Energy bills to be capped at £2,500 for typical householdon September 8, 2022 at 1:19 pm

Liz Truss will limit energy bill rises for all households for two years as the new prime minster tries to prevent widespread hardship.

A typical household energy bill will be capped at £2,500 annually until 2024.

The huge support scheme could cost up to £150bn, but Ms Truss refused to put a figure on it, saying “extraordinary times call for extraordinary measures”.

Businesses will get support, with bills capped for six months, a shorter period of protection than many had hoped for.

The help will be for everyone in England, Scotland and Wales with equivalent assistance for Northern Ireland.

But there are concerns the measures are not targeted enough, with no additional support for the most vulnerable. As a result, millions are still expected to be in fuel poverty this winter.

The energy price cap – the highest amount suppliers are allowed to charge households for every unit of energy they use – had been due to rise by 80% on 1 October. This would take the typical household energy bill to £3,549.

To limit the amount customers’ bills go up by, the government will compensate energy firms for the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers.

The final cost of the scheme will depend on the cost of energy on the international energy markets, which can be extremely volatile.

The money to cover the support will be borrowed by the government, adding to the UK’s already large debt pile. This comes after Ms Truss rejected calls to extend a windfall tax on gas and oil company profits to pay for the package.

Labour leader Sir Keir Starmer said the refusal to fund it with a windfall tax showed she was “driven by dogma” and “it’s working people who will pay for that”.

Meanwhile, Liberal Democrat leader Ed Davey accused the government of bringing in a “phony freeze”.

“This will still leave struggling families and pensioners facing impossible choices this winter as energy bills almost double,” he said.

“Liz Truss and the Conservatives are choosing to allow this huge hike to people’s heating costs, while refusing to properly tax the eye-watering profits of oil and gas companies.”

Ms Truss told MPs: “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.

“This is the moment to be bold, we are facing a global energy crisis, and there are no cost-free options.”

Gas prices have soared this year, largely due to the conflict in Ukraine which has reduced supplies of Russian gas.

Experts and charities warned that without help with soaring energy bills, lives would have been at risk this winter, with people struggling to afford basic day-to-day living costs.

The government’s new Energy Price Guarantee will limit the price suppliers can charge people for units of gas – although Number 10 is not saying what that unit cost will be.

Ms Truss also outlined plans “to make sure we have security of [energy] supply for the long term”.

This includes issuing new oil and gas exploration licences for the North Sea and lifting the ban on fracking for shale gas “where there is local support for it”.

In addition the government will:

The decision to lift the ban on fracking will be controversial. The practice was halted in 2019 – as outlined in the Tory Party 2019 manifesto – amid opposition from environmentalists and local concerns over earth tremors.

But the government said the move could get gas flowing in the UK in “as soon as six months”.

Downing Street said the price cap would boost economic growth and curb inflation – the rate at which prices rise – which is currently at a 40-year high of 10.1% largely due to soaring energy prices.

After the announcement, investment bank Goldman Sachs forecast inflation would now peak in October at around 10% – “significantly lower and earlier” than its previous peak forecast of 14.8% in January.

PwC economist Jake Finney agreed, saying inflation was already “at or close to its peak of around 10-11% – significantly lower than our expected peak of 17%”.

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