Liz Truss Announces New Energy Plan

Britain's new Prime Minister, Liz Truss, has announced her plans to tackle the rising energy bills faced by millions of households and businesses.

Sterling market had tumbled in the weeks before Truss’s victory with investors wary of her plans to cut taxes despite the inflation pressures that have hit the pound. The yield that investors demand to lend to British companies has risen to its highest level in a decade. 

The energy package plan proposed by Liz Truss is expected to curb inflation by up to five percentage points

A previously announced £400 energy bill discount will be retained and green levies costing £150 will be temporarily removed, meaning that average household bills will remain at roughly their current level of £1,971.

At its heart is a move to limit the 80% rise in domestic bills that was earmarked for October.

According to Liz Truss, a typical household will save on average £1,000 a year from her two-year energy price guarantee.

An average energy bill for a typical household will be no more than £2,500 a year for the next two years from 1 October under the plan. This figure takes account of the removal of green levies (worth around £150 per household) and it will supersede the existing energy price cap.

The policy applies to households in Britain, but in Northern Ireland (where the energy regime is different) households will get the same amount of support.

Households who do not pay directly for gas or electricity from the mains will receive support from a fund, and will be no worse off, Truss says.

Businesses will get equivalent support, under a scheme lasting six months. After this there will be ongoing support, particularly for vulnerable industries.

Carl Emmerson, deputy director of the Institute for Fiscal Studies, has said the Government’s energy support package could cost more than £100 billion in the first year alone.

Union leaders have criticised the energy announcement from Liz Truss, saying that it should have included a windfall tax and that ministers should have acted earlier. 

The government says that the same level of support will be provided to households in Northern Ireland, as it is in the rest of the UK. However, this will require legislation.

Governments in Sweden, Finland and Switzerland have also announced emergency liquidity support for electricity companies to prevent the cash crunch from paralysing power markets and spilling over into the financial sector.