How long will energy bills be frozen for, will businesses benefit, and how much will it cost? Details of Truss’s £150bn bailout package
Liz Truss has already made what could be the biggest announcement in her premiership – a £150bn plan to freeze energy bills for two years
Liz Truss has already made what could be the biggest announcement in her premiership – a £150bn plan to freeze energy bills for two years.
The success or failure of the policy is likely to define Ms Truss’s political career, and the prospects of Britons for years.
What is Ms Truss’s plan?
The new PM has announced a two-year freeze on average energy bills at £2,500 for a typical household.
The freeze is more than £1,000 below the latest energy cap of £3,549, which is due to come into effect in October.
Households will also still get a £400 rebate this year, a policy announced in the summer. As a result bills should be little changed over the next year.
How will it work?
Ministers are signing legal contracts with the energy suppliers requiring the firms to supply domestic customers with fuel at a fixed price.
The taxpayer will then make up the difference between the fixed price and the market level.
Will businesses get support?
Yes. Ms Truss said that business will get ‘equivalent’ support – but it will only last for six months initially.
After that it could be targeted to ‘vulnerable’ areas of industry.
The government is proposing to operate this through the wholesale market, although details are not yet clear.
How much will it cost?
Estimates of the total cost vary wildly and will depend on the wholesale price of energy.
One Whitehall source said £100billion would be at the ‘top end’ of expectations, but ministers admit privately it could cost £150billion or even more if gas prices continue to soar.
That would be more than double the spending on the massive furlough scheme during the pandemic.
How will it be paid for?
The huge cost is set to be paid for out of general taxation.
Ms Truss has ruled out extending the new windfall tax on energy firms – something Labour is demanding – saying it could hit investment in future supplies.
Will it reduce the risk of blackouts?
Experts have warned that the plan could increase the chances of power shortages this winter as consumers will have less incentive to cut consumption.
With other European countries also considering price freezes and Russia threatening to further cut supplies, there are growing fears of potential blackouts if weather conditions mean wind turbines do not produce as much power as hoped.
What is the long-term strategy?
The Prime Minister also unveiled plans for a radical increase the UK’s domestic energy supplies in a bid to make Britain less reliant on global markets.
This will include a dash for gas and oil in the North Sea and a renewed drive to build more nuclear power stations.
Ms Truss is also lifting the ban on fracking, potentially opening up huge new reserves of gas if communities can be persuaded to accept the controversial technology.
She said fracking wells could be producing gas within six months.
Ms Truss also set a goal for the UK to be a net exporter of power by 2040.
A worker at the Cuadrilla fracking site in Lancashire in 2018
Will fracking be forced on local communities?
Fracking has been controversial and was halted in 2019 because of concerns about earth tremors.
Kwasi Kwarteng – now Chancellor – opposed a resumption as Business Secretary, as he was sceptical about the timescales and how much it will bring down gas prices.
But the industry insists it is safe, and a recent technical study for ministers – which has yet to be published – is said to have opened the door to its resumption as long as environmental protections are put in place.
Ms Truss and new Business Secretary Jacob Rees-Mogg are open to industry demands to relax tight planning restrictions on the technique.
Fracking firms are planning to offer local people discounts of up to 25 per cent off energy bills in communities where shale gas is extracted.
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