Under the Prime Minister’s flagship plan to tackle rising household bills, the existing energy price cap will be replaced by an “energy price guarantee” with the government paying energy suppliers to cover the gap with market prices from October 1st. The policy will mean families will be spared the expected jump in average bills from £1,971 to £3,549, saving an average of around £1,000 this year. But the savings could be reduced in the second year as the £400 one-off support payment announced earlier this year by Rishi Sunak has not been extended. All businesses and other non-domestic properties such as schools or charities will have similar support for six months from October, with a review after three months to target subsequent payments to those most in need. Businesses were not covered by the previous price cap and faced bill increases of up to five or six times. Under the new regime, the government will intervene to keep wholesale prices low. Downing Street and the Treasury declined to estimate the cost of the overall package. Experts have put the price tag at £150bn, but Whitehall insiders believe this is too high and hope the final bill will be under £100bn. Chancellor Kwasi Kwarteng will give the first official estimate of his emergency budget later this month, although officials warned that the potential cost could vary widely depending on fluctuations in world market prices. Unveiling her plans in the House of Commons, Mrs Truss again flatly rejected Labor calls for all or part of the scheme to be funded by a windfall tax on energy giants’ excess profits, estimated by the Treasury at £170bn. “We will not give in to the leader of the opposition asking to be funded by a windfall tax,” he said, to cheers from the Tory benches. “This would undermine the national interest by undermining the very investment we need to secure our domestic energy supply.” Labor leader Sir Keir Starmer questioned why Ms Truss remained so opposed to a new windfall tax – arguing his party’s proposal for an expanded producer levy would allow bills to be frozen at current levels. “Under our plan not a penny more in bills, under this plan a price increase,” Sir Keir said. “This support does not come cheap. The real question is who will pay?” Sir Keir pointed to the £170bn of “excess profits” expected to be enjoyed by oil and gas producers over the next two years, an estimate made in a recent Treasury analysis leaked last month. He added: “The prime minister is against windfall taxes. He wants to leave these huge profits on the table, with one clear and obvious consequence – the workers will foot the bill.” The Lib Dems have accused the Conservatives of bringing a “false freeze” on energy bills – pointing out that £2,500 will be double last winter’s £1,277 cap. “This bogus freeze will continue to leave hard-pressed families and pensioners facing tough choices this winter as energy bills almost double,” said leader Sir Ed Davey. Ms Truss also suspended the £150 green levy on bills to pay for renewable energy alternatives, but officials said the schemes would not be scrapped but would in future be funded from general taxation. As part of a “twin track” approach to keep bills down and boost security of supply, he announced more than 100 new licenses to drill for oil and gas and lifted a UK fracking ban, despite warnings that it would has little direct impact. in the prices. He set out the ambition to make the UK a net energy exporter by 2040. The new energy guarantee will put a cap on the unit price of energy, meaning the actual bill households pay will vary depending on their gas and electricity use. Officials estimate annual savings are likely to range from an average of £650 for a well-insulated block of flats to £1,400 for a detached house. A new Energy Supply Task Force, led by vaccine task force director-general Madelaine McTernan, has begun negotiations with suppliers to agree long-term contracts to lower the price of energy and increase security of supply. The task force will also negotiate with renewable energy producers to lower the prices they charge, which are currently tied to much more expensive natural gas. The government expects Ms Truss’s package to curb inflation by 4 to 5 points, potentially reducing the peak of 19-22 percent analysts forecast for next year to 14-17 percent. The Prime Minister also believes that it will boost growth and thereby increase tax revenue. Labour’s shadow climate secretary Ed Miliband this morning described the government’s rejection of the tax as “dogma” and said the argument that investment would fall was “totally bogus”. Labor had proposed freezing prices at their current level of £1,971 for an average household, a £29bn six-month plan partly funded by a windfall tax on the profits of energy giants.
