Truss drafts £130bn plan to freeze UK energy bill

energy crisis

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7 minutes ago

UK energy bills were set to jump 80% from October to £3,548 a year for the average household.

UK energy bills were set to jump 80% from October to £3,548 a year for the average household.

British Prime Minister Liz Truss

Photo credit: AFP

Incoming Prime Minister Liz Truss has drafted a plan to lock the annual electricity and gas bill of a typical UK household below the current £1,971 (€2,300).

Truss recently held discussions with her team and government officials to avoid a significant increase in energy tariffs due to start early next month under existing tariffs, according to sources and advisers. I settled on the mechanism to do this. To Truss, where she was briefed on the plan. The policy could cost up to £130bn over the next 18 months, according to policy documents seen by Bloomberg.

UK energy bills have jumped 80% since October to £3,548 a year for the average household, forcing many poor families to choose between heating their homes and other basics. The plan crafted by Truss’ team effectively abolishes that pricing system and sidelines his Ofgem, the energy regulator. Instead, ministers will set new unit prices for electricity and gas to be paid by households, the official said.

The pound rose against most major currencies on the report, rising 0.4% against the dollar in Asian trading, the second straight day of gains for the first time since July.

Truss will be officially sworn in as Britain’s prime minister to succeed Boris Johnson after visiting Balmoral Castle in Scotland on Tuesday to meet with Queen Elizabeth II. As Russia cuts off gas supplies to Europe in response to sanctions imposed following its invasion of Ukraine, she is pressuring British families and businesses to come up with a solution to soaring energy prices. It is hung

Despite inflationary pressures hitting the pound, the pound market had crashed weeks before Truss’ victory as investors wary of Truss’ planned tax cuts. The yields investors are asking British companies to lend to have risen to their highest level in a decade.

Under the truss plan, energy suppliers would be obliged to charge homes a discount on their energy bills, according to documents seen by Bloomberg, and the government would pay the difference from what they would have been charged under the previous system. guarantee a loan that covers

Jacob Reese-Mogg, who will become the Truss administration’s business secretary, met with energy company chief executives on Monday to discuss plans. The company was open to the idea, according to people familiar with the matter. That means avoiding the occasional tax and making the shortfall in income payable by the taxpayer.

During his campaign to lead the ruling Conservative Party, Truss had already pledged to remove about £150 a year of environmental taxes from the bill, but the previous government has pledged another £400 in government subsidies to help families. had promised. Combined with the new aid package, average households will effectively have their bills frozen, officials said.

The prices energy companies are allowed to charge consumers will be set by ministers and will likely be reviewed on a quarterly basis, the person added.

Just last week, the Truss wanted to extend the existing assistance package introduced by former Prime Minister Rishi Sunak from £400 to £1,000 per household. However, after lengthy internal discussions, it was decided that this wasn’t enough and she had to go further, sources said.

©2022 Bloomberg LP

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