Liz Truss will today announce her plan to tackle spiralling energy bills, in one of her first major policies as Prime Minister.
The new premier has announced her Cabinet, and took on Labour leader Sir Keir Starmer at Prime Minister’s Questions yesterday.
The main topic at PMQs was how Ms Truss will fund her new energy bills policy, and more should be revealed today.
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Liz Truss to announce energy bills freeze
Labour leader Sir Keir Starmer said under the Prime Minister’s energy plan the bill will be picked up by working people.
He cited estimates that energy producers could make “£170 billion in unexpected windfall profits over the next two years”.
He said: “The head of BP has called this crisis a cash machine for his company, and households are on the other end of that cash machine, their bills funding these eye-watering profits.”
He said he wanted to see the windfall tax expanded, but said: “The Prime Minister… wants to leave these vast profits on the table with one clear and obvious consequence: the bill will be picked up by working people.”
Sir Keir Starmer said under Labour’s plan there would be “not a penny more on bills”, but under the Prime Minister’s plan there would be a “price rise”.
Sir Keir described the situation as a “national emergency” and said Labour spent the summer “fighting for a price freeze”.
Taking aim at Ms Truss, Sir Keir said many people “said we were wrong” and “they dismissed our call for support as handouts”.
He said the objections could not last and “the Prime Minister had no choice”, saying: “So I am pleased there is action today and that the principle of a price limit has been accepted.
“But under our plan not a penny more on bills, under this plan, a price rise… But this support does not come cheap. And the real question before the House today… the political question, is who is going to pay?”
Liz Truss said she will launch two reviews, telling MPs: “Firstly a review of energy regulation to fix the underlying problems. We want a new approach that will address supply and affordability for the long-term.
“Secondly, we will conduct a review to ensure we deliver net zero by 2050 in a way that is pro-business and pro-growth, and this review will be led by the member for Kingswood (Chris Skidmore).”
She added: “The reason we are in this difficult situation is because of Putin’s appalling war in Ukraine, but we do need to make sure our energy supplies are more resilient and more secure so we are never in this situation again, and we cannot be subject to global energy prices and the actions of dictators.”
The Prime Minister said the costs of energy support would be offset by ramping up energy supply and launching an energy taskforce.
Liz Truss told MPs: “The way we are going to defray the cost of this intervention is first of all by ramping up supply.”
She also said the Government had created a new energy supply taskforce, and likened it to the vaccines taskforce, adding it was “already negotiating new long-term energy contracts with domestic and international gas suppliers to immediately bring down the cost of intervention.”
Ms Truss added: “We are also accelerating all sources of domestic energy, including North Sea oil and gas production. We will be launching a new licensing round which we expect to lead to over 100 new licences being awarded.”
Liz Truss said she would not “give in” to calls for a larger windfall tax to fund her energy support package.
The Prime Minister told the Commons: “I can tell the House today that we will not be giving in to the Leader of the Opposition who calls for this to be funded through a windfall tax.
“That would undermine the national interest by discouraging the very investment we need to secure homegrown energy supplies.”
She later added her Government’s plans were “pro-growth, pro-business, and pro the investment we need for our country’s energy security”.
Liz Truss has claimed that her energy bills policy will cut inflation by five percentage points.
Given inflation has hit double figures, and is forecast to hit 22.6% by January, this would be a significant drop.
Ms Truss also said this will cut the cost of servicing Government debt.
Prime Minister Liz Truss said a fund would be set up for those using heating oil, living in park homes, or on heat networks.
Speaking in the Commons, Ms Truss said: “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.”
She went on: “For those using heating oil, living in park homes, or those on heat networks, we will set up a fund so that all UK consumers can benefit from equivalent support.”
Liz Truss has said that her Government will introduce an “energy price guarantee”.
This will mean that the average household energy bill will not rise above £2,500 per year for two years, as was reported this morning.
She said: “This Government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth.
“This guarantee, which includes a temporary suspension of green levies, means that from 1 October, a typical household will pay no more than £2,500 per year for each of the next two years while we get the energy market back on track.
“This will save a typical household £1,000 a year. It comes in addition to the £400 energy bills support scheme. This guarantee supersedes the Ofgem price cap and has been agreed with energy retailers.”
At Prime Minister’s Questions yesterday, Liz Truss made it very clear she would not be bringing in a windfall tax on energy companies, like the one Labour has proposed.
She has also said she plans to slash income and corporation taxes, and increase spending on the armed forces to 3% of GDP.
Therefore, to pay for the energy bill freeze, which will reportedly cost £150billion, it is likely she will have to borrow the money.
So where does the government borrow money from? My colleague Henry Sandercock has put together a detailed explainer on this.
He explains that the money the UK borrows comes from the private sector, usually financial institutions like pension funds and banks.
It raises this cash from bonds - also known as gilts. These are basically promises to pay the lender money over a certain period of time, with the bulk of this cash repaid on the final date of the bond.
The payments before the end of the bond’s lifespan tend to consist of interest. Overall, the private sector views these loans as a low-risk way of investing.
This is because they guarantee regular repayments for the investor/lender over what is often a long period of time. But they do carry some risk, as inflation can wipe out interest if the bond is not index-linked.
Prime Minister Liz Truss is expected to announce today her “bold” plan to freeze energy bills for up to two years.
The new premier is likely to unveil that domestic bills will be frozen at around £2,500 as part of a package to ease the cost-of-living crunch.
The suggestion is it will be funded through borrowing, reported to be up to £150 billion, with Ms Truss rejecting the idea of applying a windfall tax on the bumper profits made by oil and gas companies to cover the cost.
This statement will be made to the House of Commons at around 11.30am.