Truss announces plan to ease energy shock

Prime minister Liz Truss today (8) capped soaring consumer power bills for two years in a package to limit the economic shock of war in Ukraine that could cost about 150 billion pounds.

With Britain facing a lengthy recession sparked by a near quadrupling of household energy bills, Truss – appointed prime minister on Tuesday (6) – set out what she described as bold immediate action to protect consumers and businesses.

She told parliament that average household bills would be held at around £2,500 a year for two years, preventing the expected 80 per cent leap that was due in October, threatening the finances of millions of households and businesses.

“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 told parliament.

“This is the moment to be bold, we are facing a global energy crisis, and there are no cost-free options.”

The new cap of £2,500 will mean average bills will remain at broadly current levels after factoring in a previously announced £400 credit on bills and the removal of a levy.

With wholesale gas prices remaining highly volatile, Truss did not put a price on the package but Deutsche Bank have estimated that the energy price offset plus Truss‘s promised tax cuts could cost £179 billion, or about half the sum Britain spent on the COVID-19 pandemic.

The full cost is likely to be given at a later fiscal update by new finance minister Kwasi Kwarteng.

The announcement marked a major turnaround from a leader who had ruled out “handouts” during her campaign to succeed Boris Johnson but is now forced to act to stop families falling into destitution and businesses from going bust.

Consumer price inflation in Britain jumped to 10.1 per cent in July, the highest since February 1982, and is forecast to rise to 13 per cent in October.