LONDON — UK Prime Minister Liz Truss on Thursday announced a broad stimulus package to help Brits with soaring energy bills and attract investment into the energy sector.
Truss announced a “new energy price guarantee that will give people certainty on energy bills.”
In her first major move in the leadership role, Truss announced the typical household “will pay no more than £2,500 ($2,880) per year for each of the next two years,” which the prime minister said will give the average household “a £ 1,000 savings per year.”
The cap will be in place from Oct. 1.
There will be an equivalent guarantee for businesses for the next six months. There will then be further support for vulnerable sectors such as hospitality, the prime minister said.
The prime minister also suggested businesses should look at ways to become more energy efficient and look to produce their own energy.
The UK will be “a net energy exporter” by 2040, according to Truss’ statement.
“Secure energy supply is vital to growth and prosperity,” she added.
“I will end the UK’s short-termist approach to energy supply once and for all,” Truss concluded.
The full cost of the package will be laid out by the Finance Minister Kwasi Kwarteng later this month, but Truss says she will curb inflation by up to 5%.
In the run-up to the announcement, questions had been raised over how the bill would be fundedwith speculation about whether the bill will land in the taxpayers’ lap in the longer term.
Before the announcement, energy bills for Brits were set to hit £3,549 per year from Oct. 1, up from £1,971. That cap was estimated to climb to £4,649.72 in the first quarter of 2023 and then £5,341.08 in the second quarter, according to consultancy Cornwall Insight forecasts.
The price cap in the UK, set by the regulator Ofgem, essentially limits the amount a supplier can charge for their tariffs, but this limit has surged higher recently due to the rise in wholesale prices — meaning Brits have seen bills skyrocket.
Truss also announced a temporary suspension of green levies to fellow lawmakers in the House of Commons.
This comes after Truss thing Jacob Rees-Mogg as her new secretary of state for business, energy and industrial strategy. Rees-Mogg has previously been quoted as calling fracking an “interesting opportunity.”
Deutsche Bank estimated that Truss would implement an energy bill freeze. It was speculated whether Truss would keep the October energy cap at £3,549, as announced by Ofgem on Aug. 26, or whether the freeze would be put at £2,500 per household per year.
Reports also suggested a £40 billion package would be put in place to support businesses with their energy costs, according to the bank, bringing the total of the expected support measures to £180 billion.
The figure is almost half as much as was spent in providing financial support during the Covid-19 pandemic and just over 8% of GDP, according to the bank.
Energy bill protests likely to go ahead
Truss’ announcement will be a big relief to people concerned about their energy bills, according to Alice Haine, personal finance analyst at investment platform Bestinvest, but it may not be enough to ease all concerns about the coming winter.
“Energy prices are still significantly higher than they were a year ago, with some households already struggling to absorb the rising costs and food prices are too high. It means household budgets are not completely out of the woods yet,” Haine wrote in a press release.
Businesses will also be relieved that they “aren’t forced to shut up shop,” Haine said, but it is “unclear” what happens next year one the initial six-month price freeze will come to an end.
The stimulus package comes as more than 180,000 people in the UK have pledged to cancel their energy bills payments on Oct.1 in protest to the increased energy cap.
Speaking to Sky News Thursday before the announcement, the Don’t Pay movement organizer Lewis Ford said the campaign would go ahead if the measures implemented didn’t bring costs down to well below the current price cap.
“We’re calling for 2021 levels,” he told Sky News. “A lot of people are going to be completely unable to afford this,” Ford said.
In October 2021, the price cap sat at £1,277 per year. It’s been predicted that 12 million households in Britain (42%) would be in “fuel poverty” this winter if no financial support was put in place. Fuel poverty is defined as being unable to adequately heat a household.