Liz Truss, her first day as prime minister has confirmed that her government will announce tomorrow its plan to address the rising cost of energy.
Truss stated that she will present the energy statement directly to the House of Commons. The statement will include both proposals to support future energy supply and plans to reduce short-term bills.
Speaking during her first prime minister’s questions, Truss trailed tomorrow’s announcement by saying that her government would “give people certainty that they can get through this winter”.
The announcement is widely expected to contain plans to freeze energy bills at the level of around £2,400 per year. When the already announced £400 grant payment to households is factored in, this would in effect see energy prices remain at the current £1,970 level.
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Without further government intervention, industry analysts have suggested that the energy price cap could be forced to rise to £5,000 per year.
The level and duration of future energy price increases will affect the cost of the UK’s impending energy package.
The think tank, the Centre for Policy Studies (CPS) has estimated that holding energy bills at the April 2022 level will cost the UK exchequer at least £44 billion. The CPS has estimated that if energy prices reach the £6,616 level forecast by the analyst firm Cornwalll Insights, the cost of maintaining the April price cap could soar to £130 billion.
The government’s proposals are expected to be financed in the short term through further public sector borrowing.
Sir Keir Starmer, Labour leader, attacked Liz Truss over her opposition to a windfall income tax. This is the first sign of how the political divide between Conservative and Labour parties is likely to grow on this issue.
Treasury forecasts have reportedly suggested that the oil and gas sector may make as much as £170 billion in profits over the next two years.
Attacking the new prime minister in the House of the Commons, Sir Keir said, “Her first act as prime minister is to borrow more than is needed because she won’t tax excess oil and gas profits”.
Responding to Sir Keir, Liz Truss said, “We cannot tax our way to growth”. Truss confirmed that tomorrow’s announcement will not be paid for by a windfall tax.
The prime minister’s official spokesperson has though since confirmed that there are no plans to repeal the windfall tax already introduced by the Johnson government on on oil and gas companies earlier in the spring.
One key area to watch in tomorrow’s statement will be whether the new government will move to end the current moratorium on fracking as part of its plans to boost energy supply. The 2019 conservative manifesto laid out a ban on fracking, ‘unless the science shows categorically that it can be done safely’.
However during the recent Conservative leadership campaign, Truss stated, “We need to make sure we’re fracking in parts of the country where there is local support for it”.