"This support does not come cheap and the real question before the House today, the real question the government faces, the political question is who is going to pay?," he said.
"The Treasury estimates that energy producers could make £170bn in unexpected windfall profits over the next two years."
Starmer repeated Labour's call for a windfall tax on energy suppliers to fund the package, accusing Truss of wanting to "leave these vast profits on the table with one clear and obvious consequence, the bill will be picked up by working people".
"We need a government that will never leave working people to pick up the tab for excess profits of the energy industry," Starmer continued.
"We need a government that plans for the long term rather than leaving us badly exposed to the whims of dictators and we need a government that will drive us forward to energy independence rather than doubling down on fossil fuels.
"The change we need is not the fourth Tory prime minister in six years, it is a Labour government."
As part of Truss’s “twin track” approach to tackling the energy crisis, the government also plans to lift the UK moratorium on fracking to boost domestic energy supply.
Truss said this ending of the ban could see gas “flowing” within six months in areas “where there is local support for it”.
They will also issue over 100 new licences for oil and gas production as part of the pledge to make the UK an energy exporter by 2040, and drive forward the development of new energy sources from North Sea oil and clean sources such as nuclear, wind and solar.
The government plans to undertake fundamental reforms to the structure of the UK energy market, and is launching a review into the regulatory framework.
Following on from a successful vaccine taskforce, we have created a new energy supply task force under the leadership of Maddy McTernan,” Truss told MPs.
“They are already negotiating new long-term energy contracts with domestic and international gas suppliers to immediately bring down the cost of intervention.”
A new review will also be launched, chaired by Conservative MP Chris Skidmore, on ensuring the UK meets its Net Zero 2050 targets in an economically-efficient way, due to report later this year.
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